Consultant practice editor Mark Lee offers a handy guide to everything accountants need to know about ‘software as a service’ applications.
You may have heard the phrase ‘Cloud Computing’ before and perhaps thought it didn’t apply to you, but accountants should make an effort to find out more about this new technology – if not for themselves then on behalf of their clients. I recently spoke to Frances Critchlow, director of online legal employment document provider Cleardocs, who shed some light on the issue.
Q: What is Cloud Computing?
A: “In IT-speak Cloud Computing is often referred to as ‘massively scalable IT-related capabilities that are provided as a service across the internet’. In English this means that we can subscribe to software, download it, use it and get updates directly via the internet”.
Q: Why call it ‘Cloud’?
A: “The term ‘Cloud’ refers to computing that takes place ‘somewhere out there’. The term is probably better understood when compared to what we normally do with software, applications and computing - it tends to takes place either in front of you, or in close proximity, on your PC or on a server, for example. Computing in the Cloud is remote. The software is stored on another computer ‘somewhere out there’ and you access it via the internet.
“Put simply, rather than opening a box with a user manual and disc, loading the disc onto your PC and getting started on QuickBooks, for example. In the world of Cloud Computing, you would search online for ‘QuickBooks’, go to their website, read the terms and conditions, pay using a credit card and access the application online. All of your data would be stored by QuickBooks online, so all you’d need to do would be to remember your login details”.
Q: How is cloud computing relevant to accountants in practice?
A: “Cloud Computing could offer accountants and their firms a number of financial benefits.
“One of those key benefits is a reduction in the level of IT investment required. Servers with specific applications are likely to be redundant and as such, why should anyone continue paying to have them maintained? Why purchase new PCs with bigger hard drives just to store software applications when you can increasingly access the same application online through a cash-flow friendly subscription using existing PCs? Let someone else store the software, and you can instead think about a ‘pay per use’ ethos.
“Encouraging clients to think about what IT and applications they really need to run their businesses, and to only pay for what they use, could go a long way to reducing their costs. Reducing the costs related to hardware maintenance and office space requirements could be significant for a small business. This could also mitigate some of the issues around hardware assets aging, or of software going out of date and the cost of license renewals.
“Expensing software is a one-way street - once it’s purchased it has no residual value (at least with a server or PC it has a secondhand value, albeit a very low one).
“So here’s where we see the joy of Cloud Computing – it delivers choice, and with choice consumers usually get a better deal on service, product quality and price”.
Q: What are the other cost saving opportunities that might arise?
A: “Cloud Computing means that your clients won’t need an entire IT infrastructure associated with the typical server/desktop arrangement - someone else takes care of the software/application and storage of your clients’ data, so your client doesn’t need to. This could mean no air conditioning in their server room, no IT staff required, no hardware maintenance, no backup costs and so on.
“Another approach is to consider why we buy software. We purchase software because we need it to solve a particular problem. Often we end up with a much bigger or more powerful application than we need to solve the problem, because that used to be only way to purchase software, ‘in big heaps’. However, things are changing, now there is more information, choice and opportunity to improve the way businesses are run.
“Cost savings are possible, and even probable. The good news is that your clients could see real savings in the short term”.
Q: Clients appreciate their accountant advising them ways to save costs, but what about helping clients grow their business - can cloud computing help?
A: “From the cost savings and the subsequent reinvestment into a business that Cloud Computing could bring, businesses could be advised to update and improve products or service offerings.
“Instead of paying for new software licenses for their customer database for example, your client could use the same application on a pay per use basis via the internet and invest the savings into search engine optimization – improving the visibility of your client’s website and therefore making it easier for customers to purchase”.
Q: Is Cloud Computing just another fad? Is it really something that accountants should be talking to their small business clients about?
A: “Cloud Computing is not new: We’ve been using the internet to host applications, manage and store data for a number of years. The uncertainly about the term is probably due to the recent hype. I think the media hype is a fad, but Cloud Computing? That’s here to stay.
“I do think accountants should talk to their clients about it. One of the biggest benefits that cloud computing has to offer is aimed right at the SME: It’s flexible, cost effective business computing that delivers choice. The benefits are instant. In many ways, businesses are no longer tied to traditional expenditure – a PC, credit card and connectivity to the internet could be all that’s needed”.
Q: What else do accountants need to know before mentioning the Cloud to clients?
A: “There are a number of things we all need to be aware of when talking about Cloud Computing. The most obvious caveat is connectivity - all businesses must have reliable fault free internet connection. If not, it’s just a house of cards. BT has recently launched its NGA project (next generation access) which put simply, means that they are replacing the existing copper wires with the latest super speedy and reliable fiber optic cables. Cloud Computing and fiber optic cables are a match made in heaven.
“Another potential issue, and a very important one, is that your client’s data is stored ‘elsewhere’ and security risks associated with having data remote or in the Cloud need to be understood. That said, storing data on a client’s site is also risky – hardware failure, coffee spills, fire, theft and so on”.
Critchlow is a director of Cleardocs, an online legal employment document provider. Critchlow has previously worked in various technology companies including Hewlett-Packard.
Mark Lee is chairman of the Tax Advice Network and consultant practice editor for AccountingWEB.co.uk.
Reprinted from our sister site, AccountingWEB.co.uk