Knowledge Peers

Over the last few months, I have found myself having more and more discussions around cloud based systems. This may be to do with my involvement with Xero, a leading online accounting system, as people see the benefit of this system and start hunting around for other cloud solutions to their various needs.

Just looking at the Xero add on list, the number of cloud solutions are increasing exponentially – it is like the SME business world is part of a cloud solution revolution. If you have a need, there is likely to be a cloud solution out there! It is key however to understand the positives and the pitfalls of becoming a “virtual” business owner.

1. The real seller for any cloud solution is the fact you can login anywhere, anytime –to me this is really pushing the revolution forward and the key benefit. There are a number of systems that have apps to make it even simpler to access. For example, you can do your bank reconciliation, raise and email sales invoices and record your expenses through the Xero Touch App.

2. Upgrades – As the system is live 24-7, you are always using the most up-to-date version. You don’t have to download patches or be sent an upgrade disc in the post – it is just upgraded and next time you login, you’re on the new version. Fantastically simple!

3. The price differential is noticeable – typically, there are no setup fees or contract periods, welcome to the pay as you go world of SaaS. For accounting software Sage Line 50, you are looking at about £600 to buy the system, which you need to run on your own server (another cost), then you typically pay for support and an annual upgrade whereas Xero is just a monthly fee of £19 (medium package) with a fantastic help suite and unlimited support and users.

4. Choice and trial periods – the current choice on the market of solutions for SMEs is unprecedented. In days gone by, you would go into PC World and look at the shelf and see 2 or 3 different project management packages. All looked quite complicated and it was hard/impossible to “try before you buy”. As of today, Xero has 25 project management add ons listed on their website, which are standalone systems but integrate with Xero – if you looked further afield the number is enormous. All have a 14 or 30 day free trial so you can see whether it is the right system for you.

It is not all positives – there are a few pitfalls you need to be aware of.

1. Upgrades – One of the positives, but I have found a problem with automatic upgrades. When a cloud system is upgraded, you have no say over it. It is upgraded and you can then only use that version of the system. What happens if you really like the software as it was, the developers have tried to be too clever when “improving” the system but have lost the simplicity of it, i.e. the reason you use it. You cannot remove the upgrade or reinstall the original version, you just have to go along for the ride, learn to like it or change to another solution.

2. Extraction/backup of data – A number of people have said to me that they would find it useful if Xero automatically downloaded the data, say once a week to their computer. To me, I cannot really see the benefit of this as the data is always there, online. It also does not work for something like Xero as you use Xero to interpret the data – if you just download the data into excel to retain it on your hard drive, what are you actually achieving? Nevertheless some see this as a pitfall but I think it is more an understanding of the cloud that is the issue here.

3. Lack of connection to the internet – most cloud solution say they can “guarantee” you being able to access the system and your data. They cannot however guarantee access to the internet. A client of mine rightly asked, what would happen in their broadband goes down? My reply was simple, just pop over to Costa, a local hotel or somewhere else that has WiFi. In fact they were carrying an iPad so my initial reaction was “you can just connect via 3G”. Again I think this is seen as a pitfall but is easily overcome in reality.

4. The software provider has gone bust! – The dreaded scenario – You load up the login page and try to access your data but cannot seem to get in. You see written at the bottom of the page a note about the company going bust and the service is no longer available. Oh no, where is my data, how can I have access, it is all lost in the cloud? This is a possibility, especially with start-up providers, but the bigger outfits have safeguards in place. Xero for example lease the servers from Rackspace six months in advance so if they go bust the data can be accessed and downloaded. Before signing up to a solution, perhaps try to find some stats – if they only have 500 users, I would probably hold off using them until they have 10,000+.

In my view, there is a revolution going on in the SME marketplace. Yes there are pitfalls to the world of cloud solutions but they are here to stay. As an advisor, I would always recommend that the astute business owner should look around to see what solutions are out there that can help them do business leaner, meaner and ultimately smarter.

Simon Clark is Partner at Kingston Smith and a Knowledge Peers Expert Member. To view his profile or contact him, click here