The host with the most
Online hosted services are experiencing widespread adoption by businesses. NZBusiness shines a spotlight on cloud delivery and how it’s transforming the business landscape.
‘Cloud’ has become the wholesale default word to describe anything to do with business software delivered to computing devices via the Internet.
Put simply, cloud services mean those services where the software, and the support, is accessed through your Internet connection. There is no software physically loaded onto your on-premise IT equipment and that provides a whole suite of benefits for business owners, which we’ll delve into shortly. But is cloud delivery cheaper? That answer coming up too, and it may surprise you.
But first, let’s look at the take-up of cloud computing in New Zealand.
The Frost & Sullivan ‘State of Cloud Computing New Zealand 2013’ report confirms the growing shift to cloud-based solutions by organisations. The report revealed that 63 percent of respondents that currently use cloud solutions planned to increase their spending on such services in 2014 – an increase from 57 percent in 2012.
Of those organisations already using cloud services, 32 percent spend more than 20 percent of their total IT budget on these solutions, while 47 percent devote ten percent of their IT budget to cloud offerings. So the transition is accelerating.
Steven Stanford, New Zealand sales manager for Vocus Communications says the rapid growth in the uptake of cloud computing will be powered even further by the rollout of ultra-fast broadband (UFB). “The faster connection speeds delivered by UFB will enable businesses to take advantage of a wider range of cloud-based services, from hosted applications to complex virtual server infrastructure, desktops and phone systems.
“Smart businesses are building modern, cloud-based IT infrastructures to fuel the unrelenting demand for data, apps and mobility,” explains Stanford. “Innovative applications such as Salesforce.com, Xero and Microsoft 365, are equipping businesses with unprecedented insights, and furthering the mass migration off-site.”
Of course, when it comes to cloud-delivered applications and their benefits – top of mind for most business owners is accounting services. This is where software-as-a-service (SaaS) truly shines. Indeed, Xero is building a global empire on it.
Maria Mullane, founder and managing director of Wellington-based Aspire Solutions, an MYOB Approved Partner and Xero Certified Advisor, knows the practical benefits well. “Undoubtedly, the biggest benefit is the ability to stay completely up to date, thanks to bank feeds and user collaboration. Daily bank feeds provided by MYOB BankLink are a revolution in end user accounting software, with their ability to program automatic coding logic into the system; this means that data entry is significantly reduced, saving up to nine hours per month.
“With desktop-only software it was often difficult and/or too expensive for SMEs to enable multiple concurrent users, whereas the cloud allows for multiple users to be working with the data at any point in time.”
Margaret Holmes of Pukekohe and Tauranga-based Engine Room Chartered Accountants agrees that the SaaS model is about convenience – and access anywhere, any time.
“From an accountant’s perspective it allows us to provide better quality services for clients,” she says. “From a user’s perspective the increased security of data is a great benefit – no longer do they have to worry about doing backups or upgrades.
“One of the biggest problems we had pre-cloud was lost data when business owners didn’t do backups, or didn’t realise their backups were corrupted. We no longer have to worry about whether the business is using the same version of software as us; it is all taken care of in the subscription.”
MYOB’s New Zealand sales manager, business division, Scott Gardiner, reminds us that mobility is also a key element of cloud delivered products. “Many businesses operators spend a lot of time away from the office. Using our cloud range enables them to keep control of their operation, manage payments and get up-to-the-minute reports wherever they are.
“AccountRight users can also work on a version of their accounts offline – for example, while using their laptop on a flight – and have their accounts synced and updated the next time they connect to the Internet.
“Ultimately, our cloud products help business operators gain better insight into their performance – giving them real-time updates that allow them to look forward, rather than waiting until the end of a period to see how they did,” he says.
“Being able to work on-the-go also helps businesses manage crucial issues like cashflow. The ability to send a quote and an invoice while you are out and about – and soon even accept a mobile payment that updates directly into your accounting software – makes an enormous difference to whether you are able to get paid on time.”
So tick ‘accessibility’, tick ‘stress-free upgrades’, ‘compliance’ and ‘security’ – but also, says Kelvin Chen, MD of online payroll provider Crystal Payroll, tick ‘ease of maintenance’ when considering the key benefits of cloud services. “We think that’s a big drawcard. All necessary system updates are performed behind the scenes, automatically, so your system is always up-to-date with both technical and legislative changes.”
Catie Cotcher, GM business group at Reckon, also highlights the maintenance benefits, using their modular Reckon One solution as an example. “It allows us to deliver both new features and entire new modules without waiting for a traditional ‘patch’ or software update to be shipped to each customer.”
