What is the cloud and should my accounting software be in it?

In 2008, when we started moving our clients to the Azure Cloud, I had to explain that “Cloud” was synonymous with “Internet.” Today almost everyone has heard of the Cloud. In fact, the term has become so ubiquitous that “Cloud” has become a generic term – much like “green,” as in "green energy."

The important thing to know about the Cloud is that this is NOT just a passing phase; the movement of computer systems to the Cloud is the real thing. The Cloud is a disruptive technology, and the world will never be the same.

If you are in the market for a new accounting system, your purchasing decision should definitely include Cloud-based accounting system options. Computer applications delivered through the Cloud typically cost less than an On Premise solution. As long as cost is a motivating factor for accounting software selection (which it always is!), businesses will continue to migrate their accounting applications to the Cloud.

In general, today your accounting system will be delivered to your staff in one of three ways: On Premise, Multitenant Public Cloud, or Hosted Private Cloud.

On Premise

On Premise was the primary way that we accessed accounting systems from the time that client-server computer architecture became prevalent in the late 1980’s through the mid-2000’s. This may still be a good option for your company if you already own new server equipment, your business changes very little, and your employees never work outside the office. However, if you anticipate growth or change in your business at any time in the next 10 years, you should seriously consider accessing your accounting software through the Cloud. (I say 10 years because 10 years is the average life of an accounting system, and once you go On Premise, it is usually cost-prohibitive to change your mind and go to the Cloud later.)

Multitenant Public Cloud

A great example of a Public Cloud is Google. You can do Google searches and get your email on Gmail. There are now a number of accounting applications delivered through the Public Cloud. The Public Cloud is a good option if you have a generic business that doesn’t need integration with other applications. It will not be a good option if you want to automate your accounting functions deeply. You also should make sure your employees are tolerant of change, as Public Cloud providers upgrade your software on their schedule, not yours.

Hosted Private Cloud

Finally, you can put your new accounting system in a Hosted Private Cloud. This means that you have your own virtual servers hosted at a data center run by a hosting provider. Since you have your own virtual servers, you get the control over your own servers that you would have in your own On Premise solution, but you still get the lower cost advantages of the Public Cloud. With a Hosted Private Cloud, you get the best of both worlds without the worst of either.

Software licensing is very different when you purchase your accounting software from the Cloud instead of On Premise. You pay for On Premise accounting software at a flat up-front cost per user, plus around 18% of the list price of the software each year as a licensing fee. You generally pay for a Cloud accounting software on a per-user, per-month basis. This means that when you are making the purchasing decision, you will need to do a Net Present Value analysis to fairly compare costs.

Which software delivery and licensing model you pick is ultimately up to you, but you will frequently find that accounting software delivered in a Hosted Private Cloud will be the most cost effective and flexible solution.

Want to find out how much money you can save by moving to the Cloud? Get in touch with us to find the perfect ERP solution and compare pricing to on-premises options.