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Xenakis on Technology: Are Accounting ASPs your Friend or Foe?

Here's what we found when we looked at three accounting applications service providers.

ManagedOps.com provides Great Plains for $450 per month per user, for users that enter data into the system. There’s a second level, users who only need to display or print reports, and for them, the charge is $50 per month.

The difference in price reflects the complexity and functionality of the products.

In addition, Great Plains and other classical accounting systems can be customized for your business, provided that you’re willing to pay some stiff consulting rates to the ASP.

However, Internet-only accounting systems use an entirely different mass audience business model where no code customizations are permitted.

Of course, both kinds of systems allow you to customize forms, displays and reports.

Misgivings

As I was preparing this column, several misgivings arose. You can decide for yourself whether my misgivings are important to you, or whether you feel I’m being overly anxious.

First, NetLedger was the only software company willing to even estimate how many paying customers it has — 2,000 paying customers, and 35,000 that have tried the free online demo. I commend Stephen Wolfe, VP of product management at NetLedger, for his openness about this figure, which is very important for getting a sense of a vendor’s credibility.

Intacct and ManagedOps.com were unwilling to give me any clue as to how many paying users they have, but since they’re priced quite a bit higher than NetLedger, my (unproven) assumption is that they have far fewer users.

However, I did speak to a ManagedOps competitor, Genesis Innovations (www.genesisinnovations.com) of St. Paul, Minn., who tells me that they have nine paying customers using their Great Plains ASP service, and over 1,300 trying out their full- featured demo.

Now all of these vendors have 100-200 employees, and so have $5 million to $15 million going out each year just for payroll and related expenses. How many paying customers do the ASPs need to continue to meet their payroll after the investors start demanding to see some profits? Do the math yourself, and you’ll see why I’m concerned.

There are millions of small businesses in the U.S., so there’s no doubt that any of these vendors could survive, if only it can get even a tiny market share. But that hasn’t happened yet, and no one appears to be even close.

What about free demos? Intacct and NetLedger let you try out their online accounting systems for free for a few weeks, with a demo account, as does Genesis Innovations. ManagedOps.com appeared to be shocked! shocked! that I even suggested such a thing as a free online demo of their systems, and refused to even consider it. So it appears that some ASPs are willing to permit demos, and some aren’t.

I believe that online demo versions are going to be increasingly important marketing tools for all ASP vendors.

In fact, online demos can alleviate the risk of switching to a new accounting package sight unseen. One of a financial officer’s worst nightmares is that a new system simply won’t work.

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