Time to get real about IT.

Reality has caught up with the e-commerce hype in the professional services sector. The vision of a firm being able to work for a client exclusively over the net has yet to materialise, and even now it looks as if it is a long way off.

Nowhere is this is more apparent than among small accountancy firms.

Overleaf the latest Sage/Accountancy Age IT skills survey reveals that only 14% of accountants in small practices believe their clients expect them to deliver services electronically. It is a result borne out by the experiences of those practices that consider themselves to be at the forefront of adopting the new technology.

‘A lot of steam has gone out of the market in terms of how quickly clients would move to internet-based working,’ says Jeff Hartstone, partner at Bergman Kaprow Lewis.

‘We have focused on other areas, like using technology to make our accounts presentation more slick, rather than building up internet connectivity with our clients.’

Currently, for firms like BKL, the benefits of moving into internet-based service provision cannot be justified by the costs.

‘There was massive hype about going internet based, with many people worrying about getting left behind and jumping on the bandwagon. Lots of companies paid out money to have websites designed, and many, certainly in the profession, are not transactional, more like brochures.’

But BKL has gone some way to delivering services online.

At the beginning of the year the firm launched ‘Brasstax plus’, a service which allows clients to email specific tax queries with the guarantee that a consultant will reply within a fixed period.

The response includes a costing for carrying out any work that might be required.

This might not be the most sophisticated use of technology but it appears that clients currently are not fussed about how a service is delivered.

‘The hype was that everyone would adopt the internet as the standard way of communicating and transacting business. It is true to say that neither is true at the moment,’ says Hartstone.

A good example came with BKL’s online independent financial advice service, which was originally designed to operate exclusively over the internet.

‘We found that people wanted to look into the eyeballs of their adviser,’ adds Hartstone.

So instead, the firm moved to a ‘clicks and mortar’ approach which ensured first contact was made over the net, then was dealt with locally, and more importantly, face-to-face.

One of the biggest problems with using new technology to work more efficiently with clients appears to be the inability to ‘bridge the chasm’ between the early adopters of the technology and the mass market, particularly in the SME marketplace.

For some SMEs, even a computer could seem foreign, according to fellow BKL partner Jeremy Hyman, who recently stood down from chairing the UK200 Group’s IT committee.

But with a younger, more IT-literate generation coming through this situation is expected to change radically.

This will take time, however, with experts predicting a three to five-year time lag as the technology is there but the capability and expertise is not.

John Oates, chairman of the technical committee of the ICAEW’s IT Faculty, predicts that within five years most companies will be internet enabled, though there will always be a rump that will carry on doing business in a traditional way.

‘But these businesses will find themselves at a competitive disadvantage,’ he says.

The position could also change within accountancy practices. Oates estimates that between 10% and 15% of people in practice use internet-based technology but expects this figure to be reversed in the coming years.

One area which is predicted to grow but has yet to fulfil its promise is application service provision.

Application service providers work by hosting systems that clients can access through the web no matter where they are located, so a client can input financial data direct into a system which can then process the information for that client.

‘This is a modern version of what an accountant would do for his client 10 or 20 years ago,’ says Oates.

But growth has been held back by scare stories – clients have been concerned about security and other risks involved in allowing financial data to be processed over the internet. ‘Clients are scared to put all their eggs in one basket,’ he adds.

At a seminar at the National Accounting Exhibition in Birmingham last week, Andrew McIntyre, managing director of e-Carisma, a company that has developed a number of ASP-driven products for accounting functions, spoke about the benefits and opportunities of ASPs.

One of the problems for ASPs, according to MacIntyre, was convincing people to outsource their systems, especially some of their core IT operation, traditionally an in-house function. ‘But ASP is already here,’ he told delegates. ‘You log on to Yahoo! Mail everyday, or a similar web-based email service.

That is an ASP.’

One of e-Carisma’s products, eXpense, allows a company to process all its expense claims through windows-based applications accessible via the web, meaning that an employee can log on in any part of the world and update their expense claims. It is controlled by a central administrator and is password protected.

In the long-term, the idea is that ASPs take on the responsibility of handling ‘nuts and bolts’ functions, allowing a company to focus on its core business activities.

But there may be another major inhibitor to the growth of ASPs, according to Oates: speed and cost of internet access.

‘ASPs will mature within two or three years, but will never succeed while the cost of communications is still too high,’ says Oates.

The situation for ASPs sums up the issues for the whole of professional e-commerce service. After all the hype, there has been a healthy dose of realism. ‘But there is a danger of dotcom death – going from one extreme to another,’ argues Oates.

If anything the slowing rate of adoption, as the Sage survey reveals, is a reaction to the over-hyping of the internet and the realisation that the new technology will not, after all, change the world by next Wednesday.