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More than 85 percent of the FAO workforce is distributed across labor-intensive transactional processes, though suppliers have also started to hire experts for core F&A processes like AP/AR, general accounting, risk management, financial reporting, financial management and shareholder services. In the mid-market, expertise revolves around the software. In accounting, domain expertise revolves around the application.
Accounting application software functions as a corporate information system, recording and processing accounting transactions within functional modules such as AR, AP, payroll and trial balance. Accounting software can be developed in-house by the company or organization using it, can be purchased from a third party, or can be a combination of a third-party application software package with local modifications. It varies greatly in its complexity and cost.
Using third-party application software packages means keeping up with the F&A software Big Five—SAP, Microsoft, Oracle, Sage and Intuit (with Thomson Creative Solutions in the mix as well). As the software industry consolidates, Sage and Microsoft hold sway in the mid-range, SAP and Oracle are coming down from on high and Intuit is coming up from small business with QuickBooks Enterprise. All of this means that FAO players need to map strategy around the popular financial, ERP and customer relationship management (CRM) packages, as well as Web-based offerings like Intacct and Oracle’s NetSuite.
Worldwide packaged accounting software revenues are expected to grow at a strong 15 percent compound annual rate, driving revenues to $20.4 billion by the year 2010, predicts an IDC report entitled “Accounting Software: Worldwide Market and Trends by Mid-Market and Other Segments.” According to the report, sales into the “middle-market” (companies with revenues of $25 million to $249 million) will outpace the “enterprise” sector (revenues greater than $1 billion).
Online accounting is also playing an increasingly important role in the FAO process. Software as a Service (SaaS) means on-demand subscriptions and hosted business applications. There are two types of SaaS providers of hosting services: Software On-Demand Providers and ASPs. “On Demand Software Delivery” describes software delivered to the customer via a network (like the Internet) as a service. The hosting company offers its customers software specifically built for one-to-many hosting (one copy of the software is installed for use by many companies who access the software across the Web. There is no division between licensing and hosting fees and traditionally there is little or no customization of software for customers.
An ASP provides computer-based services to customers over the Internet. The most limited sense of this business is that of providing access to a particular application program (e.g., accounting software) using a standard protocol such as HTTP. ASPs do exist in the mid-market of Sage and Microsoft Dynamics GP users. myownasp.com, Vancouver, Wash., offers Sage Partners the ability to provide a secure, reliable ASP service to their customers. The ASP service is offered exclusively through authorized resellers in the nationwide network of Sage Partners. RoseASP, San Diego, Calif., has more than 25 years of combined expertise in hosting financial and accounting systems, and is experienced in hosting Microsoft Dynamics GP (Great Plains).
SaaS is not necessarily more cost-effective than traditional delivery models such as “on-premise” software deployments. In fact, studies show that on-premise software can offer a lower total cost of ownership over five years than hosted alternatives. The motivation to go for “on-demand” software service comes from other areas such as convenience, security, business continuity, speed of implementation, etc.
For Indian BPO/FAO firms like Genpact and software vendors SAP, Oracle, Sage Software, Microsoft Dynamics and Intuit QuickBooks—the mid-market is the future. The only question is, will the FAOs be able to work with the software vendors and VARs in this space to allow their efforts succeed?
Ned Madden is CEO of Real Time Global Services, Inc., Newport Beach, Calif., a specialist in outsourcing U.S. accounting work to India. Ned has an extensive background as an offshore outsourcing consultant, Internet entrepreneur, writer, editor, journalist, publicist and investment advisor. Ned can be reached nedm@realtimeaccounting.com, or 949/547-0143.
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