The 10 years of the Celtic Tiger have had a dramatic impact on the market for accounts software in Ireland. The strong economy has seen many small businesses expand rapidly, creating a large pool of mid-size companies. The old characterisation of the economy as comprising a multitude of tiny businesses, a couple of hundred large ones and very little in-between is, if not quite a thing of the past, much less true than it used to be.
Peter O’Rourke, managing director of Access Accounts, affirms that the mid-market — companies with between 10 and 100 employees — is where a lot of the growth is these days. At the same time, small and medium-sized enterprises’ (SMEs) IT requirements have evolved and become increasingly sophisticated.
“Years ago, companies used to say ‘I need to do bookkeeping, I need to do Vat returns, I need to do invoicing; therefore I need an accounts system’. Now companies typically aren’t looking for an accounting solution; they’re looking for a business solution that manages everything.”
Jayne McCormack, management information systems director at Sage Ireland, agrees that the typical SME customer has become a lot more demanding in recent years. “Their attitude has changed from ‘what can your product do for us?’ to ‘this is what we want your product to do’. And so the challenge facing accountancy packages out there is to be flexible.”
She adds that small business is also showing considerable interest in features that hitherto would have only been used by larger firms. “One of the big areas now is intelligent reporting or business intelligence (BI). Even in SMEs, executives are looking to slice and dice their financial information so they can get a detailed picture of how their business is performing and so achieve better forecasting.” In response, Sage has included a BI tool as standard with Sage Line 50 and offers it as an option on its other products.
Alan Connor (pictured), commercial director of Exchequer Software, says that SMEs want to be able to mix and match their accounts software to the requirements of their business. So while there might be a set of core financial modules, from general ledger to cashbook, which will be fundamental to any accounts software package, customers will want be able to add on particular modules as they require.
“The biggest change we’ve seen in the past 10 years is that SMEs are far more discerning. They expect much more because they’re tech savvy now. But, having chosen the best software based on features, they still want real value for money and to be able to calculate, say, a total cost of ownership over five years,” says Connor.
But the accounts software firms have not been the only ones catering for this new breed of ambitious, clued-in customer. Big software houses such as SAP and Oracle, as well as relative newbies to the enterprise resource planning (ERP) area such as Microsoft (through its Great Plains and Navision acquisitions), are targeting them. The result is that the mid-market has become a battleground for accounts software. Not only that, the line between accounts software and ERP — the powerful software used by enterprises to run their back-office business systems — is starting to blur, says Connor.
“ERP as a software concept is a bit greyer these days,” he says. “Because mid-range business software can do so much more there is no clear dividing line between what is ERP and what is accounting software.”
What is a bit more clearly defined is how much you can expect to pay for accounts software. This depends on the feature set required and the number of users, says O’Rourke, who estimates that an SME system will cost €5,000-€10,000 and a mid-market system €15,000-€30,000, while a larger SME with 50 employees might be looking at an outlay of approximately €50,000.
Given the sizeable investment required, it is important that companies make the right choice for their business. Having a predefined checklist of what they need can help, says Connor. “First, look at total cost of ownership. Seek guarantees from your provider about what the total cost of ownership should be over three to five years and get it to contract on that basis. Second, don’t be afraid to ask questions. If there are future promises being given on upgrade plans, for example, either get those promises in writing or look at past performance in delivering upgrades on schedule. Finally, if you are buying into an annual lease of software make sure you’re aware that’s the case. Otherwise, if you fail to renew an annual contract your software will expire.”
O’Rourke believes that an SME will be more likely to make the right buying decision if it thinks ahead. “The one mistake every SME makes is that it buys what it needs now rather than what it will need in three years. You can buy a solution now for €3,000 but you could buy one for €5,000 or €10,000 and add on modules as the business grows.”
McCormack, too, believes forward planning is very important. “You need to be aware of where you will be in three years. If you’re going to change significantly in that time, your accounts information such as product codes and inventory needs to be structured in such a way that it can be taken over easily [to the new system]. Once you think along those lines you’ll be fine.”
Looking to the future, McCormack expects a different payment model — ‘software as a service’ — to be the norm in the accounts software area. “I think things are going to change drastically in the next five years. Companies are going to be looking for hosted solutions, even in the accounts area. Customers will be looking for companies to host an application and pay them rent for it and if they like it they have the option of taking it in house after a couple of years. I think we’re seeing the start of it already.”
By Brian Skelly