With some 200 packages in competition, the accounting software market has never been an easy game. If anything, the crowded space of small-to-medium financials is a fair game for all willing to engage in it. So much so that even the top-end ERP vendors are moving a tier down in search of new prey, forcing accounting software vendors to reconsider their role in the market. But how is it all going to end? Tamara Plakalo investigates.
The saturation of the enterprise resource planning (ERP) market was bound to happen sooner or later. Even the reigning ERP solutions providers, Baan, Oracle, PeopleSoft and SAP (euphemistically referred to as the BOPS), admit as much when asked to explain their sudden interest in the so-called middle market, which has historically been seen as the kingdom of small-to-medium sized accounting software vendors and resellers. But while everyone expected the BOPS to run out of their upmarket ERP customer "reserves", not much thought has been given to the impact their strategic refocusing would have on the pecking order in the mid-market accounting software space.
Invariably, the middle market is defined in terms too broad and too varied for anyone to presume a top-end ERP vendor and a mid-market accounting software specialist would necessarily meet at the crossroads of any of these definitions. However, one can claim with some degree of certainty that the BOPS mid-market invasion is going to happen (if in fact it hasn't started already). And when it does, the ERP attack will be aided by the combination of tier-one vendors' marketing dollars and expertise aimed at raising customers' expectations and literally creating the need for the solutions that were never designed with small-to-medium enterprises in mind. For just as they change companies' business procedures to fit their ERP solutions, the BOPS will inevitably attempt to "re-engineer" the mid-market customer psyche, making it more responsive to the BOPS' "need to be needed" in the mid-market accounting software arena. This, after all, is what the business game is all about. The question is: how will accounting software vendors fare in it?
"We see tier-one ERP vendors as a threat, as you'd be very naive to underestimate their power," says Garth Laird, managing director of Brisbane-based Navision Software. Originally a Danish company, Navision specialises in providing accounting solutions for the middle market and Laird's observations of the ERP accounting software clash in this space are largely based on his company's experiences with similar markets worldwide. But despite his precautionary thinking, Navision Australia's top gun believes accounting software vendors have a head-start in what is predicted to be a hot race for considerably large pieces of the mid-market pie.
"It is important that the marketplace understands that the ERP terminology we refer to these days really describes solutions provided by the BOPS," Laird explains. "These are organisations that have magnificent products, but most of their solutions are designed for the supply-chain type customers; large multinational organisations that are actually running every part of their business by controlling their entire supply chain." And this, according to Laird, is where accounting software players in the Australian market have a definite advantage over the BOPS.
"If you look at the majority of businesses in the Asia-Pacific, we don't necessarily find that they require a supply-chain product. What they require is a product that is designed for an organisation that fits into a supply chain. In other words, a product that is designed for the people who supply the nuts and bolts that make that supply chain entirety."
The last point brings us back to the problem of defining the mid-market. It is obvious that at least part of the hype surrounding the meeting of the David and Goliath of financial solutions stems directly from not realising that the BOPS' mid-market talk often revolves around European and US definitions that can refer to companies with a turnover of anywhere between 250 million and one billion dollars.
In contrast, Australian middle-market definitions tend to settle for a smaller number of zeros, drawing borderlines around companies with 10 to 500 million dollars in annual turnover. Consequently, a number of mid-range financial software vendors don't see the BOPS as a serious threat to their reign in the Australian market.
"I don't think we'd be much affected," Peter Lucas, managing director of Sybiz Australia, maintains. "While we do consider ourselves to be a mid-market vendor, we concentrate on the lower end of that market, targeting $2 million to $100 million small-to-medium enterprises (SMEs), so we really don't meet [the high-end players] very much."
Lucas is equally confident Sybiz's peers higher up the mid-market chain can rise to the ERP challenge effectively. "The key thing in the mid-market space is installation procedure," he asserts. "At the lower end, people tend to look for a packaged solution with a minimal cost of installation, rich features and a high level of support. Now, there is a lot more to installing the ERP software than that, so there aren't many resellers who want to get that involved with ERP implementations to start with."
The above-mentioned importance of the link between reseller involvement and mid-market success is echoed at almost every point of the accounting software vendors' collective consciousness. So firm is their belief in the value resellers add to mid-range solutions that one of the most successful financial software providers at the corporate end of the market, Great Plains, metaphorically links it to the discovery of the wheel.
"Anyone who wants to compete in the mid-market space must 'discover' the channel first," Rob Kirkey, Great Plains Australia's managing director, proclaims.
Practising what they preach, Great Plains' operation in Australia is based on the 100 per cent channel model. Craig Neil, director of channel sales at Great Plains, is quick to point out its business strengths.
"In terms of market profitability, the channel model is very sound and strong," Neil claims. "If you want to be an SME provider, your product needs to be flexible and it needs to be implemented quickly. Our channel allows this flexibility, making it our number-one competitive advantage over the BOPS," he concludes.
As if confirming the vendors' claims, an Aberdeen Group research indicates channel presence is a factor that holds sway over a large number of customers, making them choose accounting software companies whose solutions come in a package with the reseller value-added services over those who do not use the middleman.
