THE NUMBERS GAME
With the year 2000 fast approaching, CFOs at Asian companies are scrambling to buy new accounting software. Here's what's out there.
By Sahr Ermaco Johnny

"The wrong software costs about the same as the right software - until you try to use it." Sheldon Needle, president of accounting software research firm CTS.

Nothing is permanent, so the saying goes, except change. But for CFOs in Asia who are now looking to replace or upgrade their company's existing accounting software, change couldn't have come at a worse time. These days, with cash at a premium and patience at a minimum, getting the company CEO to agree to fork out thousands of dollars on new accounting software is not exactly the easiest sell in the world for a finance manager.

Nevertheless, that's exactly what many CFOs say they're having to do. For some, the need to reengineer the finance function - a need driven by both cost and strategic considerations - means old and outdated accounting packages must be replaced. Certainly, most companies are now keen to glean more from their reams of financial data than the generic reports spit out by most old accounting packages. Any CFO eager to analyze financial processes and mine deep for data has little choice but to throw out ancient - if beloved - programs.

Mostly, though, the sudden interest in new accounting software stems from the missing two digits in old accounting software. Indeed, corporate concerns over the Y2K readiness of older applications is the single biggest reason finance managers are now shopping for new accounting packages. This is particularly true for finance managers at small-to-medium-sized companies, most of which have long relied on tailor-made software for accounting functions. For these managers, custom-built accounting applications are Y2K time bombs waiting to go off. Many cannot be fixed - period. With time growing short, CFOs at many of these small-to-medium-sized com-panies are finding they have little choice but to splash out on off-the-shelf accounting packages that are fully Y2K compliant.

Even finance managers who long ago jettisoned custom-made software for packaged software are fast realizing they need to upgrade to Y2K-compliant versions of their existing applications. It's not surprising. When these CFOs purchased the original software, the year 2000 was a distant concern. What's more, the maintenance contracts for many of these programs simply do not cover Y2K-compliant upgrades.

Eva Chan, chief financial officer of Seibu Enterprise, the Hong Kong-based division of the Japanese retailer, knows all about the problem. Seibu has been using SunAccount from Systems Union for years and has upgraded several times to take advantage of new functionality. Now, Chan says they've upgraded to ensure their current system will still be functioning on January 1, 2000. "Our previous version was thought to be Y2K compliant but Systems Union could not guarantee 100 percent compliance," she says. "Hence the upgrade to the current version which is most definitely Y2K-ready."

Other CFOs are also taking the Y2K issue very seriously when purchasing their accounting software. Peggy Chan, director of finance at Informatics Holdings, a Singapore-based international provider of education and training services with 1998 revenues of S$94 (US$58 million), says the importance of Y2K compliance cannot be overstated. Chan insists that finance managers should not rely on vendor statements of compliance alone. "We conducted extensive tests ourselves to ensure that the software is compliant," says Informatics' Chan. "This involved closing down our operations one weekend to conduct the tests." Informatics was recently awarded a Y2K-In-Action logo by the Singapore National Computer Board.

Tipping the Scale

If many finance managers now have little choice but to purchase new accounting software, this purchasing has become a lot more complicated than it was, say, five years ago. Competition for the mid-market accounting sector has started to heat up, with new players joining the battle from both ends of the spectrum. At the high-end, enterprise resource planning (ERP) vendors such as Baan, J.D. Edwards, Oracle, Peoplesoft, and SAP are now trying to woo mid-market customers with promises of stand-alone financial modules that can be implemented more rapidly and at a lower cost.

The appeal of accounting software from the large ERP vendors lies in powerful multi-currency, budgeting and reporting features and support for consolidation across multiple locations. Bundled ERP packages and financial modules also make sense for companies that expect to put in ERP systems in the not-too-distant future.

Still, these big ERP vendors are going to have their work cut out trying to convince mid-sized companies in Asia to make the considerable leap to enterprise-wide applications. Generally speaking, high-powered financial systems from ERP vendors are more expensive than offerings from mid-market vendors.

And make no mistake, right now price is a big issue for many local corporates. Derek Fan, managing director of one of the mid-market vendors, Solomon Software (Hong Kong), finds it difficult to see how ERP vendors will attract a lot of mid-sized corporate customers. "Only 5-10 percent of companies can afford to purchase ERP software," Fan says.

