On-demand accounting software that is accessible without an in-house server may still be relatively young and growing, but as far as it being the wave of the future, don't get out your surfboards just yet, say users and consultants.Many small and midsized businesses are still attached to their multi-dimensional, server-based software and are not yet ready to make the jump into the Web. But not all the hold-up is the fault of the users - the software producers admit that their products are good, but in some cases could be improved. Missing integration to add-ons and a lack of features within the on-demand systems leave some work to be done.

The wave of the future may not have hit, but it is building up strength and support.

"E-commerce is causing some companies to grow wildly while others fall into bankruptcy," explained consultant Carlton Collins, "I predict that those distributors and wholesalers who embrace supply chain solutions will flourish over the next 10 years, and those that don't will wither away."

Server-based companies, and their accountants, today must buy a CD-ROM for the desired application from either a vendor or the company directly, wait for the software package to arrive, configure the operating system, install the software, and sustain continuous maintenance to the system, including purchasing upgrades as needed and buying multi-user editions if the company grows.

And if an accountant has more than a few clients, they are bound to have more than a few software packages to learn, operate and own. Not only does this become costly, but with new versions and upgrades, the learning process is continuous.

An Internet database's biggest virtue is the relief from these installation and learning hassles. To set up a company using an application service provider, one has only to buy the licensing number, click onto the Web site provided and start setting up the company within the system. Some services allow the accountant to be added for free during the set-up. Cost and set-up time are sliced in half - and some packages such as QuickBooks Online offer a free trial period as an incentive.

"If a client walks in with nothing but a browser, they can have a database accessible to them anytime in multiple locations with multiple users," said Mike Dickson, CPA, CITP and president of Business Technology Group LLC.

Upgrades are also a benefit of online accounting, said Paul Rosenfeld, director and business leader for QuickBooks Online. "Every customer paying for online services creates revenue for us, we give it back to the users," said Rosenfeld. He went on to say that upgrades are done automatically, as they are with all on-demand accounting software, and free of charge.

Another important feature about ASP products is the virtual elimination of the tech support team. While bad news for information technology employees, companies could potentially save thousands of dollars by using online tech support staff, which come with subscriptions to QuickBooks Online, NetSuite Small Business, Intacct On Demand and EPeachtree.

But completely relying on an online company or product - especially after the dot.com bust - for data management has kept many companies away. Knotted up with fears about their data's security, little add-on integration and the inability to back up their own data, they opted to keep data in-house.

The fear factor

"People are wary of giving other people their data," said Peter Frank, CPA and partner at New York-based Cornick, Garber, Sandler LLP. "A lot of people start to think, 'What if this company goes out of business? What will happen to my data?'"

But most on-demand products have options for clients to back up their data if they need it. For instance, with EPeachtree and Intacct, a company can order a CD with their data on it for a nominal charge, and users of QuickBooks Online can download an important document from time to time into an Excel file for free.

All products have the option for customers who wish to discontinue their service to obtain their data either on CD or by downloading it onto their desktop, usually via Excel.

Some users are still hesitant to give up their data, however, for fear of how confidential it will remain. Many accountants and software companies feel that these security fears are unfounded, however, as long as there has been some research done on the data management company beforehand.

"We have a bunker facility for all our data, and most people who work here can't even get into the facility," said Stephen Wolfe, NetSuite's vice president of product management. "I can't even get into it."

All agreed that end users need just a few questions answered before deciding that their data is safer in the hands of these companies rather than on a PC.

"The more that you explain things, the more it makes them comfortable," said Chuck Corcoran, senior product manager for Best Software.

Yet the biggest obstacle for on-demand products remains the lack of features and customization options.

"I do not use an online product and do not plan to," said Roman Kepczyk, CPA, CITP, of Infotech Partners North America Inc. "All my accounting resides on my machine with the full version of QuickBooks Pro 2005. This product allows me to do my time keeping, expense management, [continuing professional education] and some marketing, which are features that are not as robust on the Web versions."

Some products offer integration with other add-ons, but many automatically integrate just with desktop versions of their own product. All on-demand products we contacted offer some customizable charts of accounts, but all are willing to admit that their features are not as plentiful and their systems as multi-faceted as the server-based applications yet.

"It's not that the market isn't ready for on-demand services," said Rosenfeld of QuickBooks Online. "On-demand services are not ready to meet the demands of the market."

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