Cloud-based accounting solutions offer several advantages over traditional on-site, on-premise software systems. As opposed to these more traditional systems, such as Quicken and Peachtree, cloud-based accounting solutions reduce total cost of ownership (TCO), improve return-on-investment (ROI), and shorten Payback timing, all while delivering other advantages in system performance, reporting, and worker efficiency.
Total Cost of Ownership: Cloud vs. On-Premise
When comparing the TCO of the cloud versus on-premise systems, it may initially appear that on-premise solutions provide a more cost-effective solution. For example, the start-up costs, on average, for software licenses is about 9% of the total IT expense as opposed to the initial subscription fee of cloud computing which can be 68% of the total IT expense. However, looking at all of the costs associated with each system shows there is more than meets the eye:
|Initial Expense||Software licenses||Subscription fee|
With on-premise software solutions, the majority of the ongoing costs become visible after the system has been implemented. With the cloud, the only ongoing costs include implementation, customization and training which require a less substantial ongoing investment. Because of this, businesses can actually save money with the cloud. With lower total costs, Return on Investment (ROI) can often exceed triple-digit percentages, while Payback timing is typically a fraction of on-premise, averaging 3-6 months.
Cloud System Benefits
In addition to reduced on-going expenses, the cloud offers multiple benefits over on-premise systems including enhanced data security, reduced maintenance costs and easier workforce management.
Enhanced data security: Keeping sensitive financial data safe is paramount to any operation. Because a cloud-based system resides in a managed data center, the data are significantly more secure and stable that comparable on-site solutions. Offering 24-hour security, multiple redundancy and other forms of continuity, cloud-based systems significantly reduce the risk of theft, damage or other issues when compared to on-site, on-premise PCs within a central office.
Reduced maintenance costs: Cloud-based systems provide software upgrades that are automatically installed, which reduces the need to expend IT resources to install, reinstall or upgrade software programs. Additionally, because cloud-based software is monitored at a data center, any incompatibility issues have already been addressed and resolved before a new program is implemented. Cost savings are also realized due to reduced system downtime.
Easier workforce management: Cloud-based solutions enable software access from any computer. This makes it easier for business partners, such as auditing firms and outsourcing companies, to access relevant data more quickly. Companies also enjoy a greater degree of immediate control over data access when employees leave the company.
Flexibility and Scalability: cloud-based systems offer anytime data access from any computer, which optimizes the systems’ flexibility. Providing real-time data, reporting is more flexible with up to 13 dimensions and visibility for consolidated or multiple entities. Able to expand when needed, cloud-based systems are extremely scalable to suit the needs of an operation. Instead of having to procure user licenses and suitable hardware that is needed in traditional on-site installations, the cloud easily accommodates new users and multiple entities, as well as multiple currencies through its central data center.
Cloud vs. On-Premise: A Gift that Keeps Giving
When comparing the features of a cloud-based system to an on-premise system, factors such as enhanced data security, reduced maintenance costs and easier workforce management, as well as flexibility and scalability offer a significant improvement in performance over the long-term. Additionally, the greater costs and risks of on-premise systems associated with hardware, running software and maintaining data integrity make cloud-computing a much more appealing option.
To learn more, register for a FREE webcast titled, “The Economics of Cloud Financial Systems,” which will be broadcast on February 19, 2014 at 1:00 PM EST. The presentation will provide an in-depth look at the total cost of ownership and return on investment using cloud accounting solutions along with a demonstration of cloud accounting applications. Click here to register.