Deloitte Private Connect – How Did Deloitte Build It And Why?

Accounting Software

Accounting firm Deloitte Private revealed the fruits of a two-year, secret internal project this week. Deloitte Private Connect put many software companies in the shade this week with a service that combined online portal, integrated cloud apps and widget dashboard to provide automated bookkeeping and financial analysis.

The service is sold to Deloitte Private clients on a fixed-fee, subscription basis, a huge departure from time billing commonly practised among the Big Four. For $1,299 a month a small business can have their books checked and stamped by Deloitte.

BoxFreeIT asked David Hill, national managing partner of Deloitte Private, how the service was conceived and built.

BoxFreeIT: How much did it cost to build the online program behind Deloitte Private Connect and who built it?

David Hill: It’s been a big investment by the firm in people, money and time. An army of people inside the firm have worked on it and we’ve worked with outside people as well. In terms of hard cash it’s a multi-million dollar cost.

Deloitte’s team built the web app internally on the platform.

BoxFreeIT: Where did the idea come from?

Hill: It bubbled up on many occasions from clients and staff. It took Ben’s strategic mind (Ben Shield, national lead for consulting at Deloitte Private) and vision to embrace it and see where we could take it and myself as the sponsoring executive to say, This is an imperative.

Sometimes you can just sit there when there’s digital disruption or you can make it your friend and embrace it. That was probably my role in being the executive sponsor of it.

We have a design principle that we wanted to make everything with Deloitte Private Connect intuitive, simple, easy to use and affordable. Two years ago we started with those design principles in mind.

BoxFreeIT: What is the concept behind the service?

Hill: There are several concepts. We’re all now pretty familiar with the concept of doing more with less. For example, jobless growth – wealth is growing but we’re working longer. We’re seeing that in the family private business (which along with high net worth clients are the primary customers of Deloitte Private).

The family businesses are saying, I need to get my compliance work done but what I’m really looking for is my advisory work.

The accounting profession has gotten away with the idea of giving someone their financial statements nine months after the end of the financial year. Often the business owner doesn’t read or understand the financial statements, they don’t have access to their financial information from wherever they are and compliance is an expensive thing relative to their profit.

Not to knock bookkeepers but they have a significant role in businesses and take up a lot of spend. But they aren’t accountants, and often accountants have to fix up accruals, depreciation and the like.

There is a lot of time wasted in accounting moving data from one system to another, obtaining source documents and limited client contact during the year.

Since the GFC many businesses in that sector have neglected their spend on IT. They have outgrown their systems and are needing to upgrade. The cloud is cheaper, quicker and easier to implement.

Some SMEs are buying point solutions but this can also cause major grief. You end up with multiple sign-ons, multiple subscriptions, passwords all over the place, some talk to each other, Some don’t. Some work on many devices, some don’t.

BoxFreeIT: Are you going to white label Deloitte Private Connect to other firms?  

Hill: We have designed it in such a way that we could. Our priority is to ensure that we give our clients the maximum ability to use it. The focus will then be on other Deloitte member firms.

We want to give our clients competitive advantage first and then we will share with our colleagues. But certainly one of our design principles was to design it and share with others.

BoxFreeIT: How did you work out your prices for fixed price billing? That’s a huge deal.

Hill: It’s a huge thing. Deloitte and traditional firms operate on a time and cost model. We have gone wih a subscription payment for monthly invoicing and payment and billing. Those are very significant things to do in a very large business – we are at $1 billion turnover with strong legacy systems.

BoxFreeIT: How did you sell the idea of fixed price billing inside Deloitte? What changes did you have to make internally?

Hill: There’s a lot of lessons in that for us and for anyone else who is going to embark on the journey. We use legacy financial systems that are all geared around our people charging their time on a six-minute unit block which is how our profession works. When you move to a subscription model it’s very different.

We’ve had to go back to an activity based costing approach. For this type of task we would expect it to take this much time and we would impute a certain cost to that activity.

If you look at some industries that use a standard costing model, you’re probably familiar with end of month or quarter, companies will look at pricing variances which is essentially the difference between what the actual costs are and your standard cost.

That’s been a significant challenge going to that environment because we’re very used to measuring people on things like utilisation. Now we’re looking at productivity and executing tasks in a highly efficient manner.

BoxFreeIT: Is the entire team at Deloitte Private moving to fixed prices?

Hill: No, we have created a specific group, the Transaction Management Services team, to administer Deloitte Private Connect.

It’s very exciting and I’m really happy that all sorts of services are changing their delivery and pricing models. You don’t just sit there and do nothing, you tackle it. You start with the market place and what the client wants and work your way back, from a design perspective.

BoxFreeIT: Did you really have feedback that clients wanted fixed prices?

