Managing well...
2 Jun 08
It is easily said that software can be crucial to a company's success but how to find the right suite to control and nurture your company?
by Guy Clapperton
The accounting and financial software industry has been going through change over the last 12 months – we always seem to start by saying that. Worse, we’re going to say it’s changing in the same way in that software as a service (SAS) is becoming increasingly important to the way in which systems are sold.
Software as a service was first mooted in the late 1990s when it was called application service provision (ASP). That was before the introduction of widespread broadband, which made it a very slow starter or expensive option for many people. It seems to be emerging as something people want now.
Software house bluQube’s managing director, Simon Kearsley, agrees that there is a move towards software bought in this way. “There is still interest and an ever growing acceptance in hosted and the prospect of using a ‘rentalised’ accounting solution,” he says. “This is particularly attractive to start-up organisations or those that want to migrate to a new system but perhaps do not have the in-house resources to support such a move, or ‘just want it to work’.”
The headline news at the time of going to press, though, was the credit crunch and how companies are panicking over it.
The effect has yet to be felt in the software sector.
“Despite the shadow of the credit crunch, we have seen absolutely no difference in the propensity for firms to invest in new systems,” says Kearsley.
“If anything, we believe that if there is going to be an impact, it is likely to be positive, as companies turn to newer finance systems that will help them tighten their belts and become more competitive.
“The self-service and devolvement characteristics of the latest accounting solutions can deliver major cost savings to companies that are still using older systems they have simply outgrown.”
As an MD of a software vendor he is bound to be optimistic – the cynic in me says he will be even more so when talking to the press.
A more subtle change can be predicted, however. Microsoft is making small incursions into the market, but Raymond O’Hare, director of Microsoft Scotland, confirms that increasingly the company is winning contracts when it competes with more established players.
“It’s gone very well. We cover a very small base and we’re not a major player in terms of market share at this point, but there isn’t a clear leader,” he says, meaning that the fragmentation of the market into sectors makes success difficult to measure definitively.
Microsoft has the advantage,he believes, because just about everything it does links into the Microsoft Office environment. “There’s a very standardised look and feel so the product is as strong as it’s ever been,” he comments.
He sees most of his company’s growth in financial systems coming from people who have been using pen and paper until now rather than taking chunks out of the market traditionally owned by Sage and others such as Quickbooks or MYOB in the Mac market.
Inevitably when thoughts turn to who’s doing well at the low end of the market the word Sage comes up very quickly. It’s strong in the medium and enterprise markets as well as its traditional low-end start-ups business.
Kerrie Keeling decided to set up interior and exterior decorating company A Woman’s Touch in 2003 after years of working for an investment bank. She left her job and went on short courses in decorating, plumbing and tiling before starting the London company up. She began by doing small jobs for family and friends and expanded swiftly into a specialist market.
“I realised that there was a gap in the market for female tradespeople as often women can feel uncomfortable and intimidated at having a strange man in the house,” she says.
Once the winner of NatWest’s Businesswoman of the Year award, Keeling initially ran the business through a set of spreadsheets. Contrary to popular belief there is nothing wrong with spreadsheets – accountants often like them because they can be imported into standard software without any concern about the client using different systems.
With 20 employees and a major system crash, however, it became apparent that the equipment was no longer workable as only part of the information had been backed up.
“I decided to install Sage Start-Up to keep better track of the business’s financial health, and have visibility of where the money was coming from,” says Keeling. “The programme has been such a success in terms of keeping my finances in order, and it would have saved me so much time and money if I’d been able to use it from the beginning.”
The financial visibility was important because it enabled her to realise she could buy two commercial vehicles outright as well as equipment to help her organise her on-site staff. “The software allowed me to see exactly how much spare money was available at any one time,” says Keeling. “This then enabled me to invest in a dedicated switchboard, hand-held push email and Internet devices for key on-site contractors, and synchronised email and calendars that enable both of my phone operators to work from home.”
The financials were the key element of the system offering benefits. Administrative tasks including VAT and tax returns were completed not only automatically but accurately and output in a format that would be accepted by accountants and which was known to be accurate.
