Cloud suites are here, just as the goalposts moveby
It’s been a big week for tax and practice software. In a matter of days, two of the main suppliers in the market went public with their cloud-based compliance and practice management software suites.
Almost at a stroke, the announcements about the IRIS Elements suite and BTCSoftware’s cloud app plans put an end to the long-running arguments that practitioners were not ready to move their systems to the cloud.
In response to these announcements, one AccountingWEB member posted a question on Any Answers this week about whether there were any software vendors left for smaller practices.
I’m sorry to disappoint this member, but any accountant investigating their options for new software will now find that most of the developers they approach will steer them towards online applications.
If there was any lingering resistance to this idea, pandemic lockdowns took care of that. By unveiling their embryonic suites at this point, IRIS and BTCSoftware were not so much forcing their customers down an unpopular technology path as responding to their demands for online tools.
If anything, the prevailing question for practice developers in recent months has been, “What’s taking you so long?”
IRIS, the biggest player in the market, has been signalling its plans to introduce an integrated cloud software suite for years, but on the eve of Accountex, the company finally confirmed that its IRIS Elements project now included viable compliance tools.
In case you missed it, Sage has also been proclaiming its “cloud-first” credentials for more than five years. Until the turn of this year, it hasn’t had much to show practising accountants on that score, but visitors to Accountex got a chance to compare the new Sage for Accountants suite with the IRIS and BTCSoftware equivalents.
While not as big as IRIS or Sage, BTCSoftware is a very influential player among small firms, having bagged seven software awards from AccountingWEB over the past five years. As far back as 2016, BTCSoftware was dropping hints about its intention to enter the cloud practice software stakes.
That leaves BTCSoftware’s closest rivals, TaxCalc and Thomson Reuters (Digita), as the only non-cloud practice suites on the market. Yet TaxCalc now positions itself as “cloud-capable” with its Cloud Connect online database that offers anytime, anywhere access to client data.
Meanwhile, in our recent Insight webinar on practice management software, Digita user Sarah Bedford said she was sticking with Thomson Reuters because she, too, valued the advantages of integration and had been assured by her supplier that it would be moving its compliance apps online in time for the transition to MTD.
Keep an eye out for Ireland-based Bright Group, too, which bought AccountancyManager in March. With backing from Hg Capital, Bright has long-term plans in hand to migrate Relate’s compliance programs into the cloud to create yet another contender in this rapidly evolving marketplace.
The argument is over
The cloud debate has been running for more than 15 years on AccountingWEB, starting with the birth of KashFlow and FreeAgent in 2004-5 and galvanised by the arrival of Xero in the UK in 2007. While small business bookkeeping led the charge, it took another several years before Gbooks, Capium and Nomisma brought online tax and practice tools to the market in 2014-15, followed not long after by Taxfiler.
Though widespread adoption of cloud practice and tax apps lagged initially, the trend was galvanised first by demand for practice management apps to help cope with the challenges of Making Tax Digital and then by the need for software to support remote working during the Covid pandemic. The two lines on the chart below show the percentages of firms using cloud bookkeeping and practice from our annual software surveys going back to 2006. Note that the high percentages are based on respondents posting rating at least one app in these categories - the stats do not indicate that 80% or more of all firms and all clients are using only cloud apps. But the direction of travel is very clear.
Practice cloud software adoption 2006-21
What’s the new argument?
Reporting from the show floor at Accountex, AccountingWEB technology editor Tom Herbert said it felt like the cloud product announcements from IRIS and BTCSoftware marked the end of the initial cloud adoption era and that practitioners were moving onto the next phase, which was taking us into the “realm of the suite”.
This, too, is an argument that has been around since the early days of self assessment. The best of breed cloud ecosystem players have enjoyed a lucrative period during the past five years. But it should come as no surprise to hear IRIS chief marketing officer David Turner raising the integrated war cry to herald the arrival of the new IRIS Elements suite ingredients.
Pointing to the complexities illustrated in our ongoing My Tech Stack series, Turner said that the mid-size firms that use the current IRIS Accountancy Suite stuck with the desktop solutions because they preferred the benefits of a single client database with joined-up workflows.
“Younger, millennial accountants may not know about IRIS, but our job is to excite them and make them realise that life isn’t just about QuickBooks and Xero,” he said. “They won’t help practitioners transform their businesses to cope with MTD.”
We’re bound to hear more of this kind of talk over the next few years. But could we end up re-enacting confrontations from the last great software war rather than looking ahead to the next major transition?
The next wave
There’s no little irony in seeing all these compliance programs come to life within cyberspace just at the point when the classic Windows-era annual self assessment process is moving into its twilight years.
In 2024, HMRC estimates that another 4.2m small businesses and landlords will come into its Making Tax Digital for income tax filing regime. That represents a lot of digital record-keeping systems, all of which are going to require a method for filing quarterly updates with the tax department.
An intake of that scale is going to wreak profound changes on the practice software market, which is where we start to notice the likes of Xero, FreeAgent and QuickBooks Online lurking with intent. Xero made the first move and is currently the best positioned to support accountants who want to cater for the MTD ITSA generation. But FreeAgent has stolen the lead with its niche landlord option for one of the biggest client populations in this camp.
A look at HMRC’s list of currently available MTD ITSA programs reveals three names that may be mildly unfamiliar to practitioners: Apari, Cirrostratus and untied. While the nuances of double-entry bookkeeping and tax compliance (not to mention shifting programming interfaces at HMRC’s end), these developers are more data wranglers who see the opportunity to carve out constituencies currently untended by established developers - and accountants. As Richard Sergeant has reported previously, the race for sole trader MTD solutions could be the space to watch as we try to work out who’s going to find the magic formula that shapes the next generation of tax and practice apps.
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AccountingWEB’s Editor at large has been with the site since 1999, rising from news editor to editor in chief, global editor and head of insight. As a roving editor, he continues to investigate the profession's use of technology around the world. He devotes his spare time to technology history and an oddball collection of stringed instruments...