Clash of the Titans

Remember the movie Clash of the Titans, in which the Greek gods used Earth as a battleground for their competing egos? If you do, you remember that mighty Zeus held all the cards, whimsically dealing his favors to gods and men alike and occasionally releasing the Kraken to destroy a city or two as a sign of his displeasure. Replace Zeus with Microsoft, and the gods with the leading accounting vendors, and you see that Windows NT has become the focus for a new clash of the titans, as vendors converge on the platform.

The accounting applications market used to be stratified along hardware lines such as mainframe, mini, and PC. These segments did not overlap, so vendors and products had clear, easy-to-understand market share. Today's client/server accounting market is much more fluid and consequently more confusing, with products potentially crossing multiple segments. Table 1 divides the accounting software market into four segments: SOHO (small office/home office), workgroup, corporate, and enterprise. These distinctions are guidelines only; accounting applications and the businesses that use them do not always fit in such neat categories.

The potential of the NT platform--by which I mean the Microsoft Windows NT Server OS and its tightly integrated, complementary Microsoft BackOffice applications--has persuaded vendors from all market segments to focus their resources on developing NT versions of their client/server accounting offerings. Enterprise-level vendors such as Dun & Bradstreet Software, J.D. Edwards, PeopleSoft, and SAP, for example, are mixed with middle-market vendors such as Great Plains Software, Platinum Software, Solomon Software, and State Of The Art. Most vendors are also focusing their NT platform offering on Microsoft's SQL Server relational database management system (RDBMS) and integrating functionality more closely with other BackOffice components such as Microsoft's Exchange and Internet Information Server (IIS). For complete buyer's guides to middle-market and enterprise accounting software, visit our Web site at www.winntmag.com.

Besides enjoying the backing of Microsoft's marketing clout, NT is attractive to accounting application vendors because of its versatility for running the variety of core services that modern accounting systems demand. These services include running the application, process, and database services for n-tiered client/server deployments; providing imaging, messaging, and workflow servers to deliver added-value services; enabling connectivity to the Internet using Internet access and proxy (security) servers; and hosting middleware and online analytical processing (OLAP) tools for integrating legacy data and assisting with decision support.

Windows NT Server 4.0 provides a homogenous server platform for managing all these complementary services and has a homogenous user interface--Windows 95's--for both the client and server. NT simplifies how users run applications and how developers maintain applications by focusing on one set of single-vendor, commercially popular APIs.

Enterprise Accounting: Managing Complexity
To the NT platform, enterprise accounting packages bring a breadth and depth of functionality that reflects the need to manage all types of complexity, including

To manage such complexity, you need accounting software that is functionally broad and deep. Functionally broad means that enterprise accounting offers a wide range of integrated application modules. Many enterprise accounting software suites have dozens of modules embracing financials, supply chain, manufacturing, and human-resource management. Functionally deep means that enterprise software offers more functionality in every module, plus across-the-board functionality such as handling multicurrency processing or offering multilingual interfaces.

Enterprise Accounting: High Expectations
In the past, enterprise accounting software ran on mainframes. Dun & Bradstreet Software, with its M and E series mainframe accounting applications (former McCormack & Dodge and MSA America products), claims more than 5000 mainframe sites today. Add to this number a few thousand sites from other mainframe accounting suppliers including Integral, SAP America, and Walker Interactive Systems.

Many enterprises also run on minicomputers, a combination of mainframe and midrange platforms, from vendors such as IBM, Digital Equipment, and HP. More than 300,000 of just IBM's midrange AS/400 computers are installed, so you can figure that more than half a million corporate and enterprise accounting systems still run on midrange equipment.

Individuals and workgroups go home at the end of the day, but enterprises never stop. Enterprise accounting users expect a lot of scaleability and availability from their systems. Mainframe and midrange computers are still the dominant enterprise accounting platform in that top 10 percent or so of the market that requires 24 X 7 X 365 system uptime, very high-volume transaction processing, and support for thousands of users. Today, NT is not yet mature enough to handle the demands of these top-end applications.

Of course, Microsoft is chipping away at this immaturity every year. For example,

Enterprise accounting applications in particular must be able to integrate with other enterprisewide information infrastructures such as email, electronic data interchange (EDI), groupware, and corporate intranets. Without this integration, accounting cannot leverage the full value from these complementary technologies and is in danger of remaining an information island. NT and the BackOffice components can deliver this integration capability with solid support from vendors of other complementary applications such as sales automation, document management, and workflow.

Middle-Market Accounting
You could perceive enterprise accounting vendors as reluctantly reaching down to run their applications on NT. But NT is a natural for middle-market accounting vendors who are reaching up. NT is the venue for a clash between downsizing enterprise accounting vendors and upsizing middle-market vendors. In the long run, this shift will be good news for users because competition will increase product quality and decrease overall implementation costs.

