Software as a service: time to unwind

The new IT FAD - software as a service - involves a third party managing your software and storing the data on their servers, taking potential problems off your hands. Our reporter explains how this will free up your time

Quite rightly, nothing changes very fast in the mission critical accounting systems market. Characteristically, the latest ‘hot topic’ that everybody is talking about, Software-as-Service (SaaS), has been around in various forms for many years and will not have a significant impact for a few years.

‘In terms of pizzazz and sexiness, SaaS is the top technology story,’ says industry analyst John Tate. ‘It has been around since at least the 1970s, yet the vendors think the world will change within two years. Realistically, I think it will be five to ten years before it reaches 25% of the market.’

SaaS involves a third party managing the application software and holding the data on its own servers in its own data centre. Multiple customers access the software through a browser over the internet, paying a monthly charge per user. In its purest form, such as Salesforce.com, the third party uses a single set of software. An interim step is for the third party to run separate dedicated software on dedicated servers, either through a browser or in traditional client/server mode though ‘thin client’ software.

The concept originated in the old days of the bureau, but lost out to the flexibility of PC networks and distributed client/server applications. With the dotcom boom it emerged again, with the much-hyped application service providers.

It was a good concept, especially for start-up companies, but migrating is a major task that few accountants in established organisations would undertake until forced off their old in-house software. High communications costs were another obstacle.

SaaS offers lower costs and more reliability, through sharing a very robust infrastructure supported by more highly skilled staff than any individual user organisation could afford on its own. Dennis Keeling, director of the Business and Accounting Software Association, and a speaker at next week’s Softworld event, has seen companies like Comrange, HR Express and Impaq make SaaS work in specialist areas.

‘Other vendors will realise that they can change their business model to make use of this technology,’ Keeling says. ‘It is now robust, strong and easily deliverable and most organisations now have broadband access.’

Clive Longbottom, director at Quocirca, the analyst, expects companies like salesforce.com, SugarCRM and Concur to turn their focus to providing accountancy functionality, just as NetSuite already does. Tate warns that the biggest barrier to switching is emotional, especially an irrational fear of the data being held elsewhere.
There is also an irrational fear of the lines going down and not being able to access the application, even though the infrastructure is much more robust than in-house servers. ‘Providers will have to prove themselves,’ says Longbottom, ‘not only to customers, but also to their outside accountants and auditors.’

Tate predicts that a new vendor will emerge and dominate the accounting systems market. It will be well-written global software with a single code set, one development team, one support team, giving it massive economies of scale.

‘I have seen no evidence that the vendors who have been in the market for the last 20 years are going to do anything to accelerate their slow but steady growth,’ he says. ‘If somebody like Salesforce.com brought out really decent mid-market accounting software they could do really well.’

Mark Holland, head of Baker Tilley’s IT advisory service, says that SaaS has great potential and is a concept whose time has finally come. ‘I suspect that nobody is making money,’ he warns, ‘but it should eventually be profitable.’

Microsoft is a great supporter of SaaS, but likes to give organisations a choice. ‘It is spectacularly arrogant of any vendor to assert that one way is the path of righteousness,’ says Paul White, director of Microsoft Dynamics. ‘Customers will exercise their own choice in their own time, based upon their own business metrics. If an organisation thinks it can make SaaS work for them ­ fantastic. Others may prefer to stay on-premises ­ that is cool too.’

Paul Booth, technical manager at the IT Faculty of the ICAEW, believes that SaaS is a valuable approach for accountants who want to concentrate on accounting and leave managing software and servers to experts, but would not recommend it to all organisations. He believes that it should be given particular consideration by start-up companies and organisations that are changing to a new accounting systems vendor.

‘Accountants should look into the contractual terms, technical performance of the platform and data security issues very carefully,’ Booth advises. ‘But if these are properly addressed they should not prove an obstacle.

It is good to have a choice of approach and accountants should not let cultural issues of control interfere with making a sound business decision on which route to take for the future.’

Ask the experts

The Masterclass Theatre at next week's Softworld event (17-18 October, NEC Birmingham) features expert speakers offering practical, top-notch advice on selecting business software and managing the implementation project. These invaluable sessions are free to attend and ensure visitors to the show make the most out of the time spent out of the office, hearing first-hand accounts from speakers that have been there and done it before.

The speaker line-up includes a number of end user experts talking about their own experiences and sharing the lessons they have learned. Also included on the programme are business experts, offering advice on technology issues ranging from negotiating IT contracts and developments in the software market, to business needs for the mid-market company and tackling the data overload trend and its impact on your business.

For more go to Softworld