The market for accounting software and related business solutions is hotting up as a growing band of new and established SaaS (Software as a Service) vendors enter the hosted or rented solutions market. Capitalising on improved communications, reduced IT complexity and fixed (or at least known) cost models, the SaaS proposition is looking more appealing to the end-user community. Gary Simon, FSN’s managing editor, looks at this mushrooming industry, and analyses why it appears to be gaining traction with companies of all sizes.
For those doing business in the seventies and eighties the concept of sharing expensive and complex computing resources comes as no surprise. In those days mainframe computers dominated the corporate landscape but were costly and beyond the reach of all but the largest businesses. Enterprising companies which owned these large installations but found themselves with spare capacity could put their investments to work by literally renting out time-slices so that other organisations could benefit from their surplus capacity using the same set of applications.
Roll forward half a century and similar thinking is once again in the ascendency. The technologies involved are of course vastly different since in the earliest incarnations of rented applications client companies had to deliver their transactions by hand to the mainframe where a data processing department batched the documents and punched them into ‘green’ screens. Nowadays, all that is needed is a robust broadband connection and a web-browser through which to enter transactions directly.
Putting communications technology to one side the whole notion of time-sharing and its modern SaaS equivalent was to allow end users to rent expensive or specialised applications which could not be cost justified in-house. The renting organisation was also shielded from technical complexity. It did not have to employ IT specialists to develop applications, manage upgrades or maintain the software.
Whilst payroll bureaux survived, the advent of departmental computing followed by the development of the personal computers reversed the trend to hosting by making end user computing more affordable. So what is now driving businesses towards the Saas model?
Well cost is relative. Even low end shrink wrapped software of the Sage or Quickbooks genre can appear expensive to owner managed businesses and start-ups. For the fledgling business the immediacy of web-based solution for a fixed monthly outlay without the need to tool up with expensive hardware on premises is very appealing and if you search the sites of on-line accounting vendors you will find that plenty of their customers are indeed early stage businesses.
Noting the common need of smaller businesses for ‘hand-holding’ many SaaS vendors seek to create close ties with accounting practices that specialise in SMEs (Small and Medium sized enterprises). One of the benefits often promoted by these vendors is the ability for small businesses and their accounting advisors to collaborate online, putting through, say, month-end journals, payroll adjustments or producing management accounts.
They also promise quick implementations and data migrations. Adaptive Planning a supplier of on-demand budgeting applications over the web says on its web site that “implementation projects average less than 10 days of consulting time, compared with 6 months or more for enterprise alternatives,” and First Hosted a NetSuite partner last week announced the “Sage Switch Program” offering faster migration for Sage users and 50 percent discount on first year subscriptions.
But the SaaS phenomenon is not confined to matters of cost and nor is it limited to small businesses. Complexity is still a major incentive for ceding responsibility for applications to a third party. Since the early eighties, the number of modules in the typical accounting product and the range of integration possibilities (both within and outside the organisation) have increased substantially. This has added significantly to the knowledge and skills burden needed to set up and maintain applications in house for all organisations, irrespective of their size.
Saas providers such as Visor with “accountsIQ” are capitalising on the growing trend of larger businesses to adopt the SaaS model. William Parker, sales director, for accountsIQ, told FSN, “We are not seeking startups or young businesses but established businesses that don’t want to invest in IT skills or manage the burden of maintenance and upgrades”.
Recent success at Technology Management seems to bear out the trend away from the smaller end of the food chain. Tony Crowter, MD of the Midlands based business which is taking a lead in putting applications such as Microsoft Dynamics Nav and Pegasus into the cloud told FSN he has been “surprised by the variety of companies that are willing to explore hosted solutions”.
Purists in the marketplace like to make the point that true cloud computing means that applications have to be architected for the web in order to perform, but Crowter is unimpressed.
“End users do not care about the technical solution,” he counters and “with relatively high volumes it is absolutely critical that users can process transactions quickly and reliably. Unfortunately in my experience web based applications are still too clunky and unresponsive to handle, say, lots of sales order entry lines being entered in short time period.”
Not everyone is convinced that the SaaS model is appropriate and some players such as Pegasus have not entered the fray in earnest. Kevin McCallum, managing Director of Pegasus told FSN, “I’m not sure that the market is ready for it just yet,” but is keeping his options open.
Others have taken a similar stance, offering end users a choice of on-premises and hosted solutions. Infor, (Pegasus’ parent company) which released a new version of its expense management solutions last week offered users a choice of on premises , SaaS subscription, SaaS hosted license and dedicated hosting.
Crowter has some sympathy with this approach. He told FSN, “What’s important is the needs of the business and the underlying processes. The technology is just an enabler and the customer has to choose the most appropriate solution.”
A ‘one size fits all’ all approach often promoted by the newly arrived SaaS vendors may suit their business model which relies on repeatability and scalability to make money but may not suit all end users.
“We have found significant demand for customisation of applications and processes amongst Microsoft Dynamics NAV users. I can’t see the large SaaS providers being able to cope with this,” adds Crowter.
IRIS Group too is finding that SaaS is often a matter of ‘horses for courses’. Commenting to FSN, David Pinches, Group Marketing Director said, “We are seeing SaaS becoming very popular in the area of project management solutions where mobile consultants need to be able to enter time sheets and do their billing over the web. The business need is driving the technical solution, not the other way round.”
So is SaaS a revolution in the making or just another over-hyped technology? The answer seems to be neither. Hosted solutions are both driving and enabling change, but it’s a trend that is not universally needed or appreciated. There are a variety of factors that shape the decision whether or not to run with a SaaS solution, such as the application, the business need and the maturity of an organisation. What is important is not a blanket approach but offering choice in technology, process, functionality and financing. SaaS is a means to an end; not an end in itself.
