It's not all that difficult to define enterprise-class accounting software. If it costs a lot more than your car, and requires a large team several months to install, it's enterprise-class. Defining mid-range and separating it from entry-level is not quite as simple. Though mid-range accounting software is generally sold and serviced by value-added resellers, it still often requires a team to complete the installation, and often takes weeks, rather than days or months.
To get a better focus on the characteristics that separate the entry-level from the mid-range accounting software market, determine what the state of the art is in existing packages, and find out where vendors feel the market and products are evolving, we askedvendors that are recognized as having applications in the mid-range space, including Sage, Intuit, Cougar Mountain Software, Open Systems, Intacct, NetSuite and Microsoft, by sending each a short questionnaire asking the following questions:
1. How do you feel your product differs from entry-level and enterprise applications in the following areas:
Features and functionality?
Maintainability in-house?
Scalability?
Ability to interface with other applications?
2. Is there a specific audience, market segment or business size that you feel this product is particularly suited to?
3. Are there application modules available in this product line that are unavailable with other vendors' offerings and are unique to this product series?
4. How do you see the market for mid-range accounting software changing in the next five years?
THE SAME OLD SAME OLD?
To a large extent, the answers were pretty much what we expected, and far from surprising. In making up our questionnaire, we had hoped that we would see some "Aha!" moments. To a great extent, we were disappointed. Maybe it was because the questions generally went to product managers, rather than product strategists, or because vendors were simply loath to tell us where they were heading for competitive reasons. Perhaps we weren't clear enough about asking for differences, and how each vendor differentiated their product from others in the market. Whatever the reason, much of what we received was product fluff.
Every now and then, we did stumble across an enlightening answer. But in many cases, each of the vendors we polled gave us replies that were uniform, rather than unique. To some extent, that's an answer in itself, and it raised some questions that we didn't ask.
One of these is whether accounting software in the mid-range market has reached the point where products are so mature that products from different vendors have reached parity. This certainly seems to be the case in the entry-level market. If you removed identifying vendor information from the two leading products, and sat someone who hadn't used either down in front of them both, in most cases the potential user would find it difficult to see where one product was markedly different from the other.
When vendors answered the question about where their software was uniquely different from other vendors' applications, most of them pointed out almost precisely the same thing. And when one vendor tells you it has a wide selection of subsidiary modules to accomplish this and that, and several others tell you exactly the same thing, where's the difference? Unless your client has a need for a specific module that one vendor offers and another doesn't, a purchase decision boils down to other factors.
This was most evident with the responses from Intuit and Sage on their QuickBooks Enterprise Edition and Peachtree Quantum. To a large extent, these products are very similar to the retail editions that you can buy at a fraction of the cost at Staples or Costco. But there are some differences that bump them up into the mid-range segment.
Scalability is one area. Both vendors' products support considerably more users than their retail entry-level editions. But each vendor supplied an area where they believe these "ultra" editions bring them into the mid-range accounting software market segment.
Senior product manager for QuickBooks Enterprise Solutions Catherine Fisse points out that QBES includes the TrueCommerce EDI Transaction Manager, and works seamlessly with Intuit Field Service Management ES to schedule service jobs, giving it more functionality, in addition to supporting a greater number of users.
And both QuickBooks Enterprise Solution and Peachtree Quantum are capable not only of supporting a large number of transactions, but also processing them in real-time, a standard feature of accounting software in the mid-range.
Service is another important differentiator between entry-level and mid-range segments. Entry-level software users need great customer service because of their lack of familiarity with both the application software and, in many cases, the particular accounting functions being performed. But for the most part, maintaining the software is usually just a matter of applying updates.
The service issue in the mid-range market is much more complex. Not only does it involve customer service questions and help requests from all levels of an organization, which multiply as more users are added to the system, but the responsibility for providing service is handled by multiple sources - in-house IT, the VAR the software was purchased from, and the application vendor.
One way this is handled is by vendors building a strong support organization. For the most part, in the mid-range segment, customers are often supported by the reseller that they bought the software from. A particular vendor may offer more or less access directly to the customer.
WE SPEAK YOUR LANGUAGE
An area where there's a lot of growth in the mid-range is in vertical market software. Accounting software developers have long thrown a few concessions into the system flow and labeled their application a vertical.
That has changed dramatically in the past few years. With the increasing sophistication of development tools, it has become possible to get ever more granular when addressing the needs of specific vertical markets. In turn, where a vendor might have offered two or three vertical packages, it's not uncommon to see a vendor offering vertical customization in half a dozen or more industries.
