DEALING WITH DIGITAL DISRUPTION

DEALING WITHDEALING WITH

DIGITAL DISRUPTIONDIGITAL DISRUPTION

Daniel WynerHead of Strategy, Mergers & Acquisitions

Asia Pacific

AgendaSESSION 1

Presentation of Market Research

Phil Hassey, CEO, capioIT Market Research

SESSION 2

What are the top challenges for your accounting practices

Daniel Wyner, Head of Strategy, Mergers & Acquisitions Asia Pacific

BREAK

SESSION 3

Ways to deal with digital disruption

Ron Drost, General Manager of Sales

Q&A

What is digital disruption?

Digital DisruptionChanges enabled by digital technologies that occur at a pace and magnitude that disrupt established ways of value creation, social interactions, doing business and more generally our thinking.

- The University of Sydney

Daily distribution of Australian screen minutesSource: Milward Brown AdReaction, 2014

Phil Hassey CEO

CapioIT Market Research

What are the 3 key items that impact you & your

firm?

October, 2014

Phil Hassey CEO capioIT

Can the Accounting Profession keep up with clients and the cloud

Capture Understand Collaborate Innovate

Key Takeaways and Themes

© 2014 capioIT www.capioit.com14


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• Embrace, not fear, the cloud.

• Current business transformation is more than the cloud. Emerging digital experiences will define you and your clients business

• 69% of accountants surveyed use a cloud computing platform for accounting software

• The overall impact of cloud is quantifiably beneficial for the accounting profession. Your SME clients are net positive, but need more convincing

Methodology – Quantitative and Qualitative



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Quantitative Methodology •200 Australia wide telephone interviews of SME organisations•300 Australia wide telephone interviews of Small to Mid Sized Accounting/Tax firms

Qualitative Methodology •12 in-depth or one-to-one interviews of SME organisation employees•12 in-depth or one-to-one interviews of Small to Mid Sized Accounting/Tax firm employees

Methodology - Secondary Research



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Secondary Research •As part of the process, capioIT undertook secondary research and use internal and externally published sources of information to help support the overall report. •The sources include published and available data from organisations such as the Australian Bureau of Statistics, NBN Co, and other agencies. •capioIT also had internal information that is relevant to leverage

Quantifying Cloud Usage for Accountants



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69% of accounting firms in Australia currently use cloud computing

(SaaS) based accounting applications

(sample size = 300 Accountants in Australia)

Quantifying Cloud Usage for Accountants



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• Australian accountants use an average of 1.9 cloud accounting apps

• 59% of Accountants operating cloud based software, use 2 or more cloud apps

• Xero and MYOB dominate the market.

• 98% of accountants using cloud use at least one of these brands.

• 49% of accountants using two cloud apps use both of these brands


Regional vs Urban Accountants



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• 26% of accountants were located in regional centres, the remaining 74% in the state and territory capitals

• 60% of accounting firms in regional areas are using cloud based accounting applications with their clients

• 72% of accounting firms in urban areas are using cloud based accounting applications with their clients

• Overall whilst uptake in regional areas is lower than urban, there is limited defining behavioural patterns differentiating the two locations

• This reinforces the universal client driven demands to go to the cloud(sample size = 300 Accountants in Australia)

Is There an Accounting Age Divide?



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Baby Boomers vs Millennials



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• This issue is clearly critical to how you communicate with your clients and co-workers older and younger

• You cannot use a one size fits all approach across the age divide. Younger accountants understand the technology and the benefits

• A critical qualitative issue is the way in which the cloud is sold to Millennials.

• “Everyone is trying to sell cloud to our parents, not to us”

• “Don’t sell us the cloud - Tell us why I should use MYOB not Xero”

• “Help us sell to our clients, and create a cloud ecosystem for the SME”


Depth of Impact of Cloud Computing on Services provided to SME’s



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Depth of the Impact of Cloud Computing on Services provided to SME’s



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Depth of Impact of Cloud Computing on Services provided to SME’s



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• On the scale of 1 (significant negative) to 5 (Significant Positive) • Users of cloud computing rated the impact of cloud on the

accounting profession as 4• Non-Users of cloud computing rated the impact of cloud on the

accounting profession as 3.5• A clear indication that the adoption of Cloud Computing is seen as

overwhelmingly positive • “The cloud is the most exciting “invention” for the accountant since the

abacus. It will make our job easier and allow us to add real value for our clients”

• “Cloud will find out poor bookkeepers, but for most it is a very positive part of the industry as it allows us to focus on supporting the client”

Which Accounting Business Processes Impacted by Cloud Computing – Remembering it is considered positive



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Which Accounting Business Processes Are Impacted by Cloud Computing



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• Overwhelmingly the number one accounting process impacted by the cloud is “Financial Reporting and Taxation”. This was cited by over 40% of respondents.

