June 2000

AICPA Council Approves Internet Portal

Microsoft, Intelisys, Thomson, ADP, Aon Are Joint Venturers

On May 22, AICPA Council approved the Internet portal project announced at its regional meetings in April. The AICPA also announced that Microsoft, Intelisys, Thomson Corporation, ADP, and Aon are joint venturers in the portal.

The AICPA plans to present the portal as an initial public offering this summer. Known as CPA2biz.com, the vertical portal will connect CPAs and small businesses. Vertical portals provide one-stop shopping for knowledge, products, and services for a particular industry. They differ from horizontal portals, such as America Online, which provide information on a variety of topics rather than target a specific industry.

AICPA President and CEO Barry Melancon said that the portal will enable CPAs to serve small businesses in an Internet world in much the same way the profession has for decades. AICPA research indicates that CPAs and their small business clients conduct $3.3 trillion in transactions per year. The AICPA said that the portal would capture 10 percent of this market and capitalize on the influence that CPAs have with their clients.

"The AICPA and nearly all the state societies have been working to present a major business opportunity to their members by giving them a vehicle to e-enable their clients," Melancon said. "E-enablement means bringing the power of the Internet to a business, particularly small businesses."

Melancon stated that the portal will be an Internet location to which CPAs can transition clients' business, management, and accounting systems. He said that the portal's high-speed connectivity, hosted software applications, and access to processes to allow small businesses to sell on the Internet will, in many cases, eliminate the need for clients to have their own stand-alone packages.

Melancon also pointed out that large corporations already have achieved tremendous cost savings using business-to-business e-commerce practices and said that the AICPA portal will be a vehicle for CPAs to help small businesses take advantage of these opportunities.

"In my opinion, there is no more trusted intermediary, no more trusted person by any small business than its CPA," Intelisys Chair Erskine Bowles said, in a videotaped message played at the Council meeting. "We are in the infant stage of the explosion of the e-commerce market. Within three to five years, I believe that every small business in America will have to be e-enabled if they want to sell to a large business, or if they want to do business with federal or state government. There is an enormously powerful role for the most trusted intermediary--the CPA--in this regard."

Portal CEO Brett Prager said that the joint venturers collectively would contribute $100.7 million in exchange for 22.6 percent of the portal's equity.

"We've been investing heavily in both electronic and Internet-based interests over the last number of years," Thomson Corporation President and CEO Richard Harrington said, on the video shown at the Council meeting. "If we don't take the initiative to take advantage of technology like the Internet, someone else will. And there's a chance that we could lose a connection with our customers."

Prager indicated that the current investment projections put the AICPA far ahead of initial forecasts. It was not clear from the presentation at the May meeting whether the venturers' contributions would be cash or in kind.

In explaining benefits available to AICPA members, Prager said that they will be given ownership rights in the portal either through options or actual stock when it goes public. In addition, he said CPAs will receive fees for setting up small business clients on the portal, as well as compensation for goods and services their clients purchase from affiliated vendors on the portal.

"The options to small businesses will be numerous and will be designed to enhance CPA-client or CPA-employer relationships," Prager said. "However, if the CPA provides attest services to the client, the compensation may have to be placed in a pool and distributed in an as yet unspecified way."

Regarding stock options, the Institute said that AICPA members would qualify to purchase additional stock if they also are members of a state society that has licensed its membership database to the portal. At its June 3 meeting, the NYSSCPA board of directors voted to participate in State Societies Network Inc., a shared services company that will be a portal partner and will license its membership database to the portal.

AICPA senior staff also will be able to purchase portal stock. Melancon will receive 1 percent, and other members of AICPA upper management will collectively be given the opportunity to acquire 0.6 percent. At the May Council meeting, then NYSSCPA President Alan E. Weiner, representing the New York delegation to Council, moved to have a separate vote on whether AICPA upper management should be given the opportunity to invest in the portal at the current value of its stock. The motion to divide the issue failed. Council's approval for the portal demonstrated a strong show of support for AICPA management led by Melancon. *