As the economy finally edges its way out of recession businesses need to be on high alert. Company collapses will hit record levels this year and stay high in 2011, according to insolvency body R3.
One of the main reasons for the post-recession spike is the increasing aggression of creditors as growth resumes. Top among that list will be HMRC, an organisation that has been extremely lenient over the past 18 months, allowing organisations to defer payment of VAT and National Insurance contributions.
That leniency is now coming to an end, and businesses now face the need to increase payments to address the backlog. Unfortunately for the financial software market, this shift in attitude coincides with a time when the recession is biting hardest.
Accountancy software resellers continue to face tough times as companies are typically not looking to replace this core solution. Simply finding new opportunities is demanding a high level of sales and marketing activity, while the increasing desperation of many competitors is resulting in software being given away at cost.
There is a growing realisation that this model is unsustainable. As a result, many financial software resellers are looking to sell their assets, ranging from the installed base associated with a specific product to the entire company. Others are looking to diversify, replacing one accounting solution with another. But it is not poor product functionality that is reducing sales - there is simply no demand for a new accounting solution in this market.
There is, however, a massive need for financial directors to improve cost control. As the recession has taken hold, financial directors have changed their focus from managing business expansion to imposing control over expenditure. The concern now is the lack of visibility over committed spend and the money wasted through poor, disconnected procurement processes.
And while organisations have put in place some point solutions to address endemic manual processes, 99% of companies do not have a holistic solution to automate the purchase-to-pay process.
Any reseller which can offer these organisations a quick way of imposing control over spend, deliver immediate, real-time commitment visibility and offer rapid return on investment based on a reduction in procurement cost has a message that will have real resonance.
Furthermore, this is a message that can be taken straight to the installed base and leverages the existing skills and experience of staff.
In 1991, when the UK began to emerge from the last major recession, 40% of the accountancy software channel went bust. Will it be as bad this time? The signs are not good.
Traditional business is not going to sustain any reseller over the next 12 to 24 months. And simply replacing one accounting solution with another will not stop the rot.
Organisations need a solution that truly addresses the market need. By diversifying into the automated purchase-to-pay market, resellers gain fast-track access to a solution that is both demanded by the installed base and can gain a strong foothold in what is a virtually untapped market.
The benefits will be significant: those resellers that do diversify, and maximise the opportunity, will be well placed going through to 2011 and 2012, and as the market picks up and organisations begin to release budget, those resellers that survive the recession will prosper.
This was first published in March 2010