But reluctance is rife. Few have taken the bull by the horns and many still appear to see the online revolution as little more than the latest business fad? It may come of some surprise to many – it should do – but mid-tier firms are still holding out.
Business development partners are fully aware that their firms can no longer expect to earn their bread and butter by offering purely traditional accounting services. Years ago, they will tell anyone who will listen, they became business advisers.
But, will those that think it is still too early to embrace e-business find themselves without even a burnt crust to nibble on? Or is it all just hype?
Most of the top mid-tier firms appear to believe that much of what the electronic age claims to offer for retail and other such businesses, does not apply to accountancy firms whose focus is on small and medium-sized companies.
Most firms have concluded that the way forward in the electronic age is not to develop wholly new services targeting new clients. Instead they need to offer value-added services online to existing offline customers. It is what is known as ‘enhancing the existing community’.
Grant Thornton, the UK’s sixth largest accountancy firm, is among the firms struggling with the vexed question of how to live life in the new economy.
‘How can we effectively take away from them (clients) the old fashioned accounting services that used to be provided?’ is a question that frequently passes the lips of Andrew Godfrey, head of growth and development services at Grant Thornton.
‘Most of the bigger firms have largely moved away from these types of services because of the sheer cost of servicing it.
‘The power (of the internet) is in taking problems away from SMEs and giving them advice and interpretation,’ he adds. But what about new services?
SMEs traditionally only trading in the UK now have the chance to offer their products or services to the whole world. These companies have adapted themselves to view their accountants as business advisors and not number-crunchers and that is the advice firms are providing. Nothing more it would seem.
‘Before, if a company with a turnover of £5-6m was considering entering the German market, it would have had to consider many risks, such as putting people there, stocks, sales trips etc,’ Godfrey says.
‘Now, however, one of the great things about business-to-business is that it enables SMEs to not just enter the German market, but the worldwide market and sell its wares really at very little cost; compared with a worldwide sales trip.’
The firm has adopted a two-pronged strategy to take forward its vision of e-business; what it can offer in terms of advice to businesses seeking expansion via the web and internet start-ups aiming for an IPO. This is the extent to which most mid-tier firms have gone.
It may seem that mid-tier firms are rather sluggish in their uptake of e-commerce, unlike the larger accountancy firms, but they vehemently argue their reasoning is founded on logic.
Various surveys over the past two years have indicated that SMEs have for many reasons been slow in integrating e-business. ‘The net to me is a means of bringing people together, communicating and selling yourself to the worldwide marketplace,’ says Godfrey. He compares the internet to the way the telephone changed business processes.
The firm’s ‘European Business Survey’ revealed less than rosy results for SMEs struggling to corner the electronic world.
The report polled almost 7,000 small and medium-sized businesses in 19 European countries, of which 1,189 were in the UK. The survey revealed that after almost two years since e-business kicked off in the UK a worrying 42% of UK SMEs do not have a website let alone an e-strategy.
Some 63% in Denmark are already online and 67% in Sweden. However, compared to France where only 39% of SMEs have a website, the UK isn’t doing too badly.
But, the development of a website is only the first stage to channelling the benefits of the internet. Of the 42% of SMEs online, 25% said their websites were updated annually and in some cases, less frequently.
Some 50% said they were not using the internet as a tool to advertise, buy or sell. This, according to most UK and US e-business consultants, is the greatest stumbling block. Many companies feel accomplished by having reached the website stage, believing it to be sufficient until they take the next big plunge, which many remain highly sceptical about.
‘The web is a huge bonus if you have a proper website and not just a brochure,’ says Godfrey. ‘This is the main issue for SMEs. It is difficult for them to get the right consulting help. There is a real shortage of good IT consultants affordable to these companies.’
Gary Boomer, founder of Kansas-based Boomer Consulting Inc, calls it the ‘brochureware’ stage. It is the first step in his five-step plan to establishing a fully functioning website.
The reasons Boomer claims the majority of UK businesses have not progressed past stage one is because of a lack of resources, vision, leadership and investment, among others. This, he says, applies to both business and accountancy firms.
However, this is not necessarily a bad thing because SMEs, until now, have not been ready to throw themselves head first into unfamiliar waters, according to Boomer.
Grant Thornton still does not, however, have a dedicated team of e-men to work on internal and external e-business strategies. It is all integrated within other service departments. But the firm sees no commercial gain to be had by developing a dedicated IT department.
