From English Prof to Tech Startup CEO: Steve Adams of Sabrix (Part 6)

SM: How did you characterize the value proposition of what you were doing at the time? You stated the need to have a unique combination of content and to characterize that content with the technology.

SA: There are a couple of ways to view the value. From a technology perspective, the unique value we provide comes through content and the value of content, which are the tax rates and rules that are constantly changing. There are over 13,000 jurisdictions in the United States, and there are 170 countries. The tax law is changing somewhere in some jurisdiction all the time. There have been people in the content business for a long time. We took the content and married it to the software. It was the translation of that tax law, the rates, and the rules, into something that could be manipulated and managed by software which was our secret sauce. That was the technological value.

The business value is, as succinctly as possible, we remove the need for the financial executive to balance the risk of compliance with the cost of being in compliance. Delivering a product in content and the services around it says you can get your return on investment and you do not have to make a trade-off. You can be in compliance in a cost-effective way.

The third part of the value is that we really shifted the model of how the business problem is solved. Prior to Sabrix, there was one tax calculator for every application in an organization that needed to calculate tax. If you were a large multinational company and you had 60 procurement applications across your company, which is not unusual at all, you would need 60 different instances of software to do the calculations, and 60 different instances of the content, which meant you had to manually maintain all of it and synchronize all of that data in order to file a return.

We eliminated that and said architecturally the way to do this is the way the RPs are doing it, a single instances of a tax engine should serve every application all in one central location. That drove the ROI substantially.

SM: How did this get handled before Sabrix? Was it outsourced at all? It sounds incredibly cumbersome.

SA: It is fragmented and done in a number of ways. One of the ways is manual processes. It could be done by tax calculators, as there were a few companies offering some of those. It could also have been done by customizing the ERP itself, but that required loading tax rates and rules into the ERP. In the US, probably 60% of companies have some type of solution. Internationally there has been no tax automation.

SM: Do they have huge tax departments for this?

SA: They have tax departments, but they are not necessarily large. They will be fragmented across internal and external groups. In the US you have state and local providers, but also tax service provides such as the Big Four and boutique firms. The entire business process is fragmented.

SM: How big is the tax practice of the Big Four?

SA: Tax practice within the Big Four is separated from tax automation. Tax practices are organized to look at state, local, and international and are primarily focused on tax policy advisory roles. They do a lot of audit defense. Within those very large businesses they will have smaller tax automation groups that go by different names. They do not report separately so it makes it hard to tell, but it is clearly a market in the hundreds of millions of dollars. The private companies and boutique firms also account for about $250 million-$300 million a month.

This segment is part 6 in the series : From English Prof to Tech Startup CEO: Steve Adams of Sabrix
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