Wednesday, July 07, 2010

Five Trends Killing Horizontal Accounting Software

Blogger Austin Merrit of Accounting Software Advice had a recent post that discussed the 5 trends that are killing horizontal accounting software . Merrit states the 5 trends are:
1. Decision makers require more than a standalone system

2. Businesses want systems that fit their unique needs

3. SaaS emergence

4. Mobile Access and Social Media Integration with the enterprise

5. Software vendors fueling the switch

I would agree with Merrit that horizontal accounting software is quickly becoming obsolete and feel that the continued development of vertical software “flavors” are the driving force behind the switch. Software designed for small business (those that gross between $1 million to $5 million in revenue annually) currently on the market can be considered “vertical” once additional modules or “add-ons” are integrated with the existing software. If you take the major accounting software vendors (Intuit, Sage, Microsoft) each has what they consider a “middle” market product that can integrate customer management, financial management, operations management and employee/HR management. These systems are also currently providing advanced reporting, deeper sales and inventory management, customizable dashboards, collaborative workflow management and online training that further push their existing software into the vertical market.

The path to vertical accounting solutions for existing software vendors can be traveled down to major routes. One is to allow 3rd party vendors to develop add-on vertical products to use in conjunction with an existing horizontal software package. An example would be Intuit’s Marketplace and Worplace App Center. The Marketplace allows small business owners with horizontal accounting software the ability to add industry specific solutions that can be implemented via the desktop or the web. The Workplace App Center provides small businesses with software programs that can be loaded on the computer or smart phone to help save time.

The second route is to create an industry specific accounting software product that integrates other small businesses back office functions. Sage currently offers vertical software designed for the construction, real estate, and non-profit sectors. These software titles give small businesses the ability to focus on industry specific business management issues, operate their business in real time, and have all their back office functions in one package.

Small businesses using existing accounting software and third part add-ons are also pushing the industry to provide more vertical solutions to their business specific issues. The question is however; are these small businesses utilizing their existing software to its full potential. I personally have rarely seen a small business outgrown one of the higher level horizontal accounting solutions (QuickBooks Enterprise, Sage Quantum, and Microsoft Dynamics GP) when they are using all of the software’s features/modules/add-ons. A major problem is that many small businesses don’t take the time to learn how to use all the features in their accounting software. The key is that small business decision makers must prioritize their needs when considering an accounting software package. By focusing on the software’s features, implementation, technology, the vendor’s reputation in their vertical market and the small business’ budget a small business can turn their horizontal accounting software into a vertical accounting powerhouse.

The Tech Accountant

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