Users of SAP software may be intrigued to hear that its chief executive Léo Apotheker was forced to "unexpectedly resign" this week just seven months into the job.

It seems the German company declined to renew Apotheker's contact and will revert back to having two joint CEOs; current board members Bill McDermott, head of field organisation, and Jim Hagemann Snabe, head of product development.

Accountants which use SAP may feel vilified in this move as reports have already begun to circulate that the change are a result of the company trying to increase support services by 22% last year.

However following a backlash from user groups the company backtracked and instead priced its Standard Support package at 18% of software licences.

One of the biggest selling factors in a predominately on-premise or traditional software company is its brand strength.

However the latest news has "increased uncertainty" on the company's future according to some analysts.

As the software industry this year is to go through various changes, with the growing demand of online and remote working capabilities; the introduction of inline eXtensible Business Reporting Language for tax filing; and the introduction of IFRS; it seems odd SAP would pick now to let its CEO go, without giving him the chance to sink his teeth into the role and face the changes head on.

Cloud computing hit headlines in 2009, but iXBRL will take priority next year.

HMRC announced from 1 April 2011 all tax returns and supporting financial statements must be compiled using iXBRL.

What is XBRL? It's a tagging system which allows investors to compare financial information. Users can "tag" or "barcode" information which can be used for comparisons by investors and analysts.

These tags however, can't be read by most computers. iXBRL can.

Although this sounds like a great idea in theory it can be costly. So far it looks as though software companies are bearing the brunt of this leap forward.

IT companies I have spoken to have pooled their resources into research and development as well as extra support services.

All have denied an increase in support charges in the future, but it will be interesting to see where the money comes from to push this technology forward.

Interestingly, although online, cloud computing and Software as a Service (SaaS)  -has continued to hit headlines and make waves in the technology industry - the award winners are not renowned for their online capabilities. All of the software winners were in-house or on-premise providers.

In my discussions with various accountants, finance directors and software vendors, remote working is one of the biggest selling points for adopting SaaS or cloud computing technology.

Gartner predicted that worldwide SaaS revenue would grow 17.7% by the end of the year, an increase from $6.4bn (£4.08bn) at the end of 2008 to $7.5bn.

However speaking to one of the technology judges at the event, I found they truly believed the client and colleague interaction was vital in running and working in a successful business. Something this judge felt was lost when too much remote working is implemented.

The awards and speaking to technology judges made me realise that online and remote working is most likely still a long way from mass adoption. In this instance I hope that I am proved wrong.

The short shelf life given to the product was astonishing.

The product was stopped just two years after its UK release date and one year after its general retail launch.

This means Microsoft must have started discussions to withdraw the product either before or just after the general retail release.

They would have had several internal discussions before having several more with Mamut - who took on support of their abandoned customers. All of which would have taken the best part of a year.

Customers would not have been expecting, having invested in such a big brand, to see it disappear after just two years. This is made worse by the Microsoft claim their products have a lifecycle of ten years, according to the CEO of Mamut who will now be supporting the product. 

I wanted to know why Microsoft had taken such early action but they declined to comment and also declined to comment as to whether they thought Microsoft Office Accounting was a failure.

We can only imagine the size of the hit Microsoft was taking on the product for it to drop MOA so quickly.

And the latest technology company results offer some tough reading.

Despite their spin, the bottom line is they're making less money.

Of course this is no surprise given this is the situation for pretty much most companies in the world at the moment.

But what disheartens me for this sector is the prospect of innovation being suffocated.

My greatest fear is that R&D becomes something big IT companies simply acquire from the smaller guy.

If more and more IT companies are consolidated, which analysts expect to continue, then research and development could take a nose-dive.

It is generally more cost effective to buy out a company that has developed software than to develop it yourself. But what happens to the user relationship with the IT company?

You then have the old problem of a technology company owning different sets of kit that don't necessarily fit together. Ironically spending years forcing them together is probably more expensive than coming up with new IT from scratch.

Software companies need to make sure that development doesn't fall off the radar in the cost saving and streamlining drive, and that they invest on what users want - not what they can get by with.

The Olympia had an online accounting zone. According to one spy at the event he received numerous complaints from the more traditional "on-premise" vendors, as they are now being labelled, that there wasn't much traffic from accountants or buyers.

This is in stark contrast to the many onlookers who swarmed to the online zone, not least because of its bright lights and enticing shiny red boards.

The more popular discussion groups centred on cloud computing, with one in particular chaired by Richard Anning, head of the IT Faculty. He had a panel including members from NetSuite, salesforce.com, FinancialForce.com and Mamut.

It was standing room only, with people straining to hear how this technology was growing and able to offer all the things that "on-premise" no longer provides.

It made me wonder how long it would be before "on-premise" software becomes legacy.

