Does cloud hosting still make sense?

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The terms “cloud hosting” and “cloud computing” are often used interchangeably, but they are not really the same thing — though in most cases, both approaches are modeled on a client/server relationship. The question remains whether hosted applications still remain a viable solution in today’s cloud computing environment, or whether it is time to move to an entirely cloud-based environment for your and your clients’ application needs.

Cloud-based solutions have become immensely popular. An application such as QuickBooks Online has been written specifically to operate entirely online on a network of servers dedicated to processing multiple instances of the application for different users. The specific server used for a client at any one time is determined by load balancing the network, directing the application to be run on a server that isn’t operating near its limits. In some cases, the cloud-based application is a newer version or update of an existing in-house or desktop application. In other cases, such as Oracle NetSuite or Sage Intacct, the application has been developed specifically to be run in the cloud environment, and has no identical or older in-house version.

Cloud hosting is a different story. With cloud hosting, most of the time you are renting the ability to run an application that may have been developed for use on an in-house server on someone else’s server, located remotely. With many cloud-hosting plans, you are running on a specific server with an application that is reserved for just your use (single tenant), or using a single instance of the software and underlying resources that serves multiple customers (multi-tenant).

Both approaches, cloud hosting and cloud computing, are a form of managed IT services where the hardware, operating system and application are managed, maintained and administered by another vendor. This eliminates the need for much of the overhead required to run applications in-house on your or your clients’ hardware and software.

The software-as-a-service (SaaS) model has been around for a long time, with the term first appearing in the 1990s. But the client/server model, which has multiple users accessing the same remote server or network of servers, was deployed as far back as the 1960s, when it was called time-sharing.

The question we wanted to answer is whether cloud hosting is still relevant in these days of cloud computing, and if so, under what circumstances. For our answer, we surveyed four vendors that provide cloud-hosting services, as well as industry experts Jim Bourke and Randy Johnson. Here’s what we found out.

All kinds of applications

One of the most compelling reasons for the popularity and longevity of hosting is the wide variety of applications that are available using this approach. While you won’t find every application being offered in a hosted variation, there is enough legacy software being offered on hosted servers to keep this model a logical choice for a user who prefers to continue using an application originally designed with an in-house client/server model in mind. And in many cases, a hosted legacy application offers many of the advantages that managed IT services provide, including the reduced need for capital investments and support services, both which are important considerations in today’s work-from-home business environment.

When it comes to the more popular applications, Roman Kepczyk, a CPA and director of firm technology strategy at Right Networks LLC, shared a list: “We find the top product used by both firms and their clients definitely being accounting applications. The latest CPA Firm Management Association survey identified QuickBooks Desktop, QuickBooks Online, Sage Intacct and Xero as being the most prevalent accounting products within accounting firms. This is then followed by the payroll providers, with ADP, Paychex, Gusto and Intuit Payroll most often selected. After that we see expense reporting applications such as Tallie, Expensify and Concur. For managing payables, is easily the most dominant product we see utilized by both firms and their clients.”

Cetrom president and CEO Christopher Stark also listed some of the popular applications that his company hosts: “Most frequently, clients are requesting our customizable application hosting services for, in no particular order, the CCH suite of products, Thomson Reuters’ Practice Management CS, CaseWare, Sage and Intuit’s QuickBooks and Lacerte.”

Other cloud hosting vendors provided similar lists. “We find most of our clients are interested in hosting not only practice management applications such as OfficeTools but also tax prep software, document management solutions and accounting software such as QuickBooks,” explained Lindsay Pinkos, senior product marketing manager at AbacusNext. “Many clients host QuickBooks not only for the firm itself but also their clients’ QuickBooks in a collaborative environment that is accessible to the clients.”

James Zachman, president of Cloudvara, added, “The primary applications that we find popular for accountants (and their clients) range from various versions of Intuit QuickBooks, Sage, Lacerte, ProSeries, Drake, TimeSlips, Fishbowl inventory management, ACT, MSO and many other applications.”

Easy peasy

One concern that many firms and clients have with transitioning from an in-house approach to a hosted approach in the cloud is how major an undertaking it might be. According to the vendors we spoke with, it’s probably less problematic than you might suppose.

“It’s very simple to transition non-cloud applications such as QuickBooks Desktop, CCH Engagement or Lacerte from a local computer to a hosted solution provider, as the hosting companies are running the exact same software and just adding and managing their unique remote access capabilities and support (along with security, disaster recovery and managing updates),” said Kepczyk.

AbacusNext’s Pinkos added, “The transition from a desktop solution to a cloud-hosting solution should be seamless when using a virtual desktop solution like Abacus Private Cloud. A hosted environment that utilizes remote desktop protocol mimics the experience of a traditional desktop environment with the security, mobility and accessibility of a cloud. This makes for a short learning curve for staff and minimal disruption to productivity.”

