Cloud Accounting Software, the Next BIG Fail How to avoid it

Did it happen?

First, this sounds ominous. Surely, you have heard of how and why Cloud Accounting will be the way of the future. And, businesses not moving to the Cloud will be like the dinosaurs. Guess what. Fast forward to 2019 and we still see Cloud Accounting struggling to get market acceptance.

Companies that were pure Cloud play went away like the Dodo bird. A good example is the buyout of NetSuite by Oracle.  You also see that SAP is still very much dependent on their traditional licensing model which is based on their classic non-Cloud products.

Many software vendors report glowing success with their Cloud solutions. Somehow it is hard to believe since it is always phrased in a manner that does not lend credibility. For example, 50% year on year increase. Dissect this and you see that if they are at ground zero, a small number of sales would have been seen as big changes in the percentage. Or, some would offer creative marketing bundles where purchase of their standard products comes with free Cloud versions. They then reported this as Cloud sales. Now, this would have been a great move if they were to provide statistics on the number of customers switching over.

The answer is clear. Businesses are not adopting Cloud Accounting in droves. And, this is not helped with the frequent hacking and leaking of data. Yes, some of these are from on premise deployments but they were plugged to the Internet, directly or indirectly. Somehow this muddled the issue. This fear, uncertainty and doubt prevail and hence detract businesses to switch.

It is true that Cloud Accounting is still on the ground floor. Any hype that it is not is just that, hype.

Why the Hold Back?

The urgency and the justification to switch from what works has to be compelling. All the frequently touted reasons favoring Cloud Accounting fail to take into consideration the most important factor which is cost.

Cost is the biggest holdback. Many software vendors thinking behind Cloud Accounting is that they have a product that customers want. Unfortunately the need is not in the equation.

In the absence of need, the persuasion has to be even more attractive. Therefore, the pricing of Cloud Accounting cannot be the sum of all costs amortized over a given number of years. It has to be revolutionary. It has to be a loss leader.

Once traction takes place and becomes a commodity like telecommunications then pricing can reflect the true cost of the service. Until then, pricing should be like those new breed of internet businesses where the company has to bleed cash to gain market share.

The Magic Pill

If ever there is a magic pill to make Cloud Accounting usage becoming ubiquitous, it has to be a drastic change in pricing strategy. Technology is a given. With a bit of effort, software companies can create solutions that runs faster, runs on any device, boasts of inter-connectivity, even sing and dance. However, to get businesses to take the gamble and make the switch it has to be the “no-brainer” cheaper factor.

To do this, the big players stand a better chance of making a difference. It is unlikely we will see smaller players, even if they are pure Cloud play now, making a dent into the adoption rate of Cloud Accounting. But do the big boys have the foresight and the gumption. Are they willing to eat their own dog food?

In Summary

There will be a consolidation phase in the market once the big players understand that they need to step up their aggressiveness to see success in their Cloud offerings.

 

Until then, the market for Cloud Accounting will be a niche solution for selected businesses.

[Footnote] The author has been involved in computerized accounting software since 1983. He has witnessed the lifecycle of technology, participated in many new paradigm shifts and even promulgated Subscription Pricing which is the heart of Cloud Accounting services. This is an opinion piece based on his observation of the state of Cloud Accounting today.