Business author Alan Deutschman popularized the phrase “Change or Die” in the title of his 2005 article in Fast Company magazine, expanding that discussion onto a book in 2007. The concept is simple and as old as business itself: The failure to adapt and improve can have dire consequences. For mid-size accounting firms, the change imperative is all about technology.
Accounting, especially for mid-size and smaller firms, is a profession steeped in tradition and often slow to change. However, the pressure is building. According to The Practice of Now report by the Sage Group, 85% of accountants believe the pace of technology adoption needs to pick up if firms are to remain competitive internationally.
Ironically, it is the pace and direction of technological change in general that has become one of the strongest factors leading firms to adopt (and adapt to) new technologies. New technologies, like AI and machine learning, create new expectations on all sides for state-of-the-art tools and capabilities.
Amplifying those pressure are the societal and cultural changes brought about by the recent pandemic. For the better part of a year, the world had to work remotely, including accounting professionals. The somewhat unexpected result is a workforce that is not only accustomed to working from home, but also expects consumer-grade technology with highly developed interfaces and immediate access to data. Current workers, whether in-office or remote, are beginning to demand the latest technologies to make their work faster, easier, more accurate and more secure.
There is a generational factor at play, as well. Millennials, especially, want to avoid what they see as labor-intensive applications like Excel. And with labor costs increasing and the labor market heating up in ways that haven’t been seen in decades, new technology enables firms to compete effectively for the best talent.
Predictably, accounting clients also now expect to see the latest technology. They have become used to instant access and immediate results from all their other services. Everything from banking services, to insurance, to healthcare and even travel and entertainment ticketing run on Web-based apps that provide continually improving customer experiences.
Competition among firms is a key driver for adoption, both for new clients and to expand business opportunities with existing clients. Accounting is a fiercely competitive industry and mid-size firms are particularly vulnerable to shifts in the business landscape. Currently, the “Big Four” firms command the lion’s share of the market with a combined $56 billion in revenue from the US market in 2018, according to a 2021 Statista (statista.com) report. With the industry forecasted to have generated more than $110 billion U.S. in 2020, smaller firms are all chasing the same half of the market.
It’s no wonder then that mid-size firms feel so much pressure to adopt new technologies. Productivity improvements enabled by technology are key to profitability. However, legacy systems that can be 10, 20 or even 30 years old represent huge barriers. Microsoft Excel, long the go-to software for accountants, is increasingly seen as inadequate to meet the demands firms now face for ease-of-use and transparency.
Other driving forces that cannot be ignored or overstated are the continual changes in tax laws and increased regulatory attention.
Ramya Bala is a partner at EisnerAmper, a global, mid-sized accounting firm with 2,100 employees and over 200 partners. The firm has won numerous awards, including Top Firm for Tech by Accounting Today and Best Accounting Firm 2020 (Hedgeweek). She recently spoke about what’s driving the technology imperative at her firm. “We’re now seeing increased regulatory scrutiny and increased complexity in projections. Accounting firms have been in the hot seat for the last few years and our ability to seamlessly adapt to changing tax laws is very, very important.”
Laura Macca, Director of Business Transformation at EisnerAmper, concurs and sees big changes ahead for the industry, as well as risks for those firms that lag. “I think that in ten to twenty years the accounting profession will look nothing like it does right now,” explained Macca. “All firms will be under immense pressure to deliver value for clients in a manner that adapts to the sweeping technology changes. Technology is also key to streamlining how people work and retaining and attracting talent.”
There is a convergence of forces propelling firms to engage in technological transformation. The perfect storm comes from: fierce competition for clients and talent; the need for increased productivity due to the pressure on profitability; and the need for quality and transparency due to regulatory and client expectations.
Clearly, the race is on. Despite Alan Deutschman’s dire warning, accounting firms of all sizes appear to be rising to the challenge of adopting the newest technologies. Naturally, some will fare better than others, but all will seek the advantages that technology offers. The real winners will be the clients, who will continue to see greater value and better, faster service.
Orion has been serving the Professional Services industry with business solutions for over a decade.
Learn more about our expertise here.