Ahead of this month's Softworld exhibition, FD's can become preoccupied with seeing their software vendor being gobbled up. Our reporter looks at how to protect finance functions from the ravages of IT consolidation
Apparently accountants don’t like change. Processes are followed hour by
hour, week by week and decade by decade with strict rigor.
Accounting software provides the engine for much of this work. Once
purchased, businesses tend to keep their applications for as long as possible
often using the same software for five to ten years or beyond.
Accounting systems are expensive to select and implement and the process is
painful. Budgets are stretched, timescales not met and the time taken to push
through the project can cause a significant distraction to the day-to-day
running of the finance function. The last thing most finance functions want to
do is change systems.
Customers therefore hope for stability with their software vendor and that
their product continues to do the job required of it.
However, the accounting software environment is far from settled. In the
early 1990s I was involved in a survey of accounting software packages with
ACCA.
There were around 1,000 respondents and the results showed they were using
nearly 300 different products.
Today, the picture is very different. Over 75% of the products named in the
survey have disappeared from the market. Some have shut up shop, others have
been acquired and the user base upgraded to other systems.
Sage has led the acquisitions table in volume having made 35 major and many
more minor acquisitions since 1991. Oracle has snapped up a number of vendors
including JD Edwards and Peoplesoft.
Microsoft has taken over Navision, Great Plains and Solomon. Infor has added
a raft of products including Pegasus and Systems Union. Agresso is currently
trying to acquire CODA and so the list continues.
Despite this consolidation there are still hundreds of different accounting
software applications on sale and in use globally, and many new players are
entering the market.
As technologies emerge, vendors struggle to adapt/rewrite their software to
work in the new environment. Computer platform DOS saw the birth of the mass
market SME accounting application.
Windows led to a raft of new products. Web based solutions and SaaS (Software
as a Service) is seeing the birth a whole new range of solutions including
products from SAP, NetSuite (set up by the founder of Oracle Larry Ellison) and
Oracle itself.
Why are all these acquisitions being made? Purchasers tend to buy accounting
software Companies for their user base.
Once a package has gained a significant number of customers the recurring
revenue can be highly profitable. Vendors who cut back the research and
development costs and reduce marketing/support expenditure can make a lot of
money from the recurring licence fees.
Unfortunately the end user can suffer as a result of an acquisition.
Reductions in R&D expenditure means that the product will struggle to keep
up with technology developments and changes in legislation. Service/support
levels can reduce and prices increase.
Some vendors attempt to migrate customers post acquisition to another product
in their stable. This can be a painful process for the end user and the
functionality of the new product may be very different from the product already
being used. As a result, customers often take the opportunity to review other
suppliers’ software, if forced into this position, and so vendors have become
more wary of taking this approach.
Microsoft and Oracle now have several products in their stable and are both
trying to create a new generation of product and a ‘seamless’ upgrade path for
their existing users to this new system.
Many in the industry are skeptical of this approach. Both Microsoft and
Oracle’s current applications are very different in functionality and it is
difficult to see how they can each build one new product that will meet the
specific needs of all of their current customers.
It is very difficult to predict where the market will go in the next decade.
For example, rumours have frequently circulated, albeit with little concrete
evidence, that Sage may be the subject of a takeover bid. If a giant like this
could be potentially bought it leaves most public and private vendors vulnerable
to an offer they cannot refuse.
How to handle ever-changing software suppliers
• Develop your in house skills in the application you are using so you are
less dependent on outside help. Invest in training on your software and try and
have ‘three deep’ cover for the product ie a minimum of three people who really
understand each aspect of the application.
• Join a user group and share your knowledge and experience with others. User
groups can also exert pressure on suppliers to improve their support if service
levels drop after an acquisition. If a user group doesn’t exist create one.
• Build close relations with your supplier – particularly the technical
teams. If your supplier is acquired these contacts could be a key point of
contact for future help.
• Take time to understand the database structure of the package you are using
and the import and export capabilities. This will help you find work-arounds for
functional weaknesses in your application and to potentially bolt on and develop
solutions that will address issues you have in the future with your product
• Automate the interface with third-party applications such as Excel and
report writing software. Consider using these tools in place of the vendor’s
interface for analysis or budgeting etc. They may be better than the vendor’s
own product and make you less dependent on your supplier
• When purchasing a new application weigh up the benefits of buying a product
that has a reseller channel. Resellers spread the expertise in a particular
application and if the vendor struggles to provide support you will have a
choice of other organisations that might be able to help you
• Talk to the press -Accountancy Age for example! If you do have problems
with support post an acquisition. This will put pressure on a supplier to
address the issues you have
To voice your IT concerns go to
http://forums.accountancyage.com
John Tate is a CIMA accountant. He is the IT adviser to
the Charity Finance Directors Group, a visiting lecturer at CASS Business School
and a director of ChangeBASE Ltd