As accounting software vendors continue to improve their cloud-based offerings, more users are moving their accounting software online. These hosted solutions are increasingly usable, easy to deploy, sold at a low monthly subscription cost and offer improved collaboration and visibility for the entire enterprise. And while many buyers are often small and medium-sizes businesses, the large enterprises are beginning to investigate cloud-based accounting ERP solutions.
To gain insight into where the industry is today – and where it’s headed – I reached out to the CEOs of three companies that provide online accounting software solutions: ePartners, Intacct and Kashoo. Before we start with the Q&A, here’s a little background on the three chief executives that participated in our roundtable discussion.
Michael McCarthy, CEO of ePartners
At ePartners, Michael McCarthy leads a team of one of the largest consulting and VAR providers of Microsoft Dynamics GP. Before joining ePartners, he was SVP at Presstek and EVP at Level 3 Communications. McCarthy emphasizes a client-centered focus, along with creating a clear roadmap to keep his team on track.
Robert Reid, CEO of Intacct
Robert Reid brings over 30 years of industry experience and a focus on cloud computing for business applications to the team that created the web-based Intacct Accounting Software. Prior to working with Intacct, Reid worked for several software-as-a-service application leaders, including LucidEra and Siebel CRM.
Jim Secord, CEO of Kashoo
Jim Secord brings 20 years of SaaS software and mobile application experience to Kashoo. His previous ventures were in mobile applications with real estate brokers and agents, including work at Kurio and MLXchange. Secord and his team at Kashoo are one of the leading providers of online accounting solutions.
Q: What are the current trends in online accounting software?
McCarthy: Most cloud-based, accounting-focused ERP transactions are for companies with less than $2 million in annual revenue, with typically fewer than 15 users. As you move up the value chain you need more vertically integrated industry solutions. What we find is that – although the cloud is mature when it comes to storage, infrastructure and platform as a service – online software has seen its heyday mostly in the lower end of the market, the consumer side and the CRM software side. More traditional ERP apps with accounting features aren’t as ready for prime-time with the more sophisticated, integrated clients, but they’ll get there.
Reid: The biggest trend is clearly cloud computing. What we’re seeing today is a repeat of what happened in the 1990s – in the same way that DOS and minicomputer-based applications were replaced 25 years ago with Windows-based systems. In 2011, modern cloud computing-based applications are rapidly replacing those aging Windows-based applications. The functionality is better, costs are lower and return on investment (ROI) is higher. The anywhere/anytime access enabled by the Internet delivers breakthrough productivity.
Secord: More are definitely moving toward the model of storing records in the cloud. Not too long ago – maybe as short as a year or two ago – security was a much larger concern than it is now. Today, small businesses don’t have the same fear and uncertainty. It’s largely been negated, and it’s not something exclusive to accounting. The adoption of Google Apps and other SaaS products has helped alleviate this fear. There’s a lot of comfort in knowing you have a constant backup that someone else is worried about, and that there’s a version that your coworkers can always access.
Q: What’s surprised you about the direction of the industry?
McCarthy: Online accounting software isn’t really a new concept. However, Microsoft has been working with channel partners like ourselves to really focus on the cloud, and organizations now have the ability to adopt integrated cloud solutions. Users are beginning to see the value of the cloud in the platform side of their businesses. But, nobody has really gotten the true cloud-based ERP solution down. It requires a lot of integration – it’s not as simple as flicking on virtualization software on a computer and downloading your storage. It’s a whole different application, and I still think we’re in its infancy.
Reid: The rapid adoption of cloud computing by key finance influencers and advocates from organizations like the American Institute of Certified Public Accountants (AICPA), CPA firms and other experts like value added resellers has been nothing short of amazing. These are all conservative organizations, but they all identified early on that cloud computing would be transformative for finance – offering improved transparency, better and faster decision making, increased productivity and substantial cost savings. As the market has matured these expectations have been proven true, driving more advocacy for cloud-based computing.
Secord: The consumer acceptance of online deployment. Again, a few years ago people weren’t willing to trust putting their business records on someone else’s servers. Now it’s become a non-issue. The small business person is also commonly mobile. Their workspace is largely virtual – it’s the passenger seat of one’s truck or in a music studio. The concept of a bookkeeper and an office is rapidly changing, and it’s altering how people use software and what they expect from a solution. Add the huge demand for mobile applications, and the idea of a “software suite” is really changing. A good majority of people today like the ability to manage their contacts, calendars and such from an iPad. It mirrors the convenience and speed that they expect and helps them manage their business.
