Keeping up With the Jones’s: How Third-Tier CPA Firms can Deliver Technology Services

By Scott H. Cytron, ABC(Accounting Software 411)

With the continuous fallout associated with failed audits, scandals and mishaps at the world’s largest accounting firms, it’s now a proven fact that more and more clients are leaving large firms in hopes of finding green pastures elsewhere.

USA Today ran a story in late September, “More Firms Flee Big 4 Accountants”, that spoke to this very topic. All four firms – Deloitte, KPMG, PricewaterhouseCoopers and Ernst & Young – lost more clients than they gained during the first eight months of 2004, according to Audit Analytics. In two-thirds of the 396 departures, the story reported that, “it was the Big Four firm that got the boot. Meanwhile, three smaller national audit firms, BDO Seidman, Grant Thornton, and McGladrey & Pullen, gained 58, 50 and 13 clients, respectively, during the period. Many of those were former Big Four clients.”

The article also went into details on the reasons behind such moves, with “cost” the primary one clients cited for actually changing firms. Another reason given was “better access to top accounting professionals.” If this reason is valid, then parallels can be drawn in how second- and third-tier firms deliver services. In the very competitive technology consulting arena, the differences could mean retaining a client or losing one to a smaller firm, and in many cases, the “how” associated with delivering these services could be the deciding factor.

“Our approach is to look for a solution to a business problem – not sell a technology solution,” says Howard Fishman, a partner with Cohn Consulting Group – a division of J.H. Cohn – in Roseland, NJ, a third-tier firm according to INSIDE Public Accounting.

“We use technology as a platform for improving efficiency and security, and respond to the most urgent needs of the current regulatory and economic environment,” says Fishman. “Because we work closely with business/strategy consultants, the corporate governance practice and the accounting side of our firm, we can bring a lot of different perspectives to the table.”

The Cohn Consulting Group has about 100 employees, and of that number, Fishman works with the Software and Networking Solutions Practice where he manages a team of 10 consultants and systems analysts who provide services to several niches, including wholesale/manufacturing, services, construction/engineering, and education/healthcare. In addition to the services he describes, others include enterprise resource management (ERP), system integration, and technology and customer relationship management (CRM). Compared to large, first- and second-tier firms, Fishman believes his firm definitely can compete, especially in the technology consulting arena. The difference is based on the size of the firm and attention to details.

“Our smaller size required a focus and dedication to a group of technologies that we put all of our resources behind, allowing us to be specialists in those areas,” he says.

A recent article confirmed the same story as USA Today, yet went into a bit more detail on the strategies associated with a smaller firm’s delivery of services. The story was derived from INSIDE Public Accounting's 14th Annual Analysis of Firms. According to the article, the strategy of third-tier firms is to compete effectively for middle-market clients by delivering better client service than the national firms do, as well as provide strong niches, competitive pricing, and a hearty menu of services.

“These firms have become fierce competitors for regional dominance and talent, and they tend to have long-term leaders who have entrepreneurial vision and the ability to execute their strategic plans,” according to SmartPros. “The power of the third tier puts the squeeze on local firms and smaller regionals, as well as on national firms. With their deep pockets, diverse specialties and a wide range of expertise, they’re formidable competitors to smaller firms with more constraints on their resources.”

The challenge for third-tier firms will be to stay on course, according to the article. In Fishman’s case, a substantial amount of time is devoted to providing core services, yet always looking to the future for the latest technologies.

Wireless installations, for example, is an example of sticking to basic technology deliverables. Cohn Consulting Group installed a wireless network using Cisco wireless access points for a school with the potential for 1,000 workstations to roam the campus using wireless tablets. Attention to the basics, such as information security, is mandatory.

“The security on this network is tight,” says Fishman. “Users cannot access the wireless network until they are properly authenticated through a username and password.”

Cohn also provides security auditing to its clients. Fishman says the company recently completed a thorough auditing of a client’s network by sampling 20 of its 200 servers and workstations.

“We examined the company's server and workstation builds, and their patch management solution. We then scanned these servers using Retina to look for security vulnerabilities, and reviewed the process of creating user security groups and how data folders were secured.”

Naturally, firms in the third tier also compete in the reselling space. Fishman also believes his firm’s size has an advantage because its professionals are able to make decisions on the local level. Accounting systems the firm promotes include MAS90 and 200. CRM systems are represented through SalesLogix and ACCPAC, and document management is accomplished through Immediatech’s Go File Room. Fishman says scalability and integration are key to providing these products, but as a provider of services, the firm often takes an objective stance.

“Since many of our companies stay with us a long time, we choose products that grow with the client, without them having to replace an entire system,” he says. “Of course there are times when, after analyzing their needs, we determine that our product may not be the best choice for the company. In those cases, we can provide the information they need on other products so they can make an informed choice. This builds trust in our team and those clients usually come back to us when they have other technology needs because they know we are not going to sell them something that is not the best for their specific needs.”

About the Author: Scott H. Cytron, ABC, is an accredited communications and public relations consultant working in the accounting, health care, high-tech and finance industries. He can be reached at scott@cytronandcompany.com or through his Web site, www.cytronandcompany.com.

About Accounting Software 411 - AccountingSoftware411.com (AS411) is a web portal dedicated to the accounting software industry. The website features breaking daily news, selected links to Web resources, community discussion boards and much more. The site also maintains a fully searchable, comprehensive software directory with over 700 vendor and software profiles listed. For more information visit www.AccountingSoftware411.com or e-mail customerservice@as411.com

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