Small but complex: How ERP providers are reshaping for a new market
There's been a lot written about how some of the traditional accounting services have been contracting in recent years. Unfortunately, it's nothing new. Clients have been increasingly doing their own writeup work for years and tax prep is also experiencing client migration to do-it-yourself software, although the Tax Cuts and Jobs Act will probably produce a spike in clients returning to the fold. If you've been examining your practice and prospects, here's a possible new arrow in your quiver: enterprise resource planning (ERP) consulting.
For a long time, the acronym ERP struck fear into the hearts of accountants everywhere. OK, that may be a slight exaggeration, but it’s true that it was common wisdom that ERP systems were only for very large organizations — but I’ve said before that it's the complexity of a business, not its size, that makes it a viable candidate for ERP.
In addition to this mindset, one obstacle to implementing ERP (and in the process, gaining enough experience to consult in that area) was the complexity of the software, as well as the need for fairly extensive capital and personnel resources to support the hardware side and operating environment. But things have changed fairly recently.
There are still plenty of ERP systems that present these hurdles, and that set entrance bar is so high that many accountants in smaller practices can’t realistically compete in this market. But ERP is changing — what used to be the mid-market of accounting software offerings is starting to disappear as formerly high-end ERP vendors are hungrily eyeing the large number of your clients who are graduating from or outgrowing their QuickBooks capability, and so-called “basic accounting” software is trying to move up into enterprise level capabilities.
A case in point is Zoho. I mentioned back in March that Zoho was starting to look a lot like an ERP system with its recent additions and capabilities, all tied under a custom operating umbrella. It looks even more like one today. But then, coming from the opposite side of the spectrum is NetSuite. The company has, since its inception, stated that it was targeting QuickBooks users that were outgrowing their systems and wanting to move them up into ERP.
The end result of this reshuffling and retargeting is that there now exists a current market for something I’ll call “entry-level ERP.” Such a product has a number of traits in common that are somewhat different from both “basic accounting” and full-on, heavy-duty ERP.
One of these is that this level of software is modular, something that was a common trait in accounting software years ago, but has kind of disappeared most recently with the availability of a single application that does much of the heavy lifting, but is just so-so in the ancillary applications such as payroll, inventory, receivables and payables. These feature in many “basic” accounting systems, at least to a degree, but often in just a very basic form. The idea with doing a one-size-fits-most approach is to hopefully provide the basics of what many small businesses could easily implement and use. Aftermarket offerings, many times by third-party vendors, have grown to provide enhanced capability in those areas. But in a growing number of cases, the client winds up with a patchwork of stitched-together applications and extensions that is difficult to maintain. True integrated modular accounting is available, but it’s becoming rarer as vendors scramble to extend their applications into ERP territory with functionality like supply chain logistics, multiple warehousing, and variances for accounting practices and standards over multiple county operations.
On the other side of the spectrum are ERP vendors such as NetSuite who are trying to lower the entry bar so that your QuickBooks graduates can move into “true” ERP territory that offers capabilities such as supply chain logistics and shop floor management. Different ERP vendors like Acumatica and SAP Business One are also trying to capture these newly emerging prospects. And they are doing it by several means.
One very positive approach is that many ERP vendors are simplifying the user interface and workflow so that the system is easier to understand and navigate. Help systems have also been greatly improved at many levels. It’s not that ERP capabilities have been simplified or dumbed down; they’ve just become more approachable and understandable.
And having high-quality ERP systems developed specifically for the cloud makes moving up to an ERP an even easier decision. Gone is the need for large capital equipment expenses, and to some extent, an extensive and expensive network of IT support personnel. Expenses are able to be forecasted with good accuracy, and support costs are greatly reduced.
Expressway to your clients
To switch gears for just a moment, consider how QuickBooks became so popular. Part of it was approachability: QuickBooks was designed to be non-intimidating to a non-accountant. Onboarding was (and is) a fairly simple process, and if you had trouble, Intuit built a large cadre of consultants and accountants familiar with the ins and outs of the software to help you. And the company recognized very early on that accountants were a direct path to the businesses they wanted to sell QuickBooks into, and built up a very large accountants' network, almost from the get-go. And heading these accountant programs were recognizable figures from the accounting world.
Many vendors are starting to understand that accountants, such as yourself, are still the best path to getting your clients moved up into ERP. To do that, they either have to sell around you or enlist you in the sales process. That presents a good opportunity if you’re willing to put in some effort understanding how ERP differs from more basic accounting and what’s necessary for recommending and onboarding the right application for your clients.
Vendors such as Zoho, NetSuite, Acumatica and others are more than happy to get you up and running as a consultant and partner, offering education as well as other support. You probably will find that aligning yourself with a single vendor will be the best bet, at least initially, unless you have staff that you can assign to come up to speed with different vendors.
Do your due diligence
But choosing a vendor to partner with can be as daunting to you as moving to a new accounting system is to your clients. If you have the time, a good approach is to attend a vendor’s yearly user conference, something most of the major vendors provide. There you can talk to the vendor’s partner representatives, attend educational sessions, and most importantly, speak to other accountants and consultants about their experiences (positive and negative) with the vendor.
While many vendors offer regional information sessions, which may also be of value, attending one or more yearly vendor conferences should give you a better perspective. It isn’t inexpensive — each conference with travel can cost several thousand dollars. But if you view it as an investment in a new line of revenue for your firm, it’s not difficult to justify.
If you want to start marking your calendars, NetSuite’s SuiteWorld and Zoho’s Zoholics conferences are in April 2020, Acumatica’s is in January, and Sage Intacct’s is in October. And if you do decide to attend one of these conferences, you might find me in attendance as well. If you do spot me, be sure to stop and say hello.