But the interesting aspect to come out of that roundtable was the honesty that not all cloud providers are created equally, according to Mamut, while FinancialForce.com stresses this is a new technology and may still has challenges to overcome.

It's a refreshing change to hear the fears of the software industry as it ventures into new territory.

This is my first blog and comments are always welcomed. The previous blogs were written by John Tate co-founder of Tate Technology the IT consultancy

The press have been busy covering the latest round of acquisitions. I’d like to have a look at a couple of these

Sage

Firstly, Sage announced at the end of last month that they were acquiring UK Construction Software specialist Tekton for £21m. The Sage board continues to look for growth via acquisition and this news adds to a long string of purchases over recent years.

On interesting aspect of this purchase is that Tekton’s software – evision, is based on one of Microsoft’s own accounting products – Dynamics NAV.

Sage and Microsoft are often regarded as direct competitors in the Accounting Software market so the fact that Sage has purchased Tekton raises some interesting questions.

Will Sage re-write the product to work with their own software? If not how does Microsoft feel about this relationship?

Sage has made its money by acquiring dozens of different products and generating good profits from the user bases – so I guess if the finances stack up for this deal the explanation for the purchase could be very simple.

Access

Access Accounting announced last week their acquisition of Armstrong Consultants – for an undisclosed sum. Armstrong Consultants has a focus on the professional services and service management markets and is a reseller of Access Accounts. Other Access resellers may not be too pleased with this purchase. Software vendors owning resellers as well as supporting third party partners creates a conflict of interest, for example when allocating sales leads and supporting new business pitches.

More interesting perhaps Access has announced plans to grow their business to £100m t/o by 2017. Formed in 1991 their turnover has so far risen to c. £14m in 18 years so they have some way to achieve this growth. However the expansion plans look like they are off the back of acquisitions of new products, so it will be interesting to see how they fare – and whether they will come up against Sage with future deals

One thing that saddens me across the SME Accounting Software space is how established software vendors have not yet managed to deliver a ‘killer product’ that gains really significant global market share, Intuit being the possible exception. Satisfaction levels among the users of accounting software products still leaves a lot to be desired. This is in part down to serious functional weaknesses in many of the products on sale. Accountants using these systems want reliable, reasonably priced and functional products that are well supported. They also want software authors to invest enough in R&D to keep the application up to date with leading technologies.

In the case of Sage their revenue/profit growth has come primarily from acquisition – not organic growth of their existing products. In the case of Access Accounts their revenue comes mainly from the UK. For whatever reasons their product has not gained a dominant position in the market and they have not furthered their growth significantly in overseas countries.

So will we ever get to the point that the market consolidates into a handful of global products? One really starts to wonders whether the only chance of this happening is with a new player in the market. Google? Salesforce? Who knows?

Electronic waste (e-waste) now makes up five percent of all municipal solid waste worldwide, nearly the same amount as all plastic packaging, but it is much more hazardous. Whilst the UK press campaign for a reduction in the use of plastic bags – only a small part of packaging, the focus on technology waste is limited.

The WEEE (Waste Electrical and Electronic Initiative) became law last year to try and address this issue. However according to a survey conducted by Informatics in February only a third of SMEs had heard of WEEE. The responses suggest that many SMEs in the IT and telecoms industries may be neglecting their environmental responsibilities. The report from this work added that SMEs generate 60 per cent of all commercial waste in England and Wales so it is critical that all users of electrical equipment understand what WEEE means for them.

In March this year VNU Net reported that UK consumers and business unnecessarily junk 12.5 million computers every year which end up in landfill, or dumped in the countryside. However, one recycling charity hinted at a lack the political will to do anything about the situation. Currently one on four people dumps their PCs at the local tip. Only one in ten people give their old PC to a friend or charity.

To compound the situation research suggests that the average lifespan of computers in developed countries has dropped from six years in 1997 to just two in 2005.

WEEE may help with recycling - but it doesn't tackle the issue of the toxicity of individual computers. The Greenpeace report names and potentially shames vendors. Samsung comes out most favourably – and Nintendo is at the bottom of the list. More information at http://www.greenpeace.org/international/campaigns/toxics/electronics/how-the-companies-line-up

Gloomy – yes. However, through greater awareness, there is the opportunity for computer users to recycle equipment in an environmentally friendly way and to put pressure on vendors to ‘Green up’ their products. I would encourage FD’s and accountants to add environmental standards to their evaluation criteria when buying new equipment

Blackberry is not alone in having problems with their service delivery. Salesforce has suffered outages also in the last year – the most recent being reported on Tuesday this week. Google Mail has also attracted criticism where there have been reports of significant email delays over the last week or so.

