[IMGCAP(1)]Web 2.0, Enterprise 2.0 is now the time to embrace Firm 2.0? What does it look like, and what changes on the horizon will have the most immediate and lasting impact on accounting firms?
Tim OReilly defines Web 2.0 as the business revolution in the computer industry caused by the move to the Internet as a platform, and an attempt to understand the rules for success on the new platform. Chief among the rules is this: Build applications that harness network effects to get better the more people use them (OReillys Radar, December 2006).
Is this social networking? Yes and no. Lets back up and consider the impact created by where the accounting industry has been and where it is going.
Integration, systems versus applications and the attempt to integrate data from multiple databases into meaningful information are all well-documented. When the word social networking is spoken, some who believe it is merely a waste of time and a drain on productivity get defensive. Discuss the same as collaboration tools, however, and people are much more likely to think problem solving and increase in productivity.
In his recent book "Enterprise 2.0: New Collaborative Tools for Your Organization," Andrew McAfee, a research scientist at the Center for Digital Business in the MIT Sloan School of Management, points out that IT enhances productivity by allowing users to do more with less. It also provides continuous savings and encourages innovation.
Software as a Service and cloud computing are getting significant attention in the corporate world. Couple them with social networking tools, and our profession is about to take some significant steps forward with technology.
Let me explain how I see these changes impacting the accounting industry and what firms will be faced with immediately. The primary areas firms must address are:
Leadership and management
Most CPAs understand the importance of leadership and vision, yet a majority under-value management skills and over-value effort and chargeable time. This articles focus is only on IT management, not on the broader implications of management within an accounting firm; however, much of what I say will apply to both.
It is not uncommon for line managers to be excluded from IT decision-making. They are focused on chargeable time, dont have IT expertise and prefer not to get involved with initiatives that dont produce chargeable time (even if the results reduce time and improve client services in the long-term). By eliminating line managers from the IT decisions, two or more results emerge:
1. All projects that should be firm projects default to IT projects.
2. There is no buy-in or support from the start, so most projects cost more and take longer to complete than originally anticipated.
The most successful firms have developed a system of IT governance that address the issues of transparency, provides channels of communication, establishes and communicates firm priorities, avoids stove-piping and establishes a high level of trust. If trust is high, projects cost less and take less time to complete. It also creates a we or team approach.
Most firms do not discuss pricing as it relates to technology, even though firms invest in technology to become more efficient and reduce time. Years ago I suggested a technology surcharge in order to recover the IT investment. While the concept is still valid (return on IT investment), the flaw in the economic model is that firms typically only bill for an accountants time on engagements. As a result, technology is viewed as overhead rather than a strategic asset like labor. (This is a general statement, and I know that some firms have developed pricing alternatives to hours times dollars, but the majority are still caught in this trap.)
In my opinion, the firm of the future must use value billing with fixed price agreements that thoroughly define the scope of work and provide for utilization of change orders. The few firms that currently use fixed price agreements argue the benefits for the client and the firm.
Those that dont approach pricing in this manner argue that it will not work. Each is a prophet. The value pricing approach does require upfront time and the discussion of fees before work is completed.
Collaboration is where the most significant changes and opportunities lie. Collaboration is based upon the team versus the rugged individual approach. It requires different thinking, and until recently we have not had the tools that make it easy. Terms like knowledge management and version control have been much discussed along with workflow and standards. Knowledge management requires structure. Social media tools such as wikis, blogs, digital content and search have all evolved over the past five years and now have serious potential for the accounting profession. Major vendors like CCH, Thomson Reuters, Intuit and others are building related capabilities and integration into their core applications.
Ask yourself the following questions:
1. Is it easier to find something on the Internet than it is on our firms network?
2. Would I like to have access to more potential clients?
3. Would I like to be able to access the most recent version of a document from anywhere at any time?
4. Would I like to be able to interact with experts (within or outside of the firm)?
5. Would I like to eliminate paper documents?
To date groupware and e-mail packages are the primary applications driving these initiatives within the accounting industry. Lets put this in perspective. E-mail is a mission-critical application, and e-mail management is a significant problem from several perspectives: risk management, search and storage.
E-mail is a channel, a private communication, whereas a platform can be private or shared depending upon access rights. Andrew McAfee calls these tools Emergent Social Software Platforms, or ESSPs. Information sent via a channel isnt widely visible or searchable, but a platform allows for searching, tagging and sharing. Wikis and blogs are examples of platform applications. Wikis can make an immediate impact for firms on the development of standards, policies and procedures, and the production of reports (audit and consulting). Blogs are great for information sharing, education and marketing.
Firm leaders must decide where these tools are applicable and how they may present compliance issues. In my opinion, wikis are the place to start to document processes and best practices. People at all levels have something to contribute, and success will breed success. Other social media tools have significant marketing and sales implications. The good news for accountants is that the tools are relatively inexpensive. The cost comes in the time to learn and implement them.
Change management is a critical skill for leaders in todays rapidly evolving economic and technological environments. There are multiple levels of change, and firm leaders must be competent in executing at the highest levels. It is relatively easy to implement incremental changes in efficiency, effectiveness and improvement, but reaching beyond these requires disciplined leadership.
What seems impossible for some firms is being done by others that have made a commitment to embracing change. A good example is e-mail management. Some firms delete email messages older than 60 days. In other words, all e-mail must be stored in a document management system and managed under the firms records management policies.
Many firms consider this an impossible change due to a lack of discipline, but e-mail is an unwieldy application for storage, search and management of documents and records.
New tools such as ESSPs present opportunities and options to firms; however, to maximize the return on the firms investment they must have a plan that establishes priorities, responsibilities and a timeline. What you dont know can cost you time and money.
Therefore, education and training are an important component. The questions you should ask at your firm are:
1. Do we have the right IT leader and governance?
2. Do we have a reasonable IT plan and budget?
3. Are we committed to making the necessary changes?
4. Will be hold ourselves accountable?
ESSPs are powerful tools but require a long-term investment in training and implementation. Many firms will decide they have higher priorities while some firms will benefit significantly.
L. Gary Boomer, CPA, is the president of Boomer Consulting, in Manhattan, Kan.
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