Application service provider technology, once described as "the next big thing to still be coming," has turned the corner on acceptance, as its advantages are winning over converts from large firms to smaller tax prep shops.Once offered only by industry giants Wolters Kluwer and Thomson, models from a number of new software providers are either in beta testing or preparing to enter the market.

"We've had great acceptance," said Jo Ann Cummings, product manager for CCH's ProSystem fx Tax. "We have quadrupled the number of returns and quintupled the number of users, so acceptance is reaching a critical mass," she said. "People see the cost savings, and they appreciate being able to work from anywhere."

"We provide the security and the back-up," Cummings continued. "You don't have to worry about a catastrophic loss."

"A lot more are adopting the ASP technology," agreed Jack LaRue, vice president of marketing for Thomson Creative Solutions. "The adoption of Ultra Tax and Virtual Office has grown to several thousand users operating in an ASP Virtual Office environment."

Although the majority of Creative Solutions customers receive their software on CDs, a lot more are adopting ASP technology, according to LaRue. "It saves them administrative time, and they no longer have to worry about installing and updating and back-ups."

He continued, "It allows the firm to retain employees who have moved away. For example, one of our customers in Missouri has an employee who had to relocate to Greece to accompany her husband. Without ASP technology, they would have lost the employee, but now she is able to continue working from Greece."

"We found that clients are significantly more likely to fill out a tax organizer in a [secure NetClient CS] portal than when it is mailed to them," LaRue said. "This past season we hosted more than 35,000 Web-based client organizers, and had more than 10,000 completed, about a 30 percent completion rate. On average, most preparers get 10 to 15 percent of the organizers completed when they send them out through the mail."

"The additional benefit is that when the organizers are completed electronically, they can be imported into the return without any data entry," he said.

Thomson RIA's GoSystem RS continues to grow its high-end software, according to product manager Boyd Gackle.

"Seven of the top 10 firms now use us exclusively," he said. "E-filing continues to be a big factor, especially in the corporate arena. Sixteen additional states will support corporate e-filing next year that haven't in the past. As they come online, we will support those as well. We're currently up over 36 percent in returns over last year."

Gackle denied that GoSystem had plans to eliminate its CD-ROM version. "The CD product is here to stay. There are no plans to discontinue it. New clients have the choice, although 93 percent do choose the RS [remote server] model."

A growing brain

GoFileRoom, a Thomson product, integrates with both Thomson and non-Thomson products, according to vice president of business development Joe Harpaz.

"The piece we provide in tax prep is workflow," said Harpaz. "We provide the solution that helps manage preparation and review steps, managing the workflow and documentation that is the front end to getting the data into the tax software."

TaxSort, a new component of GoFileRoom's ScanFlow, is designed to automate the identification of scanned tax documents. "It solves the problem of the shoebox full of documents," said Harpaz. "It will scan and organize W-2s, bank statements, broker's statements, expenses and all the forms that need to be organized and entered on tax forms and schedules. It automatically identifies the type of documents and prepares bookmarked PDF files."

Since GoFileRoom is a Web-hosted application, the "brain" behind TaxSort will always be learning and improving, according to Harpaz. "As the brain learns more, the identification process improves," he said.

Keeping control

Tracy, Calif.-based Petz Enterprises designed its V-Tax ASP model for firms with multiple offices and service bureaus.

"As soon as firms go to multiple offices, they lose control," said Chuck Petz, vice president of tax software development. "By having a central database and granting various levels of access to different employee staff, the manager can see what's going on throughout the whole organization."

"Since a centralized tax manager can review everything from a single location," he said, "it enables the firm to get consistent quality on returns."

Bellevue, Wash.-based Orrtax has developed its ASP model, and is ready for a phased rollout for tax season 2007.

"We're testing it with a limited subset of our customers," said director of product management Mark Dean. "Although we don't feel a strong push for it, we believe that our customers will see the value when they become aware of what it offers them."

After a successful test last tax season, Rome, Ga.-based TaxWise intends a full rollout of its ASP model in 2007, according to Gene Goldenberg, vice president of marketing.

"There's obviously a demand and a need for the kind of products we publish to be available in ASP," he said. "The value proposition for our customers is that so long as they are running offices that have a decent broadband connection, they will be able to install and set up users much more easily."

San Francisco, Calif.-based Orange Door Inc., a start-up founded in 2004, intends to sell subscriptions solely through the ASP model. It is currently implementing the latest updates from its last round of beta testing, and is readying its product for the 2007 season.

"We've seen a tremendous increase in both interest and education about ASP models, and the adoption curve is definitely set to ramp up," said chief business development officer Gabriel Lau.

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