InFirm: Benefits of Hosted Solutions

The “Cloud” and hosted solutions continue to garner interest amongst accounting firms, but there is a lot of confusion about the types of hosting, available applications, and the overall reasons for firms to consider hosted solutions. Our definition of what comprises a hosted solution revolves around firms using the applications, equipment and personnel of an external service provider who’s operations are located in a data center outside the firm’s office, with firm personnel accessing the hosted applications via the Internet.

This is different from a firm building a private cloud, which many firms are doing today and staffing with their own personnel, either in their own facilities or an offsite colocation facility. Whereas, with hosted solutions, firms get the application, an entire support infrastructure and automatic updates and backups.

Just about every firm today is already using some hosted applications, such as online banking/payments and payroll processing, as well as tax and accounting research and forms. Firms are already using or looking at Microsoft’s hosted Exchange at $4/user per month instead of building and maintaining their own Exchange server.

According to a recent Software as a Service Survey conducted by the Association for Accounting Administration (CPAAdmin.org) the two leading hosted applications that have contributed the most to optimizing firm productivity are Xpitax’s XCM workflow solution and Thomson Reuters’ GoFileRoom document management.

In addition, CCH is expanding their listing of hosted applications and Thomson Reuters’ Virtual Office offering hosts their entire suite of accounting productivity tools along with QuickBooks and Microsoft office, so the combination of what applications that firms want to run in a hosted environment are almost endless. Firms are even having their entire network hosted by an independent local network integrator in their own data center and national integrators like Cloud9 Real Time and Xcentric host the entire network infrastructure and all the firms’ custom applications in their facilities.

In general terms, when the cost of a hosted application is less than what the firm is paying to run it themselves, and that application is more secure and better supported, the firm should consider transitioning to the hosted application and below are ten benefits provided by hosted applications for firms to evaluate.

Reduced Costs: Hosted solutions have the ability to bring together enterprise resources which can be shared and reallocated as needed to a larger number of clients, which can be delivered at a cost that is less than what a firm would pay to build and maintain the same server infrastructure. All the servers, storage, connectivity and licenses are managed by the vendor so this reduces the administration required within firm to do so onsite.

Managed Cash Flow: Hosted solutions usually charge a fixed monthly fee per user for access, which helps firms manage their cash flow better and simplify their budgeting process. This allows them to pay just for the services they use instead of incurring significant capital expenditures. Since the functional window of a server is four or more years, firms project the maximum capacities they could require which often leads to over-buying some components that are not fully utilized or having to add components that were not planned for at a later time.

Scalability: Most hosted providers have “utility pricing” which allows the firm to easily add additional licenses and users when needed such as during busy season, as well as reduce the user count when those licenses are not needed during the summer. This can be very valuable when considering a merger as a large number of new users can be installed into the firm’s hosted applications on very short notice to insure a faster integration into the firm’s operating environment.