Having your data hosted somewhere else has always been controversial, especially when it comes to sensitive data. Some countries like Switzerland even have laws that make it very difficult to host client data outside your premises (not that it has protected any of those American UBS clients). But that controversy has gone less virulent recently: it’s now common practice, even amongst banks which tend to be very conservative, to host their email or CRM at third party providers. And even the most reticent financial institutions have no qualms about using Bloomberg, even to transact.
As bandwidth becomes ubiquitous and as browsers become more and more powerful, there is an increasing incentive to use hosted service providers. That’s great news because the benefits of using a SaaS (Software as a service) model are numerous, especially if the software is browser based. Here is a quick rundown of why it’s a good idea:
- There is no upfront cost. Most SaaS providers charge on a per month/per user basis. This is great for start-ups and SMEs since no capital is tied up, especially now when funding is so hard to secure.
- If the software is browser based, as most new modern platforms, it’s a guarantee that it will work with most OSes and platforms. You don’t have to be on this version of Windows or have that version of Excel for the product to work. And conflicts with other pieces of software are less prone to happen since interfaces are built at the server level through the SOAP or REST protocols
- You are always using the lastest version of the software since upgrading is completely transparent. How many organisations run software which is 10 years old (windows XP users, raise your hand!) because the upgrade process is so complex and expensive. For software where being up-to-date is critical (like tax or accounting software), this is indeed a great benefit.
- Your data is protected and backed up automatically. Because data resides on the server it is backed up by the vendor. Most often than not, that part is even outsourced by your vendor to some of the big names like Amazon or Google. For some people it’s an extra risk but to be honest for most it’s a guarantee that should something happen, you data is going to be recovered. How many times did you have a problem and then realised that your backup was not done or that the data backed up was not usable! When disaster strikes, you want to make sure that your insurance works...
- Security is usually addressed using SSL to encrypt communications with the servers and data itself is usually protected at the host by using both data encryption on the servers and sophisticated physical security. Even the issue of password weakness is now on the verge of being resolved by the use of 2-factor authentication. This technology has been used for a long time by banks and more recently some financial organisations have been extending their use to retail customers. It works by using something you know (a password) and something you have (a physical device). But those devices have been proprietary up until now making their adoption cumbersome. A new open format sponsored by Google is on the verge of being rolled out for Gmail. I will allow users to get rid of proprietary devices and use existing smart phones instead. As this technology takes off, unauthorized access will become a lot more difficult.
- Offline access is still not as prevalent as most people would like, but the adoption of HMTL 5 will make it possible to easily write applications in the browser that also work when disconnected from the network. It has been possible to do so in the past with proprietary tools like Google Gears but at some significant development cost.
- A third issue also needs to be touched upon. It’s lock-in. Because data is not on your premises, there is a risk should the vendor go under or should a dispute arise that you might lose access to your system. That’s a very big issue for mission critical systems. However most vendors now address this issue by providing a way for you to extract your data from their system, either on demand or on regular basis, and in a format that can be used by another vendor. This is clearly something that needs to be checked before jumping in!
So, which package to choose? It’s a question of cost, mitigation of the risk factors that we’ve talked about but also, as we’ve seen, what your accountant will support. Also, most legacy applications like Sage or Quickbooks can be made available through a service bureau that allows you to connect to a server hosting the package. It’s not what you want. It’s like using a DOS application in Windows (for those old enough to remember)! In the UK, the most popular packages built from the ground up for the web are:
- Kashflow – It’s the UK leader in the SME market. It’s the one we recommend to our clients. Cost is £15.99 + VAT per month for unlimited users. Its strength is its usability, its rapid upgrade cycle and its customer service. When we had an issue with VAT reverse charge changes that came into force earlier this year, it took the developer less than 3 weeks to upgrade the software. It’s a powerful tool for credit control and management accounts in general. It even comes with an iPhone application giving you access to your clients details, debtors list and other management information on the go.
- Xero – The leading product in New Zealand and Australia, Xero is a very strong product too. A bit more expensive than Kashflow at £24 + VAT / month for the fully functional version, the product shines when it comes to bank reconciliations. It even has the ability to automatically import statements from HSBC for an extra £2.50 per month. It also has multi-company and full multi-currency functionality unlike Kashflow. Lastly, the company is well funded (it has raised $45m so far from New Zealand markets) which is a guarantee of stability and longevity.
- FreeAgent – This one is very popular in the freelancer community. At £15 + VAT per month, pricing is similar to the other players. The company was bought by IRIS last year, one of the bigger players in the Accounting market. It is geared towards professional services so there is no stock control. Also the chart of accounts cannot be extended. But what it does, it does very well. It can even compute your expected tax liability in real time.
- Clearbooks – This is the new kid in the block. It was created in July 2008 and has already signed up 500 clients. It is priced just like its competition at £15 + VAT per month. While the product shows great promise, it might be too early to say if the company will succeed in grabbing market share from the competition.
- Liquid Accounts – This one has been around for longer than most and started as an enterprise-level system. Cost is £20 per month for 2 users plus £5 per extra user. However most advanced functionality like multi-currency, sales order processing, tracking of commissions and stock control are priced separately. If none of the others mentioned previously can do functionality-wise, and if cost is less of an issue, this one should be considered.
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