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A lot has been said about the way Internet-based applications eliminate the need to deal with technology. And the way that CPA firms are leaping into the SaaS reselling and consulting market suggests they agree with this assessment. Conversely, there is probably little need for an extensive set of vendors serving them.

The accounting software market has always been fragmented. There are about as many software products on the market now as there were 15 years ago. It's just that they are owned by fewer companies. As Zach Nelson, NetSuite's CEO, points out, his company's applications scale well. It takes a certain amount of vendor computing horsepower to support that first user. The more users a vendor can add, the more cost-effictive it becomes. This ultimately favors the emergence of a SaaS ERP WalMart.

That drives down the costs and it also eliminates many of the traditional points at which resellers could profit since much of the installation and implementation takes place on line. This brings us back to the accounting firms since taking technology out of the business makes this far more about business process, which is what the management consulting of the firm is good at, really good at, and the traditional software resellers are not. The good VARs are very good at business consulting and there are a lot of accountants working at these organizations. But the average reseller is more a plumber, working with the wires and turning on switches.

Accounting firms should have a big advantage as SaaS becomes the norm and the fact so many multi-office firms are leaping into the fray suggests they see profit opportunities here. I think the next five years are going to be very good ones for accounting firms on the cloud.

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