PracticeAccounting FirmsTo buy or not to buy …

To buy or not to buy ...

In an exclusive interview with AccountancyAge.com, leading technology writer Dennis Howlett looks at whether or not it is a good time for companies to be spending their hard-fought budgets on acquiring new software.

Doom mongers say gloomy economic conditions suggest now is not the time to be buying software. Others say the accounting software market is dead so be careful where you buy because your supplier may not be around next year. Still others say now is the time to screw software vendors into the ground on price.

All of these statements have the ring of truth. Certainly those at the top end of the market will hesitate as IT budgets come under scrutiny but I’m not so sure about the mid-range. This is a market where hard bargains are struck but where pragmatism is the watchword. There could be further consolidation over the coming year so selection care is needed.

In a curious way, current conditions play well for those vendors that traditionally have been less aggressive in their marketing. Frequently, these vendors – and here I am thinking of Epicor, Scala, Navision and Exchequer – have not had the marketing budgets that allow them to compete with the ‘big boys’, despite their owning either a rich product set that compares well with more powerful vendors.

Analysts talk about technology base and vision as key criteria but quite frankly these are red herrings. In the so-called ‘back office’ of accounting it really doesn’t matter what the technology looks like provided it can scale to meet the number of anticipated users and uses a database capable of being accessed by non-financial users and other applications.

I have long argued that as long as debits remain on the left and credits on the right, it is a moot point as to which package one acquires. That’s not true where one has international considerations but the vendors mentioned above have solved those problems in the face of the upcoming conversion to the euro.

Vision is a no-no at the moment as top-end enterprises reel from the weight of unused software they acquired in the late 1990’s in the hope that consultants would turn the vendor’s dream into user reality. And it is here, where hesitancy could trickle down to the mid-range.

Companies like those mentioned above provide a lot more than accounting, supplementing their suites with customer and supply chain management or ready access to e-commerce style functionality.

There is a cogent argument for going with a vendor that offers more than recording transactions on the principle that a single throat to choke makes for an easier target when things go wrong. It is one of the reasons that SAP, PeopleSoft and Oracle have been successful. I would argue that mid-range vendors have plenty to offer, even where functionality is not as deep as the SAP’s of this world.

Why? First, a mid-range suite is not going to break the bank. Budget on about Pounds 50-75,000 for software and services and you won’t go far wrong.

Even smaller companies with profits around Pounds 500,000 could justify that.

Second, ongoing maintenance will be a fraction of the cost associated with large systems. Third, the speed with which you get results in the mid-range makes the large players look pedestrian. Finally, there is the issue of readiness.

If my discussions with mid-sized enterprises over the last three months are indicative of reality, then these organisations have a long way to go before they are ready or willing to embrace the e-world. This provides the opportunity to assess need in a measured manner, picking off functionality that makes sense to implement over the next 12 months.

Which just leaves price negotiation.

Everyone wants a good deal but inevitably there are no free lunches.

Screw the supplier on software licensing and you’ll pay in services. There are discounts to be had and deals to be done, but when you bear in mind that the license usually represents around 10% of the lifetime cost of a software application – is it really worth making the vendor’s life more difficult than it already is? I think not.

  • Dennis Howlett is a freelance technology writer and one of the software judges in this year’s Accountancy Age Awards for Excellence.

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