I should warn you that I have personally adopted cloud solutions in my business and personal life in any manner possible. I tend to adopt new technology long before the current technology has faded. I am sure I will still discover new applications and learn to love programs that I have thus far managed to live without. What I am trying to say is that I am definitely not normal in any sense when it comes to the accounting profession and my approach to technology.
I fear it would be irresponsible to jump right into my version of a cloud accounting conversation without sharing my bias with you. Before we venture into the specifics of the cloud, there are some interesting questions that need to be addressed. When approached by an accounting professional looking to explore the cloud further, I often hear some variation of the following questions:
Is the Cloud Safe?
I dare say that any company that focuses on delivering a cloud-based solution will have a vested interest in protecting the data that has been entrusted to them. Security includes:
- Physical protection of the hardware, including secure climate controlled facilities and preemptive maintenance.
- Virtual protection of the hardware, including anti-virus, anti-malware and anti-hacking measures.
- Redundancy, including backing up critical data and testing backups on a regular basis.
According to recent sources, Intuit’s® annual revenues are approximately US billion. Intuit has a vested interest in maintaining security and has a significant budget allocated to the security of their cloud-based offering. A data breach, or loss of data, would certainly mean the loss of trust and rapid decline of the industry giant. They are motivated by survival and profit to ensure that our data is secure.
I will contrast this with the myriad number of small firms that I generally work with. Security is generally non-existent or lacking. The most striking example was a small accounting firm that used a five-year-old USB key as their daily backup. The USB key was passed around the firm at the end of the day to backup everyone’s work. The USB key was misplaced on more than one occasion, but no one in the firm had given any thought to what that could mean for the firm and its clients. Plain and simple, the vast majority of accounting firms do not have the expertise or resources necessary to adequately protect their private data.
Is Paying Monthly Cost Effective?
Many accounting professionals compare the annual cost of using cloud-based solutions against the cost of comparable desktop software. Generally speaking, the desktop software appears to be cheaper, as one can buy a multi-client license at one of many retail outlets for less than the cost of single client access for most cloud accounting solutions. A trade-off between time and money is usually missed in this analysis. The cloud version inevitably results in significant time savings for both the client and the firm. The financial impact of this improved efficiency is significant and cannot be ignored. I compare this analysis to what the accounting industry struggled with when tax return preparation software was first introduced. The software costs were an initial barrier, until accounting professionals saw the return in drastic time savings, especially if a return had to be changed or adjusted. I believe that desktop software cannot compete with cloud software, in terms of pricing, if we factor in the value of our time saved.
Are Desktop Applications Going Away?
This is a loaded question, and I won’t presume to answer for all desktop software. There are instances where specific software is required to be installed on an individual computing device. The prevalence of desktop applications will be determined by consumer demand and scarcity of resources for software developers. Consumers are demanding instant access to data. The cost of this instant access rises if we try to maintain the data in a fixed location. Software developers, like any business, have to make decisions based on where they will focus their time and efforts. If consumers are increasingly pressuring the developers for instant access, the pendulum will shift and the developers will focus on cloud solutions.
In the Intuit world, my understanding is that they will continue to support QuickBooks® Desktop. The vast majority of new product features and development will focus on QuickBooks Online. I think that is very telling and will bring about rapid change in the industry.
I strongly encourage readers to approach the cloud with the same professional skepticism that they would with any critical component of their firm’s infrastructure. We need to remain diligent and evaluate how a particular offering can impact our firm, for the better or worse. With that in mind, we need to ensure that we are giving adequate consideration to cloud-based solutions, not just focusing our research on traditional desktop installations of software.