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2004/5 Closes with record quarter
Where does the time go? No sooner have we come through year end and Self Assessment and Payroll year end is upon us. It is also for many, Online50 included, financial year end and a time for reflecting on the successes of the previous year as well as planning ahead for the year to come.
Yet despite all these distractions Online50 have completed this last quarter with a record number of new business partners subscribing to the service. We are delighted to welcome them onto the system and we look forward to working with them to support the provision of value added services to their clients.
Our congratulations and thanks go to those of our clients who have had their anniversaries on the Online50 platform in this time. The feedback and ‘testimonials’ we have received from you and the constant flow of new clients coming onto the system have been a ringing endorsement of the Online50 business model and the resilience of our systems. Thank you and we look forward to working more closely with you over the coming year.
Does Microsoft have a case to answer?
You will have seen recent publicity, “Vendors take ‘dim view’ of Microsoft” (Accountancy Age 3rd March 2005) and "Intuit prepares for competition court battle with Microsoft" (Accountancy Age 24th March 2005), voicing the concerns that accounting software providers, notably intuit in the US and Sage in the UK, have about Microsoft introducing an accounting package as part of a Microsoft Office Edition to the small business market. In it they suggest that depending on price, or how it is bundled, there may be a case for Microsoft to answer to the competition authorities in the US and Europe.
But is it really competition at issue or are their fears based on other factors?
The Sage Instant and Line 50 product range is undisputed as the market leading product in the UK with a 64% market share as measured by a recent Accountancy Age survey. So why should a company with Sage’s market share see this as such a threat?
There are two components to the answer; at the macro level there is the market itself and the way it has evolved, and at the micro level there are the organisations themselves. So what are the differences between the corporate structures of the existing market players and of Microsoft, and what, and how far reaching, are the implications?
The accounting software market is a mature market. The principles of accounting are constant and the core products have a set of defined functions in order to achieve the aims of the business and compliance with regulations. The rate of expansion of the market size is relatively small, so revenue growth for market players is achieved primarily by winning market share from other players by providing additional functionality or by moving into other vertical markets. An example of this might be Sage’s acquisition of Act!, a product that enables SMEs to manage their contacts and customer information but which does not traditionally fall into the SME accounting software market.
At the micro level we compare the Sage Group, with over 50% share of the global accounting and business software market for SMEs and certainly a 'dominant' player in the UK market, to Microsoft, as they are two very different companies in structure and approach to product development and distribution. Both are global in reach, but where Microsoft’s business is as a global software applications developer, Sage is a brand that unites a collection of different firms with products catering to specific markets in different countries. Generally, when Microsoft make acquisitions they integrate the products fully into their architecture to create global products that can be customised for individual markets. On the other hand, Sage acquire existing market leading products in a particular region and unite them under the Sage brand.
The impact that a player like Microsoft will have on a mature UK market will be marked, but the real significance is that a scaleable global product will set the standards in an otherwise fractured global market. The cost implications to bring a product such as this to market are great, but once there the marginal costs of supporting and marketing such a product will be lower, so existing players can expect loss of market share, tighter margins through price competition and consolidation or exit by some players in the market. The implications for companies supporting the breadth of product range of a company such as Sage no doubt explains their concerns. So far Microsoft appear to have emphasised that their Small Business Accounting product will not rely on Microsoft Office for operation, and arguably their product will encourage more small businesses to use accounting software thereby increasing the market, so the industry fears appear to be less the potential abuse of a monopoly and more the promise of radical change and leaner times ahead.
Money Laundering Regulations and Remote Accounting Services.
Recently we were asked by a practice what the implications of the Money Laundering regulations are for accounting practices looking to promote online accounting services. Online50 by design facilitates remote accounting support and enables accountants to support clients from geographically distant locations, in many situations making face-to-face meetings impractical. We contacted the Institute of Chartered Accountants of England and Wales (ICAEW) for guidance.
The ICAEW recognise that there are situations within the scope of the money laundering regulations where organisations do provide services remotely, without any face to face meetings. “It appears that in low risk situations there is no harm in doing so, and there are a number of mechanisms that allow for the "electronic verification of identity" by, for example, ensuring that the potential client's name and address match records held on the electoral role, credit reference agency records and so on, which are likely to be adequate for verification of identity in such situations.”
However, they advised us that in situations where doubt exists as to whether a client falls under the scope of the regulations, many practices take the view that it is simpler to apply higher standards and to reduce their risk accordingly. Guidance can also be found in the Technical Release TECH 12/04, which was issued by the CCAB in March 2004 to help accountants fulfil the requirements of the anti-money laundering sections of the Proceeds of Crime Act 2002 and the Money Laundering Regulations 2003. And last, but not least, practices should consider obtaining legal advice if any doubt still exists.
Mersey Broadband funds Online50 users
Congratulations to one of our long-standing Bureaux, PDC Business Services Limited, who have teamed up with The Greater Merseyside Broadband Project – Mersey Broadband – in order to provide the Online50 service over a broadband connection to a host of new clients. This exciting development is providing business users with the opportunity to try Online50 for a trial period paid for by the project.
Mersey Broadband is funded by the Northwest Regional Development Agency (NWDA). It was established in September 2004 with the aim of encouraging business and communities to take up Broadband services. The project is backed by BT who, through the upgrade of their exchanges, have made the region one of those in the country with 100% coverage.
The Broadband Implementation Project Manager at the Liverpool Chamber of Commerce and Industry, Bob Jonas, says: “Our aim is to increase the adoption of Broadband by demonstrating the benefits that this technology can bring and educating people about its uses.”
In partnership with local companies Mersey Broadband is able to provide access to a number of ASP services which of course reduces the cost of purchasing expensive software and give them all the advantages of using the online platform.
PDC Business Services Limited (PDC Online50) is one such company and is providing accountancy services using Online50. In partnership with Mersey Broadband, PDC Online50 is providing a free six month pilot of Online50, with one user access per company. Training and support are, of course, included. The service is directed in the first instance at companies that are already using Sage Line 50, giving them the opportunity to take advantage of the online model and also allowing them, should they wish, to upgrade to the latest version of Sage Line 50 (V.11).
This is indeed an exciting step for Peter Charlery, director of PDC Business Services Limited. Already the partnership has resulted in many new clients being placed onto the Online50 service and we feel sure that as Mersey Broadband continues to grow from strength to strength, so too will the link that has been forged with PDC Online50.