So is it all a bed of roses when it comes to adopting the cloud? There are potential issues, as MoneyWorks’ CEO Grant Cowie points out. “The two critical ones are cost and accessibility or ownership of data – especially if you want to move back to the desktop or to a different cloud service.
“In terms of cost, the cloud industry has touted cost savings, but it is difficult to see how paying a monthly fee in perpetuity is more cost effective than a one-off purchase.
“Ownership of data is another difficulty – if you make a spreadsheet, for example, on your desktop copy of Excel, there is no question that the spreadsheet is yours. The same is not apparent for many cloud services, and ownership can be a major problem, especially for vital business data such as your accounts.”
Cowie maintains that the main benefit of a cloud service is ubiquitous access. “However, this comes at the price of increased running costs and flexibility.”
So cost comparisons appear vitally important when considering cloud-based options. Tally up those monthly fees carefully, but remember that there are a lot of variables. Firms NZBusiness talked to say that cloud delivery creates significant efficiencies, which in turn keep overall costs down. The jury’s still out, it would seem.
Another issue, as highlighted by OutSource IT managing director Philip Adamson, is the cost versus speed of communications links in New Zealand. “As the telecommunications providers gradually improve their offerings several other considerations come to the fore.” Namely:
• Can the cloud provider host specific or custom applications?
• What backup and retention is available?
• Where is the primary data centre? Will we be subject to international traffic charges, speed limitations and latency (delays)?
• How easy is it to come back out of the cloud or change cloud providers if things don’t go as well as expected?
EMC’s chief technology officer Arron Patterson has extensive knowledge on cloud computing and he likes it for its ‘pay-as-you-use’ model, eliminating upfront capital for technology infrastructure and leasing costs. That capital can be used for other things. Users get all the features and functions straight away, and they can change tack if their SaaS provider is not giving them what they need, he says.
“This brings in one of the cloud’s challenges – actually getting out of some of these services.” Providers make them easy to get into, but hard to get out of, he says. “So you have to be very sure about a) your ownership rights on data, and b) your ability to access that data and export it at any stage.”
Patterson also sounds a word of caution on costs. “Because it’s a variable utility cost you pay for what you use, and if you’re not careful you can rack up massive bills very quickly.” People can get caught out, he says.
The advice from Reckon’s Cotcher is around data stored offshore. “It pays to check local government regulations around data security and access. We’re a firm believer that the end user owns their own data; and we store seven years’ worth of client data in our secure backups. We also provide the ability for individuals to backup their own data from both our online solution suites.”
And some myths
Ask any cloud service provider if there are still myths surrounding the delivery platform and the word ‘risk’ inevitably pops up.
“There’re people who feel their data is at risk by being held in the cloud; that others might be able to hack and access their financial information,” explains Aspire Solutions’ Mullane. “There are some who take the term ‘cloud’ quite literally, and think that their data is floating around in the atmosphere, as opposed to the reality – it is actually all still stored on a computer, albeit in a far away location!
“Some cloud applications, in the way they deliver their product, make it difficult for people to access data if they chose to cancel their subscription. This is a real problem as people feel that they are being held to ransom and locked into the monthly subscription, which could change at any time, for life! MYOB has done a great job in terms of enabling data to be checked out onto a local machine for ongoing use if a client no longer wishes to pay a cloud subscription, and/or they will allow ‘read only’ access for six months after a subscription has been cancelled. I think this is great for clients who need the peace of mind that the choice is still theirs to maintain a cloud subscription or not.”
Security and privacy have been a concern for businesses in regard to payroll and HR applications, particularly around compliance and complexity but, as PayGlobal CEO Stephen Canning points out, those concerns are largely being addressed by specialised private cloud providers (as opposed to public cloud providers), such as PayGlobal.
“The scalability and agility of the cloud are current drivers,” he adds, “but in the future BYOC (Bring Your Own Cloud), boundary-less computing, new cloud formations and business-led IT will factor into the decision.”
Canning identifies one particular cloud/SaaS myth around pay-per-use. “It’s not just about pay-per-use. Paying for a cloud service on a per-minute or per-transaction basis makes sense for applications that have a short lifespan or have large capacity variations. A fixed monthly or annual subscription-based price may be a better choice for applications that are long-lived and stable.”
Then there’s the myth about Internet speeds and their impact on cloud delivery. There are concerns about the stability of cloud solutions, but Reckon’s Catie Cotcher believes those concerns are largely either redundant or ones that will be addressed in the short-term.
