Yankee Group advisory: SMBs demanding Software-as-a-Service

As small and medium sized businesses (SMBs) increasingly move to Web-based accounting applications deployed in Software as a Service (SAAS) arrangement, CPAs face a key decision on whether to help SMBs make the move or stand by and risk losing clients. So says Sanjeev Aggarwal, senior SMB strategies analyst at technology market watchers, The Yankee Group.

It may be only two to three years before SMBs’ demand for accounting SAAS set-ups reaches a “meaningful” level, Aggarwal says, noting that SAAS has already reached high levels of penetration in customer relationship management (CRM) software, accounting for 30 percent of the CRM share in the middle market and about 14 percent in the SMB space.

He adds that SMB accounting software vendors’ online versions are already thriving. He cited earlier Yankee Group research that AccountingWeb reported on in February. which found: Intuit online has 60,000 customers and more than 200,000 users. NetSuite has 7,500 customers, and the on-demand version of Sage Software’s AccPac line has the highest growth of all of its delivery methods.

CPAs not familiar with SAAS beware. “If my accountant is using a different application than me and is not in tune with software as a service, I, as an SMB, would probably be inclined to go to another accountant,” Aggarwal says. He believes that SAAS will soon become widely known for providing superior total costs of ownership and returns on investment.

He predicts that SMBs using accounting SAAS will save 60 percent in IT costs over four years, compared to their costs for maintaining traditional desktop applications, including Web-hosted versions.. In SAAS arrangements, the vendor provides virtually all of the required technology: the application including all updates and patches, hosting servers, eliminating the need for in-office servers, as well as providing backups and other security services. SAAS also allows remotely located employees and accountants and other service providers to simultaneously view and work with a company’s financial data real time.

The downsides are that some SMB managers may not be comfortable relinquishing so much control to vendors or may not favor widespread access to financial data. There also remains some inherent aversion to going all online.

Weighing those cons against the pros of wider and real-time data access and better ROI may be among the issues that CPAs will be helping SMB clients grapple with in the years ahead, if Yankee’s bold SAAS projections become fact.

CPAs should expect and look forward to helping their SMB clients decide about SAAS, according to the Yankee Group executive.

“Outside CPAs strongly influence finance managers in choosing accounting applications or at least suggesting one or two applications that they prefer,” Aggarwal says. “When accountants actually work on the same SAAS with the client, their influence could be even greater.”

He also notes that as regulatory compliance increasingly becomes a bigger factor in SMBs’ technology buying decisions, it could provide another area where CPAs stand out as advisors. Indeed, the ability to advise on both compliance-related technology issues and SAAS could set CPAs even further ahead in consulting.

by John Covaleski

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