This is likely to affect the confidence of organisations considering adopting a SAAS (Software as a Service) model for their future business applications. In the case of Blackberry you might argue that a three/four hour downtime is not that bad. However for business users who rely on Blackberries, a delay of this nature can cause serious issues.

Conventional systems where the servers are managed by the company using them are of course not without their own problems. And remote users rely on Internet access to work on any system. Accountants working with offices/companies in the Gulf Countries and India will no doubt be aware that five Internet lines went down late last month – caused it was suggested by a combination of power failure and an anchor cutting two seabed lines. Traffic using these lines was rerouted via other cables but the problem caused serious delays/performance issues whilst the lines were fixed.

Over the coming years SAAS and internet technology is likely to settle down. As more Internet lines are set up the service reliability will continue to improve. SAAS developers should be able to get their products working 100% of the time once their code base and technology architecture matures.

But we are not yet at the point that SAAS vendors offer cast iron solutions – nor where the Internet lines that they use are rock or seabed solid.

Organisations considering adopting new SAAS/mobile technology need to have adequate backup plans for outages which may involve keeping local server based systems on standby. Not helpful for those building a business case for SAAS based on reduced cost!

The last few years has seen a fair amount of consolidation in the Industry. Sage continues to buy up companies. Infor has made a number of acquisitions including Systems Union with the Sun Accounts and Pegasus products. Iris has acquired CS Group etc etc.

As a result a number of vendors now own several completely different Accounting Software products. Microsoft and Oracle being two examples. What are the options facing these vendors?

1. Make money out of the well established and usually profitable user bases. This is typically achieved by cutting back on R&D and staff/support costs, increasing prices and trying to sell add on products/services to the installed base. Impact on users is usually not that positive. Less new product comes out, prices can go up and service can deteriorate. Suppliers that take this approach rely on customers to be slow to switch to another vendor – as it is so much hassle and expense.

2. Try and grow each product in the stable in its own right. This is typically achieved by trying to find a niche for each application and drive new business through separate sales/marketing teams. Sage, for example, achieves product differentiation by having different applications on sale in different countries. There is limited evidence of the success of this strategy in terms of generating real growth for a particular product for a vendor. Vendors struggle to create a compelling marketing message on each of their products and can cause confusion if they offer several different products for sale. I would suggest Microsoft is an example of this. Having vendors with different products on sale in different countries carries the risk that global players will take out their market share over time – by having one product sold/used globally. Larger clients benefit from having one application in use globally. All organisations should gain from the economies of scale a vendor enjoys from developing/selling/supporting one product globally.

3. Integrate all products into a new/combined application – or move users to one of the products. Microsoft has/is trying to bring the previously named Solomon, Navision and Great Plains together. Oracle is making similar efforts with Oracle Financials, Peoplesoft and JD Edwards. Combining products creates a huge challenge as different product operate in different ways – e.g. with their GL coding structure. This is limited evidence that this approach will succeed.

The alternative of trying to get a customer to switch from one product to another is fraught with difficulty. The conversion route can be tortuous and costly – and often leads to customers looking at solutions from other vendors. Pegasus in the 1990ies tried this approach, buying up several user bases and trying to convert them to their mainstream products. They had limited success with this.

So what strategy will Agresso adopt with Coda? Cash cow seems very tempting for the CODA/Dream core ledger clients. CODA does have some tasty BI tools that they could merge into Agresso of course – which could help the Agresso client base.

I spoke today to Gareth Arnold – the UK Product Manager of Microsoft’s new entry level accounting system. He was very bullish. Since launching the product late last year they have had thousands of downloads and a real interest in their new application.

Microsoft is putting considerable effort into recruiting Accountants to Microsoft’s Professional Accountants Network. They offer free software, training and support to members of this group. In the UK they have already exceeded their recruitment targets that they hoped to reach by June this year and if the current rate of sign up continues it will not be long before they overtake Sage with numbers of accountants in their program.

With the entry level product, Accounting Express, being supplied free of charge they have an attractive offering. In terms of the potential impact on Sage Gareth says that the product is focused at organisations that are not big enough to have an employed accountant/accounting professional on board – typically with up to 25 staff. This is certainly close to the Sage 50 product range (previously called Sage Line 50) and is likely to affect future sales of this product.

At the moment Accounting Express/Professional has been focused on the UK and US markets. Compared to Intuit with QuickBooks Microsoft has some work to do to develop and supply a global product. In the long term there is the opportunity for vendors to offer one product globally – and enjoy the economies of scale that this brings. QuickBooks has made good progress in this space and Microsoft will need to thing hard about bringing out a global product if they want to really succeed.

