From the Oct. 2007 Issue
About eight years ago, I first began to get excited about online accounting applications and their potential for revolutionizing the accounting services business. In 1999 and 2000, when I was traveling the country teaching accountants about QuickBooks, I added a section to the seminars to discuss a new online accounting application from NetLedger (later called Oracle Small Business and now NetSuite). Although I found resistance from accountants at first, I took it upon myself to go out and educate people on what this new type of solution would mean for our business.
The
significance of this breakthrough product (essentially an online version of
QuickBooks), was that it released accountants from the hassles of driving across
town or asking clients to come to their office in order to work on the accounting
data. Since NetSuite and similar products are delivered via the Internet as
opposed to being installed on your local LAN or hard drive, they change the
way you think about hardware, disk space, the LAN, and even the need to be “at
the office” to do work. And when it comes to client services, the fact
that the client data is online and accessible anytime from anywhere, this technology
dramatically increases our ability to provide more services to more clients
in more places around the world.
With its new product, NetSuite created a whole new software category called Software as a Service (SaaS). Other companies had been providing remote hosting of software for some time, but, in 1999, no other company had the small business accounting focus that NetSuite did, so it was NetSuite who introduced this idea to most accounting professionals.
In 2002, Intuit entered this market with the release of QuickBooks Online Edition, which has dominated the small business segment of this market while NetSuite has moved up market and now dominates the mid-range market for online applications. Meanwhile, as these web-based applications from NetSuite, QuickBooks Online and a few others have been growing in popularity, there has been a parallel market developing in “Hosted Desktop Applications.” Since the late 90s, several ASPs (Application Service Providers) such as Citrix, ProPalms (formerly Tarentella), InsynQ (cpaasp.com) and several others have been providing remote hosting of desktop applications. These companies rent access to a server that runs Windows (loaded with applications such as QuickBooks, Microsoft Office, and others) via an Internet connection. Just as NetSuite paved the road for web-based applications, InsynQ was the company that paved the road for the Hosted Desktop Applications market for small business accounting.
So here we are in 2007 with two similar approaches to the same problem. One group of SaaS vendors provides web-based applications, while the other group provides Hosted Desktop Applications. Both provide many of the same benefits, but each has its own tradeoffs of performance, features, scalability and security. The reason these technologies are so important to accountants is that we need to access client data in order to provide services. If the data is locked up on the client’s LAN or hard drive, providing services is difficult and inefficient. But that is the reality for most QuickBooks consultants. We have solutions for transferring data files and remotely logging into the client’s office, but all of these are extra steps and costs that shouldn’t be necessary. Also, clients who have multiple locations or traveling employees can really benefit from online software because of its anywhere, anytime access, and because of the always-available information access features.
Although the adoption rate for these technologies was sluggish at first, we’re finally seeing a dramatic increase in interest and adoption. Until recently, accountants and small business owners were fearful of putting data on the Internet. They didn’t want to bear the risks of client data being compromised by unscrupulous hackers. The irony is that people are now accepting the fact that data is much safer when stored on secure Internet hosts than it is on local hard drives or LANs where people can get at it with hacking tools or even a cheap thumb drive plugged into the USB port. With proper safeguards, your data is probably less likely to be lost or stolen when you use a web-based application versus your own servers and LANs.
Another factor that has prevented users from switching to web-based applications is that most web applications perform slower and have fewer features than similar desktop applications. This continues to be an issue, but performance and features are catching up with desktop applications. Although the performance of online applications may never match that of local applications on a dedicated desktop computer, users are beginning to accept the tradeoffs of slight speed penalty for the benefits of having their data online.
Even if you’re unfamiliar with these new online applications, your clients are probably already using one or more SaaS products. For example, if your clients use QuickBooks payroll or any of the online banking, bill pay or credit card download services, they are already using SaaS products. And as you help your clients plan future upgrades of products, services, software and workflows, SaaS technologies should be some of the first products you consider. Whether you want to jump all the way to web-based applications or use hosted desktop application services, or a combination of both, you will see a huge gain from employing these technologies.
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Reader Comments
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It may slow SaaS possibilites, but it won't prevent growth
(10/02/07 - 12:48 AM)
To DanB:
That position simply isn't true anymore? Where is your evidence for that statement? I did read that Symantec 9-2007 report, and I don't see the conclusion you seem to.
Let's set aside for the moment that Symantec makes money by selling security protection, and so has a vested interest in making reports like this sound as scary as possible.
It's not that the report data is incorrect, so much as it is presented in a certain way, and that certain topics are left undiscussed. For example, nowhere does the report hint that security risks mean "it's not worth putting your company's data online." Similarly, the report does not discuss the amount of risk in alternative channel options, and how they compare to having the data online.
JazzK
Hosted vs. Web Native
(10/01/07 - 12:04 PM)
There are major difference between hosted and SAAS applications (as defined here, resulting in much higher costs for the hosted solution.
SAAS applications because they are web-native are designed to be delivered remotely. While an application like Great Plains CAN be delivered as a hosted service, it was not DESIGNED for this purpose and those who do host it find themselves in a nightmanre scenario of what the application is capable of and what the end-user expectation is.
Second, because SAAS applications are multi-tentant (i.e., multiple customers share the database and application servers) they cost less as the infrastructure cost is shared across multiple companies. With hosted applications, the infrastucture is not designed to be shared, hence each customer must pay for their own dedicated hardware to run the application. Much more expensive.
The combination of this lack of "web-native" design require you to "retrofit" hosted applications to make them web ready (say with a solution like Citrix. Combined with a non web-native architecture, the cost of a hosted solution will utlimately end up being several times that of a SAAS solution.
As a real-world example NetSuite costs $99/user/month for the entire ERP/CRM/Ecommerce application. However, if you were trying to use Great Plains in a hosted environment, you would have to pay roughly $75/user/month for Citrix and THEN pay the entire costs for the Great Plains application, hardware etc. I have seen prices of $250/user/month for a hosted GP offering...and by the way, with Great Plains gives you only the accounting application (CRM and Ecommerce will have to be bolted on later at additional product and integration costs)...
John Finn
California
Online security will prevent future growth of SaaS
(10/01/07 - 07:45 AM)
Anyone who reads Symantec's latest Internet Threat Report from 9-2007 can easily connect the dots with SaaS. If the channel cannot be secured, it's not worth putting your company's data online. All of the security trends are working against SaaS despite the push by Banks to convince users that sensitive data is safer online. That position simply isn't true anymore and by the end of 2008 the business public be in the know as the criminals will educate everyone about the shortcomings of a web-based security model. It's a fairly simply argument: BofA and other banks can't secure themselves online, why should Intuit or Google fare any better?
DanB
