There are two kinds of software handled by CPAs: Those that they sell and recommend to clients (sell through products and those that they use to run their firms (sell-to products). Until this year, the major software suppliers have focused on one kind of software or the other. But that is changing.

Intuit, largely focused on products sold to firms, changed its orientation with

its acquisition of MasterBuilder and American Fundware, which are handled by CPA resellers. Conversely, Best Software largely concentrated on products sold by or recommended by CPAs, such as MAS 90. That changed with Best’s recent purchase of CPASoftware, which has tax, write-up, and practice management packages.

Will other competitors want to field both kinds of packages? Those competitors include Thomson (owner of the Electronic Accountant and Accounting Technology), CCH (and parent Wolters Kluwer), and Microsoft. Of these, Thomson and CCH have shown little indication of moving towards the sell-through applications (largely accounting software) and concentrate on products sold to CPAs.

No one has a uniformly strong sell-to line. For example, Thomson, through RIA and Creative Solutions, lacks a strong multi-office practice management system. CCH lacks write-up and payroll. No company has put it together in both sell-to and sell-through. Even with the purchase of CPASoftware, Best gets only 300 tax customers, and is not known if Best wants to be in the tax market. Nor does Best have a tax research package, useful in hitting CPAs.

Intuit has strong entries in tax with ProSeries, Lacerte, and TurboTax. It is going to move into write-up (dominated by CSI). It has the EasyAcct package acquired with the purchase of Tax and Accounting Software, but probably will put more effort in its own QuickBooks Write-up software, expected later this year. Intuit also lacks a multi-office practice management/time and billing package. It is trying to move into mid-market accounting with QuickBooks Enterprise Solutions. It has also moved into payroll with the purchase of CBS Payroll.

Microsoft has strong accounting entries with Dynamics, Solomon, eEnterprise, Attain, and Axapata. But it has not made an effort to sell CPA products like write-up. Its forays into tax preparation have been limited to a consumer product, pulled quickly from the market. With its resources, Microsoft could obviously buy its way into about any market. But it hasn’t shown much taste for selling CPA applications.

So what target companies could help fill in the gaps? For both Intuit and Best, I believe that tax research is important. There are not a lot of companies available to buy. BNA/Tax Management would probably be pricey, and there have been reports that several years ago the employee-owners rejected a $1 billion offer.

A better candidate is United Communications Group, the holding company that owns Kleinrock and recently acquired ATX. Buying UCG would give the purchaser a very good research package and decent tax software. It would also be a good defensive acquisition for companies that already have research products. (This is just conjecture.)

Of all these competitors’, Best has the clearest intentions, stating that its parent Sage sells both kinds of products in the United Kingdom and that it will do so in this country as well. Intuit, claiming it serves more CPAs than the AICPA, seems to be moving head on towards Best and the kind words these companies have had for each other this year, may end.

What’s next? Heck, maybe one of them should buy the AICPA or CPA2Biz. It might do us all good.

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