He’s Learning To Sleep Faster!

From the Oct. 2006 Issue

When Kevin Robert, CEO of Wolters Kluwer’s CCH, makes a move, he makes
a MOVE. In July, CCH had almost no footprint in the small and very small firm
market. With its ProSystem fx line firmly entrenched in solid majority of the
largest firms (minus the Big 4, most of whom are GoSystem Tax RS customers),
Robert obviously saw the other end of the market as a ripe spot for growth.
While arch-nemesis Thomson embraces a “we can build it internally better
and cheaper” philosophy, the Wolters Kluwer folks are decidedly in the
other camp. Nancy McKinstry, Robert’s boss and CEO and Chairman of its
Executive Board, commented to me last year that she does NOT subscribe to the
“if it’s a good idea then we’d have thought of it” philosophy
and that they (CCH) would acquire best of breed products wherever and whenever
possible.

First it was the old CPASoftware unit from Sage. The Pensacola group, founded
by Mark Fenimore and sold to Best, I mean … Sage Software, in 2003, was
acquired in early 2006. A few months later, it was the miserably named, but
incredibly well-designed BOCDIP product, which ultimately earned the vendor
a 2006 Tax & Accounting Technology Innovation Award from The CPA Technology
Advisor. Then, on August 1, the company announced the ATX deal. Finally (Dare
I say “finally” in a sentence about Robert? After all, when I asked
him if he slept, he quipped, “Only occasionally, and I’m learning
to do it fast!”), on Labor Day (a holiday — a point of irony certainly
not missed here!), CCH announced the TaxWise deal. All told, the company has
tripled its tax compliance user base from about 20,000 users to well over 75,000
in about six weeks! That puts them solidly in number two position behind Intuit
with 100,000+ ProSeries and Lacerte users. More importantly, its new base is
larger than the remaining competition IN TOTAL! (Thomson has approximately 22,000
between UltraTax CS and GoSystem Tax RS; Drake has just over 20,000; Orrtax
has about 12,000; and TaxWorks and a few other regionals each have well under
5,000 users.)

Consolidation has been a mainstay in the mindshare battle between Thomson
($8.70B) and its smaller Wolters Kluwer ($4.32B) Dutch rival with the two having
gobbled up over 20 smaller competitors during the past 10 years. The acquired
products, almost evenly divided between the two, met very different fates depending
on their acquirer. All of the Thomson acquired products were phased out (industry
leaders eschew the commonly used term killed), while most of the Wolters Kluwer
target products were slowly re-written and eventually integrated into what is
now known as the ProSystem fx Office Suite. SIAM, ePace, PACS, BOCDIP, ExecuSite,
etc. — each is now a component of the suite. The Thomson suite, by contrast,
has been built from the ground up with complete integration in mind and, arguably,
has a better chance at achieving what practicing accountants seek — integration
nirvana — where each item of data is keyed once and only once, and everything
is in perfect synchronization all the time. But the CCH approach seems to work,
too. And now, as Robert begins his storm attack on the small firm end of the
market, we’ll see if he can make it work there.

I spent the day with Robert and his executive team two weeks ago (to the day)
and was again impressed with their depth of knowledge regarding the practice
of public accounting. I was also (again) impressed with their commitment and
reported hard work and their dedication to expanding and refining that knowledge.
I’m sure Robert was more than a little bit uncomfortable when I (two weeks
before the announcement) asked him directly, “Are you going to buy TaxWise,
too?” I didn’t expect an answer as I know full well he couldn’t
give one, but I did want him to know we were watching and studying the strategy.

At the conclusion of that meeting, I was asked for my opinion. I shared that
I was thrilled to see CCH entering the “real world” of public accounting:
The world of 10 or fewer people in an office. The world where write-up, payroll
and tax bank products make up the bulk of fees. The world where two-thirds of
the practices are bookkeepers, enrolled agents, licensed public accountants,
public accountants, business service specialists, payroll processors and tax
preparers, and where the other one-third are CPAs. The world where SQL-based
servers deployed in a Citrix farm and offering audit and review products are
absolutely foreign. The world where 90 percent of the practices are!

Welcome to my world, Kevin Robert. We’re NOT just small versions of
big firms! And most of us don’t WANT to practice in large firms. Our clients
LIKE to do business with people — people in small firms! Oh, by the way,
we serve nearly 25 million small business clients! Training is important to
us, but we can’t afford to hire onsite specialists, and we can’t
travel to a user conference every year. We love technology when it directly
impacts our productivity. We don’t buy stuff just because it’s new
and shiny. [Note: Well, actually I do, but I’m speaking metaphorically
here! Smile!] Keep listening, learn and implement fast. And remember, 85 percent
of us have revenues less than $500K, so keep our prices LOW!!

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Mr. LaFollette is Executive Editor of The CPA Technology Advisor.
He was a Tax & Technology partner in a large local firm for 23 years, and
VP of Product Strategy for a major tax and accounting software developer for
five years. He is the President and CEO of Accounting Technology Resource Network,
LLC and can be reached at greg.lafollette
@cygnuspub.com. He also publishes the tax and accounting blog at www.TheTechGap.com.

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