Some Observations on Where Technology is Taking the Profession

Recently I was writing a piece for inclusion in the 2014 Good, Bad and Ugly inter-firm comparison study being done by Business Fitness in Australia. I thought some of my readers might be interested in the thoughts I had back in March 2000 when I wrote this and the references to an earlier paper I wrote in 1998.

As I read my thoughts at the time I’m hit by the fact that change has been extraordinary but the consequences have been reasonably predictable. In late 1998 I wrote a lengthy White Paper on what I believed technology, in particular, was doing to the competitive landscape in which the profession operates. Nothing has happened since I wrote that paper that changes my mind about the impact developments in information processing and communication technology are likely to have so I thought I would share them with you.

The pace of change has amazed me and the way it has been reflected in stock prices for what amounts to little more than fanciful ideas is scary to say the least. When the bubble bursts [which it did soon after I originally published this article] there will be many people who wake up with not much to show for the journey they’ve been on.

One of the hottest areas (in the vernacular of the day, known as cool space) at the moment is the application service provider (ASP) sector – know known as the cloud. In simple terms an ASP provides software applications over the web that users rent rather than own and they do not have to worry about installation and maintenance etc. This will give rise to totally new business models.

Revenue from this sector is expected to grow from a tiny $US7 million this year to $US7 billion by 2004. Users will increase from 20,000 this year to 30 million in 2004. In my mind that is growth but more importantly, it points to some very significant changes that will occur in the way business people inter-relate with their professional advisors. In fact it brings into sharp focus the question of who in fact their advisors are going to be.

A recent Forrester report predicts that businesses will place orders totaling $2.7 trillion worldwide via the Internet by 2003, and that 98 percent of all larger companies will sell goods over the Internet this year. In the business-to-consumer realm, Forrester predicts online retail sales to reach $184 billion by 2004. Additionally, IDC expects that spending on Internet and e-commerce site development will grow from $11.8 billion from 1999 to $43.6 billion worldwide by 2002.

For growth of this magnitude to occur I believe we’re going to see the telecoms play a major role because they not only have the infrastructure in place to deliver broadband services, they also have strong brand equity and the marketing muscle required. I’d suggest this is the reason Telstra has invested in Solution 6 in Australia and I expect to see major telecoms partner with ASPs throughout the world. [I’m not sure what happened here but this prediction did not eventuate, but who knows where it might end?]

If this prediction is correct, small and medium sized enterprises (SMEs) will soon be able to get all their applications from their telecom provider who will bundle local and long distance Internet and application services with broadband connections. This is something that will start to happen within the next couple of years and will totally redefine the competitive landscape.

Irrespective of the source of software applications there will still be a role for you to play but as communication infrastructure converges with critical business process applications you will be confronted by a situation where your clients now have a mission critical link with a powerful supplier that is well and truly out of your control.

Typically, an accounting firm would play a significant role in the selection, installation and operation of its clients’ software applications, especially their accounting system. This serves to lock the client in to them because of the critical role they play. But if an ASP-telecom aligned organization steps into that role the link with the accounting firm is broken.

It is a small step for that organization to start to offer a client other services and in the process, erode the relationship accounting firms have with their clients. In an extreme case you might even ask whether a practicing accountant will have any role to play if the client is linked directly to an ASP-telecom service provider that can easily find other partners to service clients’ broader needs.

You might want to think about this in the context of “free websites” being offered to accounting practices by some of their service providers and others. Come on guys, who are you kidding? There is no such thing as a free lunch. Is this altruistic or strategic? Many people subscribe to the view that “you should never look a gift horse in the mouth” but as Shakespeare reminds us in Hamlet: “rich gifts wax poor when givers prove unkind.”

At least one scenario that plays out in my mind is a strategy designed to get well and truly into your client channel and once the relationship with your clients is established to systematically harvest it. This is known as the classic Trojan horse strategy. The only way to combat the Trojan horse strategy is not to open the gate and drag it in.

