Break the pound barrier

No accounting package has it all, compatibility is a no-no and the year 2000 problem is causing a glut of upgrades. Simon Meredith reports.

The concurrent developments of the year 2000 - EMU, Windows and theyear 2000 problem is causing a glut of upgrades. Simon Meredith reports. internet - have compelled all software vendors to re-evaluate their product lines. The need to keep changing products has made it difficult to keep up. At the same time, users have become more demanding, more aware of long-term costs and the need to make the investment last. Gaps have been opening up in the middle ground.

'There has been a lot of dissatisfaction with what has been available,' says Yash Nagpal, MD of Navision. 'With legacy systems users cannot get changes done quickly enough. They want products that change with the company.'

In this environment, and with their legacies to entertain, the established players have been unable to move forward fast enough. By offering users and resellers alternatives, products like Navision, Dynamics and Exchequer have been able to make an impact.

Navision, for example, has over 50 dealers in the UK. It has won favour because it is easy to tailor to user needs and it already makes use of object technology.

But for every pro, rivals can find a con, and there is no product that, as one observer put it, 'does it all' at the moment. Navision is based on 'proprietary' technology, not SQL. The same could be said for Sovereign, which is constructed in the Retrieve 4GL, but there are plenty of third-party Retrieve applications.

Rivals claim that Navision and Dynamics are weak on currency capabilities.

Other products can be criticised for their lack of adherence to industry standards, or their inability to run under all the flavours of Windows.

No product has it all.

Creature features

Instead of relying on features, some established vendors believe the way forward is to work increasingly with influencers. Sage has run its Accountants Club for several years, and continues to try to get local resellers and accountants to work together. Pegasus now runs a similar scheme, and has given it a higher priority following the company's purchase of tax software specialist CSM.

'We believe the profession is going to play a much more active role in recommending products,' says Chris Leak, sales and marketing director at Pegasus. 'Accountants are hungry for new areas of business and one of those areas is IT.'

Dealers should not see accountants as a threat, rather as complementary partners to their offering, he adds. But few resellers bother to try to work with them - only those with a more professional approach seem willing to try.

Even resellers with strong reputations baulk at the prospect of working with 'the profession'. One accounting dealer says: 'To be honest, I hate them with a passion. They focus on the accounting side and don't understand the day-to-day management reports that the business needs, like order processing or stock control. They see a product that has a good fixed assets register and recommend it because of that.'

Bit by 32-bit

Some vendors will undoubtedly be using technology to address the market.

But the 32-bit Windows issue is not one that concerns users, says Graham Wylie, MD of Sage. 'Microsoft is promoting 32-bit because it helps to sell Windows 95, but as far as accounting software is concerned, it doesn't matter. Not all of our customers have upgrades to Windows 95, nor do they have the power to do it.'

There may be no hurry as far as the user base is concerned, but 32-bit will make a difference to product demonstrations. Sage is making the commercial ledgers for Sovereign 32-bit, even though the financials are 16-bit.

Pegasus hopes to have its 32-bit Visual product out by July next year. The product will use object technology, is being written in Visual Basic and uses SQL. It is an entirely new system, so Pegasus will leave its legacy behind or write complex ODBC links to bring the two together, as Sage has done with Sovereign.

Tall orders

This is not an easy issue for vendors to deal with when there are so many third-party products that work with the older version of the software.

The third-party apps need to be redeveloped as well, or the ODBC links needs to be super-efficient, but that's a tall order for such complex products.

Then there is the question of acceptance within the channel. Leak says that Pegasus will be looking for resellers with more system integration expertise to sell Visual when it comes out next year. He says: 'The question is whether the reseller channel is ready for all this. Dyed in the wool, socks and sandals people are not going to be able to skill up on SQL Server.

There might have to be a two-tier approach, but I don't think that will happen.'

Banerjee says that Windows will be important from the technical point of view and so will objects in time. Increasingly, the technology behind the system is what is differentiating accounting packages. In terms of functionality, there is not a lot of difference between them.

