In my ongoing Accounting 2.0 series (tag here) I’ve been looking at the way SaaS accounting vendors describe their products. A vast number of vendors bandy terms like “fully featured package around”. Often times this is used to describe a product that fulfils a very discrete subset of the accounting function.
Recently some comments around a review I did of AccountsIQ raised the question of what constitutes a fully featured app and what constitutes an ERP and where the divide lies. The comments were in reply to my congratulating those SaaS vendors that consider such functionality as multi-currency, multi location, stock-control and BOM functionality as “core functions”. I came off this discussion wanting to compare the widely accepted SaaS ERP solutions (Netsuite and Intacct) with some second tier offerings. Bear in mind that Netsuite and Intacct are both multi thousand dollar per year solutions – one would only expect a difference between the breadth of functionality a customer can expect from them compared to solutions costing many times less per annum.
I contacted Will Parker from AccountsIQ and asked him to contrast their offering to the offerings of the “big boys”.
Will begun by revisiting the definition of ERP. Wikipedia defines ERP as;
an enterprise-wide information system designed to coordinate all the resources, information, and activities needed to complete business processes… an ERP system supports most of the business system that maintains – in a single database – the data needed for a variety of business functions
It goes on to say that
to be considered an ERP system, a software package must provide the function of at least two systems
Unfortunately this definition gives little guidance as it leave hanging the definition of what “a variety of business functions” actually means. As Will pointed out in theory a vendor with a solution including, for example, accounting and payroll could call itself an ERP in the loosest sense of the word.
In a refreshingly humble touch, Will goes on to say that he does not consider accountsIQ to be an ERP solution due to his feeling that they cover just one area (accounting) of a business’s requirements in the sort of depth that an ERP package really should address it. He also points out that the phrase is widely misinterpreted when people look at a very basic bookkeeping product and then compare that with a much more sophisticated financial accounting platform and then call the high end platform an ERP solution when in fact it isn’t.
It seems then that people mistakenly use the phrase ERP to imply high end or highly sophisticated which isn’t quite accurate as in his opinion a highly sophisticated financial accounting package (i.e. with really good ledgers in it) does not constitute an ERP system – if it doesn’t do payroll, HR, manufacturing, supply chain etc).
It would seem therefore that, going by commonly accepted definitions Netsuite and Intacct can both legitimately purport to be ERP systems because they do cover all of the areas of a enterprise’s operations. Once again however it is important to compare the costs as well as the functionality – AccountsIQ’s enterpriseIQ product for five users will run to USD45 per user based on a five user package – roughly a tenth of the price of “true” ERP offerings.
It has to be pointed out however that there seems to be a move away from monolithic ERP systems to more modular approach. I’m sure my statement will be derided by those over in Enterprise Irregular land who work at the coalface of enterprise IT, but it’s something that anecdotally at least is occurring. Will gives the following example;
we’re speaking to a meat processing company over here in Dublin whose turnover is €900m about using accountsIQ as their accounting platform. Of course their main business processes, the production, packaging, dispatching and tracking of meat cuts are handled by some specific industry applications and not by accountsIQ. In this regard then I would certainly consider us an enterprise scale financial accounting package (we can easily handle their multi site and multi currency operations but we’re really only doing the General Ledger in accounting terms) but again not an ERP solution. In theory Netsuite or Intacct might be able to offer this company an end to end ERP solution.
It’s a little bit of “horses for courses”. Those who want a single vendor, and can work within a single source ERP solutions will be attracted down the single vendor path. Those however wanting more agility would be more likely to take a piecemeal approach.
Swinging it back though to the title of this post – I have to give serious kudos to AccountsIQ for taking a realistic and humble approach towards their offering – contrast that to those who’d have us believe a simple invoicing application fulfils the requirements of all businesses.