What's more, mid-market accounting software vendors haven't exactly been standing still over the past few years. Recent releases from established players like Solomon Software and Great Plains Software are modular and run on the latest database technologies from Microsoft. The modular approach allows companies to mix and match core general ledger and reporting software with other modules such as accounts receivable, bank reconciliation and inventory. "The mid-market is quite confused at the moment between vendors of low-end accounting packages and high-end ones. The features are beginning to look very similar," says Ashley Clarke, chief operating officer at Systems Union (Asia Pacific). "But finance managers will find that the low-end products cannot scale up."

And scalability is crucial. Simply put, scalability means that a software program can be used by a varying number of users. For cost-conscious CFOs, scalability guarantees that one software application will work at different locations. "CFOs in Asia need to have a consistent vision across the region," says Clarke. "They have to understand how to maximize investments across the region without replicating expensive systems." Observers say mid-market packages have become much more scalable of late, thanks in part to a move from traditional flat file databases - such as Btrieve - to relational database technology - such as Microsoft SQL Server. "We have installations that support 100 workstations. Not many mid-sized companies have 100 people in their accounting departments," explains Philip Tan Tee Yong, managing director of Great Plains Software (Singapore). "Typical installations will have 15-30 seats at most."

Colin Chiang, financial controller and CFO at Winterthur Swiss Insurance in Hong Kong, knows exactly how far down some accounting software can scale. Having used System Union's SunAccount at several companies in the past, Chiang says the software's scalability - as well as some advanced reporting tools - was the main reason why Winterthur choose to install it a recently launched small subsidiary. The number of users? One.

Moreover, middle-market vendors are attempting to make it easy to integrate third-party applications into their accounting applications. "Solomon Software cannot design everything into our accounting applications," Fan acknowledges. "We are not an ERP vendor." Solomon's global strategy is to concentrate on core accounting functions while encouraging independent software developers to develop additional or industry-specific modules. So far, the encouragment seems to be working: there are already over 100 such third-party add-ons available for Solomon's accounting programs.

DOS Lives

Not surprisingly, the sheer size of the Asian market, coupled with the rising interest in better corporate accounting packages, has led to a rush of vendors onto the regional scene. Great Plains, a considerable force in the US market, only recently started operations in the region. Despite the company's late entry, Great Plains is funneling plenty of resources into Asia. "We are relatively new to the market but we are taking a calculated risk and investing heavily in people in the region," says Tan. The company is currently touting software that addresses specific vertical industries. Great Plains' "Business Solutions" are based on its Dynamics and Dynamics C/S+ accounting software - software which encompass financials, manufacturing and human resources. In addition, third-party add-ons address industries from agriculture and mining to construction and healthcare.

It remains to be seen, however, whether regional newcomers like Great Plains and Solomon Software can unseat the reigning champ of Asia's accounting software market. Ask finance managers and accounting software vendors around the region to name the package with the largest installed base and they'll all say ACCPAC, the accounting software series from ACCPAC International, a subsidiary of Computer Associates. And while numbers are hard to come by, informed estimates put ACCPAC's share of the market as high as 80 percent. "A whole generation of CPAs, financial controllers and accounting students have grown up using ACCPAC," says Arvind Agarwalla, founder and CEO of Fact Software International based in Singapore. But Agarwalla insists that Fact Software, as well as other vendors, are slowly beginning to eat into ACCPAC's mind-share - and customer base. "About half of our users in the region are ex-ACCPAC users," he says.

Other competitors cite similar numbers, noting that ACCPAC has had more success with its DOS offerings than Windows-based products. "The market has no brand loyalty," claims Tan of Great Plains. "ACCPAC is having problems because, despite their success in the low-end DOS market, they are finding it difficult to gain acceptance in a Windows world.

But Low Gee Sing, vice president for the Asia Pacific region at ACCPAC International, disagrees, noting that ACCPAC offers modular Windows products that cover the needs of small businesses, as well as medium-to-large corporates. The Corporate Series of ACCPAC for Windows running on SQL Server, for example, is aimed at large divisions of multinationals with typically 15-50 users. "We've seen tremendous growth in sales of ACCPAC for Windows products," he says. "In fact the speed of adoption took us by surprise." Low says that when the Windows version of ACCPAC was released four years ago, it only accounted for 10 percent of the vendor's sales. Today, that figure is more like 65 percent.

Still, the fact that DOS-based products still make up 35 percent of ACCPAC's sales speaks volumes about the current state of some finance departments in Asia. "Contrary to what some vendors are saying, many customers are still opting for DOS-based accounting software because of the attractive price points and because they are used to the DOS interface," explains Low. Moreover, Low points out that many companies in the region are still using older 486-MHz PC technology - technology that is much better suited to running DOS programs than Windows applications. For these companies, a switch to Windows-based accounting products would require a hardware upgrade. Given the current economic downturn, buying a slew of expensive new computers is the last thing cash-strapped corporates want to do right now. "DOS is still a relevant part of the market," Low says.

