Is the Cloud Ready Yet? Let’s Ask the Accountants

by

Accounting Market Analyst

Technology enthusiasts have long praised the cost savings and simplicity of cloud computing. Early adopters have proven successful with the model, which has driven considerable growth in the market for cloud-based applications. But the late majority, including accounting firms, may yet require some convincing.

“I’m a firm believer in [the cloud] – I really am,” says Carolyn Duffy, who directs business advisory services for Hein & Associates. “But if I had some special legacy system, I would have to look at the integration issue.”

Concerns from accounting firms such as Hein about integration—or software customization, cost or IT services quality—should grab software makers’ attention, given accounting firms’ history of influencing clients’ software-purchasing decisions.

While accounting firms recognize the well-known benefits of cloud computing, many have lately voiced a variety of hesitations about moving from on-premises applications to accounting software hosted remotely and accessed over the Web. What have you heard about cloud computing from accounting firms?

 

This list of priority items may initially seem troubling for cloud adoption – but upon closer inspection, each of these concerns are well on their way to being rectified. Vendors are quickly releasing new services and products that directly address these doubts, suggesting a bright future for cloud application adoption.

Customization
One challenge accountants cite about cloud-based software is that it often doesn’t allow for adequate customization. Large businesses operating in a highly competitive market may rely on such customization to differentiate their services from competitors’—but with everyone sharing one instance of a cloud-based application, customization options have traditionally been limited. Accountants have this in mind when advising clients.

“If you have a secret sauce in how you want to handle some orders or how you handle your pricing, then often times the cloud might not be the best way to do that,” says Doug Wiescinski, a partner at accounting firm Plante & Moran.

Software vendors such as NetSuite and Intacct have already gotten the message and have built customization tools for the cloud. As more cloud-based customization tools hit the market, the centralized nature of cloud computing may ultimately make the process easier in the cloud than it’s ever been for on-premises systems.

Data Integration
Cloud-based systems can also cause frustration when it comes to integrating data from multiple applications, largely because cloud applications offer limited application programming interfaces (APIs), middleware and other integration tools that are widely available for on-premises systems. Cloud computing is only about ten years old, while on-premises systems offer a sophisticated data-integration ecosystem developed over more than 30 years of operation.

Further, accountants say, when the data that companies want to integrate resides in the cloud, accessing it can be cumbersome. “Every additional outsourced app brings another set of steps to go through to create and delete accounts and a new ID and password for the employee to have to remember,” says John Neall, chief information officer of accounting firm UHY. “That may not seem like a lot. But when you multiply that by the number of apps that employees are required to run, it becomes very time consuming just to maintain operations.”

But a number of new middleware offerings, such as Informatica, SnapLogic and Dell’s Boomi, have already begun to fill the void with mature APIs and other products. As with customization, integration is actually on its way to being more convenient in the cloud.

Cost Considerations
Some accounting professionals warn that the cloud can increase a system’s total cost of ownership (TCO), despite its ability to save money with lower up-front costs, a shorter implementation process and lower training fees. If a company plans to run an application for a half-dozen years, for example, it may find the up-front cost of on-premises software to be lower than six years of software-service fees.

“The pricing models [of the cloud] have been inconsistent,” says David McDonald, a senior managing consultant at BKD, another accounting firm. “Usually, once you get to the five-year range, your TCO is higher for the cloud versus on-premise. And you own nothing.”

True, but the on-premises approach is often not an option for smaller firms without the up-front cash for professional IT resources. The nature of smaller, recurring payments actually empowers these businesses to use software when it’s otherwise impossible. In addition, TCO often isn’t a serious concern; the flexibility of billing in the cloud allows a business to halt payments if there’s a sudden doubt. In this sense, it’s unlikely to deter many companies from getting on the cloud.

IT Staffing
Accountants also recommend weighing the pros and cons of low-cost outsourced IT services versus the value of a dedicated in-house team. If a business prioritizes IT services beyond routine maintenance, they note, the firm may want to consider staying with on-premises software and staff.

“The added benefit of a team of [in-house] IT professionals that care about the business” can be much more valuable than services from “a vendor hosting thousands of other clients,” says UHY’s Neall.

