[QQ]Once upon a time, financial software was little more than the computer equivalent of the office clerk: a way of cutting down on paperwork and speeding up the number crunching process. Lately, though, financial systems have started to take on a new role in the organisation. Through a combination of market and technology changes, financial applications are becoming part of a general move towards using information strategically.[QQ] Ask financial software suppliers what their customers want, and the same key themes emerge: better information to help them run their businesses more effectively; flexibility to keep up with changing conditions in a dynamic business climate; and support for global operations, through both multicurrency and Euro support.[QQ] “Customers want to cut their costs, of course, but most have already achieved that through automating their financial systems,” says Nick Caplan, managing director for Europe, Middle East and Africa of Walker, an enterprise software supplier. “Only in the public sector are customers still looking at financial systems as a way of eliminating rekeying. Elsewhere, the key drivers are information and knowledge, and e-commerce.”[QQ] According to Matt Muldoon, regional channel manager at Epicor: “The ultimate aim for every accountant is to go home at 5.30. They spend 80 percent of their time doing unproductive administrative work, and the remaining 20 percent is where their training comes into play and they make business judgements. We’re helping them make better judgements by giving them better information.”[QQ] The drive for more and better information has had two effects on finance software. First, suppliers are building in more business intelligence features to let managers query the financial system, create their own reports when they want them without waiting for the IT department, and carry out in-depth analysis on large volumes of financial data.[QQ] For example, JD Edwards’ OneWorld software, released in 1996, features reporting features built into every screen, enabling management to drill down from high level summaries back to the underlying transactions. “With the old system, you’d have to call the IT department and three days later get a package of documentation back,” says John Brooks, technical manager of JD Edwards UK. “Now you can keep clicking with the mouse and get the information you need immediately.”[QQ] Second, suppliers are using the web to enable managers to make information more easily available to staff within the organisation, working at home or on the road, and to suppliers and partners.[QQ] As Muldoon puts it: “Another trend is the need for access to financial information when and where managers need it. The web is making it easier to pick up information at whatever point they need it.”[QQ] Companies today are operating in a market that moves much faster than it did even 10 years ago. New products and services are appearing in quick succession; competition is arriving from new directions; new global markets are opening up. And companies have to keep up with this pace of change, whether that means launching new products of their own, opening new branches, or taking over other organisations that can give them the new capabilities they need.[QQ] Financial systems for the new millennium have to be able to support change without major upgrades. “Managers have no idea what their business will be doing in five years’ time. They want a package that will last them five to 10 years, regardless of changes such as mergers and acquisitions, and which won’t turn into electronic concrete,” says Brooks. “They need the ability to radically change their business. If their general ledger can’t adapt quickly, they’re going to lose business advantage.”[QQ] Parameter-driven financial applications that can be easily adapted to deal with different currencies have been available for some time, and the trend towards more easily-modified software is likely to continue.[QQ] A key selling point of Damgaard’s Axapta – the company’s new generation of ERP software – for example, built from the ground up at a cost of around £20m, is its extreme flexibility. Written using object-oriented methods, nearly every aspect of the package can be modified and new features added in without disrupting the system as a whole.[QQ] From a consultancy point of view, the need for constant change to a company’s business systems will mean a different approach to working with clients.[QQ] To get a payback from their investment in financial systems, companies are now looking for shorter implementation times, and in the long run this will probably reduce the amount of large-scale implementation projects.[QQ] But offsetting this, there is likely to be a rise in the number of ongoing projects modifying business systems to meet changing market requirements.[QQ] According to consultancy Benchmarking Partners, companies only get around 4-6 percent of the full possible benefits of a new system when it goes live. That leaves a lot of scope for consultancies to add value to the system over time.[QQ] “Consultants have traditionally done big one-off projects which didn’t always work,” says Brooks. “But if you can get a project in quickly and on budget, there’s scope to keep working with the customer and adding value to the system over a longer period. There’s scope to customise the system before and after it goes live.”[QQ] Internet technology is taking off fast in enterprise software because it caters for so many of the underlying business systems requirements companies have. It has something to offer in terms of improving information flow, increasing flexibility, and supporting internationalisation.[QQ] With the advent of the web, anyone who needs online access to information from the financial system can be given it via a simple browser, with no need for special software running on their PC. This opens up the financial system to people throughout the organisation – not only in the office, but also at home, or in a hotel room via the public Internet.[QQ] Any financial software supplier of any significance is now in the process of adding some level of web support to its product. For example, Epicor has web-enabled its Platinum financial applications with tools such as Era.net, which allows employees to query Platinum over the Internet, and Crystal Info, which makes it possible to schedule reports and publish them in HTML Web-readable format.[QQ] Other companies, such as Systems Union, are looking at using Internet e-mail to provide more usable financial information. The new version of SU’s Vision reporting tool includes the facility to automatically e-mail selected people according to certain criteria; for example, if a client goes over their credit limit, it could e-mail their accounts department asking them to get the account back in credit it, or ask their suppliers to stop supplying goods until the situation is rectified.[QQ] On the internationalisation front, a web-based e-commerce system linked into the company’s back-end financial systems means that an organisation no longer needs a country office to sell products in that country. “A lot of organisations, especially in the retail sector, will find that at very little expense they can get a sales presence in other countries – particularly once the euro comes in and makes it easier to compare prices,” says Brooks.