Middle-market accounting is the Software that bridges the workgroup and corporate accounting segments of the market. You can purchase and implement a typical, single-site, middle-market financials solution for under $100,000. Often, you cannot buy one module of an enterprise-level accounting system for these prices, let alone implement it. Middle-market accounting usually services workgroups of fewer than 50 users and is sold, installed, and supported by authorized Value Added Resellers who are part of the vendor resale channel.

Before client/server, most middle-market accounting systems were based on PC or Apple Macintosh LANs that often used Novell NetWare for network file-and-print sharing and the Btrieve file manager (formerly a Novell product) for managing the accounting data. Other popular variations included using SCO XENIX and UNIX and indexed sequential access method (ISAM) file managers. The NetWare/Btrieve accounting platform is still the most widely used platform for multiuser workgroup and corporate accounting running on PC LANs, and the leading middle-market vendors still support it and earn significant revenue from it.

Although this NetWare/Btrieve platform remains viable for the accounting needs of many smaller businesses, it is under attack from all sides. Middle-market vendors have introduced their new generation of client/server packages during the past few years. Table 2 lists and categorizes some of these packages.

Microsoft-centric Accounting
Vendors of middle-market accounting suites are focusing on a new accounting platform for their client/server suites, as Table 3 shows. The middle-market accounting platform is moving from being Novell-centric to Microsoft-centric. Of course, some of these vendors also support UNIX-based servers with relational databases such as Oracle or Informix. Some middle-market AS/400 solutions exist, such as AccountMate's AccountMate Professional/400, but Microsoft technology is pervasive in the middle market. For example,

But let's take a reality check. You are probably aware that, to date, few vendors have shipped more than a couple of hundred accounting systems for NT/SQL Server. SAP claims to have shipped more than a thousand, but it is the exception to the rule. Vendors shipped most systems for NT only in the past year, and stable reference sites in your line of business might be difficult to find. Even systems that are up and running sometimes support only workgroup-level transaction volumes and user communities. But the momentum is definitely there. Every vendor I talk to claims that sales of NT versions are ramping up, and customer pull-through demand, rather than vendor push-down marketing, is driving this growth.

Middle-Market vs. Enterprise Solutions
The move to client/server accounting has leveled the playing field somewhat between middle-market accounting packages and the more expensive, enterprise accounting systems. Now all sport the same user interface, Windows 3.x or 95, and the same relational database engines and server operating systems. Essentially, you cannot tell the difference between a middle-market system and an enterprise system because operationally they look the same and can run on the same platforms. Close connectivity to other Microsoft products such as the desktop Office suite is also a direction most vendors are taking, whether they sell enterprise or middle-market solutions.

The real difference between enterprise and middle-market accounting applications is in their respective functional breadth and depth or the cost and difficulty of implementing the solutions. Enterprise accounting solutions have traditionally offered more functional breadth and depth in the areas listed in Table 4.

Of course, this functional breadth and depth comes at a price (up to an order of magnitude, in fact) between the acquisition and implementation cost of enterprise compared to middle-market accounting software. And middle-market vendors are chipping away at all these functional areas. Many vendors now have basic multi-entity, multicurrency, and multinational functionality and easy-to-use customization tools. However, middle-market packages still lack breadth and depth in both supply chain and manufacturing functionality, and US middle-market packages are generally poorly represented overseas either by branch offices or by country-specific, third-party distribution and support channels.

Also, as partnering and the use of third-party technology and functional components increase, middle-market vendors have the same opportunities as enterprise vendors to quickly take advantage of new technology such as workflow, document management, and Internet connectivity without the deep R&D investment that only the well-funded enterprise vendors could afford in the past. This development means that middle-market accounting users can benefit from this technology at the same time or even before their enterprise counterparts. And perhaps middle-market benefits will cost less because middle-market vendors can sell a higher volume of solutions, reducing their third-party technology licensing costs.

The NT Accounting Slugfest
NT is shaking up both enterprise and middle-market accounting vendors, as the issues outlined in Table 5 suggest. The transition to client/server accounting has already proved traumatic for vendors from both the enterprise and middle-market segments. Enterprise vendors, such as Walker Interactive and Ross Systems, and middle-market vendors, such as Platinum Software, have experienced tough times in the past few years. Other casualties include once-dominant Dun & Bradstreet Software, which was recently acquired by Geac Computer.

The convergence onto the NT platform of enterprise and middle-market accounting vendors, the slew of foreign vendors setting up NT-focused shops, and the pace of technology innovation in Microsoft's BackOffice suite suggest that accounting on NT will be a hotly contested market through the rest of the decade. Unlike the hero of Clash of the Titans, no one vendor has a magic helmet for protection or a winged horse to fly above the fray. Instead, like ugly, villainous demigods, vendors will be forced to slug it out down in the swamp, while Microsoft looks on Zeus-like from the heights of Mount Olympus.

See http://www.winntmag.com for a middle-market and enterprise accounting software buyer's guide.