Liesel Frankenfield, manager for ACCPAC Division at Sydney-based distributor 1 World, believes the finding reflects both the mid-market suitability of an off-the-shelf modular accounting software package, such as ACCPAC (that 1 World distributes in Australia), and the value of the reseller channel.
"Mid-range companies have different requirements that can only be met by highly customisable, modular accounting software solutions that have a significantly lower installation time, cost and learning curve when compared even to the scaled-down ERP solutions," asserts Frankenfield. "There is a perception that ERP vendors have highly trained staff who add value to their solutions, but the problem is that they are trained only in one skill. Accounting software resellers, on the other hand, are not locked into a specific skill set or package, so their value-add reduces the cost of ownership for the customer, which is a major issue in the mid-market space.
"But, while accounting software vendors seem to be the champions of the mid-market when it comes to understanding customer needs and investing time and effort into further improving their solutions, they are yet to come up with an effective solution that could eliminate 'the grass is greener' effect born out of the ERP-awareness campaign run by the BOPS," Frankenfield says.
"SME companies don't have the money or the infrastructure to support ERP solutions," Reginald King, executive chairman of Solomon Software, suggests. "If they knew that some of these packages cost hundreds of thousands of dollars to implement, they'd just shrivel up and die. Yet, you do get mid-market people who say, 'wow, I can get Baan in,' which means that they might make decisions that may not necessarily be in their best interest."
King is right in claiming the grand reputation and "educational efforts" of the ERP-foursome has already changed the mid-market landscape. And not without reason. Even if constantly accused of great arrogance and chronic slowness, the BOPS are definitely keeping up with the times. Going as far as to declare that "the ERP market sucks", they have taken steps in scaling down their solutions (as well as reducing cost) for mid-market appeal or opted for the "best-of-breed" financial solution acquisitions. Oracle, for instance, has formed a whole new division for the mid-range space, while Baan claims the majority of its new licences have been sold in what was once the indisputable accounting software vendors' kingdom. More importantly, far from underestimating the competition, the BOPS acknowledge that accounting software has come a long way, making it a formidable opponent.
"Accounting software solutions are now very complex and can definitely compete [against the BOPS] in their own right," Thomas Erickson, general manager of Baan Australia concedes. However, according to Erickson, there is already an equal number of users of accounting software and ERP solutions at the corporate end of the middle market - a testimony to the effort upmarket ERP vendors are putting into educating the market on enterprise resource planning. Disproving the perception that has seen the stigma of arrogance attached to the BOPS' names, Baan seems to have thoroughly examined both the mid-market needs and the methods accounting software vendors use in addressing them, and has subsequently launched an Australia-wide reseller crusade aimed at capitalising on the "mid-market momentum".
"We understand that the SME market has different expectations and is less sophisticated when it comes to using ERP solutions," Erickson says. "This is why we now offer pre-packaged best business practice modules that focus on accounting and high-level reporting. At the same time, we are retraining resellers to deliver the sort of benefits SMEs want to get out of ERP solutions, making sure we have a good balance of partners to address the market." Never afraid of grandiose projects, some ERP vendors, including Baan, have even decided to re-engineer their own products utilising the mid-market-preferred Microsoft technology. And if that is not enough to drive the point home, what is?
Yet, as Solomon Software's King points out, big is not always best and the outcome of the clash between the accounting software vendors moving upwards and the BOPS moving a tier down will most certainly depend on the issues such as how acceptable larger players are to SMEs. Anything beyond that, however, is anyone's guess.
Accounting systems for the SME market
Product Name, Contact, Contact No.
Accpac 1 World Tel (02) 9878 8576
AUS Accounts AUS Accounts Tel (02) 9960 0015ARROW Arrow Research Foundation Tel (02) 9955 0999Attache Attache Software Australia Tel 13 3045CODA-Financials BAAN Tel (02) 9464 0100CBA 2000 Orion Tel (02) 9212 7288Finance One Technology One Tel (07) 3870 2044Great Plains Great Plains Tel 1800 624 449Greentree Focus Software Tel (07) 5476 9737Jiwa Jiwa Financials Tel (02) 9926 1218Masterpack Masterpack Tel (02) 9937 1300Mincom Mincom Tel (07) 3303 3333MYOB Data Tech Tel (03) 9222 9777Navision Navision Software Tel (07) 3221 8070Nexus Nexus Business Software Tel (02) 9956 3826 Open Accounts Sterling Systems Tel (07) 3832 2500Pronto Pronto Tel (03) 9887 7770 QSP Financials QSP Tel (02) 9419 2044Solution 6 Sterling Tel 1800 676 661Sage Sage Group Tel 1800 260 522Solomon IV Solomon Australia Tel (02) 9498 5777Sybiz Sybiz Australia Tel (08) 8232 0600SunAccount Systems Union Tel (02) 9928 4400Please note this list does not include all SME financial solutions available in the market.
