Accounting software is something just about every business needs. It is also one of the few areas of IT where the channel is almost universally respected by vendors. Yet, although the soil is fertile, tilling it is not easy work.
This is partly because most users see accounting software as a necessary evil. "Everybody who doesn't have a fetish about numbers hates their accounting software, whatever brand it is," explained Tim Berry, president of business planning software vendor Palo Alto, and a long-time reviewer of accounting software.
"They'd like to switch, but they don't because accounting software is pretty much proprietary in its approach, so switching involves lots of pain."
It can take a big company a year or two to replace its accounting software, and many users are still content with old DOS systems, not least because the platform is so reliable.
Gary Waylett, managing director of Eclipse, a Systems Union and Great Plains reseller, said: "My feeling is that we're heading towards a 'hooked for life' model. Unless there's a compelling reason to change, it's difficult to persuade customers to switch vendors."
Business software analyst Dennis Keeling suggested that the advent of client-server computing in the 1990s and then the millennium bug panic prodded many organisations into updating their accounting systems.
"But there's nothing on the horizon now that provides a compelling reason for people to junk what they already have, unless the UK adopts the euro," he said.
Replacement cycles for accounting software are long - between five and seven years - so the millennium bulge could cause a hiatus in sales until the middle of this decade, even without the current economic trough.
When they do need new software, users are more likely to buy an upgrade than switch vendors.
Conservatism mitigates against the small fry. "Resellers are finding it better to stay with big-name vendors because they are easier to sell to the customer," explained Keeling.
The barriers to entry are high, and few new vendors are successful. General accounting vendors are doing reasonably well, as long as they have cash flows from support and maintenance.
But small vendors that focus on specific industries are struggling. A decade ago, there were perhaps 700 accounting software packages on sale in the UK. Now there are about 100, and consolidation is reducing that number every year.
Keeling divides the accounting market into four tiers. At the top are giants like JD Edwards, Oracle, PeopleSoft and SAP, whose enterprise resource planning (ERP) software embraces accounting as part of a heavyweight, integrated solution.
The second tier is the corporate 'best-of-breed' standalone vendors, including Agresso, Coda, Exchequer, Squaresum and Systems Union.
Tier three, catering for mid-range companies, is where most of the interest is, largely thanks to the entry of Microsoft.
The Seattle giant has bought up Great Plains, Navision, Solomon and Damguard, and is ultimately expected to roll these accounting vendors into a single, global product line, beginning with customer relationship management (CRM) modules next year.
This could be good news for the channel given Microsoft's channel-focused stance, but there may have to be some consolidation within the four original companies' existing channels.
David Rankin, managing director of Great Plains and Exchequer reseller Tenon Technology, believes that some streamlining is inevitable. "Across the industry, there are too many resellers chasing too few deals," he said.
"For example, at this year's SoftWorld show in Birmingham, there were 24 resellers all trying to sell the same Microsoft products. Over time, there will be consolidation."
Microsoft's main tier-three rival is Sage, recently voted Business of the Year in the UK's National Business Awards. It has acquired a similar international network of products, such as Peachtree in the US. Other tier-three vendors include Access, Pegasus (now part of the Systems Union stable) and Scala.
Tier-four vendors, mostly selling sub-£300 packages to small and medium sized enterprises (SMEs), include Access, Intuit, Microsoft, MYOB, Pegasus, Sage and Simply Accounting.
Most customer activity is at the two extremes of the market. At the top, some international corporations are standardising on a single product, instead of using local products in each country. The trend could intensify once Microsoft's global offerings are on the shelves.
Vendors will need global channels to match. "We have 200 channel partners in 76 countries," stated Chris Bushnell, channel sales director at Systems Union.
"They're our key differentiator of global presence. Wherever customers want to go in the world, more often than not we have a local channel partner with local and industry experience."
