On-Premise vs. True Cloud Accounting Software

cloud-accountingAs more and more organizations look to "the cloud" for increased accessibility to their data and as an alternative to the capital expense of software and servers, many are considering migrating from their current accounting software. Below are three on-premise accounting software costs that you need to be aware of in order to make a true accounting software vs. cloud cost comparison.

1 - Say Good-bye to Accounting Servers

On-premise accounting software requires servers that need either an in-house staff or outside expertise to:

  • Determine which hardware and operating software to purchase
  • Install and setup all the appropriate software, including the accounting software
  • Install the on-going software patches
  • Perform the software and hardware upgrades when products are no longer supported or at their end-of-life
  • Be responsible for making backups of the accounting software, storing them off-site, and rebuilding the system when a disaster occurs.

Additionally, we have seen many companies lose their data and have to rebuild what they can because of on-premise hardware and software failures.

2 - Mobile Accessibility to Accounting Data

With cloud accounting software, you will no longer need the application to be set up on your workstation or laptop, and cloud accounting software is accessible using internet browsers. This means you can check your inventory from your mobile device instead of printing and working from pieces of paper. It allows executives to view their companies' financial status by using their own pre-designed dashboards without having to be in the office.

3 - Upgrade Versions & Costs

An important cost consideration that we don't see mentioned when discussing on-premise vs. cloud accounting software is the cost for each on-premise software upgrade. For example, on-premise software can have an upgrade about every two years or longer, while there is at least one cloud accounting software that is upgraded four times a year.

Let's say the annual renewal expense for on-premise software is $6,000 and the annual subscription for cloud accounting software is $20,000. The cost for each cloud accounting software upgrade equates to $5,000 if there are four upgrades in one year and the annual subscription is $20,000. Therefore, $20,000 divided by four upgrades would be $5,000 for each upgrade. What then is the cost for each on-premise software upgrade?

If a company usually waits for two major upgrade versions before actually performing the upgrade, which means waiting about five years before upgrading the on-premise accounting software. Though waiting, the company is still paying $6,000 for each of those five years for the annual renewal, so the cost would be $6,000 times five years for a cost of $30,000 for the latest version. The latest on-premise version upgrade cost is six times greater than the cloud accounting's latest version.

Furthermore, the company with cloud accounting software that is upgraded four times a year is always current with the latest functionality of the software, while the company that has on-premise software and waits for two major upgrades is never current on the latest functionality of the software it uses. In addition, cloud accounting software upgrades are the software vendor's responsibility to perform, whereas on-premise upgrades are the responsibility of the company using it.


Consider the Real Cost of On-Premise Software & It's Declining Future Development

When comparing the cost of migrating to cloud accounting software from on-premise accounting software, on-premise costs need to be included to make the best decision. These on-premise costs include upgrades that can be expensive because they include hardware, non-accounting software, accounting software, in-house staff time, and outside experts' time.

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A post by Nickolyn Hansen (1 Posts)

Nickolyn Hansen is author at LeraBlog. The author's views are entirely their own and may not reflect the views and opinions of LeraBlog staff.

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