Another key advantage was the software vendor’s capacity to upgrade. Keeling now uses Sage 50 2008 as she has outgrown the older one. In spite of the claims made by numerous organisations about the scalability of their products and the idea that they last throughout an organisation’s growth, some sort of ecosystem in which client companies can move through their various development stages is increasingly important.
The middle market also has Sage as one of its chief players – the market share of the Geordie giant means it could fill an article by itself.
Other organisations start to emerge into that space as well, however, including Access Accounting. Taking a modular approach, Access recently installed its Dimensions and Payroll system into Castlemead Homes.
Based in Wrexham, Castlemead is a developer of estates and focuses on individuality. Financial controller Darren Pender wanted a financial system that would be able to respond to rapid changes in the market.
“Previously, we used an Integrity Software Solutions package,” he explains. “This system was fine for basic day-to-day running, but had limited reporting capabilities. In
addition, because it was not linked to our costing spreadsheet (where we enter all the
costs associated with each build), running a report was very time-consuming as information had to be re-keyed from one system into the other. I spent all my time producing the reports, with no leeway to analyse the information.”
The objective, then, was to implement a system that would allow costings spreadsheets to integrate with the reporting facility. Time and again, year after year, the financial controller’s mantra: “Could we stop re-keying everything?” springs all too easily off the page.
“The costing spreadsheet is a crucial document because it collates every detail relating to a new build, from top-level site costs such as road clearance and ground investigation right down to plot costs, such as stairs and kitchen fittings,” says Pender.
“We didn’t want to change how we worked, but to address the reporting issues without changing the look and feel of the front end.”
Iris Exchequer came a close second when it came to shortlisting, but Access’s specialist centre for product support swung the deal in the end.
The essence of the implementation was to link the front end spreadsheets with the back end office accounts and enable the people to enter data into a system that felt a lot like Excel.
The biggest task was to integrate existing data with Access, which involved re-coding years of information and needed to be done by the year-end deadline.
There have been immediate benefits: “With our old system, it took me two weeks to
re-key the costing data into the accounts – it now takes 30 minutes to consolidate the information,” says Pender.
“Before, it was a race against time; now, I actually get a chance to look at the figures and see what’s going on before people ask questions.”
Inter-company reporting has also become simpler. “We have nine trading companies within the group. Previously, producing a consolidation report would mean extracting the data relating to each company, re-keying it into Excel then adding it all together. Then we’d find we’d missed a line off, so the report would be wrong.
“Now, whether we want to analyse by company, job, date, or year, I can have a report ready in an hour, not days.”
IRIS, although it lost out in this instance, is one of the few companies to offer Vista compatibility and has acquired Exchequer. Pegasus also remains a serious contender in this market, with specific industry targeting and modules for HR, supply chain management and manufacturing and other functions.
At the higher end of the market there are other players – and the financial system tends to be integrated into a much larger enterprise system. Requirements are more complex and purchasing, warehouse operations, HR, payroll and a vast array of corporate functions have to be tied together.
It is worth bearing in mind that our small business example had to invest in dedicated software to handle only 20 people with ongoing projects; clearly the requirement becomes infinitely more complex when there are 20,000 people to look after.
The same giants as before tend to come into play when examining the enterprise market. Unprompted, Microsoft volunteered that it does not compete with SAP as such – which tells the reader where it sees the main competition coming from in that sector.
Others are playing in the space too, however. COA – formerly Cedar Open Accounts – has recently won a £3.6m contract to supply all 22 Scottish health boards with financial, procurement support, business intelligence and document management systems. Typically for a system of this size it is taking months rather than days or weeks to implement and is not expected to be fully running until March 2009.
The installation is part of the Scottish Government’s Efficient Government Initiative. As a result of this, NHS Scotland is running the Shared Support Services Programme. John Francis, programme director, says, “High quality health services are a key priority for the Scottish Government. To ensure this is achieved, all Scottish health boards need to work closely together and this is only possible when a common infrastructure is in place.
With COA Solutions’ Health Business Suite being run by all NHS Scotland, the health boards will be able to share staff, responsibilities and information more easily. As well as creating a more streamlined financial service, this will free up time and resources that can be deployed on supporting and delivering the Scottish Government’s “Better Health Better Care” policy.
