EXPLODING SOFTWARE MYTHS
Accounting software is by far the most widely used financial application by businesses today.
Accounting software is by far the most widely used financial application by businesses today.
Research conducted by the ICAEW’s IT faculty estimates that 86% of organisations already use accounting software of some description.
But as the software industry looks to boost its fortunes on the back of international financial reporting standards and an increased focus on corporate governance, the question is: ‘Are increasingly savvy software buyers happy with the software products on the market?’
The accounting software industry is awash with rash generalisations about how products are used and reasons why companies select one product over another.
We look at the facts – based on in-depth research of more than 1,000 software users conducted for the ICAEW – to explode 10 common financial software myths.
1 ‘Accounting software is critical to running your business’
It is true that most companies would describe the financial applications they run as core to their business. Not only is your accounting software the hub for all financial data, it is also the central repository of information about customers and suppliers.
But alarmingly, almost one-in-eight companies has experienced a business-critical failure of their business software over the past two years, according to ICAEW research.
So it’s not a myth that software is critical – what is critical is that the system failures that consistently cost businesses time and money are addressed.
The business-critical failures cited could be down to users – but the vast majority of companies replying to the survey blame the software.
Even if a lack of training is to blame, it reflects badly on the usability of the software and a negative perception will have an affect future purchases.
Reliability is in danger of being overlooked by the supplier community.
Exchequer Enterprise may have the highest approval ratings – equal to those of Sage Instant for performance, ease of use and initial service – but its overall satisfaction score was lowered by one of the poorest rating for reliability.
This is also reflected in one of the highest reported occurrences of business-critical failure.
2 ‘Niche players are more likely to understand my market’
The reality is that the businesses and financial software market is extremely fragmented, boasting dozens of products, each used by a relatively small number of people.
Despite being the most widely used accountancy product among the ICAEW’s sample of businesses, Sage Line 50 is only used by 28%, with Sage Line 100 coming second with 6% of respondents.
Sage clearly dominates the market with the amount of businesses using its products.
But despite ongoing consolidation, the market continues to be made up of a large number of players serving small proportions of the marketplace.
The ICAEW survey revealed that 38 products serve 1% or less of users.
3 ‘IFRS isn’t really a software issue’
Although it is true that introducing international financial reporting standards is a process, rather than a technology issue, the software industry’s promotion of IFRS as a good reason to upgrade applications appears to have paid off.
IFRS is the most frequently cited reason for enhancing or replacing software in the next two years (12%), with more than twice as many respondents as XBRL (5%).
Of the sample, it is large businesses that particularly recognise the importance of these two, the figures rising to 17% for IFRS and 7% for XBRL.
Small and medium-sized businesses favour greater flexibility and more features as reasons for upgrading.
There is also a sector split, with a higher than average proportion of IT/telecoms sector respondents seeing IFRS as the reason to upgrade (24%), followed by the agriculture and energy industries (21%) and the government/public sector (18%).
4 ‘Spend more money and you’ll be happier with the product.’
The research by the ICAEW’s IT faculty analysed user perceptions of software performance, reliability, ease of use, quality of initial service from their software supplier and ongoing support and maintenance to gauge satisfaction ratings.
Software suppliers targeting the lower end of the market certainly top the league of user ratings.
Five out of 14 products listed are used mainly by micro and small businesses, and all tend to feature in the top half of the league.
Sage – the market leader in terms of usage by business unit – leads in terms of satisfaction. And both Sage Instant and Sage Line 50 are most likely to be recommended by users, with more than 90% saying they would recommend the products.
With the exception of offerings from Coda (Financials and Dream) and Exchequer, products aimed at the higher end of the market tend to provide less user satisfaction.
5 ‘You expect software from large companies to be inherently complicated’
The best-rated products catering mainly for medium-to-large businesses are the two Coda products.
In contrast, Oracle and SAP R/3 have a score of 70 overall and are least likely to be recommended by users (57%).
Users are less satisfied with SAP because it is not as easy to use, and because of the initial service.
Oracle Financials, meanwhile, has the lowest total satisfaction score and the poorest ratings for all of the attributes tested, particularly ease of use and initial service.
