Market Analysis: NT’s Impact on Enterprise Accounting Software

How enterprise accounting vendors are positioning their products

Windows NT has become a robust platform for deploying client/serverenterprise accounting solutions. NT's rise has been primarily at the expense ofNovell and Btrieve Technologies. Novell's NetWare OS and Btrieve's file managerwere the most popular network and database platform for low-cost, PC LAN-basedworkgroup accounting. Now, the vendors that focused on NetWare and Btrieve areswitching their research and development funding to new NT-based client/serversuites.

The workgroup accounting vendors are not the only ones being seduced by thepromise of NT and its supporting cast, BackOffice. The accounting vendors yousee in graph 1 are also quietly cozying up to Microsoft. Table 1 summarizestheir positioning on NT. I've wondered whether Microsoft would deliver its ownenterprise accounting suite. But Microsoft is already the most influentialpartner of most of the world's accounting vendors, and its influence will growas more vendors leverage the steady stream of BackOffice-compatible productintroductions in 1996 and 1997.

View from the Top
Nobody is paying more attention to NT as an accounting platform than theworld's leading accounting software supplier, SAP AG. SAP's partner manager inthe US, Jean McGrath, quotes some statistics that emphasize the importance SAPplaces on NT accounting.

SAP is also working with Microsoft on other NT- and BackOffice-relatedinitiatives, including the Business API (BAPI) and ActiveX. These tools let youbuild Internet-enabled application business objects and integrate MicrosoftExchange Server with R/3 for email and workflow routing. The R/3 internalapplication mail system already supports the Microsoft Messaging API (MAPI) forrouting messages to and from Microsoft Mail.

Dun & Bradstreet Software (DBS) is also a big fan of NT accounting,according to Eric Austvold, product director for SmartStream. In fact, Austvoldclaims that Microsoft BackOffice is the number one focus for Dun &Bradstreet Software in 1996. An internal DBS group, BackOffice SmartStream(BOSS), backs Austvold's claim. SmartStream has been available on NT for morethan a year, and DBS has slated support for the Microsoft SQL Server 6.5 RDBMSfor August 1996. Austvold says that 10% to 15% of the SmartStream installed baseis on NT, and DBS expects this percentage to increase as the company launchesnew software to leverage other BackOffice components. This launch will includedelivering SmartStream's functional activities as Web-enabled applets that youload through Microsoft's Internet Information Server (IIS), and managingSmartStream installs, uninstalls, and upgrades through the Microsoft SystemsManagement Server (SMS).

Systems Software Associates (SSA), JD Edwards (JDE), and JBA Holdings arevendors that traditionally focus on the IBM AS/400 platform. Although they haveannounced or shipped client/server accounting products for AS/400- orUNIX-based servers, these vendors do not appear to view NT accounting aspositively as higher- or lower-end vendors. All three have announced NT versionsfor delivery sometime in 1996, but none currently support the Microsoft SQLServer 6.0 RDBMS. Consequently, it will be some time until these players havemuch significance in the NT accounting market. This situation is puzzlingbecause NT with BackOffice, which is often positioned as a UNIX or NetWarekiller platform, resembles IBM's OS/400 in its scope, design, and strategicpositioning as an application platform.

Having no legacy baggage to bother with, client/server accounting-onlyvendors such as Hyperion Software and PeopleSoft seem to be likely candidates toenthusiastically support NT accounting. In fact, neither has yet joined theBackOffice forces. By the time you read this, both vendors should have announcedsupport for the SQL Server RDBMS and other BackOffice components. But currently,PeopleSoft and Hyperion are keeping low profiles and claim that less than 10% oftheir user base is on NT platforms. Ross Systems, Lawson Software, and WalkerInteractive Systems share the same attitude. Ross and Lawson are still rampingup their client/server UNIX accounting suites, and Walker is trying to engineera renaissance for its mainframe-based Tamaris accounting applications.

