Sramana Mitra: What does the technology infrastructure look like, and how do you charge your clients?
David Schnitt: We feel very strongly that our clients’ systems are systems of record. If they are on Oracle or Quickbooks, for example, those systems remain intact. We have built a system called Archimedes, after the Greek philosopher, and it is a web-based tool that sits on top of the client’s system. It manages all of these processes together with us and our clients. It will take any sort of financial transaction, whether it is an invoice, a bill or a general ledger entry, it brings it into the system, tracks it, allows clients to approve and view it, manages all the exceptions in the process until that transaction is actually completed and then downloads it into their accounting system. Because it is web based, it is real time and gives them complete visibility into the status of that transaction. This is something they didn’t have before because it was just paper floating around. Archimedes is a process management tool that we use together with our clients.
SM: And you developed that yourself?
DS: Yes. It is completely proprietary.
SM: And how do you charge the client?
DS: It depends on the process. If it is a transactional process we will charge per transaction. We essentially turn what is a fixed cost into a variable cost. In some areas we charge based on other metrics. We have a number of restaurant chains as clients, for example, where we are their entire accounting department. So we are putting together their financial statements, closing the books, and doing payroll and payables. There we might charge by location or restaurant for a full suite of services. We know that in that restaurant chain, there are going to be so many invoices and so many employees on payroll. We then give them one price for all of our services. We are not on an FTE [full-time equivalent] basis, which is what a lot of the other outsourcers do.
SM: Who do you consider as your top competitors?
DS: Our top competitor is people doing it internally. We actually don’t have a lot of competitors in our market. The clients we have are usually too small for the Accentures of the world. If you look at people serving small companies in this space, they are usually small bookkeepers. They are dealing with clients that are below where we target. In our space you might have people who are dealing with a certain process. So there might be companies that deal only with accounts payable, for example, or only payroll, etc. Those are the ones we see as competitors, but then again they don’t offer a full suite of services. Generally we find that their capabilities are not quite as good as ours in terms of technology and process orientation.