by Seth Fineberg

With only a handful of serious vendors in the space and a potential customer base that remains skittish about the concept, Web-based accounting may not be the most popular accounting solution available today.

But with the fairly recent introduction of resellers into the market and the comparatively low cost of online accounting services versus typical desktop products, demand is rising slowly but surely.

One of the clearest examples is Intuit’s QuickBooks Online. The company introduced a Web version of its popular box product in late 2001, and its user-base recently reached 8,000 with little marketing help.

Granted, the company has established the QuickBooks name over the past 10 years, and given the millions of box-product users, the several thousand using the online version may not seem like much. Intuit realizes that online accounting is not for everyone - particularly small businesses that don’t have mobile work forces or multiple offices that need to sync up their accounting.

However, QuickBooks Online product manager Heidi Jackman noted, “People who do get [Web-based accounting] are doing some interesting stuff that they can’t even think of doing on their desktop.” As an example, she cited outsourcing bookkeeping, rather than hiring someone to come in part-time.

QuickBooks Online, like many of the other Web-based services, may not have the full functionality of a desktop product, but it is designed to address the most crucial accounting needs or those that need to be done in a mobile environment. Fees of $19.95 a month for up to three users, discounted annual costs, and a 30-day free trial are also attractive.

Best Software, which owns the Peachtree desktop accounting brand, also realizes that many business are turned off to Web-based accounting, but that giving them a choice is important.

The company has an entirely Web-based, somewhat stripped-down version of its desktop product called ePeachtree, where all that a user needs is a browser. For those who still want a desktop interface with online features, Best offers Peachtree Web Accounting - which seems to be more popular, simply because it works much like Peachtree.

Chuck Corcoran, senior product manager for Best’s ePeachtree and Peachtree Web Accounting products, said that resellers are doing a good job of selling both products, and sales are indeed on the rise. The relative low cost - ranging from $14.95 to $239.95 a month, depending on the product and the amount of users - has aided in the adoption of these services. But Corcoran admitted that it still may be some time before any kind of mass adoption occurs, if it ever does.

Not all Web-based versions of desktop or box products offer less functionality. Accounting software vendor Accpac International claims that its Web-based accounting product, Accpac Online, has the same functionality as its Advantage desktop accounting series.

At $95 a user, it may be a bit more expensive than the Peachtree or QuickBooks online version, but it includes access to the company’s add-on modules, eCRM, eTransact and Accpac Exchange products. Again, the concept behind Accpac’s offerings is choice.

Analysts who follow this activity remain positive about the companies and product offerings that they have seen, but do not see a lot of upside potential for near-term growth in Web-based accounting.

“Using the Web for accounting may never be as popular as Web-based CRM or sales force automation, especially for small businesses that are happy with their desktop accounting products,” said Amy Levy, an analyst with Summit Strategies.

“But then, some are compelling with their add-on benefits, like NetLedger [marketer of the Web-based Oracle Small Business Suite] and its NetStore, where you can pick what you want to use. This isn’t to say the others aren’t moving forward to integrate more closely, but they understand that a small minority of customers will want [Web-based accounting],” she said.

NetLedger, one of the only pure application service pro-viders in the accounting services field, can credit much of the growth in its user base to channel partners, which it only began using last year. President and chief operating officer Zack Nelson admits that many of his 6,500 users are comfortable with the idea of an ASP accounting service.

“There is still an education issue to overcome,” Nelson said. “People need to feel secure with their data, but we are finding that people realize their data is safer in a hosted environment. All too often, companies don’t do the necessary backups on their own.” NetLedger’s services start at $50 per user per month, with costs outside of startup of about $1,200.

Cost savings have definitely been a key factor in the adoption of Web-based accounting services - not only in lower monthly fees, compared to desktop products, but in the need for accounting staff.

Ellis Ferrall, owner of Carmel, Calif.-based reseller Ryburn Information Systems, noted a case where one of his small business clients used NetLedger to eliminate the need for an MIS director and an assistant. The move saved the company $160,000 a year. Another client was able to trim its accounting department from 15 to eight with NetLedger.

Another business that is taking a more seamless approach to Internet accounting is In-tacct. Rather than providing a Web-based version of a desktop product, or a multi-functional ASP service like Net-Ledger, Intacct is providing the backbone for CPA firms to offer Web-based accounting directly from the firms’ Web sites.

After three-plus years of marketing, Intacct Corp. has recruited just 400 CPA firm users of its Web-based set-up. However, some say the company’s model will win in the end.

“CPAs are typically slow adopters, but I think there is enough traction [with Intacct’s service] where there are enough forward-looking CPAs to make it work. Their model is a good long-term play,” said Bruce Andersen, principal of BTA Consulting & Training, which handles QuickBooks, Intacct and Softline Software products.

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