“Fibre to the home is being introduced in many of the main centres around New Zealand, and ADSL2+ is already available in most parts of the country (with VDSL in some areas). Across New Zealand, the average download speed is 19.0mb/s, and upload 8.4mb/s – both of which rank us within the top 50 countries in the world (netindex.com). Furthermore, the Government is invested in expanding ultra-fast broadband access, with a target of almost 98 percent coverage within five years.”
MoneyWorks’ Grant Cowie names two myths surrounding cloud delivery – that it’s cheaper, and safer. On the cost side, he believes a five-year total cost of ownership analysis “will generally debunk this.” He compares his desktop package to a leading cloud-delivered one to demonstrate that “owning is generally cheaper than renting”.
On the subject of safety he has this to say: “If your cloud solution provider loses your data, or goes belly-up, you are still responsible if the IRD comes knocking. For desktop users it is a very sensible strategy for businesses to back up their data onto the cloud, as well as keeping a local copy. But most cloud services don’t allow you any form of local backup, so you are totally reliant on the continuance of that service.”
Contrary to popular belief, the cloud is not for everyone, and if you’re not “in the cloud” you’re not lagging behind – this according to Outsource IT’s Philip Adamson. “I had a client come to me saying they’ve just been to a conference and now realise they should have their email in the cloud. It didn’t take long to show them the pros and cons and explain that if that was appropriate for them we’d have recommended it by now.
“[The cloud] just isn’t the solution to everything that mainstream media make it sound.
“As for the persistent misconception that ‘going cloud’ is going to save you money; in some cases it can, but mostly the spend will be similar, you will just spend it differently.”
Many cloud service providers still offer desktop products – so often a hybrid-type arrangement works best. But where cloud delivery can really shine is in mobile applications.
Catie Cotcher says more individuals and firms are relying on the cloud as a delivery mechanism for both their personal and business requirements. “One of the more recent clients to move to Reckon Accounts Hosted had been a loyal Reckon desktop user for many years,” she explains. However, due to growth in his business and his requirement for mobile access to data on-the-road, desktop was no longer a viable option. He and his wife are based in a rural region of New Zealand, which until a few years ago did not have broadband access.
“Having seen a demonstration of Reckon Accounts Hosted held in outback Australia through a mobile 3G connection, his mind was changed and he moved to our Reckon Accounts Hosted product. Along with greatly enhanced functionality from his desktop software, he is now able to access all his information from his iPad when travelling.”
Cotcher says they are soon to release a mobile application for smartphones that enables users to not only access all graphs and company file information, but even send invoices and check contacts from their Reckon One client file.
Of course the smartphone is fast becoming the rockstar for cloud delivery, and it can even get you out of a tricky situation, as Kelvin Chen explains.
“One of our accountant partners amused us with a tale that demonstrates the online benefits [of the cloud]. Recently, while she was enjoying a bit of time out at her local pub, she received a demanding call from a customer insisting that she complete their payroll urgently, today, now! No problem. She found a quiet corner and simply logged into her Crystal Payroll account from her smartphone and, after some one-finger tapping, the payroll was completed. Her customer was happy and she didn’t have to catch a taxi to her office to sort things out!”
MYOB is another provider offering a mobile solution. It’s free OnTheGo app allows business owners to invoice on the go, manage contacts and see who owes them money.
PayGlobal too has a mobile app, GO, which allows employees to submit leave and allowance requests from their mobile devices.
Unsurprisingly, when it comes to cloud delivered business services, there’re significant benefits for providers too. Maria Mullane explains the advantages from their point of view.
“At Aspire Solutions we are trainers and consultants, helping end user clients manage their own systems with confidence. Traditionally we would make appointments to visit clients in order to troubleshoot any problems they’re having. However, the cloud enables us to be much more responsive and support our clients in real time, before minor problems become major problems.
We are also able to be considerably more cost effective to the client in terms of how we charge for our services.”
Mullane says the responsiveness makes a big difference. “I had a scenario recently where I was working onsite with one client, when I received an urgent call from another. I was able to pause what I was doing, log on to the other client file and solve the problem; then get back to the first job within five minutes!”
Service providers have numerous positive stories to share about the cloud experience.
Engine Room’s Margaret Holmes tells the story relating to the installation of GeoOp, an online job management system, for a new client – an Auckland based electrical contractor. “A few weeks later, when our accountant/advisor Philippa O’Mara went to meet the owner for a management meeting, she discovered he’d gone fishing for the first time in years. He now knew what jobs his employees were doing and could plan ahead. What’s more he could also keep an eye on things from the boat if necessary!”
August 12, 2014