Among the hot applications that fit the ASP space will be e-commerce tools, accounting, tax preparation, customer contact and relationship management, productivity tools of every shape and size imaginable and of course, word processors and spreadsheets that form the core of bundled office applications. But it will most definitely not only be limited to the applications we are familiar with.

Incredible developments are occurring in the area of knowledge management and its interface with applications such as general ledger packages. Sophisticated knowledge management systems are out of the reach of the ordinary business when their IT system is built on traditional LAN client-server architecture.

However, when the application is provided by an ASP and the database resides outside of the business, a smart management system that is built on a link between actual performance and a web-enabled knowledge and experiential universe is both doable and cost-effective.

I have seen some AI (artificial intelligence) knowledge management systems that are nothing short of amazing and I believe they have the potential to dramatically change the way businesses are run and how people access the knowledge universe.

Imagine, if you will, your clients use an ASP platform for all their accounting, supply chain (procurement) and customer relationship management needs. From anywhere in the world and at any time of the day they can get a status report of how their business is tracking.

They can be advised how they compare against the best in their industry. They’re told where their weaknesses are and are automatically pointed to a filtered list of documents containing suggestions on what can be done to fix the problem—not an endless list of articles that you now get when you do a word search using common search engines, but a very specific list that relates directly to the industry, business and issue at hand.

If they’re not quite sure how to interpret the advice they can ask a question in natural language form and are presented with an even more refined advice set and possibly offered a multi-media online training program that will assist them better understand what they’ve just been told.

Because of the types of questions they’ve been asking they’re automatically assigned a user profile that enables them to communicate with other people around the globe who have similar interests and/or are dealing with the same issues. They will also find that 3rd party service providers who have solutions to their problems will pass notices across their desktop for consideration.

Interesting thoughts you might say. Well, this technology is here today! This is not about the future, it is about the now. Again, I ask you to revisit the comments I made earlier in relation to the Trojan horse.

The next cool space will be taken by WAP (wireless applications protocol) we’re told. This is simply where everything you (and your clients) want will be accessible through a mobile phone or PDA (personal digital assistant) which itself will converge with the phone system. Everything is going to get smaller, faster and cheaper.

In this context, it is appropriate for us to ask what your role might be? You won’t be needed to install and support accounting systems or any other system for that matter. Tax preparation and advice won’t have to be something that physical presence mandates. It would also seem that even management advice is not something that you can use to claim the high ground if you accept the scenario I have pointed to above.

Perhaps you could do some financial planning—well look at how the traditional brokers have fared to form a view about that, clearly this can be easily (as in enormously easy) for people to do themselves by accessing super-smart systems that possess all of the interrogation and experiential resources that any individual could possibly muster.

The point I’m trying to make is that knowledge, in particular, and experience, to a lesser extent, are fast becoming a commodity. The technology required to deliver this in a form and at a time, place and price that meets user needs, 7 days a week, 24 hours a day, is available now and it will only get easier to use, more expansive in capability and of course, cheaper.

What we are seeing today would have been considered to be science fiction 5 years ago. At that time, mention of the word “browser” would have conjured up a notion of someone aimlessly wandering around a store looking at merchandise. Today it is your link to the world and can be used to buy anything from cars to coffee, to entertain and inform, to communicate and, of course, to work.

The value that accountants have traditionally created has been based on their knowledge and experience and in that sense they are knowledge workers. But their method of delivery has essentially been built on an analog model. What we are seeing today is the rapid deployment of a digital model.

What distinguishes the analog model is that it is cumbersome, discontinuous and requires an intermediary (middleman) to effect convergence. That is, a professional accountant for example, will intermediate in bringing an analysis of a situation together with past experience and knowledge of options to form advice on an appropriate course of action.