[QQ] It’s still early days for adoption of web technologies and e-commerce in Europe. “We don’t yet see the snowball rolling down the mountain; uptake of e-commerce is very patchy outside the US,” says Julian Harper, UK managing director of Systems Union. “But once the Year 2000 issues are out of the way, this time next year we think it will be a very real driver in the market. We also strongly feel that for UK businesses the euro, as the world’s first electronic currency, is a real opportunity to leapfrog the competition.”[QQ] As well as web-enabling their products, financial software suppliers are looking at ways of building links between their own back-office systems and the web-based shopfronts, so that orders can be processed and accounts kept electronically.[QQ] As more companies look to integrate their financial systems into an e-commerce solution, there will be expanding opportunities for consultancies to help them visualise how the Internet could help their business, and adapt their business systems accordingly.[QQ] “E-commerce potentially means a big shift in the business model,” says Harper. “Companies are going to need consultancies to help them see how to make the most of it. We’re talking about something more proactive than change management here – it’s a question of helping companies think about how they can change.”[QQ] The web is enabling companies to extend their markets beyond national barriers, accelerating a general trend towards internationalisation.[QQ] Which is why it’s vital that financial software suppliers offer their customers the ability to trade in euros now, even though the UK has no immediate plans to join the single European currency.[QQ] Suppliers report that their large customers are asking for Euro compliance now, because even if they aren’t legally obliged to trade in it, many of their own customers are demanding it.[QQ] “We’re seeing massive interest in the euro,” says JD Edwards’ Brooks.[QQ] “It’s not as if you can wait and say, we’ll go into Europe next month; most of our customers are multinational, and hence already trading with people in the euro zone, or at least starting to plan for it now.”[QQ] Further down the company size scale, many SMEs do not yet need or want euro support in their financial systems, but suppliers predict that this will change over the next year, once millennium compliance work is finished.[QQ] “It’s not yet taken off,” says Andrew Munday, product marketing manager at SAP. “For example, I was talking to the owner of a UK manufacturing company who was miffed because he’d put a lot of effort into being able to trade in euros but hadn’t had a single request to do so; and another UK company had had a letter from a Belgian supplier asking it under no circumstances to do business with them in euros. But it won’t last,” he predicts. “By January 2002 when the euro notes and coins are in circulation, any UK company must be able to trade in them. The euro is already regarded as the currency of Europe, and 60 percent of UK exports go to Europe.”[QQ] “We expect to see quite significant euro demands next year,” adds Guy Tarring, marketing director of Computron. “We expect a significant upturn then, especially in financials. We see the euro as a major opportunity for best of breed as opposed to ERP solutions, because people will want to put in solutions quickly, looking for deep, specific functionality, rather than moving towards an all-singing, all-dancing enterprise solution.”[QQ] Many financial software suppliers are suffering from the market slowdown that started to bite in the first quarter of this year, as companies completed their Y2K projects and sat tight to see what the millennium would bring.[QQ] Even before this, suppliers operating in the high end of the market were starting to run out of prospective new customers, and are now eyeing the midrange market in search of new blood. SAP and Peoplesoft have both brought out cut-down versions of their software (though as yet Peoplesoft’s is only available in the US) aimed at small to medium sized enterprises.[QQ] For example, SAP partner Plaut is offering a preconfigured version of R/3, plus consultancy, implementation and support, at a fixed price – and is implementing it in eight to 12 weeks rather than the months or years taken for a traditional SAP implementation.[QQ] But Harper is sceptical about how well high-end packages will really adapt to the mid-range market. “Medium-sized enterprises want rapid return on investment, which means rapid installation and commissioning times.[QQ] To do that you either need a solution specifically engineered for mid-market needs, or you take a high end solution and limit it in some way – for example, you take out a standard template for the system which makes it inflexible. High-end packages won’t fully meet the needs of midmarket customers until the suppliers completely re-engineer the products.”[QQ] Muldoon agrees that “packages like R/3 model like jelly but set like concrete. Mid-range products are more like modelling clay, because they’re catering for mid-range companies which tend to be in a constant process of change.”[QQ] Competition in the mid-range financial market is set to heat up post-2000, and we can expect to see a flurry of mergers, acquisitions and shakeouts among the numerous suppliers currently operating in that sector. Meanwhile, one of the challenges for consultancies is to find ways of working with mid-range package vendors as well as the JBops, aka the Big Five of the ERP world: JD Edwards, Baan, Oracle, Peoplesoft, and SAP. As part of this, they’ll need to think in terms of gearing their processes towards more but shorter implementation projects, reflecting the midrange market’s greater cost-consciousness and lower complexity.[QQ] As Harper cynically puts it, “Changes usually mean money for consultants. In implementation, we’re already seeing a shift of emphasis to the mid market, given that that area is growing far more rapidly than the high end.”[QQ] However, as financial software companies regroup and consider their strategy, consultancies may find themselves in competition with suppliers for service revenues. “I think we’ll see an increase in consultancy and services revenue, and a reduction in the proportion of licence revenues,” says Caplan.[QQ] “We already do most of the pure implementation consultancy for our products and an increasing amount of business consultancy, though we stay out of the very strategic end. And yes, I suppose that for pure systems integration work we will be in competition with the consultancies, though the reality will probably be that it’s more of a partnership, because their skills are complementary to ours.”[QQ] Candice Goodwin is a freelance journalist.
The drive towards a fully digital tax regime is an admirable one, but mandation is simply wrong, according to one of the UK's most senior tax technology practitioners - Paul Aplin
Barclays has partnered with accounting software company Xero to provide businesses with access to transaction data through its direct feed.
Government's estimate of a £400m admin saving from Making Tax Digital is way off - and is instead a huge cost burden, warns Lamont Pridmore chief executive Graham Lamont
Xero unveiled its expanded global partner programme at Xerocon South, the accounting technology conference in Australasia