Q1. How much application development taking place today is in the cloud? 90% maybe? Let’s take a conservative guess at 80% for now.
Q2. What percentage of companies financial transaction data is still on-premises (as in hosted on companies own PCs or servers)? This is a tougher one to answer but let’s have a look at some of the factors..
Adoption of cloud-based financial accounting SaaS such as Xero, Quickbooks Online and MYOB has been largely in the sub-five user, micro business segment. For these businesses, many of whom have either come into being in the ‘cloud-era’ or are small enough to be able to easily change the systems they use from on-premises to cloud, the cloud makes sense. It’s low cost (or free), there’s no upfront cost for hardware or licences and – importantly – for a micro business, the functionality is sufficient for what they need.
So what about the rest? Well, for the SMB and Enterprise sectors, many – we think most – have stayed right where they have been for years – using on-premises financial accounting software.
What’s that based on? Firstly, let’s take an example of a typical SME that’s in existence ten years and has fifteen employees. When they first set up their business one of the first things they’ll have needed was software to run the business on – at the absolute core of their business is the financial transactions which are the most valuable data in any organisation that buys and sells. This business will have purchased Sage 50, Quickbooks (desktop) or equivalent.
Maintaining these systems is relatively pain free – some will upgrade regularly, some won’t; some will have a reseller / consultant in place for support and others will look after themselves. Other dependencies on the system in use include external accountants / bookkeepers – who may have had a hand in what was installed in the first place.
Secondly – consider the effort for this business to migrate to a new, cloud based service. There will be migration of data to consider, set up of any processes and workflows, accounts payable, payroll, ledgers, stock / inventory, training of users (who are happy enough with what they have) – the list is long and the process painful and all this to switch to a service that may be far less feature rich than the starting point.
Lastly, while the cloud industry has won a lot of arguments around security, business owners are still inclined to keep the really precious stuff close to hand – and the financial data is the crown jewels of the organisation.
So to answer Q2, we think over 90% of businesses still use on-premises software for their financial accounting. If you were to look at the number of transactions that are completed on-premises versus online, that number could be as high as 98%!