In contrast, a digital model is characterized by continuity and natural convergence of systems which include not just the digital appliances that we are all familiar with but also the convergence of, for example, a business performance measurement system with a knowledge management system that is independent of the business itself. In this model the intermediary becomes disintermediated. Or to put that in crude terms, those of us who want to reside in the analog world won’t be needed any more at least in relation to some of the things we now do.

Paradoxically, however, the process of disintermediation will itself be replaced by what are called metamediaries or hypermediation.

Let me explain.

In the analog economy there is typically a manufacturer, a distributor, a retailer and an end user consumer. In the digital economy the economic function of the distributor and the retailer are under threat. They will not necessarily be eliminated totally (there are few successful models of total disinternmediation, Dell Computer being one classic example.)

The economic function that intermediaries once performed are seriously under threat. In their place will be a different type of intermediary, one that provides customers with information that will help them make the exact purchase they want, at the best price available from the most reputable supplier. Emerge the transaction per click phenomenon. Information is money in this model.

Each time a user clicks a link some value is created and therefore potential to generate revenue is created. At a penny a click the user will be indifferent to the cost if it leads to what s/he’s looking for. An individual business could never make any money charging people a penny for information but when you put billions of clicks together there is a lot at stake.

So what has all this got to do with you? Lot’s.

As we speak, the e-economy is well and truly starting to take hold but I’d suggest we have not seen anything yet. This is a classic disruptive technology. Historically, the impact of disruptive technologies (e.g. the internal combustion engine, the personal computer) has been seriously underestimated because of what appear to be the initial barriers and their limitations. But this ignores their innovators’ motivation to move from the fringe to the mainstream of business and society.

Every one of your clients’ businesses and your business itself will be turned on its head in the next 5 years. In the past 5 years there has been massive investment in building the infrastructure that forms the backbone of the Internet. In the next 5 years we will see that infrastructure deployed. Never before has it been so important for you to quickly embrace technology and draw your clients closer to you. Let me be even more blunt than that, you must create a situation where they are not only dependent on you but they love you to the core.

We have been saying for years that merely satisfying a client is not enough, you must delight them, WOW them, blow them off the planet. This is going to be the success mandate of this millennium.

Relationships with clients in e-space will be transitory at best. If you don’t give them reason to appoint you their premier advisor you are dead. They are just one click away from another accounting firm or some other provider of the service they want today, meaning now! You are in the information business and information, unlike physical products, can be digitized and also unlike physical products the experience of shopping for information is not an inherent part of the value chain.


People need people. We are social animals and we will always want to confide in and seek the opinion of each other. No matter how sophisticated technology becomes, this need will always be present.

Someone is still going to have to map out business strategy and define the parameters for its execution. This will involve helping clients set goals and keeping them focused on those goals. It will be a mentoring and coaching function as well as a seriously valuable interpretive function through which, to paraphrase Peter Drucker, information will be endowed with relevance and purpose for without that it is merely data.

In the previous White Paper that I wrote on the emerging competitive landscape I suggested that throughout the world, most business owners exhibit six fundamental characteristics:

1. They do not have a vision of what their business can, and does, stand for. They do not truly understand their governing commercial purpose and they have a very unclear definition of which customer segment(s) they can create value for. They tend to be willing to be all things to all people, with the inevitable consequence that they fail to meet the needs of anyone very well, and they are unable to define a service model that will WOW the customers who are potentially the most valuable to them.

2. They are shocking at setting goals. Without goals, there is virtually nothing to aim for or to monitor progress against – there is no basis on which to manage, other than in the form of reactive crisis control. In these circumstances, the business lacks performance benchmarks and floats like a rudderless ship in an ocean of mediocrity. Business performance has virtually nothing to do with having a bad strategy, but everything to do with poor execution and a lack of goal-oriented activity.

3. They lack discipline and tend to allow themselves to be drawn into dealing with short-term problems and issues by treating the symptoms, rather than addressing the root causes. This also keeps them focused on the short term, rather than the long term.