The best-of-breed accounting vendors claim to be taking market share from the ERP vendors. Hugh Scantlebury, managing director of Systems Union and Exchequer reseller Foundation Systems, said: "The ERP players are finding things particularly hard at the moment.
"Wall-to-wall ERP is just not as attractive as it used to be. Fewer people are convinced about the returns on such a significant investment."
At the bottom of the market, many SMEs still keep their accounts on spreadsheets. There are opportunities to acquire new business here, and resellers are the ideal companies to acquire it.
"Resellers are absolutely vital in the SME market," explained Berry. "For SMEs, it is the knowledge that the reseller has of their business, rather than the software package, that's key to the sale."
When they have accounting software, SMEs do not always implement it properly. Alistair O'Reilly, representative at Access Accounting, said: "Small companies buy software off the shelf or online.
"We often replace such systems and all too frequently the packages have never been fully implemented, let alone gone live, before they are replaced."
Phil Gordon, UK channel director at Sage, pointed out that SMEs can be lucrative for the reseller. "SMEs often need hand-holding when making the decision to purchase, as well as continued support and guidance," he said.
"And once they see how useful their accounting software is, they are more likely to think about add-ons, such as payroll, e-business and CRM, and they will go back to the same reseller."
A tougher sell
Many users are becoming more discerning. "It is becoming harder to sell accounting software," said Bushnell. "Customers have been through the cycle a couple of times, they know what they want, and are more demanding than ever.
"Resellers need to deliver solutions via added-value services, local presence and vertical industry knowledge."
Vendors are starting to tempt customers with added extras, such as payroll, human resources, workflow and internet integration.
Simple report-writing functions are changing into analytics and business intelligence tools that can deliver key information to individual managers.
But, in terms of basic accounting functions, there is little to choose between the leading vendors, and this places more emphasis on the skills of the reseller.
"It used to be that a poor salesperson could sell an accounting system on its superior functionality against a better salesperson with an inferior product," said Waylett. "This has changed, because the products are so similar in functionality."
The more powerful accounting software becomes, the more resellers must develop skills to match. "A single, integrated accounts package today can do more than multiple bespoke packages could do a few years ago," explained O'Reilly.
"Resellers may need to be experts in business intelligence, as well as having experience in communications, the internet and exchanging electronic transactions."
Vendors expect their resellers to stand the pace. Sage launched a reseller training and accreditation programme at Sage Expo on 12 November, while Exchequer has had one for three years.
Paul Sparkes, channel manager at Exchequer, said: "Accounting software isn't a box-shifting operation. It requires an increasingly high degree of business acumen and experience, which not all resellers can supply.
"Good resellers keep up to date with industry developments and product innovation, and make sure they get all the training they need.
"Over the past five years we've had to reinvent ourselves to become a training organisation as well as a software house.
"And if vendors provide complete support for their channel, they have the right to expect equal focus and investment in return.
"We launched a rigorous accreditation scheme three years ago, which has really sorted the wheat from the chaff.
"Although it has meant a significant investment from our resellers, it's no coincidence that our most successful resellers are those which have shown the most dedication to our accreditation programme."
Business experience is essential, and accounting knowledge highly desirable, to the extent that many successful accounting resellers are offshoots of accountancy firms.
"Ideally you need a qualified accountant, who has worked as a financial director, then moved into a consulting role implementing financials and managing projects covering process re-engineering, and who is fully trained in solution selling and is an expert listener and communicator," said Waylett.
Another skill accounting resellers must acquire, whether in-house or through partnerships, is integration.
"There's increasing emphasis on delivering solutions by integrating best-of-breed products. Resellers will tend to become software brokers that will pull together solutions for their customers, and deliver all aspects of the software, services, support and customisation," explained Bushnell.
This will increasingly require resellers to work with multiple vendors.
"One product does not fit all, and having all your eggs in one product will restrict opportunities in an already tight market," said Rankin. "The trick is to have a number of different product offerings."
