Paul Sparkes, commercial director for cloud native accounting solution, iplicit
As hybrid working becomes the ‘new normal’ for thousands of organisations, the reliance on numerous cloud-native technologies has grown in importance.
Today, not only do these tools need to support flexible working practices, but it is vital that they ensure workforces remain productive and help them to enjoy a work-life balance – all without compromising secure access and the functionality they would be used to when working in the office.
That’s led to a surge in the use of software that facilitates an identical working environment no matter where someone is based or what device they are using. And that’s only possible with the adoption of cloud-native technologies – whether for CRM, HR, finance, LMS and so on.
There is now a requirement for virtually every organisation to adopt systems that address the hybrid working needs of the average employee. Even if they are only working from home one day a week, these systems still need to accommodate secure, remote access as if they were sat at their office desk.
It is therefore no surprise that the rise in the adoption of cloud-native tools has soared over the past two years. They have provided a lifeline to many organisations that required a greater level of functionality and sophistication during the pandemic, with the added benefit of only needing a Wi-Fi connection. For the businesses that provide hybrid working options to their staff, cloud technology is now considered a must-have in their software stack rather than a ‘nice-to-have’.
So, with this is mind, what does that mean for the future of on-premise technology? Is its end-of-life imminent?
The truth is, while cloud adoption has grown in popularity, on-premise tools are still much-utilised for thousands of organisations. They will continue to remain the preserve of many businesses too – in particular for those who might be reluctant to change and view a cloud migration project as more of a hinderance than a help.
So, while on-premise isn’t exactly ‘dead’, the way in which cloud tech has been utilised throughout the pandemic has underlined that there is a much more efficient way of working – with greater flexibility and functionality as a standard. And what that will mean for on-premise soon is that it will become a ‘dead end’ for growing firms that no longer want to cope with clunky, existing systems and instead want more superior technology.
Even for the businesses who continue with a ‘better the devil you know’ approach, they will come under increasing pressure when seeking to integrate finance with other departments across their organisation. That’s because while on-premise finance will work in isolation, it’s very nature of being architected for a local network – with local servers – prevents any effective integration with any cloud-native solutions being used in other departments.
Even if migrating to hosted, on-premise (also known as ‘fake cloud’), the problems of integration persist to the point of being unusable as an integrated system.
The cloud choice
Today, cloud-native software is the number one choice for most small organisations. Taking Xero as a prime example, it currently has over a third of a million UK users, and has provided a wake-up call for other vendors to either ‘shape up or ship out’.
Additionally, QuickBooks found a comparable offering with a true cloud service. Most accountants in practice will advise either solution because they represent a safe and simple choice for those that require cost-effective, entry-level cloud accounting software. Similarly, at the other end of the scale, it’s common knowledge that Microsoft Dynamics GP, NetSuite and Sage Intacct represent cloud offerings for larger enterprises, but for a princely annual sum.
While these options appear to present vast choice on the surface, there is a huge gap that’s consistently been overlooked – the mid-market.
Typically, organisations with 30-300 employees have requirements that are too complex for entry-level software, but insufficient budgets for the £50,000-plus implementation and training costs needed, not to mention the annual licence fees that typically start at around £30,000… and rise quickly.
So, for the organisations that need to move to a true cloud system but don’t have an obvious, affordable next step with their existing provider, where do they turn? That alone is a huge reason as to why many accountants in practice are reluctant to advise medium-sized businesses.
Mind the gap
There is a shortage of knowledge within the sector when it comes to addressing mid-market requirements and providing the appropriate advice around system upgrades. As an example, organisations with multiple legal entities – and which require approval workflows, enhanced reporting, levels of automation and unlimited analysis of real-time data much like larger companies – have been severely underserviced by the few options on offer.
As a result, they have become adept at compensating for system shortfalls. Battling for too long with multiple Excel spreadsheets and manual intervention, users have tried to manage several copies of software to cope with numerous legal entities. Unfortunately for many, that has led to inefficiency, a multitude of frustrations, increased human error and the inability to see organisational-wide, real-time data to make business-critical decisions.
For years the lack of choice has posed a huge problem for many accountants who haven’t been able to offer the appropriate guidance towards a particular system either – because it simply didn’t exist. Most options for larger companies, for example, were either on-premise, overly complex and unaffordable, or posing as a fake cloud alternative that ultimately failed to deliver on what was required, and when.
Emerging solutions for the mid-market
But there is light at the end of the tunnel for a multitude of these fast-growing businesses and organisations that feel they’re being held hostage to their legacy software. Over the course of the last few years, new technologies have emerged specifically to fill this vital market gap. Affordable choices are now on offer, supporting thousands of medium-sized organisations to move their finance departments to the cloud seamlessly.
With no legacy customer base to placate or on-premise income streams to protect cloud-native developers have the luxury of starting from scratch, and no customers to lose. In response, they’ve created comprehensive finance platforms that can be accessed from any device, from anywhere – as long as the user has a browser. And these tools come complete with additional business process functionality such as approval workflows, project costing, time-sheet submission and expense management, to name a few.
The birth of entry-level ERP – where systems can be implemented in days rather than months – presents a new era of accounting software, one with serious capability and minus the hefty price tag, punitive implementation fees or unnecessary complexity.
Turning challenges into opportunities
However, even with more ‘go to’ recommendations now available, accountancy practices have understandably been reluctant to get too involved when it comes to specifying more complex systems for their customers. They simply don’t want to get it wrong.
In addition, the industry continues to face its own issues – automatic returns, Making Tax Digital and the increasing functionality in entry-level applications all result in the historic transactional part of the business being eroded. Accountants are therefore finding themselves having to move ‘upstream’ to advisory-based offerings and more complicated challenges.
However, where there are obstacles, there are also opportunities. Increasingly, clients are turning to their accountants and want to be educated on the right choice for their organisations. After all, they were happy to recommend Xero or QuickBooks before, so what happens next when the organisation outgrows these systems? They need reassurance when upgrading.
So, while prescribing a next-step solution might still be a step too far for many, accountants who are able to understand the options and guide clients towards an appropriate tool that works for them – as well as in their own practice – should result in a far better outcome rather than letting them fend for themselves and ultimately waiting to hear what they chose.
