The accounting software market is about to change.
Take a poll of chief financial officers and controllers about their experiences selecting and installing accounting software packages and you will probably hear comments like “it was a significant investment in time and money.”
Or, “We ended up replacing or upgrading most of our network to make the software work.” Or, “The system we wanted was too expensive so we ended up trying to make a cheaper system work.”
The way companies select, implement and operate their accounting systems is about to change.
The IT industry loves acronyms like ISP, TCO, and ERP. Here is another one, ASP.
ASP stands for application solution provider, and it is making headway through the enterprise resource planning (ERP) and accounting software market.
The idea is simple but powerful. Instead of installing and running software on your in-house server, you access your application from your desktop PC on a server running at a remote location. To understand why this concept is so powerful, we need to look at the problems with existing software applications.
Today most of the multi-user accounting packages are client/server based. That means the accounting data is stored on a central server and most of the processing is performed at workstations called clients. This architecture has a major weakness. Servers tend to bog down internal networks as a vast amount of accounting data is passed back and forth from the server to the client. (If you have been unable to send or receive E-mail because the accounting department was closing the books, you understand the problem.) And because the workstation/client sitting on your desk is actually doing most of the computing work, it is not unusual for an accountant’s workstation to be bogged down for hours processing CPU intensive tasks like posting or report generation.
To increase throughput and eliminate bottlenecks, the only answer so far has been to spend more money on faster and more powerful hardware.
– Server-Based Computing
An Alternative Model
To overcome the shortcomings of the client/server architecture, a new model was invented. This type of computing is called “server-based.”
As examples, Microsoft’s Terminal Server Edition of its operating system NT or Citrix’s Metaframe software allow all the computing in a client/server environment to be performed solely at the server. Only a very minimal amount of data representing changes to users’ screens are returned over the network. Likewise, only mouse clicks and key presses at the users’ workstations are sent back to the server. This architecture dramatically reduces network traffic. No actual database records are sent out over the network.
With built-in encryption to secure the screen images, you can use the Internet as your network within your office or across geographically dispersed sites. Got an old 386-style computer sitting in the corner? With a server-based model, even a 386-generation computer can be a workstation and do the same work as a Pentium III computer. Server-based computing can dramatically reduce hardware costs.
Server-based computing also radically changes the way software can be deployed by a company.
It’s now possible for a company to outsource its computing needs. ASPs have responded by building state-of-the-art data centers to where a company can rent a server. As a business’s needs grow, it can rent more capacity.
This also allows companies to replace major capital expenditures with pay-as-you-go operational expenses. Companies can also avoid hiring expensive network support staff, since the ASP now maintains your server.
Thinking about E-commerce? By hosting your accounting package and your Web site at the same ASP, you can enjoy a fully integrated E-commerce environment.
– Software Licenses Also Available For Rent
To complete the pay-as-you-go scenario, some ASPs are also offering software licenses on a rental basis. By bundling the software with the hardware, a company can now avoid the major capital expenditures required to install a state-of-the-art enterprise resource planning system or an accounting system.
Early adopters of the ASP concept are small and midsize businesses that don’t have the IT resources or deep pockets to implement enterprise software packages on their own. Or, they are start-up companies that don’t want to make the costly investment in hardware and software when money could be better spent developing their products.
Hosted applications are also ideal for start-up companies because they can get all the software tools they need like ERP, human resources, customer-relationship management solutions, as well as E-commerce applications without the up-front investment.
Pricing varies widely among ASPs. The ASP and software rental market is in its infancy, so IT managers and accounting departments need to be careful about what selections are made. Some ASPs charge a flat implementation fee on top of a monthly per-user rate that depends on the type of service.
Many offerings are still being negotiated customer by customer, so it is important that agreements with ASPs are clearly defined in terms of customer support, expected down-time and service levels.
– Considerations When Selecting An ASP
When selecting an ASP, you should examine several issues.
First, you want to look at your business needs and find an ASP that offers services that match.
Second, you should examine the providers’ service level offerings. You should expect a high level of availability from the ASP.
Third, look at the ASP’s financial strength. If you aren’t paying the up-front costs of providing the service, who is? Make sure that the source of financing is secure.
Fourth, get comfortable with their technical infrastructure. ASPs are supposed to have a better IT infrastructure than their customers. If you’re not green with envy after checking out their data center, pick another provider. Also make sure you understand how your data will be secured and segregated from other company’s data.
Finally, when renting an ERP or an accounting application, be sure that your ASP has previous experience with your application, knows how to manage it, maintain it and update it. Make sure they have procedures for adding new users, and implementing software revisions. Many ASPs are willing to host your accounting application, but few know how to maintain it or even install it. Ask if they have been certified with the software vendor to install and maintain your particular package.
Van Landingham is director of sales for the San Diego-based RoseASP.