Open Systems' director of marketing, Carla Alarcon, points out that its OSAS accounting software has a Construction Job Cost add-on that would appeal to the construction industry, though it doesn't consider OSAS a vertical application. However, OSAS does include the source code, so it can be easily and extensively modified by a knowledgeable programmer. OSAS also runs on a variety of operating systems, including Linux, Windows, Mac and more. This type of operating system independence is a feature that is common in the enterprise accounting software market, but is increasingly migrating down into the mid-range segment.
Another feature more common in enterprise software but now migrating down to the mid-market is the ability to maintain multiple books in multiple currencies. Multi-currency capability is something that's not found to any extent in entry-level accounting, but, with the increasing globalization of business, is becoming increasingly necessary.
And while keeping multiple sets of books sounds like a joke to non-accountants, with the increasing need to present financial information differently, as well as show financial transactions differently under different circumstances, that capability is also increasing necessary.
SCALING UP
One thing that separates the mid-range and enterprise applications from entry-level is that with many mid-range systems, your client has to have a formal IT infrastructure in place before they can effectively implement a mid-range accounting solution.
All of the vendors point out that the product lines that they consider mid-range are scalable and support a large number of users because they run on robust and scalable database software. For example, Sage's Michele Ballinger, the product manager for Sage 300 ERP, points out, "Customers have the option to utilize a Microsoft SQL, Pervasive.SQL, or Oracle database, as well as multiple server and client operating systems." This type of flexibility is a hallmark of both mid-range and enterprise-level accounting software, but it also imposes the need for an IT department to handle the underlying operating systems and databases.
Using a standard SQL database lets mid-range accounting offer several advantages over entry-level software. Cougar Mountain Software's director of product management, Lori Pennington, details another advantage to SQL: "With Denali, a final import option is directly through the SQL database. This allows customers to import virtually any data into the system."
A further advantage is scalability.
Vendors using a stable and popular database as a foundation provide the ability to not only make scaling up to a larger number of users rather painless (from at least the implementation side), but also provide the ability to handle greater levels of transactions, which in many growing companies is just as important, if not more so, than adding users. These same benefits are provided by using hosted/cloud-based accounting systems such as Intacct and NetSuite.
Of course, if your client does not have the expertise or budget to maintain a fully staffed IT department, NetSuite and Intacct are entirely hosted applications. Whether the vendor calls itself a Software-as-a-Service provider, or cloud-based, the principle is the same.
"Because Intacct is a cloud-based financial management system, no software or hardware systems need to be maintained by the customer," said Intacct's Peter O
lson. "Thus, the issue of in-house maintainability goes away and should not be a constraint."
NetSuite's Paul Turner agreed: "A completely cloud-based solution eliminates in-house maintenance and costly upgrades."
One large advantage that cloud-based accounting systems like Intacct and NetSuite have is their ability to be effectively implemented in smaller businesses. Sage's Karen Hyman noted: "A very important trend is the increasing importance of small business. Whether these are entrepreneurs that sell products online through a Web store, or smaller brick-and-mortar businesses selling innovative products - all of these smaller businesses have increasing needs."
CLOUDY IS GOOD!
One thing that most of our respondents were almost unanimous in predicting was a paradigm change in the way that users work with their accounting systems. Smartphones and tablets are almost ubiquitous, and it's not going to be just a matter of "there's an app for that" anymore.
Errol Schoenfish, the director of product management for Microsoft Dynamics GP, put the evolution of the mid-range software market succinctly: "What has and is changing is the line between business and personal is blurring," he said. "People in the organization are demanding that the technology they use at work is as intuitive and personal as the technology they use at home. Cloud, social and mobile technologies are making it easier for our customers to support individual users and their desire to work when, how, where and on what device they choose."
NetSuite's Turner added another development that he anticipates seeing: "Software solutions will become increasingly integrated with broader business processes - with sales, service and Web for stronger business-process automation."
With vendors having the awareness and savvy to recognize and more rapidly adapt to change, as well as continue to make their applications more approachable to a greater number of people, the mid-range accounting software market is in for a very interesting couple of years. The vendors in this market segment are most definitely not just spinning their wheels.
Ted Needleman writes frequently on software, hardware, and technology-related subjects, and was previously the editor-in-chief of Accounting Technology.