With time, the overall nature of IT services may change; this concern may fade as the structure of cloud computing matures. Businesses have a love-hate relationship with IT, and may be happy to see that function shift to the software vendor.

Back to the Basics
Even if such hesitations from accounting firms are ultimately overcome, software companies will do well to focus on them in the short term. The idea will be to reduce the list of challenges to the point where the only remaining hesitations are the standard issues considered when buying any new technology—such as picking the right partner and keeping an eye on the fine print.

“The other important thing is to read and understand the contracts—a real key point is who has access to the data and how they’re going to safeguard that data,” says Jim Carpp, director of business consulting for the Rehmann Group, adding, “You need to do some kind of vendor management to understand what type of relationship you’re getting into.”

Software selection is never easy, but moving to the cloud is looking better and better. If accounting firms’ current hesitations are any indication, then the doubts about cloud computing are more vulnerable than ever.

Got additional thoughts on accounting firms and the cloud? Let us know in the comments.

 
  • http://www.eidebailly.com Victor Puchi, CPA

    Many accountants may be evaluating only the accounting component of these cloud applications and that is a mistake. The value of these applications goes far beyond the accounting. Efficient management reporting along with strealmined processes is what really drives the value. I’ve been doing this for about 10 years and the accounting component is almost a given.

  • http://www.rfmassociates.com Richard Messik

    Many accountants in the UK do not yet fully understand the benefits of The Cloud and are are severely constricted in their views by the overriding monopoly that Sage has with the accounting software market. UK accountants have traditionally been slow in adopting new technologies and the Cloud is a specific example. However, those firms that have seen the advantages are benefiting by gaining clients who want to use cutting edge technology.

  • http://www.axiomcpa.com/ Joey Brannon

    As we hit speed bumps along our cloud strategy implementation I’m becoming aware of some big sticking points that represent golden opportunities for companies that want to play in the cloud based app space.

    1) Not all clouds are created equal. Simply renting a virtual server and giving your client’s Citrix access isn’t necessarily the best the cloud has to offer. Best in class cloud apps don’t reside on a desktop and if terminal services is just another walled garden that I can get to from anywhere then big deal.

    2) Cloud apps ARE more expensive and TOC is greater despite the lower entry price point. Customers aren’t stupid and cloud developers need to stop pretending small businesses spend a fortune on IT support that will become unnecessary upon cloud based app adoption. Instead developers need to tout the added value the Victor refers to above. Short, iterative development cycles also need to add features (and value) on a regular, constant basis.

    3) The greatest opportunities for cloud adoption exist when developers stop trying to port desktops apps to the web. The ability for web apps to talk to each other is the real future value of this space. Mint didn’t try to replicate Quicken. They leveraged the ability to connect with all my online accounts to create a real time personal financial statement. And rather than have me build the budget they just assembled one for me based on my past spending. These are innovations, not platform improvements.

  • http://www.cloudaccounting.com.au Morri Young

    As a company which provides financial management to nonprofit organisations across Australia, we can attest to the strengths of cloud-based accounting services in the right environment. In fact, in some situations it is really the only solution.
    We have many clients based in regional and remote areas, where the logistics and cost of having qualified local accountants and bookkeepers means it just doesnt happen. With a cloud-based application (in our case xero.com), we can mentor and support local trainees and administrators so they can be brought up to speed on the NFPs accounts, while keeping a ‘second set of eyes’ on the books for the comfort of the Board, and to ensure compliance and quality accounting at the high end.
    For our clients, its the ideal solution.

  • http://martinhingley.wordpress.com/ Martin Hingley

    Hunter
    I really like the question. I think the accountants are ready, but some of the software suppliers aren’t. Finance is always a bit conservative perhaps, but there’s no reason why Sage, Microsoft and others shouldn’t do SaaS, or AaaS.
    It reminds me of when we automated expenses systems years ago – it saved hours of spreadsheet work in an insant.
    Wait until Generation Y takes over – they’ll want to know why it isn’t there.
    Best Wishes
    Martin

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