Web 2.0, SaaS and Cloud Computing: What the New Internet Means for Tax & Accounting Professionals

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Imagine a world with no computers. We might be there again someday soon, but not in the 1850s pastoral sense of “no computers.” Instead, more along the line that we won’t need boxes near or around our desks to perform all of the tasks that we currently rely on such boxes to do.

With the recent explosion of Software-as-a-Service and the Web 2.0 phenomenon, we are well on our way to making such a scenario a reality. SaaS and hosted programs have been offered for around a decade, but only in the past few years have they really matured into the fully-featured solutions that people can rely on for their computing needs, that small business owners can rely on to run their businesses, and that professionals can rely on to provide accurate and dependable client service.

SaaS
In brief, SaaS programs solely exist in a web-based format. They allow users to essentially rent the application for a monthly or annual charge. So, for instance, instead of purchasing an accounting system, installing it on their servers, maintaining and updating it, a business can instead use the program over their high speed data connection. The programs run either through a secure web browser or custom interface, providing the user with anywhere/anytime access to a full strength program. For most such programs, the fact that the program is hosted makes little actual difference to the user in terms of interface and operations, although there are certainly benefits inherent in the SaaS model to both the user and the technology vendor.

Web 2.0
And SaaS is just a part of the larger picture of Web 2.0 and Cloud Computing, which are the continuing evolution of how we use the internet and computer programs in general. Web 2.0 is primarily associated with websites and web tools that promote interactive collaboration, such as Wikipedia, Google Apps, YouTube and social networking sites. According to Tim O’Reilly, the original coiner of the phrase Web 2.0, one of the apparent indicators of the success of such a site is that “the more people that use it, the better it becomes.”

The Cloud
The concept of Cloud Computing is, appropriately enough, at a higher level, reflecting many more things that we do (or can do) involving remotely available information, programs and computing infrastructure. In their February 2009 whitepaper “Above the Clouds,” academics at the University of California Berkely defined Cloud Computing as “both the applications delivered as services over the internet (SaaS), and the hardware and systems software in the datacenters that provide those services. A major component of Cloud Computing is often referred to as utility computing. Instead of users simply having subscription-based access to programs (SaaS), organizations, corporations and other entities can also buy access to virtual machines, storage space and even datacenters, allowing them to rapidly expand their own IT capabilities in very little time, but without the infrastructure and maintenance investment.

Growth in SaaS and Web 2.0
I noted a few years ago that hosted model of computing made sense for developers and for users, but at that time, users were still a little reluctant to place the same level of faith in a remote hosted program than they did in a locally installed one. My primary points then were that the hosted model was more cost-efficient for software companies and more preventive of piracy, while for users there were the very tangible benefits of being able to access the system and data from any location, as well as relief from the burdens of installing, updating and maintaining these programs.

My how things have changed. Current economic conditions have caused most traditional technology providers to experience static or even slightly declining growth, while the SaaS market has experienced double digit growth and is predicted by research firms Gartner and IDC to expand by 20%-30% in 2009.