The Journal of Accountancy reports that doing business in the cloud should cost less than doing business on-premise. A survey of 1,000 accounting firms found that 70% of respondents increased their use of Web-based applications in the cloud between 2010 and 2012, and that cloud accounting is becoming more popular.
The article suggests doing a three-year amortization of upfront costs for an on-premise application including servers, software licenses and installation plus estimated maintenance for 3 years and comparing that to the cost of subscribing to the cloud version of the product for three years.
“This can be applied to partial versus full cloud conversions and should be done on an application-by-application basis to determine whether there is cost savings by moving each application to the cloud,” said the Journal of Accountancy.
- In most instances, by moving accounting functions to the cloud, an SME could expect to reduce support costs since it would no longer have to employ an in-house expert. The vendor would offer direct support.
- IT staff could then focus on more strategic and visionary projects that generate revenue rather than day-to-day operational issues.
- Software upgrades become smoother, easier and more regular. “In many cases, those enhancements are made automatically in the background without disrupting the customer’s work. Most vendors provide advance notice to alert customers about the changes and give them the option of when to turn new features on or off, if they don’t like them or aren’t ready to upgrade.”
- Onsite tape backups or third-party backup servers could be taken over by the vendor or hosting provider. “Often vendors have redundant backup systems so that customer data is replicated in a separate data center in case of fire, flood or other disaster. The infrastructure is “self-healing” so that when a failure occurs and the backup becomes the primary source of information, the system launches a new backup instance of the data.”
However, caution is required when adopting a cloud mindset, especially when considering security and reliability.
“With all this sharing of storage space in the ‘sky,’ one of the biggest concerns expressed by those considering switching over to cloud applications is the safety of their data and their clients’ data. It’s a concern cloud vendors have been fighting to overcome for years.”
How do you know your data is safe?
A critical first step is to make sure the data center has received an AICPA Service Organization Controls Report (SOC). This used to be called SAS 70 report. These reports are broken into three types, AICPA SOC 1, 2, 3, which indicates the hosting provider has undergone a stringent evaluation on its controls over the system or cloud service it offers.
While other steps can be taken too, the above offers a comprehensive audit, which the customer can use to assess the credibility and reliability of the cloud-hosting provider.
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