Cloud-Based Accounting vs Local-Host Accounting Software
Before starting up a new business, you might need to spend some time for surveying which Accounting Software or ERP System in Malaysia that you would like to apply to monitor entire business process, cash flow, reports and more. When searching for the accounting software solutions, one of the most critical factors in your decision will be whether you choose to deploy in-house server or in the cloud server.
Cloud-based accounting are more common now in Malaysia. Today, nearly every Accounting Software and ERP Software vendor are offering cloud database hosting service and full cloud-based accounting solutions, and some vendor package with their Windows application, for example, QNE Accounting Software.
However, there are still some vendor in the market did not managed to development or enhance their solutions to cloud-based and maintaining on-premise Accounting System with the use of remote desktop server feature for wide area network connection. By doing this, users are exposed in risk for ransomware to block their access to server data. The disaster happens in Malaysia back in 2016, many companies have no option but to pay the sum of huge amount just to restore the data from the ransomware.
But there are still several reasons why a small or midsize business might choose a traditional on-premise accounting or ERP system, such as high up-time, risk-free for poor internet bandwidth and flexibility on data backup. But which one is right for your organization? Well, only you can make that decision, but this rundown on the pros and cons of each should make it easier.
By knowing the advantages and disadvantages of each type of Accounting and ERP system, business owners can determine the best fit for their small medium business, allowing for a more informed allocation of resources and a more efficient system workflow.
Deployment and Pricing of Cloud-Based accounting vs. In-House Server accounting software
The biggest difference between these two systems is how they are deployed. Cloud-based Accounting is hosted on the vendor’s servers and accessed through a web browser. In-House Accounting Software is installed locally, on a company’s own computers and servers.
Some vendors also offer “hybrid” deployments, in which cloud software is hosted on an organization’s private servers, such as QNE Accounting Software business solution.
Another key difference between cloud and on-premise solutions is how they are priced:
While there are many exceptions to this rule, in general, cloud software is priced under a monthly or annual subscription, with additional recurring fees for support, training and updates.
In-House accounting software is generally priced under a one-time perpetual license fee (usually based on the size of the organization or the number of concurrent users). There are recurring fees for support, training and updates.
Thus, in-house accounting software are generally considered a capital expenditure (one large investment upfront). Cloud-based accounting, on the other hand, are typically considered an operating expenditure (an additional overhead cost the organization will continue to pay).
Cloud-based accounting software’s low cost of entry, especially compared to hefty upfront perpetual license fees, has contributed to its widespread adoption. According to one recent study, 93 percent of enterprises currently use cloud-based software or system architecture, and use of hybrid cloud systems increased from 19 percent to 57 percent in one year make it the most popular accounting software in Malaysia.
Over time, however, system costs tend to converge. Below is a chart showing total costs of ownership (TCO) over 10 years for both cloud-based and on-premise software.
Advantages and Disadvantages of Cloud-Based Accounting
Security is often the top concern for prospective ERP buyers. Small wonder, considering the critical the information stored in an ERP system—including company financials, corporate trade secrets, employee information, client lists and more.
But while buyers once were wary about the security of cloud-based accounting, many are becoming less skeptical today (evidenced by the adoption rates above).
Reputable cloud vendors have strict standards in place to keep data safe. To further ease concerns, prospective buyers can seek a third-party security audit of a vendor they’re considering. This can be especially useful if the vendor is less well-known.
Most cloud systems enable easy mobile accessibility, and many even offer native mobile apps. But this ease of access also comes with greater security considerations, especially if employees are accessing company files on their personal mobile devices.
Similarly, more accessibility means less customization—and cloud ERPs offer less flexibility for businesses that seek to tailor their system to their hearts’ content. But organizations with less specialized needs, such as general consulting firms, can get by just fine with a cloud system’s out-of-the-box capabilities.
Cloud ERPs are therefore best suited for small and midsize businesses seeking lower upfront costs, system stability and ease of access.
Here’s a breakdown of the pros and cons:
Advantages and Disadvantages of In-House Accounting System
You’ll typically find many of the same features in an on-premise ERP system. However, there are a few notable differences in the two deployment strategies.
In general, on-premise systems are much easier to modify. The ability to customize to their specific needs and requirements is paramount for many organizations, especially in niche industries, such as specialized manufacturers with unique processes.
On-premise ERP system put more control in the hands of the organization, up to and including the security of its data. It’s therefore essential that a business be capable of safeguarding an ERP system most sensitive information, also made it a frequent target of cyber criminals.
Mobile accessibility can pose an issue for on-premise deployments. These often require a third-party client to communicate between a mobile device and the on-premise software. It’s definitely not an insurmountable problem, but it can be a pain point.
On-premise ERP system are therefore best suited for larger enterprise businesses with higher budgets; a desire to customize system operations; and the existing infrastructure to host, maintain and protect its ERP data.
Here’s a breakdown of the pros and cons:
Conclusions and Next Steps
When it comes to choosing a new Accounting System or ERP System, there are more options than ever for businesses of all sizes. Cloud-based accounting deployment models have made this software more accessible for Small Medium Business and Enterprise, though these systems come with a few drawbacks, such as more limited customization and potential security concerns.
Conversely, local host Accounting Software or ERP Software offer advantages in customization and control, but are more expensive upfront, and many don’t support mobile. This can be problematic for smaller buyers but, as is usually the case, it depends on the specific needs of the individual business.
But there is a hybrid accounting software solution developed locally to overcome the Cloud-Based Accounting and Local Host Accounting Software problem. With the hybrid solution, many businesses can achieve the expected result in cost effective ways which brings highest value to the business also the users.