Kicking off a new series about how firms are adapting to the cloud, Richard Sergeant of Principle Point takes a look at how Big Four firms are using the cloud to service SME clients.
The reaction was decidedly mixed on news that the Big Four were going to be taking on the SME market using the cloud. From the incredulous to the fearful.
The common thread though was that although these huge firms appreciated the market, they would find it too hard to get anything meaningful from it. So what is the motivation?
The big picture
High and hyper growth businesses, if you can catch them, provide enormous fee potential for Big Four firms. But they are rare - and expensive to win.
Data is being produced at unprecedented rates. And those that have access to data, and the means to analyse it, have a distinct advantage.
Also cloud technology adopted at both the micro and corporate end of the market is driving down the barriers to do business.
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Combined with whole ecosystems of connected applications to automate transactional services - from bookkeeping to raising finance and beyond - the opportunity is there to broaden and deepen the service offering to SME market and gain:
- Significant fees by nurturing fast moving businesses
- Insight and leverage from huge amounts of core data
Big Four acquisitions of digital and analytics businesses in recent time has been noteworthy, however the control and access to the primary data will be invaluable to corporate and public sector clients too.
Why is the UK ready?
- Scale (5m+ firms in UK)
- Disruption by cloud well underway
- Diversity of risk
- Tech rich
- Many early stage businesses with high growth potential
- Need for access to finance and advice
But also newer business owners are as much concerned about business lifestyle as they are about profitability.
Flexibility, remote working, accessible services, immediacy, and control are common words used to describe their approach- and crucially they value insight.
They’re open to new ideas, and new ways of working.
The radical approach: KPMG Small Business Accounting
KPMG’s Small Business Accounting service is there to fundamentally disrupt the market place. And it could work.
Unlimited access to a dedicated qualified accountant. Best of breed software subscriptions, tied together with neat analytics, VAT, corporation tax, and payroll (with AE), company secretarial... all packaged up into a regular monthly subscription.
Add benchmarking, performance metrics and regular business reviews and the proposition is pretty much everything you need to look after a small growing business.
Given the actual amount of face-to-face time most firms will have with clients, this represents an equally complete service with the underlying message of location is irrelevant. Service, contact and insight is everything.
Holding and generating the key business data for clients in the cloud gives enormous scope for other automated services not least in this case pre-approval for their funding platform and ability to generate formatted data for prospective investors at speed. An area that their corporate size and influence could leverage more and more.
Ruthless efficiency, simple to scale, flexible and dynamic (as watchers of their website can testify there are continuous rounds of refining the pricing and proposition), easy to understand, and heavily marketed - this is a well-researched and well-funded venture built from the ground up to try and run a good quality service, at scale.
With approaching 800 clients in November 2015, it should be closer to 1,000 by now. With no geographical restrictions they can grow to a considerable size without necessarily any firm in the UK feeling the squeeze.
PwC: My Financepartner
Focussing on up to £50m turnover businesses, and a model based upon more direct face-to-face relationships, distinguishes it from the mass market approach of KPMG.
The cloud however is still essential to the service provision. Largely tech agnostic, data is pulled together from across the business's other systems to generate insight. Accounting is supplemented by an advisory service with a clear growth agenda
The compliance and accounting outsourcing part is arguably less of interest than the strategic FD role they can play as a consequence of having overview of all this information.
However the cloud enabled data collection and powerful analysis, and the support around the compliance and standard reporting function is essential to make sure that it all stands up and performs cost effectively.
What is the appeal for SMEs?
Evidence seems to suggest that the main appeal is reassurance of the brand. Aligning with the reputation, gravitas and investor appeal of a big named firm is seen as a good thing. But what is also clear is that this is being backed up with clear cut service, insight and adjustable pricing. So the brand and the service and the price point are working.
Arguably now, any size business can be a Big Four client, and it simply wouldn’t be possible without cloud as the core enabler of the service.
To what extent do they pose a risk to most firms will still need to be seen. However with the direction of travel increasingly pushing firms towards a digitally enabled future, the advantage for these mega firms has been to create standalone services that skip the difficult evolution that many firms still face.
The second article in the 'Adapting to the cloud' series combines two interviews with contractor specialists firms.
Richard Sergeant is the managing director of Principle Point.
About Richard Sergeant
Specialist insight and business development support for accountants and their vendors. Cloud advocate with a pragmatist eye.