Accounting for Small Business Goes Online

The real trigger for the SMB offshore outsourcing model was the introduction of accounting and business applications which were used by small businesses, but introduced in an Internet-based or online sort of technology model. Applications such as NetSuite (was NetLedger, then Oracle Small Business), Intacct, and QuickBooks Online Edition were introduced to facilitate a closer and simpler working relationship between businesses and their team members, as well as their accountants. These web-based applications, however, offer differences in functionality and operation that many users were and still are not willing to adopt.

The creation of application hosting services for small business - namely, service which allows Intuit QuickBooks Pro to be affordably offered as an Internet-accessed application - became the magic bullet. The QuickBooks product line all but owns the small business market. Once the application was able to be utilized in an ASP technology model, the entirety of the SMB market became a potential food source for outsourced bookkeeping and business data processing companies.

Early stages of marketing the online accounting model involved professional accountants selling bookkeeping services to small business, but offering a greater level of performance and cost-efficiency than the business could experience alone. The online technology model facilitates a closer and real-time working relationship between the accountant and the client, and results in better and higher quality information for the client. By using the online application model, accounting professionals are able to increase staff levels at reduced operating costs by allowing operators to work from home or other locations. Further, the elimination or reduction of time spent traveling to client sites, manipulating client data sets, and other similar activities helps to reduce the cost of delivering bookkeeping and accounting services to the client.

The Impact in India

India was one of the first countries to visibly enter the smb outsourcing market en masse. Large numbers of business people and accounting professionals from the US paid visits to groups in India, discussing the market opportunity and potential around smb outsourcing, and to enlist processors and head count to prepare for the deluge of inbound work from US businesses. In many cases, the participants in India were required to pay heavily for the privilege of participation spending thousands (hundreds of thousands, in some cases) of dollars in training and education, building infrastructure, buying software and services only to find that the return on investment was not going to come any time soon if at all. The US accounting market was not yet ready to ship its work offshore in wholesale. And, in reality, the outsourcers weren't ready for the business anyway.

Road shows, seminars, presentations, free offers, email and fax mail and junk mail of all flavors - all have been employed to attempt to convey the value of offshore outsourcing to the business market and to accounting professionals. This marketing was, in many cases, the use of funds from the investments made by the offshore entities. Those promoting the opportunity in India were garnering funds from participants there (while promising that work would be coming in immediately), and then returning to the US only to spend the money on trying to get the business that was already promised. Needless to say, this did tremendous harm to many of the offshore start-ups, and ran some of them out of business before they ever had an opportunity to perform. Certainly, some of these businesses were simply ill-prepared and were not ready for operation, but there were many which were, and some of these positioned themselves with partners that took advantage without delivering anything of value in return.

There were other models employed, as well. Postings on open job boards, offering e-Accounting work for a fee, and with a promise of huge returns, are prevalent. The representation is that, if the offshore processor would pay into the model, then the work would be forthcoming. Many paid into the model; few received any real revenue-earning work.

Value Delivered

Many of today's outsource organizations have learned that they must provide the expertise and tools to the practice, assisting with process and workflow development, and creating assurances that the work will be handled in a timely and efficient manner. While the model is still being fully-explored, the experiences of the past few years have given these companies significant insight into the issues and potential solutions to the problems faced.

As with any new business model or technology, the �early adopters� are essentially the beta testers for the rest of the market. Models which are believed to be fully developed are found to be lacking in significant detail or insight. And many approaches are simply not realistic when applied to the larger part of the market. Having worked through a period of trial and error, many outsourcers are now finding their niche, and are delivering (very successfully and profitably) valuable services to their business and professional clients. This working model has not yet matured to the point where offshore (or domestic) outsourcing is an automatic solution for any practice, and there is no cookie-cutter model to follow to success. Accounting professionals understand the unique nature of each of their client businesses, and it is this unique aspect which represents the challenge in creating standards in processes and systems which are an absolute requirement for any successful outsourced engagement.

