Accountants on the cloud: almost ready, but not quite

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.

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Hunter Richards is an Accounting Market Analyst for Software Advice. He specialises in accounting software, but often writes on cloud computing and green issues. Hunter graduated in 2010 from Washington University in St. Louis with degrees in economics and film studies. Before working at Software Advice, he conducted legislative research for offices of the U.S. Congress.