According to Cloudvara’s Zachman, “Most transitions from desktop to hosted are quite simple to replicate. The ‘real question’ relates to negating client downtime and inconvenience. Thus, we have established a highly reliable process to accommodate the transition and avoid any disruption in work efforts. This primarily relates to our level of communication and our 24/7 support team. Depending on a client’s ongoing work effort and aversion to downtime, we typically schedule our transition efforts for evening and weekends.”

Is hosting always best?

The four vendors offer cloud-based hosting of popular accounting-oriented applications. But they are also not shy about occasionally recommending that a client or potential client consider the alternative of a native cloud app.

“We would advise any CPA firm using robust applications that require remote access, security, controlled updates, etc., to move to a true cloud-based hosted solution for optimal performance, security and stability,” said Cetrom’s Stark.

And Right Network’s Kepczyk also is not averse to recommending cloud-based rather than cloud-hosted applications in some circumstances. “Some native cloud applications are considered best of breed, and better meet the specific requirements of the firms we consult with,” he said. “For instance, XCM for workflow, Thomson Reuters GoFileRoom/AdvanceFlow, and CCH Axcess Tax/Document are all natively cloud and work effectively with hosted applications creating a ‘hybrid’ environment which is very common today. We often see specific tax or assurance niche applications that firms rely upon don’t have a comparable cloud-based alternative, so it has to be hosted (i.e., CCH Engagement, Lacerte and QuickBooks Desktop). In these instances, the hosting provider makes the application function similar to a cloud-based solution and integrates them with the other cloud-based solutions.”

A bad thing with good effects

There’s little doubt that the current pandemic has had a huge effect on the way businesses operate, AbacusNext’s Pinkos told us, and this is also true when it comes to hosting applications on the cloud: “We are seeing many firms previously using on-premise solutions make the move to a hosted environment, needing to be suddenly virtual. I would anticipate that firms will look at a long-term solution to enable remote work and implement a business continuity plan that includes accessibility and security utilizing cloud hosting as part of their firm operations moving forward.”

Cetrom’s Stark added, “In terms of new client activity, we have seen a major uptick as a result of the en masse shift to remote-work life. Many firms are realizing the need for business continuity, not only during the current health crisis but how this situation can be applied to any unexpected disaster situation. We have to be prepared for the next disaster, as our staff and clients depend on that availability.”

“The COVID-19 pandemic has taught us many things about how we live our daily lives, travel, and how we do business,” Pinkos pointed out. “In a post-COVID world, the way that firms collaborate with clients will be different, and it is time to start thinking about what the new service model will be to stay competitive and assist their clients in getting back to business. Implementing a cloud solution that allows staff to stay safe and healthy while still being able to deliver high-touch services will be essential.”

And the answer is …

Our vendors and industry experts all agree that hosted applications not only still make sense, but will continue to offer a viable alternative for some time to come.

“So does cloud hosting make sense?” asked Jim Bourke, a partner and managing director of advisory services at Top 100 Firm Withum. “Absolutely yes! If you are using a non-cloud-based technology, a cloud-hosting vendor can host that legacy for you, making it accessible to you and your staff. It’s a much better solution than trying to host that technology behind your bricks-and-mortar.”

Randy Johnston, executive vice president of K2 Enterprises, added, “When SaaS products were first written in the late 1990s, we expected features and adoption rates that were much faster than has occurred. Feature deficiency was a problem with many of the new solutions. Our current forecast is that feature-complete systems will arrive by 2025. However, not all solutions will be converted to SaaS applications. So, what do you do with traditional products? You must host them somewhere!”

Right Network’s Kepczyk agreed, but feels that both hosted and cloud-native applications will eventually replace much of today’s in-house solutions. “Moving to the cloud is a matter of ‘when’ not ‘if,’ so we suggest firms get a quote for moving those applications that are better in a native cloud environment, and a quote for managing everything else in a hosted environment, so they can make an informed decision,” he said. “We believe that hosting will be around for a long time, as certain applications don’t have a comparable cloud alternative and the reality is that many firms and their clients don’t want to change from these applications, so hosting provides an obvious solution.”

However, Cetrom’s Stark cautioned, “When it comes down to it, it’s important to first identify your top IT challenges today. Are you currently facing challenges that are impacting your ability to work efficiently? Are you unhappy with the services you are getting with another provider? Do you have aging infrastructure, etc.? But notably, we caution and advise all clients (current and prospective) to think deeply about their IT security and how your current IT setup could have a major impact on how you are able to respond to a cyber event. It’s not about planning for ‘if’ but ‘when.’ Who’s handling your data security? Do you have multiple reliable data backups using different methods, separate from the network? Are you actively educating your staff and clients about IT security best practices — because they are likely your weakest link. It’s best to go the extra mile today to protect yourself in the future.”

The bottom line is that if your firm or your clients are running legacy applications hosted on the cloud, you’re not taking a second-best approach to running a truly cloud-based solution. Rather, you’re taking a viable approach given your and your clients’ needs.

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