Of respondents, 63% say they would recommend Oracle Financials.
6 ‘Integration is king’
Listen to the software supplier community, and you’d think the utopia for businesses – both large and small – is the ability to link disparate systems.
As the ‘integrated best of breed’ versus ‘software application suite’ debate once again goes full circle, the opportunity to avoid rekeying data continues to elude users.
Certainly, few claim to have succeeded in linking their systems, despite the talk of ‘plug and play’ functionality and ‘out of the box’ integration.
Take payroll, for example – 83% of respondents say their payroll system is not at all integrated with their accounting system.
A pitiful 3% say data is passed between their payroll and accounting applications completely seamlessly and automatically.
That is not to say integrated systems aren’t on the wish list for many companies.
But the reality is that they are technically too complicated or not a sufficient business driver for most companies to worry about.
7 ‘Users want systems that turn financial data into business intelligence’
Finance organisations have made great progress in shifting from ‘policeman’ to ‘strategic business partner’ as their focus moves from transaction processing to decision support and control.
The onus may be on finance departments to produce timely and accurate data to the business for reporting purposes, but a large number of ‘don’t know’ responses when quizzed about their use of business intelligence products indicates many users are confused about just what business intelligence actually means.
It is also clear that the market for reporting tools is extremely fragmented.
The three leading suppliers are each used by less than 10% of respondents.
There is also widespread use, particularly among smaller companies, of in-house applications including spreadsheets and databases.
Four out of five respondents say their business intelligence system is not integrated with their accounting system.
The market appears to be fragmented, with the three leading suppliers – Cognos, Business Objects and Sage Winforecast – each boasting less than 10% of usage, according to the ICAEW survey.
8 ‘Companies only change poorly performing products’
There is no obvious correlation between customer satisfaction and when companies replace their software.
Read between the lines and it seems that software products have a life cycle, regardless of how good or bad they are.
Those products used for less than two years also boast higher than average proportions of users with no intention of switching products.
Intuit Quickbooks is a case in point – it is the product most respondents to the ICAEW survey have used for less than two years.
Its satisfaction score was a respectable 75, but a staggering 94% of users say they have no plans to replace the software.
Pegasus Opera is the product users are most likely to switch from – almost a quarter of Pegasus users say they intend to move within 12 months and a further 12% estimate they will change products within the next two-to-five years.
Sage Line 100, Coda Financials/Dream and Systems Union SunSystems followed as the next most likely products to be replaced. 9 ‘Dissatisfied users will change supplier at the drop of a hat’
Overall and across all products there are high proportions of users (80%) with no plans to replace their accountancy software.
Even though Oracle Financials and SAP R/3 performed worse in terms of satisfaction, their users still intend to stay with the software.
Obviously there are likely to be a whole raft of contributing factors. For example, the cost of replacing these products may be too great for the larger organisations using them, and they may be willing to work with the suppliers to resolve any issues.
Those companies that have been using products for less time are more likely to persevere with product, regardless of how content they feel. A staggering 94% of Quickbooks users say they have no plans to replace their accountancy software.
Sage Line 500, Exchequer Enterprise and Sage Instant also have a higher proportion of users than average with no intention of switching products – and most of the respondents have used these products for less than two years. 10 ‘I’m a small company. If problems emerge, it won’t cost much to sort out’
With more than one-in-10 companies saying they have experienced a business critical failure of their accounting software, making sure you select a product that addresses your business issues, and having the right mechanisms in place to deal with problems, are key requirements for software buyers.
‘Even if an invitation to tender or a request for information is totally inappropriate, it’s still an important discipline to note down for yourself what you intend and expect the software to do,’ says Paul Booth, technical manager at the ICAEW’s IT faculty.
‘For a start, you’re less likely to be disappointed, even at the lowest end of the market.’
Asking fundamental questions about return on investment are as valid for a £100 software product, as one costing £1,000.
Blanket assumptions about return on investment are dangerous.
But software costs are only part of the story – it is easy to forget hidden costs, such as hardware upgrades, internal consultancy and staff disillusionment, due to software reliability issues.
‘Energy invested in the selection process is time well spent’ says Booth.
‘And it avoids fire fighting later on.’