Get onboard with the digital revolution! Are you in the cloud? You are not still using desktop software are you? It’s all about the SaaS, Paas and IaaS. Make sure the systems you choose are API-friendly, and they need to be RESTful.
Across industries from education to healthcare, to insurance, the same buzzwords and acronyms can be found. The accounting profession is absolutely no different. So what does all this actually mean, and how relevant is it for your business?
Firstly, let’s start with some of the basics, and don’t be shy to admit that you might be a bit confused.
What is ‘the cloud’?
Technology needs infrastructure to run on. Historically, you might have purchased software and it came on CD-ROM disks, or was downloaded from the internet, and you would load the software onto your computer and hey, presto! Off you went.
If it was enterprise software, (ie being used by multiple people across a workplace) you may have needed some servers, perhaps an underlying database, and it would all be wired together to create a local network. Of course, not many of us know how to do all that, so we would hire a tech services company to come and manage this for us. When it needed upgrading, the whole process would begin again.
The cloud has taken all of that away. Rather than software being created and shipped out to customers, a cloud-based software provider has written the code for their application directly onto a master server sitting in a datacentre, managed by a cloud services provider such as Amazon, Microsoft, Oracle or Google.
The user accesses the software via the internet, through a web browser and/or via an app on your phone, hence the term ‘SaaS’ or Software as a Service. It means rather than buying software, you rent access to it, usually for a monthly or annual fee.
This provides significant benefits to the software provider and customer:
• Lower costs: access to the technology infrastructure for the software company can be ‘rented’ rather than ‘purchased’, lowering the barriers to entry. In tandem, the cost of ‘compute’ (the cost of running the actual computer processing) has fallen dramatically. This has generated an explosion in innovation, hence the terms ‘fintech’, ‘digital disruption’ etc. It’s just lots of clever software developers are creating new applications for you to consider using, all built on cloud technology.
• The ability to scale up quickly: it’s as easy as adding some more rented capacity. No need for shipping, upfront purchasing or concerns about datacentre capacity.
• Security is enhanced: (contrary to many beliefs) as the software company can leverage the gold-plated infrastructure of some of the world’s largest companies.
• The user can always access the latest version of the software: enhancements are released into the one version sitting in a cloud datacentre, and all users can access it as soon as it is available. No more need to buy upgrades each time.
What are ‘APIs’?
If you are running more than one piece of software, in the past you would have experienced the pain of getting key bits of data to flow from one system to another. For example, you might run a Client Relationship Management (CRM) system, as well as some core accounting software. If you were to update a client’s details in the CRM system, it would not flow into your accounting software. Different technologies would try and solve this by creating various data extraction, upload tools and download data into a CSV file, massage it into the right format and upload it to another system. This was fraught with pain and error.
As a result, many applications would be vertically integrated, meaning they would try and perform all the basic functions you needed inside the one application. Often that meant being good at a core function (eg books and records) and poor at ancillary services (CRM, reporting, etc).
The Application Programming Interface (API) has changed this. The API becomes a simple, standard way that data can flow between applications, either real time or on demand. For example, your accounting system has all the accounting records for your client, these are exposed via a set of APIs, meaning that another system can ‘call’ this data, knowing it will always be in a defined standard format and then use that data to develop its own specialist services. Think of it like the plugs and cables that enable data to flow around the internet, the same way electricity flows from a generator to your appliances.
This freedom of consistent, valuable data flow has created a huge industry in specialist providers building value added software solutions.
The cloud marketplace
The proliferation of new cloud-based software, with standardised data flowing between applications via the APIs, has created the opportunity for the cloud marketplace.
The marketplace is a collection of different software applications, competing or complementary, that have all been established to consistently communicate with a core set of data, and potentially among themselves. Innovation is occurring across all technology-based industries. Companies such as Xero and MYOB are just two of many, leading this revolution in the accounting industry.
From the marketplace of your cloud accounting software provider, you may add on advanced reporting apps, expense/receipt managements apps, HR systems, CRM systems, email marketing and more. The value of the marketplace comes from the fact that the hard work has already been done, with the software providers connecting the systems ready for you to access.
There is now an emerging category of cloud marketplace providers operating independently of any specific underlying software provider. These specialist marketplaces curate the quality of applications, connect and test the integrated solutions, and make it easy for you to manage a single point of billing and support. This will become more and more the way we do business in the future.
So what does this mean for your business?
The cloud, APIs and marketplaces have transformed how you can do business. You can gain access to the latest innovations relevant for your industry and mix and match the best of breed solutions to create the technology backbone of your practice, all without the need to worry about desktop software, infrastructure, local area networks and software service companies.
Of course, with this new wave of opportunity comes confusion. Read the peer reviews of software (all good marketplaces will have customer rankings and feedback), seek the opinion of your peers and industry experts, and don’t be afraid to try some of the tools for their free trials and throw them out if you don’t like what they do.
This wave of innovation also creates a revenue opportunity for advisory services with your clients. By understanding the ecosystem around core accounting packages, you can help your small and medium-sized business clients select applications, build processes and potentially manage these for the client. For example, an online retailing business will need help with e-commerce tools, billing, reporting and analytics and debtor management. All something an accounting practice could assist with if you have built the expertise.
Embrace the cloud, the APIs and the acronyms. It is less scary than it sounds and has the ability to transform your and your client’s business.