All Agree on Something
The top 10 representatives I spoke to were unanimous on several points. Theywill not deliver reduced-functionality versions of their systems for the NTplatform. They see no rationale for lower pricing of NT versions than for otherversions of their products. They do not anticipate that NT will dramaticallychange their primarily direct-sales model. They expect NT and BackOffice to playan increasingly important role in their future strategies for theirclient/server accounting suites.

The question is whether such consensus will hold up as the top 10 comeunder increasing pressure from middle-market converts to NT accounting, such asGreat Plains Software, Platinum Software, and Solomon Software. These vendorssell client/server accounting packages that run on NT and SQL Server atsignificantly lower prices than those of products mentioned so far in thisarticle. NT and SQL Server are just two more components that level the playingfield for accounting applications.

Level Playing Field
Most client/server accounting vendors now offer the same GUI (Windows), thesame server OS (NT Server), and the same RDBMS (SQL Server). The differences arein the breadth and depth of functionality that various vendor suites offer; theintegration of added-value enabling technologies such as workflow and email; thesoftware acquisition, implementation, and ongoing maintenance costs; and thesales and support networks that the vendors offer worldwide. Given thisscenario, businesses that have less than $250 million in annual revenues, thatneed basic financial and distribution software modules, and that do not havelarge transaction volumes or user connections will be hard pressed to justifypaying the top-dollar prices that the top 10 accounting suites command.

The top 10 argue that their software's value is no less on NT, so they haveno reason to charge less. They also argue that the relatively low cost of NT asa computing infrastructure means that the customer will benefit from being ableto deploy high-value software on low-cost platforms. This argument assumes, ofcourse, that the customer really needs the functionality that the top 10providers deliver. If not, the argument collapses, and customers are betterserved buying from the middle-market vendors that deliver less expensiveaccounting solutions that use the same GUI, server OS, and databases as the top10.

Something's Gonna Change
Expect the top 10 to maintain their premium pricing for a while and themiddle market players to gradually increase theirs. Then, the first of the top10 to break ranks will set off a price reduction across the board. You willcertainly see stratified product lines from the top 10 and the emergence ofindirect channels that sell NT systems primarily through value added resellers(VARs), rather than directly.

However, the VAR channel has invested more than 10 years building skillsfor implementing NetWare and Btrieve accounting. According to David Shirk, vicepresident of sales at Macola Software, this channel is not going to switch to NTovernight. For the VARs, NT is both an opportunity and a threat. Shirk says thetime necessary to convert the VAR channel is the biggest obstacle Microsoftfaces in keeping the NT accounting juggernaut on target. Naturally, Macola, likeits competition in the middle market, is hedging its bets. Like PlatinumSoftware, Macola has dropped active development of its UNIX versions andredirected resources to NT accounting. Macola already claims that 11% to 12% ofits user base is on NT now, and the company expects this base to grow to as muchas 20% by the end of 1996.

SBT, another middle market player, is also rapidly reorganizing around theNT and BackOffice platform, embracing IIS especially. Today, with products suchas WebTrader and WebAlert, SBT is probably the vendor most advanced inexploiting IIS capabilities. WebTrader links Internet browser order forms withthe vendor's order entry accounting module to automate capturing and accountingfor sales orders across the Internet. WebAlert provides an accounting-orienteddatabase notification engine that can deliver alerts by email across theInternet. Dun & Bradstreet Software, Lawson Software, SAP, and SBT's recentflurry of announcements relating to Internet-enabled accounting suggest that IISwill become another vital component of the BackOffice suite, and vendors will beeager to leverage it.

NT accounting is here to stay, and it's set to shake up the client/serveraccounting market from top to bottom. Whatever happens, NT accounting appears tobe a good deal for users, a tough act for vendors to manage, and another coupfor Microsoft, which has just taken another strategic role in anothermultibillion-dollar software market, right under everyone's nose.