• This is regardless of whether the respondent is a current cloud user or not. • Other key processes impacted include:

• Business Planning• Forecasting and Cash-flow support• Business Advisory• Tax Planning

• In general there is an alignment between cloud and non-cloud users in terms of their perception of impacts

Key drawbacks for Accounting firms when Using Cloud



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Key drawbacks for Accounting firms when Using Cloud



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• Whilst the accounting profession is very positive about the cloud, there is a range of drawbacks for use of the cloud

• Security Concerns were the number one drawback of cloud for 17% of respondents

• Client Concerns was ranked second. Qualitatively and anecdotally we also know that the client concern is largely security related.

• Data location is only an issue for 11% of organisations

• Cost is a non-issue

Is Government Red Tape Reduction a Challenge? – Accountants say NO!!



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Future Cloud Investment



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• Current users of cloud computing are very confident that they will increased usage of cloud computing in their business

• 76.3% of current users are “very likely” to increase their expenditure on cloud computing

• A further 19.8% are “quite likely” to increase their expenditure on cloud computing

• Increased investment in cloud is anticipated across all age groups• “There is no way back for cloud computing. We are embracing it all the way”• “We are partnering with a firm who provides CRM SaaS support to enhance

customer outcomes”


SME Investment in the Cloud for Accounting Services



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(sample size = 200 SME’s in Australia)

SME Investment in the Cloud for Accounting Services



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• Currently 27% of SME organisations are using cloud based accounting services

• 60% of organisations have not yet tried to shift to the cloud.

• This is a significant untapped opportunity

• “We embraced the cloud a couple of years ago after our accountant suggested it to us”

• “The real benefit for us is the improved software. Cloud was secondary”

• “We will likely go to the cloud at some stage as these are the firms who are innovating. It is hard to avoid Xero, they must be doing something right”


Who Makes the Cloud Decision? – Not the Accountant



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Brand of Cloud Accounting Package Used



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Key Drivers of Cloud Investment by SME’s



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Key Drivers of Cloud Investment

Security 44.4%

Functionality 42.6%

Price 5.6%

Pricing Flexibility 3.7%

Scalability 1.9%

Quality 1.9%

Data Location 0.0%

Frequency of Updates 0.0%

None / don't know 0.0%

• Cloud investment for SME’s is all about focus on security and functionality

• Get this correct and your clients will thank you


Perception of the Security of the Cloud Platform



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Dr Google – Do you use it?



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Don’t be surprised if your clients do the same



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Consumer Data is transforming business experience



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What Facebook (and/or Google) Enterprise Will We Help Create



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If you don’t transform you will be SMAC’D by clients



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What your Clients will demand from SMAC’D



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A successful Accountant has to build a business around these ideas


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Embrace, not fear, the cloud.

Cloud and emerging digital experiences will define you and your

clients business

(

Contact Information



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Daniel WynerHead of Strategy, Mergers & Acquisitions

Asia Pacific

What are the top 3 challenges that technological advances are creating

for your accounting practices?

47

Three Emotions

Key take outs1. Proliferation of SME cloud solutions

2. Services Impacted by cloud computing

3. Lack of understanding of Governments actions

4. Education not prescription

Proliferation of SME cloud solutions

Services Impacted by cloud computing?I told them advisory

was the future! 1…2….3….

I told them advisory was the future!

1…2….3….

Compliance

Accountant

Lack of understanding of Governments actions

What Changes?• Automation of Individual tax returns (iReturns)

• “…developing a light touch or no touch income tax experience”

• ATO no longer sends Cheques on iReturns• BAS & IAS changes

• If you lodge via ELS or Portal say bye bye to paper BAS/IAS

• 12 months away from no physical NOA’s to Tax Agents

Privacy Act 1988 - Tax File Number Guidelines 2011Guideline 6 Storage, security and destruction of TFN information

6.1 TFN recipients must take reasonable steps to:a)protect TFN information from misuse and loss, and from unauthorised access, use, modification or disclosure, andb)ensure that access to records containing TFN information is restricted to individuals who need to handle that information for taxation law, personal assistance law or superannuation law purposes.

Computer and network security – by adopting logical barriers and measures to protect computer systems and networks from unauthorised access, modification and disclosure such as: • user identity checks and password controls• separately storing, processing and transmitting TFNs from other information handled by the TFN recipient• systems including audit trails to detect unauthorised access.• Communications security – by protecting communications via data transmission, (including email and voice communications), from interception, and preventing unauthorised intrusion into computer networks

Office of the Australian Information Commissioner http://www.oaic.gov.au/privacy/privacy-resources/privacy-fact-sheets/other/privacy-fact-sheet-6-the-binding-tax-file-number-guidelines-2011-and-the-protection-of-tax-file-number-information

Key take outs1. Proliferation of SME cloud solutions

2. Services Impacted by cloud computing

3. Lack of understanding of Governments actions

4. Education not prescription

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General Manager of SalesAccounting Professionals Divisions

The next session will start in

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Head of Strategy, Mergers & Acquisitions Asia Pacific

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DEALING WITH DIGITAL DISRUPTION