The most popular accounting software in Russia: 1C system

I'm frequently questioned by my foreign colleagues about "strange Vanessa system" used in Russia. I guess my next blogpost should cover this topic, as it might be useful for those who want to start implementation in Russia.

Many foreign companies, who are coming to Russia immediately start to face the fact that they need, from the very beginning of their activities, to perform accounting and taxation routines in accordance with Russian legislation. Despite the complexity of legislation itself, it also undergoes considerable changes constantly. So, it is not an easy task for the Dynamics localization team to follow all the changes.

Apart from that, Dynamics products suffer heavy competition when we speak about the Finance module and its usability and compliance with local Russian legislation. The biggest competitor is a system called 1C, which started its development in 90th and nowadays is one of the most popular solutions. The Russian spelling is [odin es], as "c" is "s" in Cyrillic, however English interpretation as [van si] is also appropriate.

If you speak about the volume of the business, only about 30% of the market is occupied by 1C (over 50% in Russia belongs to SAP). But, this just means that biggest companies use SAP solutions and similar. If you speak about the quantities of the companies, over 90% use 1C system.

So, what is so special about that system and what are its strong and weak points? Awara IT Solutions is one of the very few companies in Russia which is 1C Partner and at the same time is Microsoft Partner, being allowed to work with both vendors under the same brand (and yes, we are the ERP Partner of the Y2015 in Russia). Thus, we know quite well the topic :-).

It is all about finance

1C system has been created as an accounting software. Further development of the system has been build around finance module - basically, it is in general about the finance, accounting and taxation. That is the main difference from Dynamics ERP system. In ERP system, the finance module is not the primary one; it is just one of the many other important modules - sales, warehouse, production might be even more important to the business that finance. 1C itself is about finance.

Box product

1C system has been designed as a box product. Meaning you can take it from the shelf, install and immediately start to use. It has predefined chart of accounts, it has predefined analytical structure, all you need is to fill in the company data and here you go. Since the chart of accounts is fixed, 1C also provides predefined accounting and tax reports in the same box. Compare this to ERP system where you design your chart of accounts by yourself, and then you will need to link those accounts with financial reports using Financial Reports functionality.

The chart of accounts and analytical structure basically is very difficult to modify. In Dynamics ERP user can easily add subaccount and define the logic for that in the system. In 1C, users are not able to add accounts. Developers have this option, but it is difficult and time-consuming to make changes in the configuration. Having done this change, 1C solution immediately becomes customized, and thus starts to have all drawbacks of customized solutions.

Legal compliance

One of the biggest benefits of using 1C system is that they follow legislation changes quite well. Having good relations with governmental bodies, 1C guys issue updates sometimes even before the legislation change takes place. Microsoft has been doing quite a good job since Y2006, but still it is very difficult to compete with 1C dedicated policy. So if you are using standard version of 1C system, you can easily roll-in the updates and issued hot fixes. 1C supports both bookkeeping and taxation accounting, and provides by standard a variety of accounting reports, tax declarations and statistics reports.

Variety of configurations

At some point in the past 1C decided that they miss certain part of the market by offering a very limited box product. Instead of developing it to an ERP by providing more setup options, they started to develop different pre-defined boxes, tailored for specific industries or needs. Thus, there exists 1C Platform (which in simple words is the programming language and methods) and a variety of 1C configurations (which are basically verticals, quite different from each other in terms of code and even user interface). Here are some configurations, available nowadays:

• 1C: Accounting - it is the major popular configuration, aimed to cover basic processes of basic company.
• 1C: HR & Payroll - absolute winner for keeping HR data and payroll calculations. It is advisable to do payroll in 1C and integrate it with NAV or AX where you might do your other finance, connectors are available.
• 1C: Trade & Warehouse - configuration aimed to cover trade companies and has extended functionality for sales, purchases and warehouse. It cannot produce accounting reports and needs to be integrated with 1C: Accounting to feed it with sales and purchases data.
• 1C: UPP (Upravlenie Proizvodstvnnym Predpriyatiem) - or 1C Enterprise - the configuration aimed to be a sort of ERP system, having the major capabilities of ERP. Usually is much more complex, more expensive and requires implementation.
• Other configurations (small enterprise, car shop, restaurant, agriculture, etc.)

Each configuration is supported and updated separately. Some of the configurations are non-official verticals, provided by partners.

Licensing policy

Another benefit of 1C system is its cheap price. The price of the license is more than 10 time cheaper than any Dynamics ERP license. But, remember, that you will get a very limited functionality. Many of our customers start their business using 1C system - it allows to save budgets during start-up processes. After a year or two they may switch to an ERP solution, provided by their headquarters (e.g., Microsoft Dynamics). The license itself is treated as a non-named concurrent user license.

Availability of resources

You will certainly be able to find inexpensive accountants in Russia, and they for sure will know 1C. You will need considerably more efforts to find appropriate affordable accountant who knows Microsoft Dynamics NAV or AX.

Re-posting - ???

One of the main controversial things about 1C is the ability for the user to change the posted data. In any ERP system users are not able to make changes to posted data (e.g., posted invoice). It is basically because the posting of the document by one user usually leads to the further processes in the system, where other users might start to do something based on that posting. 1C allows users (accountants) to modify the data. Yes, that is it: an accountant might come to his working place in the morning, open the invoice, posted yesterday, make changes to that (e.g., change the amount!) and post it again. I warn you that 100% of accountants in Russia got used to that freedom and when they would need to work with Dynamics product, you will face:

• Accountants will not value importance of the posting operation
• They will hate making reversals for incorrect operations
• You will have quite a lot of reversals in the database, especially in the beginning
• There will be quite a mess :-)

Database and Performance

Last but not least, 1C system has its own file database (as well as NAV some time ago). Also, it can work with Microsoft SQL, but (again, as NAV some time ago) it communicates with SQL using its own tools, thus it does not use full SQL power and can face scalability and performance issues. There are samples of 1C systems with 500+ users, but this is very unusual case. Normally the quantity of concurrent users is not bigger that 10-15 in average. Please ask for advice from the trusted Partner for forecast of performance.

Summary

1C accounting system is a box product with predefined non-modified settings and chart of accounts with predefined analytical dimensions. If your company is able to put its business processes in such standard box, it can be a perfect solution. If you need more, you can start to modify the standard package, but in this case you would need to spend development efforts which might overcome the benefit of cheap licenses in the end. So before developing customizations in 1C, check also Microsoft Dynamics options. Be sure to consult with trusted IT Partner to be able to select from different options before going to implementation process with a certain solution.