The advantages of application service provider technology are becoming apparent to more tax professionals as the larger players in the field continue to tout its benefits, while smaller entries prepare their own offerings."The most obvious advantage is staffing, and that's an issue that affects both large and small firms alike," said Joanie Mann, executive vice president of online accounting solution provider CPAASP, based in Gig Harbor, Wash. "It makes the transition from tax season to the rest of the year easier, because both expansion and shrinkage can be rapid and efficient."
"We use it for outlying employees," explained Janet Hara, a partner in Hilo, Hawaii-based Taketa, Iwata, Hara & Associates LLC. "We started a few years ago when I needed to work from home to care for my father."
ASP acceptance often varies according to the size of the firm, according to Jo Ann Cummings, tax product manager for CCH Pro System fx. "It's more quickly accepted by the larger firms, because they see the most savings," she said.
For those who overcome their initial reluctance, they're surprised by the advantages, according to Cummings. "The clients who use it just love it and can't believe they didn't switch earlier," she said. "We need to prod people to switch, but once they do, they're sold."
Two Thomson products - GoSystem RS and Ultra Tax CS - illustrate the rates of acceptance of ASP technology. "The ASP model for Ultra Tax CS is up over 50 percent over last year, but it's still about 10 percent of the total," said Jack LaRue, senior vice president of marketing for Thomson Tax & Accounting. "But for GoSystem RS, the opposite is true. ASP technology is the driving force for that product."
All of the Big Four and most of the top 10 firms use GoSystem RS, according to LaRue, who agreed that staffing issues have generated much of the interest in ASP models. "It's a key issue for most accounting firms," he said. "A hosted technology adds a tremendous amount of staff flexibility to the mix. For example, during tax season when you're operating in an ASP environment, you can go home and put the kids to bed and continue working in the evening. It really increases job satisfaction."
"It also has proven to be helpful for firms that lose a staff member due to a spouse relocating. They don't have to lose the knowledge and abilities of that staff member just because they moved," he explained.
Another of the primary motives for the model is the fact that all updates are done by
the ASP provider, according to LaRue. "This is key in some of the larger firms, because everyone has to be out of the software to update it locally," he said. "Also, business continuance and disaster recovery is ensured when the software is hosted remotely. If a problem exists, they can rely on us."
"ASP technology has really taken off," said Chuck Robertson, product manager at Tracy, Calif.-based Petz Enterprises.
Petz's V-Tax is the online counterpart of its CrossLink Professional tax software, developed specifically for service bureaus and other multi-office operations. "Our base doubles in size every year," said Robertson. "It's time-consuming to do product updates, and the ASP version eliminates having to work at each location to make sure the updates are working properly. It can be managed at one location and pushed out to the other locations."
The size of firms using V-Tax ranges from as few as four offices to more than 300, according to Robertson. "It allows the manager to control everything from one location," he said.
Franklin, N.C.-based Drake Software introduced its ASP during the 2007 tax season, said John Sapp, a CPA and vice president of sales and marketing.
"It's geared toward multi-office firms," he said. However, "We see the broader implications of the product. It can benefit CPA offices with remote workers."
The Drake ASP product is priced exactly the same as its regular software package at no additional charge, explained Sapp. "It allows a firm to control the entire tax return process from the home office. They can have control over all or part of the process, including billing, pricing and e-filing. It allows them to have every office the same, or to have customized settings for each office," he said. "They can set up what types of things they want each office to be able to do. For example, different offices can be given different levels of authority to finalize e-filed returns."
CCH's TaxWise now makes an ASP version of its software. "TaxWise Online will be used exclusively by the 9,000 IRS Volunteer Income Tax Assistance sites and walk-in offices that we provide software to under our 11-year-old contract," said vice president of marketing Gene Goldenberg.
TaxWise's InterviewPlus Online, a desktop model until now, is available in an online version designed for the nontraditional tax prep site, according to Goldenberg. "It can be set up at a retail site where someone can gather information from the taxpayer using a very easy-to-understand interview," he said. "The information is then transmitted to a service bureau, where more trained personnel prepare the return."
"Last year Orrtax rolled out our ASP solution to 45 sites for use during the 2007 tax filing season," said Mark Dean, director of product management. "The results were positive, and we anticipate doubling the number of sites using the ASP solution during the 2008 tax filing season."
Randolph, N.J.-based TaxSimple offers its ASP model for professional preparers, as well as consumer versions via Free File and its own Web site. "Our Internet version has increased tremendously," said CEO John Vora. "Within two years Internet sales will exceed desktop sales."
"We offer business packages via the Internet for individual business owners, as well as professional preparers," he said. "Many accountants only need to prepare a return for one company, and they use our site to do this," he said.
Orange Door Inc., a San Francisco-based start-up founded in 2004, successfully introduced its first production edition for the 2007 tax season, and has seen remarkable interest in an ASP model, according to corporate business development officer Gabriel Lau.
"The market accepts ASPs a lot more now than when we first came out," he said. "Our clients like the idea that they don't have to back up data, they can work from anywhere, and we do all the updates. It streamlines the process in terms of the technology, and allows them to focus on their tax work, rather than dealing with IT issues."
Stevie Conlon, tax director for CCH's GainsKeeper, said that the market is growing for its ASP model. "GainsKeeper does computations and applies the tax rules for investment portfolios," she said. "Where clients can't remember what they paid for a security, this tool provides market-value measures on the date they bought, and takes into account adjustments like stock splits and reorganizations."
Proposed cost-basis legislation will make the whole process more complex, according to Conlon. "The thing that's driving it is a study of returns filed a few years ago. The GAO discovered that there were a lot of inaccuracies on capital gains reporting. The legislation would make brokers file 1099s disclosing what people's basis is in the securities they sold. Right now there's no independent way for the IRS to track and reconcile your gains and losses ... . So the IRS will have the missing piece to verify capital gains and losses."
Thomson's GoFileRoom uses ASP technology to manage workflow and documentation that is the front end of getting data into tax software, according to Adam Kupperman, senior director of enterprise sales.
Since TaxSort, a component of GoFileRoom's ScanFlow, is Web-hosted, the brain behind it will be always learning and improving, he said. "It scans and organizes tax documents and automatically organizes them by type and prepares bookmarked PDF files that can be reviewed on screen."
"GoFileRoom is a very scalable solution," he said. "It's used by small CPA firms with one or two people, while our largest client has over 2,000 users."
The demand for ASP solutions has skyrocketed for three primary reasons, according to Kupperman. "One is that it's completely flexible, customizable and configurable, so you are not a static application. The second is economic. It costs to own and manage a locally hosted application that has to be managed in-house."
"The third reason is security. You actually elevate firm security and control by using a Web-hosted application," he said. "We have a $100 million data center that a firm could not possibly replicate on its own."
"It's the future," agreed CCH's Cummings. "The sooner people get on board, the happier they'll be with their practice."
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