Those vendors in the middle ground are under pressure. The capability of mid-range products is increasing and users are becoming aware that there are alternatives to the large, highly expensive systems that have been used in the past.

This is good and bad news for dealers. Leak comments: 'Obviously, a huge proportion of the market is second-time users looking for something better, but there are new opportunities being created by companies downsizing and the middle market is moving upwards to meet them.'

Nagpal thinks there will be rapid consolidation around the end of the decade. 'By the year 2000 there will only be 25 major players in the world. Because of year 2000 and EMU, a lot of smaller companies are going to disappear in the trend towards globalisation.'

Global warning

There will, however, be many hurdles to climb before a global accounting market can develop. As we are seeing now with EMU, making systems work across many countries is complex. Even without globalisation, he could be right - there may be too many companies competing for the middle ground.

Competition is fuelling development and increasing customer choice.

But for resellers there is always concern about the building legacy of a user base and the difficulty of going back once you have started to sell a particular range. To make a serious commitment, the re-seller as well as the user needs to feel secure about the vendor's development policy and its ability to deal with the challenges facing business today.

Vertical markets

Vertical markets have always been a haven of value-added opportunity for resellers, but while there are plenty of resellers addressing specialist areas, few do it really well, says Dave Anderson, applications director of Oracle UK and Ireland.

'There are enough dealers out there, but I'm not sure they have the vertical focus truly embedded in their psyche.' It's easy to understand why. 'Resellers go after the business they can win. In a #10 million firm, it's difficult to restrict opportunities to one market. Dealers can not afford to turn away opportunities that don't fit their profile.'

But many don't recognise the potential for specialisation, says Anderson. The potential stems from the market or business they originally came from. The real key is to look at the customer base. 'That inherently is where all their skills will have been built up,' says Anderson. 'There is no such thing as a general reseller. Most have been born out of a particular applications area. Now, we can't go out with a mandate for the reseller, but we can encourage them to focus.'

Oracle is trying to get more resellers with vertical market and software skills to work inside its Partner programme. It has 30 software modules spanning accounting, HR and payroll, manufacturing, sales and marketing, and its applications business is growing by about 50 per cent a year in the UK. To keep that up, it needs more resellers to represent its products.

Increasingly, accounting software vendors are trying to address the needs of vertical markets as the broad accounting business becomes more competitive.

Some of them have been doing this for years - Tetra and Multisoft have tried to address manufacturing over the years and Oracle has also attacked specific vertical areas with is products.

More companies are adopting this kind of strategy. Navision, for example, is planning an MRP module, plus logistics and distribution modules for its accounting system. The company is actively seeking out resellers with vertical market specialisation.

Vendors in other areas like sales and marketing and relationship management software are also renewing their quests for resellers with the right qualities to develop expertise. But they are not easy to find.

The supply chain sector is becoming a lucrative market and vendors like Oracle are working hard to maximise penetration. Resellers with database expertise could easily break into this market.

Vertical market coverage

According to Romtec, the 10 most popular vertical market specialisations are:

1 Sage 2 Pegasus 3 Own accounts

4 Financial/accountancy

5 Local government

6 Miscellaneous manufacturing

7 Central government

8 Medical

9 Retail/distribution (non-food)

10 Quicken Accounting software is clearly the dominant area of specialised focus and the two most popular suppliers dominate this area. Beyond this, government and manufacturing are the two obvious areas of focus for resellers and the medical category probably includes a good number of specialists which focus on hospital trusts and on GPs.

Bubbling under the top 10 are areas such as food, wholesaling and distribution, banking, building societies and insurance, schools and education, legal services and miscellaneous business services. Areas such as the motor trade and construction come much further down the list.

The suggestions from these figures - and accounting products have the highest penetration levels - is that fewer resellers are specialising in any particular area. But with growth, such as that displayed by Oracle's applications business, it looks as if there's plenty of room for focused players in specialist areas.