4. They are cost-focused, rather than value-driven. This draws them towards a tendency to buy the cheapest inputs, to minimize expenditure on training and other business building investments, and to adopt marketing and pricing strategies that drive margins down in the (usually mistaken) belief that their customers are also narrowly cost-focused.

5. They are appalling managers of their own time and usually find it easier to “do it themselves”, rather than investing time systematizing business processes and then delegating responsibility to trained team members.

6. They are very parochial in their view of the world and the changes that are taking place around them. They firmly believe that the problems they face are unique to them or their industry, and that they are doing as best as can be done given the circumstances. Because of this, they are unable (or unwilling) to adapt to change.

The firm of the future will help its selected business clients deal head on with these six generic issues. It will do that with a big dose of personal professional intervention, through the extensive use of technology and through its affiliation with a powerful knowledge network such as the Principa Alliance [it was RAN when I originally wrote this.]

The firm of the future will inject itself into, and be an essential element of, its selected clients’ value chain. By that I mean it will be an indispensable part of the business and its value creation process. SMEs that do not embrace technology and integrate it into the very fabric of their business will find it hard to survive. The only way they will be able to cope with the changes that are about to take place is to partner with an accounting firm that can deliver business applications and intelligence to its desktop.

The firm of the future will not be organized along traditional lines but will be a scaleable model comprised of Client Service Units of about 7-8 people who are all technology savvy. Each CSU will look after about 30 business clients who, in today’s prices, will be paying at least $30,000 annually for a highly systematized, and customizable service. It will include traditional compliance services but will be primarily business development and business support focused. The CSU will become the client’s administrative backbone and will perform both chief financial officer (CFO) and chief technology officer (CTO) functions.

The people in these firms will be compensated on the basis of results and will probably have some skin in the game. Fees will be fixed by negotiation and will be closely tied to value created rather than the cost of resources used. Much more sophisticated and relevant systems than timesheets will be used to monitor performance.
The firm of the future will be positioned in its community as a preeminent professional service provider. Its clients will be linked 24/7 to its extranet through which it will channel best of breed applications, services, advice and assistance that it draws from the extensive support network (the Principa Alliance) that it is a member of – [this is the essence of social networks and client portals]. That alliance it will also give the firm of the future the muscle it needs to offer, on equitable terms, telecom delivered broadband services [today that what cloud based applications offer to its clients.]

The firm of the future will look and feel like a business portal. It will dominate the real estate on its clients’ desktop [today read notebok, tablet, smartphone, TV and desktop.] In effect it will be a mini DotCom entity. Information that is uniquely relevant to each of its clients will be seamlessly and automatically channeled to them. It will be seen by its clients as their primary service provider. Through this it will achieve client lock-in.

The firm of the future will be independently owned and operated and will therefore be entrepreneurial and able to act nimbly and with purpose. Its cost structure will be much lower than its larger competitors and it will be a lot closer to its clients than its larger competitors can get. It will build unsurpassed client loyalty because it will be totally sensitive to their needs and its network affiliation will give it all the fire power it requires to be able to deliver any level of service sophistication required by its clients.

The competitive battle of the future will not be characterized by firm-to-firm combat but networks will compete for market space on behalf of their affiliates. The firm of the future will, however, through the support it gives to its affiliated network build the strength and market power of the network. It will participate as both buyer and vendor of knowledge and experience. In fact, the major value proposition it will offer its clients is access to an unsurpassed knowledge and experience network of consulting accountants who share a common service protocol, have a global reach and who bring world class applications and support to the table.

The size of the firm of the future will not be as important as the size and strength of the network it is affiliated with. In fact very few firms will be big enough to compete independently of a network. This will not be solely due to the magnitude of the capital pool that is required to develop and harness technology but there are inherent diseconomies of scale in professional service firms which make it extremely difficult for them to respond quickly enough to changing clients needs and economic circumstances.

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