[IMGCAP(1)]Remember when the hefty three-ringed tax research guides required a whole room set aside as a library? Oh, and a librarian? Imagine justifying this expense to your partners today. You couldn’t. You wouldn’t want to because the alternative is so much better than the dark woodsy library ever was.

Online tax research quickly booted even the interim step from paper to CD-ROMs in favor of Internet-based services. In doing so, we were forced into an outsourced world, which turned out to be a more productive and efficient world. Though nearly all tax research is now online, some of us still use that fancy room, but now it’s just to impress new recruits with stories of how we walked uphill in the snow both ways and did our research on paper, back in the good ‘ol days.

Outsourcing Taboo?
Mention “outsourcing” in the accounting community and the first thing that comes to mind is sending tax preparation to India. To some, that is a good thought, yet many others have an immediate and negative reaction.

However, since the invention of fire… oh, and the abacus… CPAs themselves have successfully convinced businesses that outsourcing their accounting and tax compliance functions is a good thing:

“Take advantage of our experts.”
“We do this all day long.”
“We have the credentials.”
“It’s too risky to do it on your own.”

These are all good points, and I agree completely – hence I use an accountant, and thus my own company uses a CPA firm to do its taxes. We couldn’t possibly compete with our CPA’s experience and, most importantly, I couldn’t do my day job if I tried.

The paper-based to Internet-based transition is a perfect example of outsourcing’s advantages. As with tax research, technologies of all kinds are following suit. It’s pervasive. Software is being Web-enabled. Servers are being virtualized. Networks are moving to the cloud. And the younger generations are thankful for it. They get it. They want it. And they don’t understand why we’re resistant to the change.

What is the Cloud?
Firms today are moving toward the inevitable — the cloud — a model where technology helpdesk, hardware, software, and management can be completely outsourced. No more servers, fewer IT people, improved productivity and more time to focus on the business.

If India just popped into your mind, you can rest easy. Few, if any, U.S.-based hosting providers are opting to offshore their IT talent, so we needn’t worry about our precious client data traversing the globe to lands far, far away. Plus, learning about the provider’s operations is a straightforward piece of the due diligence process.

Remember when the “Web” became the catchy new term for the up-and-coming Internet? Well, the “cloud” lives on the Web and it’s the new hip way to refer to a cornucopia of outsourced Web-based technologies. The cloud is best defined as a “pay as you go computing Web-infrastructure, leveraged for economies of scale.” You will often hear the cloud referred to as SaaS (software-as-a-service), PaaS (platform-as-a-service), and even IaaS (infrastructure-as-a-service). Wikipedia is a great resource for learning more about each.

What Can Be Put in the Cloud?
All of your software will eventually live in the cloud: tax, practice management, engagement/trial balance, document management, QuickBooks/Peachtree, the aforementioned tax research, Microsoft Office collaboration tools (e-mail, shared calendars, tasks). Nearly everything will go into the cloud; it’s just a matter of time.

You’d be surprised how many firms have already moved there — small firms with two employees, large firms with hundreds of employees and everything in between. Multi-office firms and firms that need remote access are especially good candidates because everything is securely accessible via the Web … from the cloud.

What Does This Mean for All of Us?
In short, all of our technology will eventually live in the cloud, and we will be better for it. This transition will allow us to focus on what we do best in our businesses, leaving the rest for people who focus, and are experts, on what we don’t care to do or are not good at. Technology is a cornerstone for most of our businesses in terms of success — we can’t live without it. But ask yourself why you started your business to begin with.

If “technology management” or “technology services” isn’t core to your firm’s purpose and mission, then it likely falls squarely into the “headache” category. Aside from the distractions related to doing technology well, there are inherent risks to consider. Security, reliability, performance, compatibility, redundancy and obsolescence are just a few that come to mind.

As a profession, accounting firms can no longer be a pioneer on the outsourced technology/hosting front. The good news is that many firms have made the transition successfully and they’re asking themselves why they didn’t go there sooner. Their client data is far more secure in a SAS-70, type II data center than it ever was in their closet at the office. These firms now live in a world where they spend little, if any, time planning for technology upgrades or future IT expenditures, working on IT staffing issues or fretting over security concerns.

Just as in most successful transitions to outsourced services in the past, we are much better off after the change if we can just get ourselves to start the move in that direction. Of course, there’s always the alternative of walking uphill, in the snow, barefoot. Think fancy three-ringed binders on beautifully ornate book shelves.

By the way, has anyone seen the tax binder containing Revenue Code KGF 6386 Z9 C644 1979? It’s not where it should be! Hello?

Trey James is the co-founder and CEO of Xcentric, a provider of technology solutions for accounting firms.

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