The question is not whether or not your client should outsource their work - the answer here is obviously yes, and that's why your client works with you. But whether or not YOU should outsource certain processes or functions remains a question. There are significant benefits to be derived, not the least of which is an improvement in workflows and controls to measure performance. The cost-of-service benefits may, for some, remain elusive. The primary reason many companies initiate outsource arrangements is based on the assumption of handling the existing work using the existing processes, but at reduced labor rates. In truth, the benefits more frequently arrive in the form of enhancements to workflow and control processes, and the development of a greater and more in-depth understanding of the work being performed on the clients' behalf.

After a very disappointing encounter with a computer specialist supposedly capable and knowledgeable, I have come to the conclusion can only depend on self to solve a problem; to research and fix what is wrong.I paid this "expert" to repair the operating system (OS) of my computer. All he did was insert a few disks to reinstall the OS. Didn't make any attempt to diagnose and examine what is

The last few months have been a roller coaster. I have been busy promoting my business. I have made some changes to:tjkfinancialaccounting.comCheck out the following group for additional comments:groups.google.com/group/tjk-accounting-services

Throwing in the Towel - Linux on the server = yes. Linux on the desktop = not if I don't have to

Linux Linux Everywhere. Except where you can see it.

There is a lot of discussion in the media about Linux and Microsoft. The recent agreements between Microsoft and various Linux distros came as quite a surprise for some people, as there is a significant difference in the business model and philosophy of open source software versus commercial software. "Microsoft has announced a partnership with Novell and will help promote Linux. This is stunning. This is like Red Sox fans announcing they're going to root for the Yankees." (Forbes.com) But for others, these agreements simply underscore the reality of the market at large: Windows wins on the desktop. It's not because of functionality or because it's superior technology or because of the cost. It's because of momentum. This is the same reason why Intuit QuickBooks wins when it comes to smb accounting. MOMENTUM. It's the most important thing right now, and it is being leveraged quite nicely.

Take Microsoft, for example. First, they market against Linux. Then, they see the server market numbers being impacted in a big way with Linux sales for servers, so they figure out a way to make that market theirs (at least partially). What this does, in effect, is acknowledge that maybe Linux is a good thing to use on some servers, as long the desktop still runs Windows. Put your "partners" where you want them; where you can possibly control them. That way, you can still fulfill your primary mission - keep your products squarely in front of the end-user. And there are way more desktops than servers in most enterprises. Volume = Momentum. Also, the end-user works directly with their desktop and gets to experience operating the OS and applications running on it. Not so much with servers. Familiarity = Momentum.

Intuit has also taken this approach, and it's going to work for them. The Intuit team apparently heard the message coming loud and clear from the Linux community: "I really need QuickBooks on Linux", and has taken the steps necessary to satisfy the requirements of the market. Sort of.

"Answering the call for an open source option from Information Technology professionals, Intuit Inc. announced that businesses will soon be able to operate QuickBooks Enterprise Solutions from Linux servers." (Intuit press release). Amazing. But, again, it underscores the defacto standard that exists in the market: Windows runs on the desktop. Intuit is willing to acknowledge (as Microsoft did) that maybe servers are OK for running Linux. Maybe servers with Linux are even a good idea. But the application that the user sees? It's a Windows desktop application. The desktop OS that the user must run? It's Windows. Go figure.

Note that it is only the Enterprise Solutions which will be available with a Linux database server. While the QuickBooks Pro/Premier versions utilize the same Sybase database engine, Intuit must have figured that their requirement to support Linux sits only at the Enterprise level rather than the entry-level or smb markets. Maybe they, like Microsoft, believe that only larger companies need or want Linux, and only at that the server level. Again, it is momentum. Intuit essentially owns the small business accounting market, and they will continue to fight to keep it. By softening to the Linux community, at least at some level, they gain users and access to new markets without compromising their primary goal: keep the product squarely in front of the end-user.

It's not really surprising to see either Microsoft or Intuit take this approach. I fully expect other Windows-platform applications to follow this route, and to possibly make their servers available for Linux platform while keeping the client-side in Windows. It allows them to capture a growing segment of the IT market while not increasing their development (or IP?) exposure dramatically. It is typically much more cost efficient to develop to a single platform than to try to support multiple platforms well. With the Microsoft/Linux "alliance", there is an element of safety now for Microsoft-platform developers who wish to incorporate Linux support in their products. And while this all looks good for Linux platform adoption at the server level, the desktop space is still pretty much locked up with Windows (no pun intended).