The downturn in the economy will prompt SMEs to look for more from their accountancy packages, writes Ian Campbell.
Accountancy software that was fundamental during the Celtic Tiger will become more pivotal as Ireland heads into an era of economic uncertainty, especially for firms that have known nothing but the good times. A new economic cycle and a more stringent regulatory environment will put pressure on small businesses as well as large to squeeze more out of their systems.
Alan Connor, commercial director at Exchequer Software, has already seen signs of a change. “The buoyancy is no longer there in the market and in the past six months customers have come looking at our software from the point of view of management control,” he says. “Auditors are becoming tighter. Black holes and areas of confusion can’t be tolerated anymore.”
In more prosperous times, inventory control may have allowed for a corner of the warehouse to be dedicated to returns, or a higher percentage of shrinkage and waste may have been tolerated, but as margins tighten the last thing a business needs is a nasty surprise in the accounts. “You have to be able to control costs and use the software to deliver more to management,” says Connor. “In the heyday, many companies bought systems to get things out the door as fast as physically possible. Now, far more detail is required.”
Sage managing director, Liam Mullaney, is irritated by talk of recession, pointing out that even with an annual growth rate of 2.5pc Ireland would still be the envy of most of its European counterparts. That said, he expects businesses to be sensible and more prudent in their planning.
“Fast-growth companies didn’t have to worry too much about financial software,” he says. “They had so much money that it didn’t really matter if the customers didn’t pay on time or if they had too much stock. When it gets tougher to do business you have to put good processes and systems in place. If there is any fat, you have to take it out. Today you have to be very clever about stock management and you need to get your cash in, because cash is king.”
Kevin McCallum, commercial director at Pegasus Software, believes the financial software sector enjoys some immunity from the economic downturn. “We’re insulated from the worst excesses of boom-to-bust cycles that affect other areas of the technology industry. People don’t make quick decisions on accountancy software because it’s too integral to the business. On average, they only change their system every five to seven years.”
The slowdown will, however, accentuate a trend that has seen owner-managers looking for more bang for their buck. “Businesses are looking for better value for money. They don’t blithely make buying decisions these days and they are looking for greater efficiencies. The technology is becoming affordable for SMEs to implement tools that can help them,” he said.
Such added value functionality is evident in the latest version of Opera, the Pegasus accountancy package, which has a CRM module, a document management solution and a dashboard feature for extracting business information to help simplify decision-making.
Such features are typical of a trend that has seen accountancy packages move into a space previously the domain of ERP systems aimed at large companies. “Small businesses want all the sophistication and integration that big companies have but they want it for a couple of thousand not millions,” says Mullaney.
At the same time, SAP and Oracle are attempting to scale their ERP products down for SMEs, a transition they will find difficult, according to Connor, because they don’t have the same market knowledge. Exchequer has carved out a strong niche in Ireland catering for idiosyncratic needs that only come to light when working closely with customers at the coalface.
“We’ve learnt over the past decade that Irish industry is more complicated than the UK with far more subtleties,” says Connor. “Common business practices were not based on typical accounting principles. Simple things, such as treatment of currencies, agreements with suppliers and after-the-fact and seasonal rebates, have evolved in such a way as to make it a very different market.”
Another UK trend has seen a surge of activity around new delivery models for SMEs: making accountancy software available as a hosted service. What may seem like a natural for fit for ASPs (application service providers) has some inevitable drawbacks, according to Connor.
“Hosted software might work if you are a sole trader such as a window cleaner, but in Ireland SMEs will not feel comfortable with it partly because of broadband inaccessibility and partly because they will be reluctant to have their accounts on someone else’s server.”
Sage has offered hosted products for a number of years, but uptake has been slow. “There are a couple of factors,” according to Mullaney, “One is speed of broadband. In a mission-critical world you need top-notch performance and we’re not there yet. The other is that online really comes into its own when you have a big mobile workforce. Ireland is a small country and there’s really not that big a demand for it.”
Exchequer also offers a hosted solution for accountants but interest has been similarly slow. Connor identifies another reason why: “A level of business expertise is required to give the right kind of service. We have personnel and partners who can offer industry-specific consultancy. We can have 50 companies in the same trading estate, each using the same module in completely different ways.”
McCallum agrees, pointing out that the ASP approach has been talked about as ‘the next big thing’ for the past six years. There are reasons why it has failed to make an impact. “A lot of our customers are interested in people who understand their businesses. Through our re-sellers and direct engagement we make sure customers get the system that does what they need. It’s not a shrink-wrap offering,” he says.
“It’s a complicated solution, not because we want to make it difficult for people to use. Quite the reverse; it’s complicated so that it can be used by as many businesses and industries as possible.”
By Ian Campbell