Key to understanding how COA solutions won the contract – and how major accountancy firms can become involved in similarly sized bids – is a glance at the history of the NHS boards in Scotland and the supplier’s understanding of the NHS market. COA made sure it understood the market very well indeed, and had a history of selling it.
Francis explains: “The majority of NHS Scotland’s financial transactions were already going through COA Solutions and so it made sense to build on this and work with COA to enhance and to extend the Health Business Suite. The software has been developed to fully support the re-engineered business processes and help deliver the identified improvements.”
Understanding the business is a lot less crucial in the smaller markets but in the larger
accounts it is essential. A strategic view of how the system will grow is also vital.
Regardless of the size of the markets, though, there is commonality among customers and their behaviours. “Many organisations that are looking to replace or upgrade their existing finance solutions are looking for more than just a ledger,” comments bluQube’s Kearsley. “When you start to delve deeper it seems that what they are really looking for is a system that not only controls finances but also helps drive growth.
“Senior management are becoming increasingly aware that the finance system should be at the heart of their operation – a business management tool, with the ability to provide other key business functions such as those considered historically to be CRM, supply chain and/or workflow.”
This has led to a change in the way people use their systems. “The most popular module within our bluQube software is Portal, which is a personalised web page that gives finance information and operational functionality that is pertinent to the individual viewer,” says Kearsley.
“This is a reflection of the growing demand for continually updated information that can be consumed and acted upon by a broad range of personnel across an organisation. There is a growing recognition that this type of functionality is now vital. Enabling instant access and response to the latest data means more informed and quicker decisions that will help the organisation to be both leaner and more responsive.”
As to the future, accountants tend to be a conservative lot. I was writing the “will they move to Windows?” article years after everyone else had done so and the same question mark now hangs over the latest version of the operating system.
BluQube’s Kearsley says: “We are aware that the eventual adoption of Windows Vista may provide upgrade problems for companies because they may find that they also have to upgrade to a compatible finance system. This dilemma can be avoided, though, if they opt for a web-based finance system that is compatible with any operating system.”
Nonetheless the biggest change in the coming years is likely to be the emergence of Microsoft as a key player. Granted, Microsoft is bound to say it is doing well.
If its own employees didn’t think so, why get out of bed? However there is a precedent from the early 1990s that is worth considering.
Outside the accounting arena, Microsoft can broadly be said to own the majority
of operating systems on computers, networked or otherwise (at least in terms of those systems visible to the non-technical user). The word “Windows” springs easily to mind.
It was not always thus. In the early 1990s, Novell had a product called Netware, which worked primarily as a file and printer sharing system. By today’s standards it was primitive but at the time it was industry-standard. Microsoft owned a competing system called LAN Manager, which was a poor second in the market.
Until, that is, Microsoft issued Windows for Workgroups in about 1992. This was a version of the single-user system that linked people in an office together. Later, it renamed LAN Manager as Windows NT.
The result over time was that people came to think of Microsoft not so much as a single company as the progenitor of an ecosystem. You started as a single user with Windows 3.1, moved to Workgroup, then to NT. The names and indeed the exact products have changed, but “call everything Windows and let everyone upgrade as they grow” worked spectacularly in the company’s favour.
Now we fast-forward to today. It is around 12 months since Microsoft launched Accounting Express for Windows. That is the early, entry-level business catered for. Then it moved up to Accounting Professional and later on there are Great Plains, Navision and the other high-end accounting systems.
O’Hare is right to confirm that Microsoft does not compete much with people like SAP at the top end but this may be temporary. The company has again created an ecosystem in which its customers can grow, assuming “Microsoft makes this” is the norm.
There is no reason to assume that a handful of today’s small business startups using the free, downloadable versions will not be the sort of company that would want SAP in 20 years and the best guess – on which Microsoft rightly declines to speculate – is that Microsoft will be among the companies providing it.
For the moment, less astonishing things are happening. As I said at the beginning of this article, a year ago we did a round-up and said software as a service (SaS) was becoming an increasingly important factor in the market. This is still the case and outside the accounting systems arena, the emergence of applications from Google will make it more acceptable to log on to rather than install or download electronically held data and programmes.
So the prediction for next year is that we will be starting once again by saying SaS is one of the more important new elements in the accounting systems market. Which will at least save your correspondent from having to write a fresh opening paragraph.