In Firm: 2010 IT Predictions and 2009 Results

From the December 2009 Issue

It’s no surprise that the down economy had a serious impact on accounting
firm technology spending as many firms hunkered down this year and only invested
in those technologies and updates that were absolutely necessary or those that
had a clearly obvious return on the investment. With the increase in IT activity
we are experiencing at year end, there is invigorated hope that the 2010 economic
outlook will be much more positive, but I believe most cash-strapped firms will
wait until after busy season to evaluate next-generation products and technologies
that other firms were successful with during the upcoming busy season. With
that in mind, I present my In Firm 2010 IT predictions, including updates on
those forecasts made at the end of 2009.

1. Cloud Computing: Last year my number one prediction was
   the take off of Software as a Service (SaaS), which describes applications
   that are delivered to a client (tax & accounting firm) over the Internet
   for a contracted fee based on the number of users or volume of usage, and
   which are technically written specifically to take advantage of Internet architecture.
   From that perspective, my prediction was iffy at best, so this year I am expanding
   my prediction to encompass Cloud Computing. Cloud Computing includes almost
   any technology that allows applications to be run effectively over the Internet
   by an entity outside the firm. This would encompass applications accessed
   via Windows Terminal Server and Citrix farms, which would include, in part,
   the Thomson Virtual Office suite, and externally by providers such as Xcentric,
   who continue to provide this custom suite hosting capability to accounting
   firms. CCH has completely rewritten its tax, practice and portal applications
   to take advantage of SaaS architecture and has added a workflow (WorkStream)
   tool, but I am guessing most firms will hold off until reviews come in after
   busy season. Intuit introduced its ProLine Tax Online Edition, a brand-new
   web-based professional tax preparation application that was written on new
   code, with re-designed tax entry, review and filing processes.
2. Windows 7 Success: My prediction for Windows 7 in 2009
   was that it would effectively kill Vista adoption, which it has, so I get
   a win on that one. Looking ahead to 2010, my prediction is that firms buying
   new computers will buy them with Windows 7 beginning after April 16, 2010,
   and will transition their firms to this platform as they replace workstations.
   While many of the existing Windows XP workstations could technically be upgraded
   to Windows 7, the increased RAM needed by the operating system as well as
   the additional monitors being added, doesn’t make it worth the time
   and effort on older PCs.
3. Office 2007 Becomes Standard: I predicted that firms would
   push towards Office 2007, which has panned out based on the firms I worked
   with this year. While I think Office 2010 will be delivered on time and become
   an effective competitor on the web-based side going up against Google Apps,
   I also think the major accounting application vendors are going to have a
   hard time getting their applications (particularly audit engagement containers)
   to interact properly. So I am betting that firms will stick with Office 2007
   because it is stable. Firms must remember they make their revenue from tax
   and audit production; so the more stable the environment, the more profitable
   they will be.
4. Google Continues Being a Thorn for Microsoft: Last year,
   I predicted Google would be seen as a viable competitor to Microsoft Office
   outside of the accounting profession. While there have been some educational
   and small business transitions, it was not enough for me to stake a claim
   of success. So I will just say I was wrong, particularly with the free web
   versions of Microsoft Office 2010 being announced for next year. Google, however,
   still has a strong following on the “Search” side. And with money
   to invest in acquiring competitive technologies, Microsoft won’t be
   the only one doing the bidding so I think their competition will heat up more
   in 2010.
5. Apple iPhone Inroads: For those firms that have AT&T
   as their digital cellular provider, I have seen a lot of partners getting
   iPhones. While the ultra cool iPhone is not as prevalent as the more practical
   BlackBerry devices, I believe I got this one right and it may continue on
   even more in 2010 if the rumors about Verizon supporting a new and improved
   iPhone are true. Those rumors include a better battery and possibly laptop
   tethering, which would push adoption since I see Verizon as listed more than
   any other as the digital cellular provider in the firms with which I work.
   Also, last year I commented that the number of Apple workstations would continue
   to grow, but not within tax and accounting firms, which has turned out to
   be correct. I don’t believe that will change this year since I have
   not heard about any of the major vendors going this route (and I did not see
   any Macs lying around when I did my CCH and Thomson site visits this year).
6. Virtualization Becomes Standard: I felt that virtualization
   would be promoted as a technology this past year, which it was, so that was
   a fairly easy win. This year, I am pushing the prediction further and feel
   that setting up multiple servers in a virtualized environment would be the
   majority of new installs. I think that the experiences of firms this year
   and the fact that it was one of the hottest topics among the IT groups at
   the technology conferences and firm network meetings throughout the year,
   will push the trend to a standard in 2010.
7. Web Backup Leads to Disaster Recovery: Last year, I predicted
   that firms would begin transitioning to web-based backups due to the increased
   volumes of data that they are experiencing by going “paperless”
   and the high cost of larger tape drives and media. As the cost of offsite
   storage and the bandwidth to access it has dropped, I have seen steady adoption,
   so I feel like I also got this one right. My take on this prediction for 2010
   is that we will see a number of web-based organizations not only provide secure
   offsite storage for accounting firms, but also integrate a disaster recovery
   solution by being able to host the firm’s applications in their data
   center. If the backup company has the data and also the knowledge of how to
   run accounting applications remotely, they could sell this service much more
   cost effectively than the cost to a firm of keeping a “hot site”
   or paying one of the national providers to deliver a trailer and generator
   in the event of a disaster.
8. Portal Standard: I predicted that portals would become
   the standard in 2009, and while many firms did adopt them, the massive sweep
   I predicted had not happened at the time of writing this article. While I
   am taking a ½ correct hit on this prediction, the recent activity in
   firms asking about portal technology may make it the standard before year
   end, so you’ll have to let me know if I earned the whole correct prediction.
   Interestingly, both Nevada and Massachusetts have passed laws making it more
   difficult to email a tax return, which would further promote the use of portals,
   so I am pushing this prediction again this year stating that the majority
   of U.S. accounting firms will have portals in place by December 2010.
9. Laptops as Terminals: I will have to take an “iffy”
   score on the prediction that firms will transition their laptops to “dumb
   terminals.” While many firms have adopted Windows Terminal Server and
   Citrix and have added digital cellular access through air cards and tethering
   of their smartphones, many auditors are still not using it as evidenced by
   the high percentage that are still not filling out their daily timesheets
   and expenses. While I think this should be the long-term standard for securing
   audit data, I have seen a growing trend towards firms using disk encryption
   tools to alleviate this concern. So for 2010, I am going completely off the
   wall and predicting that a major merger or technology upgrade within the digital
   cellular providers will create a usable nationwide digital cellular network
   that firms can rely on.
10. Scanning Boost: The major providers of scanning technology
    have all done a good job of improving their products, and those that are using
    them are seeing the benefits. While I feel the economy at year end will turn
    around and that we will all have solid tax seasons, the late recovery pushed
    front-end scanning technologies in the “would be nice” category
    instead of “gotta have it” category, which means it won’t
    be a success for 2009. So I will take a hit on this one. For 2010, I feel
    that firms will continue to transition towards front-end scanning tools for
    the organization and bookmarking, but that the automatic input technology
    will not be as effective as promised until 2011, but then that would have
    to be on that year’s list!