Aping, Evolving

Ultimately, though, DOS-based accounting software will go the way of Beta and the dodo bird. To avoid a similar fate, several large accounting software vendors have made nimble moves into whole new market segments. One of these vendors is Hyperion Solutions. "The market has defined Hyperion's space," explains Richard Lisbin, the Singapore-based director of sales (Asia Pacific) with Hyperion Solutions. "Traditionally, a big portion of our products concentrated on finance. But today we are the leading vendor of analytical software." Analytical planning software such as Hyperion Enterprise enables managers at multinational corporations and top-tier local companies to collate and draw intelligence from diverse data sources. Backers of analytic software argue that ERP applications are transaction-based systems that generate a lot of backward-looking reports based on historical data. Analytical planning, they say, deals with the future, covering things like planning, budgeting, profitability analysis, manufacturing mix analysis, consolidations and cost analysis.

ACNielsen, the international market research firm, is a user of analytic software. With operations in 14 countries in the region, the company's Hong Kong-based finance department must consolidate monthly financial data from around the region and forward it on to headquarters in Schaumburg, Illinois. That's where Hyperion's software comes into play. "Enterprise is very flexible in terms of letting us set up multiple roll-ups, multiple consolidation paths and different levels of management reports," says Kenneth Ho, director of regional financial systems at ACNielsen in Hong Kong. "I haven't seen any other product that has the breadth of features for multinationals that Hyperion Enterprise has."

Others application vendors in the region have moved away from providing pure financial software, and instead have aped the product lines of mid-range vendors by adding manufacturing, distribution and services modules. Tetra Software is one former financial software vendor that is now competing in the mid-market ERP arena. "We are drifting away from core finance because that's the way the market is moving," explains Gordon Cameron, director of sales for Asia at Tetra Software International. Cameron says there are two types of typical Tetra customers in Asia: multinationals that use a big ERP package at head office but use something cheaper - and quicker to implement - at their subsidiaries and domestic trading or manufacturing companies with 50-250 employees and few or no overseas offices. Despite the change of focus from core financials to mid-range ERP, Cameron says the company has not forgotten its roots. "More than a third of our research and development still goes into the accounting side of Tetra CS/3." As a European vendor, Tetra can provide nifty features such as support for multiple currencies, multiple languages and multiple tax systems. "Tetra has already started rolling out Euro support in CS/3 in phases at a time when US vendors are still trying to figure out what the Euro is all about," Cameron says.

Platinum Software Corporation, well known in Asia for its financial accounting package Platinum for Windows, has also gradually evolved into a mid-market ERP vendor. According to Steve Collins, managing director of Platinum China based in Hong Kong, this evolution has been a natural process. "Even in the early days of Platinum for Windows, we've always had strong finance and distribution capabilities in the product," Collins says. "We added manufacturing to this, which allows us to offer our clients an integrated ERP-type product."

Collins believes that, unlike Platinum's products, other ERP applications have traditionally been weak on financials. In its bid to plumb the mid-market, Platinum will be rolling out newer versions of Platinum for Windows - versions geared for small-to-medium-sized companies.

Decisions, Decisions

In fact, the on-going vendor battle to win the hearts and minds of finance managers at small-to-medium-sized companies in Asia is only just beginning. Expert say, over the next few years, more software vendors will arrive on the scene and, in turn, more accounting products will hit the market.

Naturally, smart CFOs shopping for new accounting programs are leveraging this influx of new vendors and products for all it's worth. Industry watchers say finance managers at even small local companies are now demanding better post-purchase support from their software vendors. Chan says technical support was critical in Informatics decision to go with Great Plains and its Dynamics accounting system. "We get great support from the company," she says. "Great Plains values our feedback and incorporates some of that into future upgrades."

The truth is, with all the major accounting packages now offering fairly similar functionality - and all moving towards the same Windows/SQL Server and Internet platforms - the distinguishing features of individual accounting applications are all but disappearing. In the end, finance managers must make decisions based on price, localization of features, service, and support "The trend will be for companies to look for after-sales service," says Great Plain's Tan. "Companies that offer poor service to customers will end up being the losers."

It won't do the customers much good, either.

Sahr Emarco Johnny, an information technology specialist, is a senior writer at CFO Asia.