Dear Firm Leaders & Boomer Technology Circle Members,
It was great to see many of you at the Spring Boomer
Technology Circle meetings and we hope to see the rest of you soon. With this round of meetings in the rearview
mirror, we’ve once again prepared an executive overview that will provide strategy,
direction and access to resources in 2014.
The trends and information included below are based upon emerging and expanding trends and best
practices we have seen at the Boomer Technology Circles and other
conferences thus far in 2014. As always,
there were a few strong themes that emerged from the trends – a continued
discussion of cloud adoption, virtual meeting and training, expanding interest
in process improvement and Lean Six Sigma principles and opportunities to
provide advisory services in the future.
The pace of change in technology
and our profession is increasing. Your firm’s involvement in the BTC program
keeps you at the forefront by giving you access to thought leaders from the
best firms across the country.
Before we dive into the primary themes and underlying trends,
let us first present the latest BTC firm metrics. Revenue per FTE
(FTE = 2080 hours) was up slightly to $173,855 from $173,774 the previous year
and average hourly rate decreased to $168 from $171. Percent chargeable showed
a moderate increase from 48.9% to 49.7%. IT support ratio stayed constant at 1
to 32. After a sharp increase in the
financial performance numbers, we are seeing these numbers level off as we
predicted last year due to firms operating on very lean staff levels and hiring
now that we are a little further removed from the recession.
Technology expenditures stayed constant with 5.7% of revenue
invested in technology, the same as last year. Firms showed a slight decrease
in investment in technology per charge hour declining to $9.56 from $9.82. The flat
trend in technology spending is attributable to the continuance of a
wait-and-see approach as firms determine whether the cloud will be part of
their go-forward strategy. The main drivers in this are leadership,
current applications and current position on the infrastructure life cycle.
Note: If you
are a Boomer Technology Circles member, there is still time to participate in
the BTC metrics survey and benchmark against your peers and prior year’s
performance. Please help us work toward our goal of full participation by
submitting your data as soon as possible. The value of the metrics
increases for you and your peers when we have everyone contributing.
As we alluded to above, there were some clear trends that
emerged from the presentations and discussions at the Spring BTC Meetings. We can’t cover them all in this letter but
here are the top 10.
Licensing Audits – Prior to the
meetings, we received an email from one of our member firms asking if other
firms had recently received a letter from Microsoft requesting a self-audit. We
hadn’t but after asking the question at each circle it became apparent that
this is not an isolated case. Microsoft
is ramping up their focus on licensing compliance and firms of all sizes across
the country have received the letter. Many firms had either already responded
or were in the process. Those that had
completed the process advised firms to comply and said Microsoft was
approaching it from an education and compliance assistance perspective rather
than a punishment opportunity.
Disaster Recovery & Digital Disasters – Due to the sensitive nature of the data we handle for our clients, security
has always been a concern for CPA firms. However, this is becoming more so with
the recent highly publicized data breeches (both on-premise and in the cloud).
Firms are starting to question whether all efforts and resources should go into
prevention or whether striking the right balance with response/recovery is the
better approach. Today’s reality that it’s not as much about “if it will
happen” but “when it happens” that is driving this discussion. Disaster
recovery continues to be a topic of interest as well for two main reasons: 1)
the fact we’re not too far removed from some major natural disasters (Oklahoma
tornadoes, Sandy, etc.) and 2) the increasing prevalence of cyber-attacks and
Six Sigma – Firms of all sizes
are continuing to seek ways to do more with less by improving processes. One
way that BTC firms have had success improving processes is by using the Lean
Six Sigma method. Lean is the purposeful elimination of wasteful activities.
Six Sigma is a business problem-solving model designed to improve profitability
by improving quality and eliminating variation. In two of our Circle meetings,
Dustin Hostetler of Flowtivity
presented on the Lean Six Sigma method and how firms have used it to increase
speed, quality and profitability.
- Mergers/Growth – Growth continues to be a focal point for
firms – as it should be. Historically firms have either chosen either an
organic growth strategy or to pursue expansion through merger and acquisition.
More firms today are looking to a combination of both to fuel their growth.
Constantly on the look-out for potential M&A candidates while also focusing
on hiring top talent and developing them for the future of the firm.
Progressive firms are also expanding their service offerings to move beyond
compliance services (tax, audit, and accounting) to higher value advisory
services (more on that in a moment).
Emerging Leaders/Generation Y –
Generation Y is anyone born between the early 1980’s and early 2000’s. This
generation is commonly referred to as Millennials. How this generation prefers to work (more
collaborative) is driving firms to change how they manage, promote and work
with one another and their clients.
Millennials want their managers/supervisors/partners to communicate
openly and frequently about their performance. Millennials want their firms to
invest in them and help develop them to be better. Currently, 36% of the global workforce is
Millennial. By 2025, that will increase to 75%. Firms that are able to
understand Generation Y and leverage their interests and strengths will have a
competitive advantage over other firms.
