Cloud Computing & Accountants

In tech publications, forums and even here at CPATechAdvisor.com, the world seems to have gone crazy over the idea of “cloud computing.” But before we go marching lock-step down this particular road, accounting professionals need to take a hard look at the benefits (and the problems) of cloud computing.

The concept of “cloud computing” isn’t as foreign as it might seem at first. Basically, there are three types of services: infrastructure as a service, platform as a service and software as a service. In all three cases, the concept of the cloud is that we take the service off of the desktop and put it in another location — or distribute it over many locations — for access by the Internet or other network.

Thus, you can have hard drives and printers that are in the cloud as your infrastructure. Your operating system may be accessible through a web browser. Major forms of accounting software are already operated as online services.

Sound familiar? It should be. It is basically the resurrection of that old, nasty mode of computing called client/mainframe. That is, we’ve put a modern, Internet-style spin on client/mainframe computing, much in the manner of putting lipstick on a pig.

Client/mainframe computing has been dead for a couple of decades now, except in the most insular of environments such as mega-corporations and educational institutions. For those who may not remember it, client/mainframe was a style of centralized computing that effectively gave the organization better control over its data, better security, more streamlined workflow and substantially lower costs.

But it had a down side, too. Centralized control meant that every single application had to be approved, with no exceptions. Innovation was almost non-existent, and in fact most of the applications we rely on today — from spreadsheets to financial calculators — didn’t exist in the client/mainframe world.

The newest version, “cloud computing,” goes even further. If this is implemented and universally adopted, you would have restricted choices in infrastructure, operating systems and applications. These would be chosen for you by the High Priests of the Cloud, with no exception. You would not own your own data and may not even know for sure where that data is. Client files, tax returns, compliance attestations: All would be stored somewhere or everywhere in the cloud.

And they would be subject to review by persons with a higher security level than yours. For purposes of security and operating efficiency, your data and that of your clients would be perused, audited and reviewed. In fact, if the data happens to be stored in a country whose laws are different than our own, there is no limit to who may have access to that data.

Of course, many of the companies that currently champion this vision of “cloud computing” have openly declared that they would safeguard your data and keep the “cloud” open to innovation. These are, for the most part, large companies that have built a reputation for reliability. But remember that even the best of intentions will falter under a government mandate, even if the “cloud” you are using is designated as private. Or under threats, or by bribery. An easy way to think about it is this: How badly do you wish to have your client data stored on a server in China? Or accessible to the Russian mafia?

Cloud computing may, in fact, offer such substantial benefits that we should rush to embrace and advance it. But it would be foolhardy indeed to push into such an environment without a clear resolution of as many of the unanswered geopolitical, security and innovation concerns that have already been noted with respect to operating in a cloud.

For today, the path for most accounting firms is clear: Move into the cloud slowly, cautiously, reading the fine print and being mindful of how client and firm data is safeguarded.