The results from the Grant Thornton survey may bring comfort to PKF’s approach. ‘We take a much more personal approach. The bulk of our fees come from providing advice, I don’t see how we can get that service online. In practice, the sort of work we do is not conducive to online services.’
And it would appear that it isn’t only companies suffering for the symptom of the ‘brochureware stage’. In this respect Grant Thornton is leading the pack, if only marginally.
So far the firm has thrown its weight behind an online tax site. ‘We give a quote, if they like it they pay by credit card and then we give the answer. All very simple,’ explains Godfrey.
The site is the brainchild of Robin Rowe, a tax partner based in Grant Thornton’s Petersfield offices. ‘We’ve had great feedback. We get all sorts of queries, personal and business-related,’ says Rowe. ‘There are inquiries about shares and asset disposal, capital allowance and restructuring. And property queries have become very popular too.’
Foreigners setting up businesses in the UK also use the website, explains Rowe.
He freely admits to being a ‘net geek’, which has obviously worked out well for the firm. ‘I’m naturally interested in e-commerce. It’s all pretty simple really. It took me about three months to set up. I couldn’t believe no one had done it.’
Although the normal business advisory charges to clients will apply to e-commerce as well, charges will be reduced substantially through the use of the internet to produce the sort of ‘bog standard compliance products’.
‘The internet will drive those prices down, we expect,’ says Godfrey.
As for the future, the online area that interests the firm most is procurement.
‘We can offer our clients some of our purchasing powers, for example buying stationary and office furniture. SMEs don’t have the same purchasing power as us,’ he explains.
A survey commissioned by a new cross-industry online exchange revealed earlier this year that overall costs to UK small and medium-sized businesses could be slashed by as much as £24bn a year.
Firms however are facing stiff competition from other businesses trying to cash in on the internet goldmine. GroupTrade Exchange, which commissioned the survey, is targeting SME operating costs, which can account for between 30% and 60% of a company’s turnover and £32bn of expenditure yearly.
By any measure the market potential is huge. Given their caution, whether mid-tier firms are well placed to capitalise remains to be seen.
HOW OTHER MID-TIER FIRMS ARE REACTING TO THE E-COMMERCE PHENOMENON
By and large, mid-tier firms appear to be adopting a wait-and-see policy to the new economy. Most are doing something, but none appears to be a wholehearted supporter of the online revolution.
Pannell Kerr Forster’s annual partners’ conference in September this year concluded that it was only interested in services that ‘truly added value to our clients’.
‘E-commerce is on the management agenda, but we are trying to find a balance between ‘bucket-shop’ services and the advisory side of things,’ says Sheena Sullivan, business development partner at PKF. ‘We are watching with interest. But, we are not at all convinced that it is the way forward for us.’
BDO Stoy Hayward has joined forces with Oracle but it is yet to be convinced of the full benefits of e-business. ‘We don’t like the idea of offering off-the-peg solutions,’ says Peter Hemington, corporate finance partner.
The firm has three strategies relating to the phenomenon: providing profession service activities; providing knowledge which is a mixture of data and experience and the last and most important is providing wisdom. ‘Our business isn’t going to change that much,’ he predicts. However, he doesn’t rule out the firm eventually offering procurement services.
HLB Kidsons director of e-business, Nick Robinson, is more of a believer.
‘We have a strategy broken into three segments,’ he says. ‘The first layer is helping our clients get wired. We have formed a number of strategic alliances with other firms. And we’re reviewing our larger clients. We are proactively taking our ideas to them to gauge their response.
‘The second layer is internal efficiencies. We are trying to raise awareness internally to improve efficiency. We are looking at online purchasing, recruiting and booking courses online, among other things. As a firm we spend several million pounds a year on training, if I can reduce that via the internet, we can save big bucks. We are looking at distancing learning, delivering internet courses to employee’s desktops. They can do their courses at their desks rather than packing them off to hotels.
‘The third layer is physical delivery, such as tax online and our client zone as we call it, are some of our strategies. We are also looking at delivery services in corporate finance, forensics and insolvency. We are looking at every aspect of our business to improve our services.
And Robinson is dismissive of those who are not encompassing e-business.
‘I think these guys are in for a shock,’ he says. ‘If they don’t get their eyes open soon, they’ll miss the boat.’
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