Software as a Service: Hot or Not?

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The talk of the market has been that Software as a Service, applications that run on the Internet, has been hot because the subscription pricing used to pay for these packages gives customers the ability to stretch out cash.

In fact, the choice between subscription pricing and paying for software licenses up front, the traditional method in financial software, is as much a lease-versus-buy kind of decision as it is a technology decision.

Not everybody agrees with that first point. At Convergence, the Dynamics user conference held last month, Kirill Tatarinov, the head of Microsoft Business Solutions, said the idea that SaaS is hot was being pushed by "companies that only have SaaS products" and that Microsoft's customers weren't clamoring for Internet-based applications in great numbers other than for Dynamics CRM.

Partner Insights

But another view came from Marshal Kushniruk, an executive VP with Avalara, the Bainbridge, Wash.-based company that markets online sales and use tax applications.

Kushniruk said business is booming because taxing authorities need to track down revenue since the economy has pushed down the purchases on which taxes are levied. And companies need to make sure they are paying what they should.

But beyond that, Avalara has seen a spike in customers using the online financial systems from Intacct and NetSuite. And that's not just new Avalara users. Kushniruk said there is a noticeable number of established Avalara customers who were using traditional, on-premise software who have switched to the online services.

Of course, both Tatarinov and Kushniruk have vested interests in their positions. Microsoft doesn't sell online accounting software and Avalara's business is online. In fact, Tatarinov said Microsoft is holding to its position of letting resellers hosted its Dynamics accounting packages rather than having Microsoft itself get into the hosting business.

Given the choice, I'm inclined to say the online business is growing rapidly, but it is still growing from a small base and it's going to be some time before a significant number of Microsoft customers are demanding SaaS. Recently discussed numbers indicate there are 70,000 businesses using Dynamics NAV and 40,000 Dynamics GP, the most widely used of the company's four financial software lines. NetSuite and Intacct have a long way to go to even get close to the Dynamics GP figure.

However, there are many reasons to suggest SaaS is the future, and maybe a future that's coming more quickly in the accounting world than many of us thought.

It's been my contention for some time that "When will accounting applications go to the Internet" is the wrong question. The better one is "What portions of the accounting process are better suited to the Web."

I still believe a hybrid model will prevail in many companies. But the economy is really changing assumptions. And that need to spread out payments and the ability of companies that use Internet-based applications to cut costs because of the reduced need for staff to support on-premise applications are pushing users toward the Web faster than would have seemed likely only a few months ago.

VAR 100-Ranking Resellers

This month's issue features Accounting Technology's annual VAR 100, which ranks by revenue value-added resellers whose businesses are based around the sale of accounting software.

It's a much different picture this year, as the economy has cut sales for many, and often VARs whose revenue has dipped have also cut staff to hold down costs. But there are also many resellers who had a very good year in 2008.

A major tool used by tax professionals, tax research, is the subject of "Tax Research Comes in Many Flavors" by Senior Editor Alexandra DeFelice. There is a lot going on in the research fields as major vendors implement sweeping new research platforms.

And another staple of the tax and accounting business, payroll, gets featured in the online payroll review conducted by accountant Wayne Schulz which surveys the features available in leading Internet-based payroll packages.

Need Insights?

Editor Robert Scott also writes "Consulting Insights," a free, twice-monthly electronic newsletter that addresses issues concerning the consulting and reselling market. It's insight with an attitude. If you want to subscribe, put the following in your browser address line: subscribe.webcpa.com. You can also visit us at www.accountingtechnology.com

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