From the August 1996 issue of Controller Magazine

Do You Need Enterprise Accounting?

by Stewart McKie

If your organization can benefit from a system that offers broad and in-depth functionality, the answer is probably yes. But this level of sophistication is a major investment of time and money.

Just what is an enterprise accounting system? Cynics would argue it is software that is expensive to buy, tough to implement and out of date by the time it comes on-line. A more balanced view is that an enterprise accounting system offers the breadth and depth of functionality that is demanded by today's distributed enterprise and that delivering this level of application sophistication is not a trivial or inexpensive task.

Either way, enterprise accounting is a whole different ballgame from so-called middle market and small business accounting, as indicated by Segmenting the Accounting Software Market on page 50. The table gives some guidelines for dividing the accounting software market into four segments: SOHO (small office, home office), workgroup, corporate and enterprise. These are guidelines only; accounting applications and the businesses that use them do not always fit together as neatly.

Note that enterprises can use so-called best-of-class applications as well as true enterprise suites to provide accounting solutions. While combining multivendor best-of-class solutions may truly result in the best possible functional fit in all enterprise lines of business, some people are not enamored with the real world problems of integrating up to a half-dozen accounting systems on an enterprise-wide basis. Best-of-class financial, budgeting or project management applications are generally only a partial solution to the overall needs of enterprise accounting.

Managing Complexity

Enterprise accounting packages must be adept at managing complexity of all types, including:

Organizational complexity: A typical enterprise is multinational; manages dozens or hundreds of subsidiary companies; employs thousands; grows by acquisition and merger; has multiple lines of business; and is vertically integrated so it may undertake manufacturing of some sort.

Cultural complexity: Multinational enterprises have to handle linguistic diversity, differences in terminology, subtle differences in business practices and other religious, cultural and legal complexities seldom faced by domestic businesses.

Process complexity: Enterprise business process management may be centralized or distributed, and autonomous or focused on shared service centers for managing processes such as procurement, billing or cash. Business processes may cross functional or legal entity boundaries or be controlled from one point by so-called case managers.

Accounting complexity: Enterprises are faced with multinational statutory compliance issues, a wide diversity of taxation systems, managing currency risk, intercompany transactions, global cash management, and consolidation and translation reporting.

Managing this level of complexity requires accounting software that is functionally broad and deep, which means enterprise accounting vendors must offer a wide range of modules, such as manufacturing control and human resources management, and each module must offer deeper functionality, such as being able to handle multicurrency processing or offering multilingual interfaces.

Enterprise accounting software just does more, so it is harder to develop. It must embrace more complementary technologies, such as Electronic Data Interchange (EDI), and it is more difficult to support and maintain.

Flexible Deployment

In the past, enterprise accounting software could largely be defined as accounting software that ran on mainframes. Dun & Bradstreet Software, with its "M" and "E" series mainframe accounting applications (ex. McCormack & Dodge and MSA America products), has thousands of such sites today. There are many hundreds more supplied by other mainframe accounting suppliers, including Integral, SAP America and Walker Interactive Systems. These mainframe sites often service hundreds of on-line users and manage multigigabyte databases of accounting data.

A great many enterprises also run on a combination of mainframe and midrange platforms. Midrange being defined as minicomputers from vendors such as IBM, Digital Equipment and Hewlett Packard, among others. With over 300,000 midrange IBM AS/400 computers installed alone, there may be more than half a million corporate and enterprise accounting systems still running on midrange equipment.

While mainframe and midrange computers remain the dominant enterprise accounting platform and will continue to have an important role to play in Client-Server accounting, enterprises are moving away from centralized accounting based on a single host architecture. Instead they mix desktop PCs, mainframe, and midrange systems with servers running variants of UNIX, Novell NetWare or Microsoft NT connected by local and wide area networking (LANs and WANs). Often new Client-Server accounting applications run alongside the existing "legacy" accounting and manufacturing applications.

Enterprise accounting applications especially must be able to integrate with other enterprisewide information infrastructures such as e-mail, EDI, groupware such as Lotus Notes, Internet/intranet applications, document imaging and workflow management applications. Without this integration, accounting cannot leverage the full value from these complementary technologies and is in danger of remaining an information island.

To handle the diverse technology needs of the modern enterprise plus the ever constant dynamic of change, enterprise accounting software must offer flexible deployment options. This means allowing system mangers to choose between a range of server, database and user interface options depending on individual enterprise business unit needs. It also means the ability to deploy the applications locally and remotely, say across the Internet, and to deploy applications in variations of two-and three-tier Client-Server architectures for better scalability and performance. Enterprise accounting software has to offer more flexibility, plus better use of technology to manage these complex distributed information management environments.

In-Depth Support

Individuals and workgroups go home at the end of the day but enterprises never stop. Enterprise accounting applications run 24 hours a day, seven days a week, 365 days a year. Ideally the software should never crash, but if it does, enterprise accounting demands rapid recovery from failures.

To keep this type of operation going, an enterprise accounting vendor may be expected to provide around-the-clock support, help desks in every major business time zone, disaster recovery services, and automated problem tracking and resolution software similar to Dun & Bradstreet Software's Smart Stream Assistant package.

Enterprise accounting can seldom be implemented by the customer's internal resources or even those of the customer and vendor combined. The scope of the problems encountered when rolling out enterprise accounting software frequently demands the use of third parties, such as international systems integration firms of the Electronic Data Systems (EDS) type or accounting firms with a global presence. To support these efforts, the software vendor must maintain offices around the world with local sales and support resources and regional training centers for delivering product education and support.

Many enterprise accounting solutions depend on the success of a mixture of hardware and software solutions. To deliver these solutions, enterprise accounting vendors are often forced to partner closely with other technology providers. This involves cross training and ongoing training of staff and supporting development teams focused on managing the integration with third party technology.

Enterprising accounting customers require a lot more servicing than the average customer, which means that vendors need deep pockets and industry partnerships to provide the necessary level of support. Privately-held vendors with less than $100 million in revenues are seldom equipped to handle the demands of enterprise level service and support.

Enterprise accounting is primarily about managing organizational complexity, delivering flexible deployment options and providing ongoing support worldwide. So that's why it costs so much - or does it? At less than $100, Intuit's Quicken is a great solution for managing an individual or business with revenues around $100,000, while a $1 million enterprise accounting system may service a $1 billion organization. Equally, single-user Quicken takes about a man-week to implement. Whereas an enterprise solution servicing 500 users could take ten man-years. Either way, the numbers really do make sense, but only if you really need what enterprise accounting is designed to deliver.

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