Cloud computing - what is it and why does it matter?

Cloud Computing is one of several names applied to software services provided through the internet to many different users (with slight variations in meaning this is also referred to as Software as a Service or SAAS, online computing and hosted computing amongst other names).  If you run a cloud computing application you do not need to install your own server, or load up the software locally, just open a web browser (Internet Explorer, Firefox, Safari, etc) and log into your account.

This technology has been around in various forms for many years, but over the past few years has really started to take off.  Some of the best recognised applications include Facebook, Google Documents and Microsoft Sharepoint and there are many more besides. 

Now we are seeing more applications being released aimed at the small business market, in areas such as accounting, payroll, business intelligence, CRM and many others.  The number of products – both in Australia and overseas – is growing rapidly.  In a forthcoming blog I will review a few of these products.

So why are cloud computing solutions particularly useful for small businesses? 

• There is no upfront cost for the software, just a monthly subscription which helps with cashflow.  
• You do not need to install a server or any other IT infrastructure, again a big saving in cost plus this is a much simpler solution for those small businesses without an in-house IT team.
• You are able to access your data from anywhere, which is a great solution for the small business owner who wants to log in from home, or for businesses that run virtual offices.
• The functionality offered by many of these applications for a small monthly cost rivals what you could get from desktop solutions costing 10s of thousands of dollars.
• The ability to invite other users in to your application can provide you high levels of on-demand support at a very low cost (for example from you bookkeeper or from your account).

Cloud accounting solutions are also not new, but only in the last couple of years have they started to take off in terms of number of users.  Xero and Saasu have been available in Australia for several years, and now have upwards of 22,000 and 12,000 customers respectively MYOB has just launched LiveAccounts and is expected to grow its customer base rapidly.  There are numerous other solutions available. 

And what about the downsides?  The most common question relates to security of data, but in a practical sense the security risks to an SME of having their data “in the cloud” is far lower than having it on PC or server in their office: the risk of unauthorised access is almost certainly lower (the usual provisos apply about safeguarding passwords), the risk of loss of data through fire, or theft is far lower.   

The take up of online solutions is expected to grow rapidly over the next few years: various studies by the Garner Group and others have predicted that 25% - 40% of new accounting systems will be cloud based within the next 2 years.  The ease of use, cost of ownership and ability to collaborate online make hosted solutions a vastly superior option for most small and medium businesses.