Q: Who is choosing to adopt online accounting software?
McCarthy: Most companies that have approached us for cloud-based accounting solutions have been under $10 million in revenue. We find that organizations looking for this type of solution have fewer than 10 users and are making a strategic choice for their business based on cash flow preferences; available personnel; customization requirements; and control and ownership preferences. Making the decision to move accounting operations online offers companies the ability to experience a faster time to value for their investment, as implementations typically take less time in the cloud.
Reid: The fastest adoption rate are with small and mid-sized companies – those up to 1,000 or so employees. Large global enterprises are adopting cloud financials for specific divisions and operating entities, but not yet replacing their core ERP systems. Industry adoption is being led by firms in business services, technology, nonprofit, CPA firms, financial services, healthcare, retail, and distribution. The only industry that I see as a late adopter is manufacturing. The most common characteristic of companies adopting cloud financials is that the company has adopted cloud computing somewhere in their business. Once they get a taste, they want to move off of old on-premise software and on to the cloud for financials too.
Secord: I think much like other companies moving to the cloud, it tends to be smaller organizations or individuals who don't have a dedicated accountant or IT person on staff. Our clients tend to be companies of 1 – 5 employees and are primarily in the services industry – not retail or manufacturing. I also am seeing a trend of international companies adopting online. We have customers in over 80 countries using our product and 20 percent of our sales are outside the US and Canada.
Q: What are the benefits in switching to online accounting?
McCarthy: A company that chooses to implement an accounting solution in the cloud is typically interested in focusing on what they do best, which is run their business rather than spending their time maintaining an on-premise software solution. There is value in not having to hire, train and retain specific technical resources if they have a cloud-based solution in place. One other key element is the guarantee of “up time.” In the cloud, these solutions are typically guaranteed to be available more than 99.9 percent of the time.
Reid: There are four immediate benefits. The first is better decision making through improved financial visibility. An interesting extension to this benefit is our customers also providing system access to people outside the company, such as to their auditors, to board members, to loan officers, etc. The second is improved process automation. This frees the finance team to work on more strategic work. The third is revenue generation. It’s not uncommon to see immediate 10 percent revenue increases from eliminating billable expense leakage, automating billing and renewals, etc. The last major benefit is cash preservation, since you don’t need to pay for software licenses up-front. You also don’t need to make any up-front capital expenditures for servers, hardware or ongoing IT personnel costs.
Secord: Often it's the company owner that is setting up and configuring the accounting system. SaaS is inherently easier to handle because there is no software to install; networking or sharing is not an issue; and you don't need to be concerned about backups. Beyond that you can select best-of-breed solutions. Many of our clients use one product for invoicing and electronic payments and our product for their financial reports and cash flow management. Sharing is also a big factor, so many people can share their financials with a business partner, banker or accountant with an email invitation. This type of convenience is great for small business.
Q: What's next for online accounting software?
McCarthy: Online isn’t really a new technology, but rather just an alternative delivery mechanism where pricing and ease of implementation are key deciding factors. Some people think about it just as, “something in the cloud.” Software as a service is really application access. Today, the cloud is not as mature of a platform for obvious reasons for large scale, more complex accounting solutions – but it’ll get there. Confidence, security and regulatory compliance remain issues, and yet while some of these issues are real, some are a lack of knowledge. In the future, the cloud will allow more secure, cost-effective ERP deployments. It’s really beyond accounting – it reaches all levels of the enterprise.
Reid: Think of all of the ways that the Internet is impacting your life as a consumer – and now extend these ideas to your financial systems. As with Google Apps, anyone in your organization – or connected to your organization – will be able to securely access the information they need to make better business decisions. You’ll be able to use your smartphone and tablet to access the system – the idea that anyone needs to come into the office to work on your financials will seem ridiculous. And all of your systems will work together, connected over the Internet. At the end of the day, it’s about becoming a real-time enterprise – where all of the parts of your business are always instantaneously visible to each other.
Secord: The reduction of data entry. A big problem with accounting software is how do you get transactions into the system – it’s why businesses have a bookkeeper, or business owners just put off inputting transactions until the last minute. Today, automatic feeds come from the bank. With mobile technologies, you can take a snapshot of a receipt from a purchase, or travel expense, or just an entertainment expense. Being able to capture, automate, organize, and consolidate this process is huge. So much more of it is now “real time.”
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