Interestingly Microsoft has decided not to offer their product as SAAS (Software as a Service) i.e. a hosted web based solution. Some would argue that part of the reason for this is their determination to encourage users to keep their PCs/Desktops – and continue to buy software for each machine from Microsoft. However, the counter view is that web based solutions are still not being adopted that widely and accountants prefer to have their data loaded on a machine in their office – rather than an anonymous server with the obvious security concerns. I expect their decision to offer their software to run on a PC will have little impact on their sales in the next few years.

Rugged Logic has been around since 2003 and its technology has been developed around Microsoft Excel. Industry sources suggest that Rugged Logic has had a tough time getting their business off the ground and it will be interesting to see how it is reshaped under Paul’s leadership.

Accountants may wonder why it is necessary to buy a third party tool for forecasting. Most accounting applications offer a capability for forecasting and there have been a number of vendors supplying forecasting tools for 20 plus years. I suspect part of the reason for this is that when forecasting becomes complex IT tools can make the forecasting process more rather than less complex. Excel offers a basic structure but out of the box needs a lot of work to create a robust, easy to use forecasting application. The challenge for a vendor is how to create a sophisticated, yet easy to use application for this sort of requirement. The challenge for a user is how to ensure they get trained properly on the tool and subsequently manage the deployment, often to a large number of employees. Sadly in the past this has been something that many (most?) organisations struggle with.

To get IT right it is of course important that you have the right tool for the job. However the success of most projects depends on an organisations ability to manage change. More on this subject in future postings

They are currently in the process of floating the company and yesterday (5^th December 2007) released a mass of data with pre-float information. In the 9 months to Sept 2007 they reported revenues of $76.8m and losses of $20.6m. Formed in 1998 it has taken the company some time to reach these figures – but they now have c. 5,400 active clients. Out of interest this compares with Salesforce.com ( CRM SAAS vendor) who has c. 38,100 customers and was formed in 1999. Salesforce sales revenue for the fiscal year ending Jan 2007 was $497m.

In terms of the potential value of NetSuite on float it is likely to be in the range $773 to $952m. Not bad for a loss making company and reminiscent of the Dot Com boom at the turn of this century. Time will tell whether investors will get a good return on this investment.

So will NetSuite make it in the accounting software market? The bulk of the $76.8m revenue reported above comes from the Americas region ($63.4m or 82%) so the pickup in the rest of the world including the UK is slower. Certainly the marketing resource applied to the UK has been limited which may have impacted the level of new business. Also UK companies may be slower to adopt SAAS compared to US organisations. SAP has launched its mid-market SAAS solution and is planning to invest heavily in its product so is likely to give NetSuite a run for their money.

Will Sage or Microsoft push against this one wonders? US software vendors in the past have often focused their effort on their local market and countries like the UK has been on the edge of their radar screen. If NetSuite/SAP/Microsoft wants to make it big time in the mid-market they will need to have a truly global offering – with appropriate marketing and support in the UK. There are too many vendors chasing the Accounting Software space. Will some of the smaller players be pushed out? This in part depends on the frequency with which people change their accounting system. Many users keep their system for 5 plus years and so it will take some time for the smaller vendors to lose their client bases. Or will SAAS/ the newer vendors offer a compelling reason for an organisation to change sooner? I haven’t seen a killer argument for accounting software to date.

One challenge for all the entry level vendors is their ability to price and deliver adequate support to their user base. Even though Microsoft’s latest entry level offering is free, users may well struggle to get the software up and running without some face to face training – which can cost several hundred pounds a day. There is a UK discussion forum on the Microsoft site which includes questions about VAT handling which highlights this problem.. More information at

http://www.microsoft.com/office/community/en-us/default.mspx

Most accountants will agree that regardless of the tool, users need a reasonable level of accounting skills to use any product. Many small charities do not have these and rely on helplines to slowly work their way through the problem. Helplines cost money to staff and charities ultimately have to pay for this. For an entry level system to really take off this issue needs to be addressed. It will be interesting to see whether Microsoft develop a new approach to this that might work – for example via interactive training/support. If they can tackle this they may make it in the entry level accounting software space.

So will this product take off? Early review of the product indicate some positive features - including strong integration with the core Office products. The product also has some data conversion capabilities for Sage which might attract some users to switch products

So where will this go?  Microsoft have not made a stonking success of their various products/attempts to gain a dominant position in this market over the last decade. Some may remember that Microsoft has had two entry level products in the past - Microsoft Profit and Microsoft Money. Some years ago also they tried to buy Intuit - the authors of Quickbooks. However the current pricing makes it an attractive alternative for say Sage or Quickbooks so maybe it will take off.

Sageline 50 - the dominant SME product in use in the UK, has been around for almost ever. However users often have mixed views of the ease of use/functionaility of the product. Could Microsoft take Sage head on in this space?

It is certainly worth having a look at this product if you are unhappy with your existing software - and you can download the Express version for free.