Cloud v. On Premise Accounting Software

Posted by George Delp

Which will get you to the "end zone" faster?

Cloud accounting solutions are becoming quite popular these days. The success of companies like Intacct, Acumatica and NetSuite have shown that cloud accounting is here to stay.

​But what about the traditional middle market ERP powerhouses, like Microsoft Dynamics, Epicor, Sage, etc.? Where do they stand? What about QuickBooks?

Your software options:

First off, let’s determine potential game plans and compare the various deployment options while looking at the attributes associated with each one. We will also introduce a third option that blends elements from the first two. (1..2…3… break)

1. On Premise Deployment

• You are responsible for maintaining the server, backups… basically all maintenance related to supporting your computer network and application servers
• Higher up front software cost / lower annual software maintenance cost
• Higher annual IT cost
• Sometimes easier to do customizations and/or “get at your data”

3. Hosted

• Combines SaaS like advantages to traditional on premise systems, the primary benefit being that you don’t have to deal with your own hardware
  
• You generally purchase the software but pay to have someone else host it for you
  
• Subscription pricing is often available
  
• Often has the lowest total cost of ownership (TCO) over a multi-year period
  

2. Software as a Service (SaaS)

• Hosted on the software vendor’s systems
• No servers to maintain, just need computers connected to the Internet
• Medium annual software cost
• Lower annual IT cost
• Sometimes more limited in what you can customize and/or direct database access
• Also often called “cloud” based solutions, although the definition of “cloud” is much broader than just applications available through the internet

The pure cloud accounting players, like Intacct, Acumatica and NetSuite, only offer the Software as a Service option. The “traditional powerhouses” that have been around a lot longer tend to offer On-premise and Hosted options.
​
As an example, here are the deployment options for both Intacct and Microsoft Dynamics GP:

Intacct

• Software as a Service (SaaS)

Microsoft Dynamics GP

• On Premise
  
• On Premise + Hosted
  
• Subscription + Hosted
  

In the past when you purchased on-premise software you typically paid a large amount up front with a low annual maintenance fee. In order to better compete with the inherent nature of spread out payments associated with pure SaaS offerings, subscription pricing is being introduced that allows SaaS like payments for your on-premise software.

---

How do you access the software?

All of the SaaS vendors offer pure web interfaces for their products. This makes deployment easy as all you need is a web browser. Hosted deployments have traditionally used tools like Citrix or Remote Desktop type technologies to provide access. As such, productivity tools such as email and Microsoft Office are bundled in order to provide one seamless environment in which to operate.

​That being said, many of the traditional on-premise players are rolling out pure web interfaces for their products. Microsoft Dynamics GP for example now allows you to access virtually all of the system functionality through a pure browser based client. Pretty cool, right?

---

Which option is right for you?

The answer to this question is different for every organization. Here are some common profiles with which you might identify.

On premise

• Have existing IT infrastructure
• Have access to IT staff
• Cash flow supports larger up-front costs
• Heavy customization and integration requirements
• Approach often used by larger companies with mature IT capabilities

On premise + hosted

• Have existing IT infrastructure, but it might be aging
• Looking to have IT department focus on mission critical tasks, not routine things like server maintenance
• Cash flow supports larger up-front costs
• Heavy customization and integration requirements

SaaS

• Have minimal IT infrastructure
  
• Lack of internal IT expertise
  
• Cash flow supports medium recurring payments
  
• Light customization and integration requirements
  
• Approach often used by startups and companies looking to focus on their business, not manage IT resources
  

---

Where can you find more information?

As you can see, there are many options to choose from and the choice these days is not as simple as cloud vs. running software on your own hardware. Think of it as the offensive line of your favorite football team. Every teams is different, but having an effective one is critical for the whole “team” to function and move forward.

​If you would like to learn more I encourage you to attend one of our “Accounting Showdown” webinars where we'll further discuss these topics, as well as provide live demos of some of the leading cloud and on-premise based accounting solutions.
​

View upcoming webinars