In future, the requirement for integration can only increase, as companies strive to squeeze more business advantage from their accounting systems.
Terry Redding, best practices director at business intelligence vendor Comshare, said: "We'll see more emphasis on linking finance to the wider corporation, with integration into other key operational systems taking priority.
"The traditional accounting/finance function will be pushed further out into the organisation for increased visibility and collaboration."
With most of the key players apparently fully committed to the channel - many exclusively so - accounting software is likely to remain one of the channel's core markets.
But as consolidation continues and margins on software decline, successful resellers will have to increase their value-added contribution, and work hard to hold their position.
"At Foundation, we provide CRM, professional services automation, payroll, human resources, e-business, e-procurement and advanced systems integration in a range of specific vertical markets," claimed Scantlebury.
"Whatever happens, the vendors understand and need the added value of the reseller model."
CASE STUDY: The Scotch Malt Whisky Society
Many of the hottest prospects for accounting resellers are small organisations that are outgrowing their entry-level accounting systems as their business expands.
The Scotch Malt Whisky Society began in 1983 as a private drinking club. It now has more than 24,000 members worldwide, sells about 80,000 bottles of whisky a year, runs regular events in Edinburgh and London, and owns four self-catering flats.
The Society wanted all this integrated into its accounting system, but its software couldn't cope. So it bought an integrated ACCPAC Advantage Series solution from ACCPAC reseller and Premier Partner Gamma Dataware.
The ACCPAC system integrates with Gamma's own LeisurePOS front-office marketing solution, written specially for the leisure and tourism industry.
The society bought several modules of LeisurePOS, including retail point of sale, stock and purchase order processing, membership, mail order, and bookings and event management. These integrate directly with ACCPAC Advantage.
"Integration avoids time consuming re-keying of data, and ensures that we have constant access to consistent, up-to-date financial information," explained Joan Saywood, the Society's finance director.
"It also allows us to control each separate service while giving us a unified view of the whole business. Much of the information from our various business areas used to be integrated manually at the end of the day.
"The ACCPAC solution streamlines our operations, enabling us to speed up bookings, sales order processing and new memberships.
"A live link from London to our mail-order and online business in Edinburgh gives us real-time updates of what purchases are being made, and lets us fulfil orders quickly and reliably."
As well as integration and functionality, improved management information and scalability were major requirements.
"ACCPAC Advantage is more than just a basic accounting package; it's a complete business management tool that lets us collate and analyse financial data from across the society," said Saywood.
"As we expand, the financial and business intelligence we get from it is of real value in forecasting and decision making. We're confident that the system will be able to grow with us."
HOW TO PICK A WINNER
Vendor Access Accounting suggests that accounting software resellers seeking likely prospects should target expanding companies that want to:
- Centralise more of their applications and processes.
- Make their software available to staff at home and on the road, or to customers using the internet.
- Deliver financial information automatically to a wider range of departments and staff, according to their needs and the company's business rules.
- Use IT to drive their business forward by, for example, looking for new customer relationship management, or planning e-marketing.
- Provide better customer service, reduce lead times and eliminate keyboard errors thanks to the electronic exchange of transactions.
- Use better business intelligence to target new campaigns or trim costs.
Various vendors suggest that there are good prospects in construction, manufacturing, services, healthcare, finance, retail and wholesale, as well as the public sector and in any organisation that rushed in and botched a new system during the millennium bug panic.
Access Accounting (01206) 322 575
ACCPAC (01753) 241 900
Comshare (020) 7349 6000
Eclipse Computing (020) 7680 0650
Exchequer Software (01202) 298 008
Foundation Systems (020) 8238 6400
Gamma Dataware (0141) 585 6338
Dennis Keeling (01494) 680 907
Palo Alto Software (020) 7610 9371
Sage (0191) 255 3036
Systems Union (01252) 556 000
Tenon Technology (01753) 754 600
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