SME technology special: bringing services out of the dark
Application service providers can offer SMEs greater access to core services online
Application service providers can offer SMEs greater access to core services online
The internet is profoundly changing our working practices and the established
procedures, which firms have long used to access accountancy services, are not
immune from this relentless disruption.
The latest online buzz is around the delivery of core accountancy services
via an application service provider model. This involves provider firms setting
themselves up as ASPs and offering clients direct access to accountancy services
and software over the internet.
The type of client companies that are being targeted by these emerging ASPs
are typically small and medium-sized firms that do not have the resources to
hire in-house accountants. In fact, if the accountancy ASPs are to be believed,
the days of small firms submitting their annual accounts in a shoe box are soon
be consigned to the dustbin of accounting history.
Embracing the new
Traditional accountancy software providers are redesigning their programs so
that they can be offered directly to end-user clients by accountancy firms
acting as ASPs. Paul Booth, technical manager of the ICAEW’s IT faculty, says
there is little uptake of ASP-based accountancy services based on such software
in the UK currently, but expects the situation to change during the next two or
‘There is every reason to expect that the provision of online accountancy
services will grow as there are clear attractions to certain kinds of
businesses, particularly small businesses. Such firms, which are too small to
have their own accountants, do not need to worry about software upgrades or
indeed maintenance of the software or the platform that it is running on,’ says
Neil Hamper, a chartered accountant and former chairman of the Federation of
Small Businesses’ taxation committee, says that the ASP-based accountancy
services market will be kick started by increasingly prevalent broadband
internet connections that are helping small firms to wake up to the potential
benefits of the online world.
‘We will increasingly see accountants offering their clients online access to
their systems. But I see no evidence that this has taken off yet. When this
technology has been around for a few years and has been tried and tested we
expect it to take off,’ says Hamper.
Although the ASP model remains in its infancy, the potential benefit of using
an online accountancy service for small businesses is, according to Hamper,
‘absolutely intense’. By putting financial data into an online system on a
regular basis, staff running the client business are able to get much more
information about the client’s financial position than would have been possible
previously when accounts are only submitted once a year. This, Hamper says,
allows the accountant to offer value-added services beyond the traditional
annual preparation of accounts.
‘The advantages of having access to real-time data and figures are
tremendous. What is going to happen is that the migration to online services
will allow not just the larger small businesses, but even relatively small and
growing business that are prepared to pay for a value-added service, to benefit
from having a sophisticated management accountancy service which they would not
otherwise be able to afford,’ says Hamper.
‘The client companies will be doing most of the donkey work putting in their
financial data regularly and, as a result, will be able to sharpen up their
financial planning considerably. The turnaround time for their year-end figures
will be reduced, but they will also be able to undertake regular financial
analysis before their year-end period and use the data to optimise their
Same but different
This view was echoed by Clive Longbottom, service director at independent
analyst firm Quocirca. However, he believes that it is important to make a
distinction between accounting services and book-keeping. ‘I do not believe that
the main annual accountancy function will work well on an ASP model for end-user
clients. If there is any possibility of accountancy software being translated to
the ASP model, the main customers for such services will be the firms of
accountants that will buy their service from the service providers. While the
relationship between the end-user, small business clients and their accountants
will remain much the same,’ says Longbottom.
‘It really comes down to making the differentiation between book-keeping and
accounting. Virtually all small and medium-sized companies outsource their
accounting end-of-year books, which is done by their firm of accountants. This
will continue in this way for firms that cannot afford to employ an accountant
in-house. This needs to be separated from the book keeping day-to-day financial
work that most firms will do in-house using basic software packages.’
According to Longbottom, services offering hosted book-keeping over an ASP
model are much more compelling for small firms. This allows the clients to put
their invoices, expenses and so on, into the software that is hosted externally
by their accountants. This means that their financial data will always be up to
date and accessible to the companies and their accountants. This makes it
possible to generate up-to-date financial reports in real time.
However, Booth points out that concerns over IT security remain a significant
factor inhibiting uptake of ASP accountancy services delivered over the
internet. ‘Firms must make sure they understand the risks involved. There are
very real concerns over hackers and viruses – all the things that are
commonplace and which firms should already have measures in place to counter.
Companies must do all the things that they should already be doing to mitigate
Andrew Yeomans, vice president, Global Information Security, Dresdner
Kleinwort Wasserstein adds: ‘I’d see these as yet another external service
provider/outsource arrangement, but with clear demarcation lines. So it’s little
different to any other web/e-business service. There’s no real need for tight
integration between networks.’
Given that these IT security concerns can be assuaged through basic good
practice, Booth argues that there is a bright future for ASP-based accountancy
services. ‘Accountants do not like being regarded as bean counters, but would
rather be seen as high-level business advisers. The ASP model is potentially a
win-win for accountants acting as service providers and their clients.
The client wins with much better financial data and the accountant wins by
selling value-added services.’
ButlerGroup offers the following advice to SMEs considering using ASP-based
? SLAs –What service level agreements are available? Consider the option in
light of the service or project being outsourced. Business-critical systems need
high levels of availability.
? SME Experience –What experience does the provider have in dealing with
? Vertical Sector – In some outsourcing situations it is important that
vertical sector expertise is available. Can the outsourcer deliver?
? Provider Expertise –How long a provider has been in business delivering the
type of services that are required will contribute to the changes of successful
outsourcing. Check the credentials of the individuals running the company.
? Technical Expertise –What technical expertise can the outsourcer
demonstrate among its staff?
? Flexibility –A provider must be able to adapt to changing customer
requirement, within the usual change management boundaries.
OUTSOURCED ACCOUNTANCY SERVICES
? Flexibility to access applications from basic book-keeping packages to full
accounting, general software and company secretarial services.
? Price – reduced and predictable overheads based on a fixed monthly fee.
? Ease of start up and ability to adapt quickly to business change.
? 24/7 real-time access to records.
? Access to technical expertise.
? Records archived off-site by ASP provider avoids necessity of storing large
quantities of paper to meet accounting regulations.
? Immediate access to up-to-date interpretation of new legislation.
? Develop a better relationship with accountant by more regular contact.
? Firms must have an established and efficient way of inputting or sending
information to accountants to make sure information is up to date and
comprehensive. As much information as possible needs to be captured
electronically to avoid any human error.
? Security still a concern – back-up arrangements, disaster recovery plans,
confidentiality agreements, accessibility, encryption.
? Need to draft water-tight SLA to govern relationship.
? Danger – or perceived danger – of loosing control of core systems.
? Additional charges from accountancy provider to deal with increased volume
and frequency of financial information.