H&R Block Embraces Benefits of Open Source

SAN FRANCISCO—H&R Block’s use of open-source technologies is not about saving money, but rather about creating revenue, acquiring and retaining customers, and providing technologies they really care about, said Mark West, the company’s CIO, at the annual Open Source Business Conference here on May 22.

“Newest is not always best, but neither is the most mature. But without standards you will fail as you will create a middle layer that cannot be unwound,” West said in his address entitled “Open Source: Leveraging the Capabilities to Drive Consumer Product Innovation.”

Open source has brought changes in the way H&R Block services its customers, but there is no such thing as free, he said, noting that businesses still need to have the talent to make all their technologies work and be competitive.

Tax preparation is a $17.5 billion business and, of H&R Block’s 13,000 locations, only 3,000 are open year-round. The company employs 15,000 permanent tax and accounting professionals, with another 100,000 being seasonal workers.

“We open up 10,000 stores and hire 100,000 seasonal employees in about 60 days, every year. Our technology is proprietary—an ERP [enterprise resource planning] system that is 60 percent rewritten every year due to legislative changes to the tax laws,” West said.

There are about 325,000 tax preparers in the United States, and 8 million elsewhere in the world, he said, noting that H&R Block holds about 15 percent of the U.S. market, where it makes half of its annual revenue in about 12 days, usually in the first half of February.

“So, our challenge is to retain staff and make all this happen every year. You want pressure? Try to do all this while adding innovation into that mix, and do it from a technology perspective,” West said.

H&R Block runs a lot of Red Hat Linux software as well as “a fair bit” of Unix, West said, and uses open source or in-house open-sourced technologies.

Over the past year or so, the company has created a Web product known as Organizit, which uses Lazlo technology to allow customers to store their data on H&R Block’s online server or on their desktop.

It took just 10 weeks to design, build and launch, with more than 2 million copies in distribution through download or CD, West said.

H&R Block has also built a new product known as Tango, which is its next generation of “Do It Yourself” tax preparation products.

The product was built using emotional design, and co-designed with movie producers, emotional design teams and consultants. It connects with consumers through storytelling and not questions and forms.

Click here to read about the battle over patents between Microsoft and the open source world.

“It took five months to build, and allows customers to store their online data on their own PC or on our server, and it is the platform for future consumer offerings. But, without open-source technologies, this product would not have happened, not in a million years. It would have been too costly and taken too long to develop,” West said.

On the office e-mail front, H&R has gone with Zimbra, as it needed a solution that was simple, fast, hosted and cheap.

“It makes no sense to roll out an e-mail infrastructure for a system that rolls out for three months of the year. We also moved from dial-up to broadband and the cost was the same as dial-up, but this has allowed us to do many of the network things we wanted to,” he said.

The company has also developed vPro or Virtual [Tax] Professional, another new platform to connect consumers with tax professionals in real time.

This took eight months to build and uses multiple open-source components that are integrated into a simple platform to provide customers with the right expert.

But the project was complex, and needed to have the available skills necessary to meet demand and quality communications between its staff and customers. “But it helped get our tax professionals connected with our customers in a big and good way,” West said.

But, at the same time, West made it clear that technology was also a competitive differentiator for the company. “We have absolutely no interest in writing technology for our competitors to use, so the downside is that we spent a lot of time right now talking about legal issues,” he said.

Some of the lessons H&R Block has learned along the way are that open-source technologies still require support and that integration with existing technologies is more complex. Industry standards were critical, and companies had to understand that production support would be needed upfront, West said.

He predicted that, within five years, the key open-source components will be in the same place as Unix was in the late 1990s, and there will be more computing power for less.

“SAAS [software as a service] will get it right, and there will be a shift towards intellectual property creation over writing interesting code, and this will be a different pipeline to manage. The innovation pipeline will also continue to get compressed through features, competition and ubiquitous access,” West said.

“All of us right now are in a talent crunch and that bar is only moving up, and that is the thing that can absolutely snuff us. Where we get this talent is one of the key innovators for us right now. Global teams are required to make this technology all work, and talent is critical in that.”

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