Hill: We genuinely did. There was a time when you’d send the bill out with a list of things like a charge per fax and photocopy. Clients moved away from that and said you do this work and give me a fixed fee quote and you deliver it efficiently. They didn’t want the meter running on every meeting or during the phone call.

They felt like they couldn’t freely chat about a project because they had to be careful about how much the meeting was costing.

Clients moved a long time ago. There certainly has been a move for specific projects to move to fixed fee billing.

Then there’s been a number of trendsetters in the online domain who have moved to subscription billing. The beauty of that is that unless there’s some project work that comes along it’s fixed and paid very simply by credit card or direct debit.

BoxFreeIT: Would you consider rolling out fixed-price billing to all Deloitte Private?

Hill: We’ll consider it but we think it’s horses for courses. It’s also part of a bigger digital trend and there are several things we are thinking about. Alliancing is another major thing that’s happening. Say Deloitte and Worley Parsons are going in an alliance to the market.

Outsourcing is a key new model. There is a lot of use of experts – their charge rates are fundamentally different because they just want an individual guy like Chris Richardson in Deloitte Access Economics.

There are a lot of new ways in which the profession is responding to the market.

We refer to the integrated model. For large consulting arrangements Deloitte might be the integrator for packaged solutions. We’re the curator who delivers it to the client. A subscription business model is one of six or seven in terms of responding to the changing market.

BoxFreeIT: Why did you decide to create a platform for single sign on and provisioning of cloud programs? That seems to be outside of the accounting brief.

Hill: The single sign on exists for buying third-party cloud apps and once you’ve got them they populate the dashboard in Deloitte Private Connect with their data and you don’t have to sign onto them each time.

Why did we do that? The concept is we are trying to make it as efficient as possible in every possible way for our clients. There have been a number of excellent articles in the past couple of months that say an SMB can look at the universe of business apps and think this is great and buy a point solution.

But all of a sudden it has eight to 10 different apps, each with separate sign-ons, different configuration for devices, and it becomes an administrative hassle. We will try our very best to eliminate that and work with others to try and solve those problems for our clients.

(Hill clarified that while Deloitte Private Connect gives a single sign on and invoice for connected cloud apps, the Transact and Analyser apps within DPC have separate logins at this stage.)

BoxFreeIT: How will this role of building cloud software systems affect the way in which your clients perceive Deloitte accountants?

Hill: I would hope our clients would say Deloitte are great accountants, and behind every good Deloitte accountant is the power of Deloitte to design the systems we use and provide to our clients in the most efficient possible way.

We still have to be outstanding accountants. I don’t think clients will start perceiving us as tech gurus, but I would hope that they would see us as accountants who are progressive and adapt to change.

BoxFreeIT: As an auditor of accounting software companies, Deloitte can’t sell accounting software. So how do Deloitte Private accountants recommend cloud software that integrates with Deloitte Private Connect?

Hill: The Deloitte Private people wouldn’t profess to be experts in cloud software, it’s the clients’ choice. We are at pains not to be advocating or pushing a technology or software solutions where we’ve got the independence obligation.

To buy apps clients can go to the 9 Spokes app store (which provides the software integration and unified billing for Deloitte Private Connect) or search Google and select an app. We inform them which apps are all compatible, but we don’t restrict them.

The selection of apps for clients is growing but clearly a number of apps are becoming the apps of choice for inventory and the like.

BoxFreeIT: The Analyser app (in Deloitte Private Connect) looks very similar to a cloud app called Fathom.

Hill: The Fathom engine is behind Analyser but we have wrapped it around a whole bunch of things such as the Deloitte Value Map. It identifies all the KPIs at issue. If the client asks how can I bring debtor days down from 90 to 60, we have mapped that to the Value Map and an analyst can see a whole bunch of ideas of how you can reduce debtor days.

It’s a very seamless connection between KPIs that reveal areas which could be enhanced and a database of initiatives clients can take advantage of. It’s a wonderful link between technology built by the Fathom guys and the way we have built up a huge amount of industry benchmarks.

We have over 60 pharmacists now who are on our Value Initiative benchmarking tool. We use the tool every month to show how they’re performing. That’s how you can bring extraordinary value in an automated way.

With us they get to tap into the ability every month to receive a benchmark report that’s automated, available on their iPad, which shows their performance against all our other pharmacists yet in a confidential way.

You have your actuals, benchmarks and budget. It’s just awesome and clients are absolutely thrilled. That’s where the ecosystem delivers real value.

BoxFreeIT: How much detail does the benchmark go into?

Hill: For a lot of clients it’s benchmarking using financial information – profitability, working capital, revenue growth, etc. Your classic financial KPIs.

Where we’ve taken a domain play for example with pharmacies we’ve taken a clear strategy of building a bespoke benchmarking tool and looking at other measures as well. Another example is our motor industry group which has another benchmarking tool which has nothing to do with Fathom, we built it ourselves.

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