Can Big CPA Firms Be Big Resellers?
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by Robert W. Scott
Maybe it’s the fact that Matt Camden’s title is chief technology officer that marks Clifton Gunderson’s efforts in consulting and reselling as more serious than those of the average CPA firm. After all, even among firms active in the accounting software business, it is not a common title.
Nor is Clifton Gunderson’s consultative sales approach that relies on a dedicated sales force, now about two years old, yet the norm among multi-office CPA firms. But the Peoria, Ill.-based firm sees consulting services, including its technology efforts, as key to moving from twelfth on the list of CPA firms to No. 8.
“Clifton Gunderson’s mission has always been focused on growth,” says Camden. “I think consulting is a key. We must offer all the business-related products our clients need.” In fact, this year, CG reorganized to lead with technology services, not just reselling.
That’s a bold statement in a time when economic conditions or choice have driven large and small firms from the field, and when concerns over regulations regarding consulting services have firms nervous about the business. Clifton Gunderson moved into technology consulting in 1996, the year that Camden came on board.
A separate consulting unit took shape in 1998, growing to $10 million for the year ended May 31, 2002, and to $15 million for fiscal 2003 and employing 150 consultants. To move up the list of top firms, the firm continues to look to organic growth and acquiring other firms, including technology consulting and reseller operations.
This year, the firm created CG Technology Solutions, as it completed the acquisition of Network Technology Solutions, its latest acquisition. The business goes well beyond reselling, including application development and infrastructure consulting. “We’re not just an accounting software VAR anymore,” Camden said. Nevertheless, the latest acquisition was designed to enable the firm to sell against VARs.
CG views consulting broadly. Besides the technology group, it also engages in business valuation and financial services sold to non-SEC middle-market clients—prime targets for traditional services.
“It’s the smaller client in the middle market that CG and other firms got successful with,” says Camden. “Hang on to these clients and you can pursue larger, non-SEC middle-market clients.” But while tax clients are often in the $20 million-a-year-and-below revenue range, the technology group snares prospects with up to $50 million in revenue.
The reselling business relies on sales of software from the Microsoft Business Solutions and Best Software accounting product lines. CG has been more active with Best because “Best showed faith in us when Microsoft didn’t,” Camden says. The result is that CG made the President’s Club for sales with Best’s product in the last year, but did not do so with MBS. What does the firm need to do a better job with Microsoft? “Have them treat us like a national partner,” he comments. But he admits the firm itself could improve its chances with the other vendor. The firm does well with application development, infrastructure, and Navision. “We need to do a better job with Great Plains.”
That more large firms don’t do better with either consulting or reselling is somewhat surprising. And Taylor Macdonald, vice president of partner development for Best Software, believes the big firms have great potential. (See related story p. 22)
Consider CG, with $161.41 million in revenue for 2003. That’s high on the list of accounting firms. But $15 million from Camden’s group does not rank with the powerhouses in mid-market consulting like ePartners, Aston Group, and Tectura.
And that’s the picture across most of the Top 100 firms. Some are serious players in technology, but few are top VARs. For the MBS President’s Club, whose members are chosen purely for revenue growth, the list of Top 100 public firms included SVA Consulting (the affiliate of Suby Von Haden), Crowe Chizek, and Wipfli Ullrich Bertelson. Perhaps not surprisingly, most of the aggregated operations made the list, including RSM McGladrey.
Among those honored by Best, a company known for its CPA resellers, CG makes the list of leading business partners, while McGladrey was named as Consulting Partner of the Year. No other large firms were named.
Why don’t they do better? Traditional partners still lack knowledge and interest in technology. Sometimes there is outright hostility to a business that is seen as not producing recurring revenue, or yielding billable hours, and which may represent a threat of litigation from failed systems.
“If I were to characterize IT at big firms today, I would characterize it as all over the map,” says Jennifer Wilson, a partner with Convergence Coaching, which provides consulting services to CPA firms. Wilson says that the changing regulatory climate under Sarbanes-Oxley gave partners who opposed IT practices a whipping boy.
“They were waiting for the excuse to get out of technology consulting,” says Wilson. She adds that, “sometimes we think firms bring us in so they can justify firing their IT group. We expose issues in the firm. Frequently, they say, ‘we told you.’”
Still, Wilson agrees that the large firms can be players. Moreover, she believes that when the economy picks up, they will wish they were. “Those that threw it away are going to find themselves with their pants around their ankles,” says Wilson.
Some have gotten out of the business. About two years ago, Larson Allen Weishair sold its reselling business. Earlier this year, Moss Adams dropped its Great Plains business. Tony Maki, managing partner of the consulting group, cited the changes brought about by Sarbanes-Oxley and independence rules, which hampered cross-selling opportunities. But he also cited the fact that the practice was not growing. Moss Adams still provides many technology services. “We continue to do information systems design, strategic design, and implementations,” says Maki. “We just don’t sell software.”
Many say regulation has not forced firms below the Big Four out of the business, although the impact on the not-for-profit market is stronger.
“We do have some effects from the GAO and Sarbanes-Oxley,” says Mike Burlew, partner in charge of BKD Technologies. But he adds, “There’s plenty of business outside of what’s regulated. It’s just hard to get to.” Most firms below the Big Four aren’t heavily engaged in audit, and even then, many can choose which clients they will serve.
What makes the players who stay successful? Most interviewed agree on commitment, something that applies to big and small. But there are widely different approaches. Some firms, like Moss Adams, eschew reselling, and continue to provide technology services. One way, often labeled the agnostic approach, is to avoid selling software in order to be objective.
“Even if I were to sell three different packages, I am still by definition not going to be objective and independent,” says Dan Schroeder, managing director of Amper Consulting, an arm of Edison, N.J.-based Amper, Politziner, and Mattia. That firm, once a top reseller for the former SBT Accounting Systems, phased out of reselling about three years ago.
“To sell technology goods requires a heavier investment in people,” says Schroeder. “You’ve got to have critical mass. You’ve got to have the technical people, the consultants, the good relationships, and the baggage.” By partnering, a firm like Amper can get its staff to under 10 consultants, but provide many of the same services. Other firms carry multiple products, believing that makes them in effect objective because they are not wedded to one vendor. Others stress loyalty to a single partner.
Is there a formula? Some firms organize on a national basis, others by local office, and still others by region. It’s clear that there are different roads to success in technology consulting and that most of these roads have their difficulties.
Being big doesn’t shield a firm from a weak market. But big firms have the resources to ride out bad times that have driven many smaller operations from the field.
“We have learned how to run the business as a tight ship,” notes Raj Chaudhary, a Crowe Chizek executive in charge of technology. Crowe Chizek’s technology business operates within the Systems Consulting Group in five different offices. The group employs 180 people and produces about $36 million in revenue, down from 300 employees and revenue of $45 million about two years ago.
Business lines include enterprise application integration, the sale of the high-end Onyx CRM package, and system integration. The company began selling Great Plains software about two years ago, after it stepped away from the weakened Baan financial line. That was in time for the market to slow down dramatically.
But Chaudhary notes, “When we entered tough times, the firm supported us to get us back.” He also believes that the business knowledge that CPA firms have separates them from run-of-the-mill resellers and consultants. He also believes that firms can’t avoid technology services because customers demand them.