What customers want
Packaged solutions built around Microsoft technologyLow implementation time, cost and learning curveInternet-enabled solutionsLow total cost of ownershipFlexible company-wide systemHigh-level product supportACCPACACCPAC International is an accounting, business management and business software specialist whose family of accounting products offers scalable business management solutions to any size business. Featuring Open Database Connectivity (ODBC) and Common Object Model (COM) integration tools, ACCPAC for Windows works well with Microsoft Office products allowing ACCPAC and MS Office to dynamically update each other.
The system is multi-company and multi- currency and offers "complete e-business functionality", as well as flexible data analysis tools and real-time queries and reports.
General ledger with accounts payable and receivableInter-company transactionsGeneral ledger consolidationsAllows an unlimited number of usersMultinational functionality, reporting tools, sales force automation capabilitiesE-business solutionsDistributed by:
Tel (02) 9878 8888
A fully integrated accounting package, New Zealand-developed AUS Accounts was designed specifically for the Windows environment. With its user-friendly interface consisting of pull-down menus and toolbars, the system is touted as an "accounting out of the box" solution.
AUS Accounts is GST-ready and consists of several modules suitable for point-of-sale and Internet invoicing. The system also allows comprehensive data analysis by category.
General ledger, debtors and creditors modulesMulti-warehouse stock controlContact managementJob costing modulePoint-of-sale and Internet invoicingFull bank reconciliationPassword protectionAUS AccountsTel (02) 9960 0015BaanBaan-owned CODA-Financials forms a part of the Baan Suite. The system targets the mid-market accounting software space, providing a flexible, open client/server product that operates with a range of SCL-compliant relational databases. As an Internet-enabled enterprise application, CODA-financials supports multiple currencies and inter-company exchange.
User-defined document templates and the use of "master" records containing all the parameters and fixed information a business operates with deliver a high level of system flexibility. Baan's accounting software solution offers several optional modules, such as CODA-Assets, CODA-Enterprise, CODA-Workflow, CODA-Alert and CODA-Designer, all of which can further contribute to the system's functionality.
Tel (02) 9464 0100
As a mid-market financial software specialist, Great Plains takes pride in the "superior financial management" capabilities of its Dynamics C/S + financials solutions.
In addition to "powerful reporting and analysis", Great Plains claims Dynamics C/S + delivers the adaptability which allows customers to "take advantage of streamlined business processing through online checklists, definable workflow processes and a user interface that can be personalised to meet the user's needs and responsibilities".
The financial series is one of the elements that comprise Great Plains' enterprise-wide solution and include distribution, purchasing, manufacturing, field service and human resources.
General ledger, accounts payable and receivableEnterprise, financials and business intelligence reporting with ad hoc query capabilities and multidimensional analysisInter-company transaction processing with multi-currency capabilityFixed asset management and bank reconciliationDistribution, purchasing, manufacturing, field service and human resources modulesThe system was developed for the Microsoft Windows market in a range of industries, such as services, retail, legal and medical.
Tel 1800 624 449
Danish small-to- medium enterprise (SME) business solutions vendor Navision Software is a new player in the Australian and New Zealand markets.
Understanding the need for functionality in mid-size financial software, the company has developed a product that is claimed to offer "the enterprise functionality without the costs and implementation time generally associated with enterprise solutions".
Dubbed Navision Financials, the product allows a customer to package several functions into a system best suited to their needs. Navision is currently looking for more partners to distribute and support its software in Australia and New Zealand.
General ledger, purchases and payables, sales and receivablesJobs - detailed accounting of all costs and billings for a project or jobFixed assets, inventory and cash managersHuman resources, contact management and manufacturingResources - tracking the use of resources and forecasting resource availabilityWeb Shop for the creation of e-commerce sites that require no administrationNavision Financials is designed for Microsoft Windows 95/NT/BackOffice.
Tel (07) 3221 8070
Sydney-based Solomon Australia was established with a local accounting software and ERP market in mind. Its flagship product, Solomon IV, has made a successful debut in the 50- to 500-employee mid-market space, allowing the company to predict its product licence and maintenance revenue will continue to grow faster than the overall market.
The system is said to allow easy management of data using a single code base designed for SQL database, while offering a selection of scalable vertical-market solutions that can be deployed worldwide.
Customisable solution that allows remote accessGeneral ledger, accounts payable and receivableCurrency and cash managersOrder processingBarcoding and scanningInventory managementPurchase managementMaterial costingSolomon AustraliaTel (02) 9498 5777SybizAn Australian-developed business accounting system for small-to-medium users, Sybiz Vision automates essential accounting functions offering a comprehensive range of reports in every module.
Built for Windows 95/98/NT4, Sybiz Vision is an open architecture-based system that allows easy, safe and cost-effective customisation giving third-party developers an opportunity to build industry-specific accounting solutions. The 32-bit application is especially suited for organisations with between two and 50 users.
General ledger, accounts payable and receivableInventory, sales and purchase ordersPoint-of-sale processingJob costingPayrollBill of materials, telemarketing and remote links for businesses with multiple sitesSybizTel (08) 8232 0600