To buy or not to buy? That is the technical question

A quiet revolution is stirring among the Big Four and other major accounting firms. From AI and analytics to workflow automation and beyond, leading practices are aggressively expanding in-house technology capabilities and reducing reliance on off-the-shelf software vendors.

This accelerating trend is driven by the desire for differentiation and deeper competitive moats in what remains a crowded and increasingly commoditised industry. Technology built specifically by and for accountants promises more customized solutions better suited to highly specialized needs.

Yet at the same time, vast software vendors including SAP, Oracle, and Microsoft still command massive resources and talent focused squarely on designing technology for finance and accounting use cases.

It begs the question – what specifically are the advantages and drawbacks of firms going it alone to develop their own proprietary tools versus continuing to buy cutting edge systems available on the open market? There are reasonable arguments on both sides.

At the heart of the decision point is the classic build versus buy dilemma that faces organizations across sectors grappling with technology innovation.

For CPA leaders plotting their firms’ digital futures, fully understanding the implications of each approach is essential as they balance desires for differentiation against practical constraints surrounding skills, resources, and adapting to rapid rate of technology change.

Both options present alluring opportunities – but neither lacks downsides as well.

What are the benefits?

More customised functionality

Unlike generic accounting software, homegrown tools can be tailored to reflect the precise workflows, methods, data structures that are unique to an accounting practice. Instead of customizing off-the-shelf-packages, purpose-built programs are aligned from the start.

Tightly integrated systems

Rather than building custom interfaces between disparate vendors, linking proprietary apps and databases using common code and shared schemas enables seamless handshakes. Data and functionality interconnect without friction across finance, audit, tax and advisory tasks.

Innovative differentiators

Incumbent accounting vendors have innovation lags – it took over a decade just to move desktop software to the cloud. Developing in-house provides agility for leading firms to build differentiating capabilities in analytics, workflows and even AI assistance that outpaces what current mass-market solutions deliver.

More responsive roadmaps

Instead of submitted enhancement requests to vendor product managers and waiting for their priority setting process, internal tech teams are fully devoted to accountable client-facing partners. The roadmap is steered by those closest to serving client needs.

Potential profit centers

Large consortiums could ultimately produce proven solutions applicable to thousands of smaller, resource-constrained accounting firms. Incubating software internally first allows perfecting capabilities before commercialising services – a play pioneered by industry leading consultants.

A time to be cautious?

High development costs

Specialised engineering and design talent doesn’t come cheaply – developing custom technology requires major upfront and ongoing investment. For the same budget, more functionality can often be purchased than personally built.

Scarce technical talent

The software skills needed to architect sophisticated accounting systems are in short supply globally. Tech giants with deep pockets also aggressively compete for those scarce human resources – a challenge smaller firms can sidestep by adopting proven vendor packages.

Reinventing the wheel

Huge vendors spend vast sums on next generation capabilities from blockchain to robotic automation that can seem wasteful to replicate. Reinventing existing wheels diverts resources from pushing other real innovations in-house technology can better enable.

Integration headaches for clients

If major firms fail to align their proprietary solutions, adopting them piecemeal can create added complexity for clients already struggling with too many fragmented systems. Seamlessly connecting should be a base requirement before commercialisation.

Fast changing tech terrain

Complex software takes years to perfect and enterprise adoption runs slowly. Meanwhile the technology landscape continuously evolves rapidly. By the time systems are battle tested internally and ready to scale out commercially, cutting edge techniques may have already shifted.

There is no one size fits all

Accounting finds itself at a pivotal crossroads as technology increasingly becomes the driving force shaping the client and user experience. At stake is nothing less than competitive differentiation and leadership.

Major firms universally recognise that software innovation can no longer be outsourced wholesale to third party vendors – some critical mass of R&D must happen internally.

Yet resisting the siren call of total self-reliance is equally prudent. Isolating completely from the vibrant ecosystem of accounting software vendors remains fraught with obstacles from the scarcity of specialized skills to fast-moving tech waves challenging long development lead times.

Where functions are clearly commoditising – from core bookkeeping to essential workflow staples – packaged solutions still often reign. The solution likely lies in a hybrid approach for most practices.

Key base infrastructure should remain bought, not built from scratch. But for truly differentiating capabilities around analytics, decision support, and customer experience enhancement – internally incubated systems allow greater customisation and market responsiveness necessary to stand apart as advisory services take center stage.

By focusing inward only on what really provides competitive advantage, accounting firms can balance internal technology investments against the richness of an increasingly vibrant vendor solutions marketplace – blending the pros while mitigating the cons of both approaches. Those adopting that balanced perspective are most likely to lead their industry into the digital future clients now demand.