The Rise of Cloud Accounting

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IMGCAP(1)]As cloud-based solutions for email—and virtually every office system—have become available, accounting software packages like QuickBooks are adapting to this trend and offering cloud-based versions of their solutions.

Typically these are Software as a Service, or SaaS, subscription-based Web applications, which provide a solid subset of the standalone product functionality.

Assuming there is a reliable and always-on Internet connection, and that the accounts are kept in good standing, these online products offer key benefits versus buying and maintaining desktop versions of applications.

Like their desktop counterparts, these online accounting and bookkeeping products can all exchange data with Excel, allowing the import of spreadsheets and the export of reports and data—all of which is of obvious importance to accountants. And because these online packages often lack some of the reporting power and “what-if-scenario” capabilities of their desktop versions, there is even more need for a powerful spreadsheet system that matches the cloud-based solutions being considered.

Because there are many benefits to an online spreadsheet that allows collaboration and sharing, and an ongoing need for desktop spreadsheet programs with the ability to handle larger files—what is needed is a hybrid solution combining a desktop spreadsheet editor like Excel or OpenOffice in combination with a compatible online spreadsheet, working together—not exclusively.

Spreadsheets in the Cloud
Today’s modern browser-based spreadsheet is a fantastic complement to a desktop-based spreadsheet program like Excel or OpenOffice.

When choosing business applications in today's technology marketplace, there are online cloud options available that will save you time and money in the short term, and provide more overall security and protection for your data in the long term.

The ability to run your applications in the cloud means that the capital expenditure, technical complexity and unreliability of running physical server computers and maintaining adequate hard drives and network bandwidth are largely in the past.

However, as any balance sheet will tell you, there is no such thing as a free lunch. Even the products that cost nothing up front have hidden costs such as vendor lock-in or costs associated with the level of control over your data.

Accountants are the original spreadsheet wizards.

The original paper spreadsheet was a bookkeeping ledger, so despite the vast usage of spreadsheets in financial modeling, analytics, and scientific fields, the accounting field arguably depends upon spreadsheets more than any other.

Before computers, paper spreadsheets were often hundreds of thick, labor intensive, and error prone pages. In the 1970s, the first true graphical user interface-based spreadsheet program, VisiCalc, was developed as the first software that provided a visual representation of the printed bookkeeping ledger format.

During the 1990s, Microsoft Excel rose to dominate the spreadsheet marketplace, becoming the de facto standard spreadsheet application.

Circa 2005 a new type of Web application was developed using a new dynamic Web page technology called AJAX—and a new generation of browser-based online applications was born. Shortly thereafter, 2006 Google released its online spreadsheet, as did competitors such as Sheetster and Zoho.

Today, the proliferation of Web based and mobile applications has taken online-only software products to the mainstream. But web based spreadsheets are still not in a position to replace the power of a desktop spreadsheet like Excel or OpenOffice. Because of this fact, it is crucial that any spreadsheet tool have a high level of fidelity in reading and writing XLS and XLSX files – the Excel file format – in order to allow editing of the spreadsheet both online and offline.

Cloud-Based Apps Complement but Don't Replace
Anyone who has spent time in a Web-based spreadsheet will notice the difference in speed and "snappiness" compared to a full-featured desktop product like Excel.

This is largely due to the fact there are many more bottlenecks and vastly less bandwidth available for a Web application to read data from a spreadsheet file. The transfer speed of data from a hard drive to a CPU or RAM is orders of magnitude faster than that same data read over the Internet from a server. That data would have to be converted to a usable Web format like JSON; compressed and transmitted through the Web to the browser; executed in the browser; and then built-in the Document Object Model as a Web page viewable by the user.

Web applications are quickly overcoming many of these issues through optimization techniques and predictive user behavior models. For example, new rows of spreadsheet data can be loaded during idle time or when reading through a spreadsheet, enabling rows to be instantly available while navigating.

That being said, these limitations are far outweighed by the advantages of online documents and spreadsheets:

• The ability to share and collaborate with clients and partners
• The single view of information possible when using a shared document
• The ability to run customized reports, generate charts, and perform calculations available for embedding in company website or as part of email workflows
• The ability to create customized Web applications built from your spreadsheets

The entrepreneurial accountant will find their ability to wield a powerful VLOOKUP gives them a fresh new way to differentiate and add value for their clients.

Controlling your digital destiny means you keep your data—and most importantly, your client's data—on systems that you can control. This means you can always access the documents when you need them, and that business matters and application functionality will not change unilaterally. We've seen what can happen when Google Doc adds (or removes!) features or incurs downtime.

The ability to put Excel skills to use in a Web app, in addition to the ease of collaboration and sharing, makes cloud-based spreadsheet solutions the optimal choice for accountants. In instances when the volume of data is too large for a Web-based editor, the ability of an online spreadsheet tool to export to Excel with a high level of fidelity becomes paramount.

You Always Have Other Options
Ultimately, the beauty of the hybrid cloud approach is in refusing the false choice that leading vendors present, instead opting for a best-of-breed solution that combines the strengths of multiple approaches, while avoiding the pitfalls of lockin and loss of control.

With your data under your direct control and available through applications that you can trust you maintain the upper hand. By installing a Spreadsheet Server to Amazon Web Services or for shared online spreadsheet capabilities, and by choosing a smart combination of SaaS, proprietary and open source options – each when they make the most sense – you earn back the control of your digital destiny.

Given a choice between monolithic vendor lock-in on the one hand, and trusting client data to an advertising company on the other, is really no choice at all. As long as you control your data, you will always be in a position to hold vendors accountable, demand fair pricing, and retain the power of your purchase that will always serve you well.

John McMahon is CEO of Extentech Inc., a developer of Web-based spreadsheet development tools.

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