In his post on the ICAEW’s forum entitled Dynamo or Dinosaur, Richard Messik (partner at Vantis, long time advocate of online accounting and a good friend to e-conomic) challenges the accounting profession to jump on the online accounting bandwagon.

This elicited a response raising the question of risk.  To paraphrase the response, isn’t it risky to put your accounting data on a cloud computing platform rather than having it on your own computer that you can see and touch?  What if the software vendor goes belly up – will you lose your accounts?

Cloud computing is a term which conjures up a strong image – much more so than “SaaS” or “on demand”.  White, fluffy stuff over which we have no control.  Not a particularly helpful term then!  But the question of risk is obviously important.

Here are my thoughts:

• It is wrong to label online accounting in itself as “risky” (for reasons that I state below, online software has the ability to reduce risk for most SME’s).  Some vendors are more robust than others, just as with traditional software.  It’s not about the technology.
• Some of the world’s largest accounting firms (such as KPMG in Denmark and Ernst & Young in Sweden) have looked into this in detail.  They conducted significant due diligence before committing hundreds and thousands of their clients’ accounts to e-conomic, concluding that this is a good strategic platform and jumping in with both feet.  Some significant firms in the UK have looked at this as well – the aforementioned Vantis, obviously, another example is Baker Tilly with their Revas service.
• e-conomic’s strategy is to partner with accounting practices, so we addressed the question of risk head on.  For our customers’ peace of mind we have an agreement with Fujitsu (our hosting provider) that if we were to go belly up then they will continue to operate the system for a long enough time to allow customers to make new arrangements, perhaps a commercial collective to keep the ship afloat or by exporting their data (using the export utility provided in e-conomic) to migrate their data to another accounting package.  The likelihood of the agreement coming into play is remote – we’re fast approaching the point where the accounts for more than 20,000 companies will be maintained in e-conomic, with lots of bookkeepers and accounting practices also using e-conomic to collaborate with their clients.  This may be a small customer base compared to Sage, but our growth is continuing at a pace and we’ve never made a loss (as evidenced by our annual returns in Denmark), nor have we had to resort to external funding.  These are strong foundations for the future.
• Given the recent announcement of redundancies at Sage and the demise of MYOB (in the UK), the relative risk profile of traditional software vendors vs. online software vendors is changing.  Sure, if you have their software running on your computer when a vendor goes bust then you might try to carry on in the hope that the software will continue to run correctly without the need for vendor support.  Perhaps OK as a short term option, but risky none-the-less.  (By the way, I’m not suggesting that Sage is going bust!)

The bottom line is that, for the majority of small and medium-sized businesses (especially those with no IT department), it’s a lot less risky (and a lot less effort) to use a proven cloud computing platform than it is to install software and manage the data themselves.  After all, how secure are most people’s computers and data backups against breakdown, theft or fire?

When I first learned of e-conomic in December 2007 I found myself thinking “Why wouldn’t someone choose this?”.  In a few years time we will probably look back at the days of installing software in the same way as we look back at cassette tapes.  e-conomic – the iPod in accounting!

This entry was posted on 22 April 2009 at 6:56 pm and is filed under Market info, Miscellaneous. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.