Technology, linkages, and interrelationships 69

Technology is mentioned by Riley as an important structural cost driver, and is concerned with the technologies used at each step of the process. This driver is not mentioned directly by Porter. However, this cost driver can be mentioned in relation to technology because timing can result in a first-mover advantage, e.g., by being the first (or best) company to take a particular action (Porter, 1985, pp.79-80).

Vertical linkages and technology are together an important driver of costs for many accountancy firms. Only a few firms, such as Visma, are actually producing their own software. Other companies have bought or are licensing software to use in their work process. This is then a cost for the companies that use software developed by others, and at the same time a source of revenue for the software provider. Both firms want to use more technology in their work process, and they also convince their clients to begin upgrading their systems and

incorporate technology to automate their processes. This helps to improve efficiency in the accounting process and it allows, e.g., Visma to sell more of their IT-products to customers. The increase in automation changes the work process. The interviews revealed that the companies invest more of their time working with coordinating their employees and find new ways of organizing the work process. These are considered to be hidden costs because they result from changes in the work process that the firms must address. According to Sum, these are quite large costs because of the time spent on both communicating with the software provider and the customer. The communication with the software provider is often related to new development and streamlining the end product. Sum reports to spend approximately NOK 100 000 a year on software. This number does not account for all of the hidden costs as mentioned above. At the same time, Sum does not have any costs associated with implementing software at their client’s location. They also report to have costs associated with the IT-systems they develop in their subsidiary company. They did not estimate the cost of this, but they do have developers helping them in Vietnam. For the company overall, the actual cost of software is estimated to NOK 150 000 each year.

The local office in Visma Lillestrøm was also asked to estimate the costs related to technology. The manager did not have the exact numbers related to these costs, because they are reported through the Visma group, and not the individual office. For the purpose here, the Visma group annual reports from 2011 to 2013 have been used to acquire the necessary data. The local offices in Visma do not have any direct costs associated with the use of their own software since these costs are transferred to the client. The costs that are directly linked to software are the research and development of new software, and the acquisition of other companies. These investments are made for the purpose of the entire Visma group and not Visma Services AS alone. Research and developments in the Visma group is thus connected to work process in the local accounting offices.

This affects both the cost drivers of linkages and interrelationships. For example, when a local office is in need of support, they rely on the business unit within the Visma group that has developed the software. This affects the vertical linkages in the organization. It also affects interrelationships as the local offices can share, e.g., know-how with the business unit responsible for the software. It can also allow for Visma to benefit from economies of scale as

with the other «sister» units. An example of interrelationships in Sum is the cooperation between their main office in Stavanger and their «sister» unit in Tønsberg they opened in 2014. They are able to move work between the units to utilize capacity and special knowledge between the offices. Since they are using a web-based accounting system, they can easily move tasks between the offices. Also, Skype allows them to coordinate and talk to each other without much cost. Hence, they feel they can operate both offices as one unit though they are geographically far apart.

In 2011, Visma invested NOK 337 314 million in the research and development of software (Visma group annual report, 2011). In 2012 and 2013 the numbers were NOK 317 639 million and NOK 695 844 million. Costs that are included in research and development are included the salary cost in the respective department and the proportionate share of the operating expenses of this respective department (Visma group annual report, 2013). Visma’s growth is driven in large on an increasing focus on SaaS/Cloud software and has invested substantial development resources in SaaS technologies and products. The cash flow from investment activities was NOK (-) 409,4 million of which NOK 326,8 million were related to acquisitions. Visma states that they in 2014 were focusing these acquisitions on SaaS and transaction-oriented businesses, and that these acquisitions will complement the internal R&D investments focused on developing SaaS/Cloud solutions for their primary product areas (Visma group annual report, 2013, pp.31-36).