Signatures – The recent IRS
ruling to allow electronic signatures for Form 8879 has provided a major
momentum boost. While several firms have
been using this technology over the last couple years for engagement letters
and internal agreements, we are going to see a much more widespread and rapid
adoption of e-Signatures throughout 2014 and into the next tax season. It’s pretty apparent to firms that huge
efficiencies can be gained in the 8879 process. Early adopter firms have also
found that it can streamline the process for internal agreements and reduce the
sales cycle by offering electronic signatures on agreements with clients.
- Moving Toward the Cloud – The interest in the cloud has been growing over the last five years and the attitudes of firm management and technology professionals has also shifted. When we first started talking about the cloud we were met with significant resistance and a list of reasons it wouldn’t work. As success stories have emerged (along with more cloud solutions), the openness to considering whether the cloud fits into the strategic direction of the firm is also increasing. We still aren’t to the point where we’ll see massive adoption of the cloud but we’re making progress.
We also had two BTC firms present on
their migration to CCH Axcess prior to this tax season. And, although they had some challenges that
are common to all software migrations, the feedback was primarily positive.
Both firms feel they are well positioned for the future and happy they made the
move as they look forward to 2015 tax season.
There are two secondary
trends related to cloud that we’d like to note.
First, more and more firms are accepting that email is a great place to
start the cloud migration and Microsoft Office 365 is gaining more adoption
among BTC firms. We still run into hesitancy when we talk to those firms that
have dipped their toes in the water but haven’t made the move. But, the firms
that have committed to the decision are reporting positive feedback. Second,
there is a growing interest in hybrid clouds (combination of private cloud and
public cloud services.) We simply aren’t
to the point where everything can be done in a browser and so supplementing
those solutions that we do have with a private cloud for the rest is a growing
trend. This second trend is related to disaster recovery and the strategy of
removing all infrastructure from the firm’s physical office.
- Client Advisory Services – Client accounting and advisory services continues to garner a lot of attention as well. We’ve thrown around the trusted business advisor tagline for some time now but most firms are still focused on the compliance and transactional work, making them more of a trusted technical advisor. To truly live up to the title of trusted business advisor, firms need to better understand their clients’ businesses and offer services that focus on business performance and strategy.
We also presented an expanded model of our level 1-2-3
services we’ve been discussing for the last couple years and posed the
question, “Is your firm prepared to play above the line?” Below the line or Level 1 includes compliance
services and are based on hindsight.
Above the line services (Levels 2 and 3) include advisory services
focused on business performance and business strategy respectively. These services are based on insight and
foresight. So why is this a focus now? The answer is the advancement of
technology and specifically cloud solutions that offer access to real-time data
in a more collaborative environment.
The Producer Circle is entering its fourth year and is laser
focused on this trend. If your firm is currently providing advisory services or
looking to build out these offerings, you should take a look at this community
or talk to us about The CAS Transformation consulting Boomer Consulting offers.
devices (tablets, phones, etc.) – It’s
no surprise that the number of mobile devices being used in firms continues to
grow. By the end of 2015, it’s predicted
that more mobile devices will be shipped than desktop and laptop computers.
Historically, IT leaders spent most of their time managing and setting up
workstations (desktops and laptops), however, firms will quickly have more
mobile devices to manage than they do workstations.
With the increase in
mobile devices, the conversation about security becomes even more popular. Some
firms have seen success by using mobile device management software such as Airwatch. We will continue to see companies
and startups create new ways to better secure mobile devices. A small startup
in Kansas City, MO, EyeVerify, has created
the technology to use the camera in your mobile device to scan the whites of
your eyes to unlock your phone and apps.
Also, your clients
use mobile devices every day. Their expectations to access information, and
communicate with you, via an app is increasing.
The number of firms developing mobile apps is relatively small but we
are seeing this grow. If your firm is
considering creating an app, make a plan first!
It can be a costly initiative and is often subject to “scope creep”.
Remote Working/Meeting/Learning Technology – We have all heard the
saying before, “work is what you do, not where you go”. We continue to see this as a trend in our profession.
Firms are downsizing their office space
and investing in video conferencing (cameras and software) for each of their
staff to use from their workstations and mobile devices. Firms are seeing the
decrease in need for expensive conference room video technologies.
Also, many IT departments are seeing great
success using video and webinars to educate and train the firm. Recording “how
to” videos for software has multiple benefits as users can access and watch the
video on their own time. One firm has
started a monthly webinar series focused on security best practices, both
personal and professional.
Attitude is everything!
As Henry Ford’s famous quote states, “Whether you think you can, or you
think you can’t – you’re right.” Those firms that have commitment from the top
and the right attitude to see strategic projects through to the end (in good
times and bad) find a way to make it work.
Those that don’t find every reason it won’t. A positive attitude can make all the
difference in ensuring you’re right – you can!
In closing, let us say Thank You from everyone at
Boomer Consulting. We appreciate your continued involvement and interest
in the Boomer Technology Circle program and are proud to work with such
outstanding firms. Have a great rest of 2014 and we will see you at
the Boomer Technology Circles
Summit in August.