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Opinion: Cloud Computing - not just a fad

3rd Aug 2009
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Don’t listen to those who stir up fear, uncertainty and doubt around Cloud Computing. Technology’s latest disruptive wave has history on its side, argues Liquid Accounts managing director Matt Holmes.

“It’s too limited!” “It doesn’t work the same!” “I don’t understand it!” “It’s not safe!”

You may think that I’m talking about the “new and scary” Cloud Computing or software as a service (SaaS), but whilst these are some of the things that people are saying about the new online technologies, I’m actually talking about some of the things that were said about steam trains when they were the latest technology.

My point being, that whenever a new disruptive technology comes along that’s destined to revolutionise the way we do things and render old technology obsolete, this is people’s first reaction.  In some cases, it’s a fear of the unknown, but in a lot of cases it’s scaremongering on behalf of the people who rely on the existing technology and can see their livelihoods slipping away from them. 

And I don’t blame them, change is always scary. Going back to my train analogy, if we look back at how things played out, we can see that the online technological revolution is already a significant way down the same path, and there can only be one conclusion. 

Steam trains didn’t just arrive on the scene in the 19th Century out of thin air.  They were a product of their time.  Many people had come up with the same sorts of ideas to improve transportation by drawing together several different existing ideas and trends. Just as the waterway network, track technology and steam engines paved the way for the rail network, Cloud Computing has been born out of the convergence of broadband provision and more flexible working practices. Online business software is just one more web-based phenomena alongside Twitter, YouTube, Facebook, Flickr, iTunes, Wikipedia and Google.

The first steam trains ran on a circular track, like a giant train set – think of beta testing software or early applications that worked online but didn’t do very much.  Initially, people were convinced that they could die from travelling so fast and that there wouldn’t be a mass market for trains because there wasn’t a network of tracks to run them on.  At this stage trains were an unproven technology – slow, expensive and unreliable and many couldn’t see the need for trains when they already had canals.

But then pioneers started to build railways and make use of steam trains in industries built around moving large quantities of heavy goods such as coal and people started to recognise their potential.  Most customers started out by using a combination of steam trains and traditional horse-drawn trains, but steam engines began to prevail because they could haul bigger loads at higher speeds. For a while steam trains and canals continued to coexist with trains mainly carrying passengers and light goods and canals bulk items.

Then, as people began to see other advantages to railways - package holidays, newspapers and post, commuting, and even the standardisation of time - they started to build railways everywhere, mainly financed by industries that wanted faster delivery, bigger quantities, reduced costs, and access to bigger markets.

This is process we’ve seen over the past four years at Liquid Accounts. Our early customers were mainly people who had a specific need that wasn’t being addressed by offline software, others wanted to try it alongside their existing software in order to compare them.  Now, however, people are using online apps for all sorts of things and every coffee shop, train station and airport has Wi-Fi. While online software is gathering momentum, it is still seen as just an alternative to offline software. 

We’re seeing more and more companies coming into the online market place, lured by exactly the same benefits as the railway companies 150 years ago – faster delivery, bigger quantities, reduced costs and access to bigger markets. Liquid, for example, has picked up clients in Ireland, Switzerland, New Zealand, South Africa and the Far East, just by being online.

Looking back at what happened on the railways, there were three outcomes:
1.    The existing technology (canals) went into decline and never recovered
2.    Trains became the dominant technology
3.    The winners were those who embraced the new technology and kept adapting with it.

Before all that happened, there was an almighty fight, Backed into a corner, the canal companies  did all they could to undermine the image of train transportation. They dropped their prices, they pointed out the problems, they said it wasn’t mature or established and warned of the risks involved. Sound familiar? But the real problem was that canal hauliers couldn’t change what they did - they couldn’t get a boat that went as fast as a train!

Yes, there were teething problems. Lines were owned by different companies with different prices, rules and standards (or they didn’t even join up at all). Nor were there any timetables. But what everyone had forgotten was that the same issues had cropped up when canals were the latest thing.

Once the rail network began to expand, it became quicker and cheaper to lay more track and quicker and cheaper to transport things by rail. The train became the dominant technology until cars and planes came along.

What we’re talking about here, is technological revolution, rather than evolution. Throughout history you can see the same processes and protests happening over and over again. Modern ‘Luddites’ who are spreading mistrust and misinformation in order to try and hold back the tide of change (such as the recent AccountingWEB piece Don’t overlook the risks of Cloud Computing) are, like the canal companies of the 19th century, fighting a losing battle. Within days of this particular article Microsoft had announced its own plans to enter the Cloud and the company’s UK applications marketing director had left to join online pioneer, Xero.

Cloud Computing isn’t its infancy. has been working in the Cloud for 10 years, and Liquid is in its fifth year. Yes, it is still an emerging market without clear standards and expectations, but these elements come later on in the process. As we saw with railways, people didn’t realise they needed timetables and uniform pricing structures until regular train services came along. Any responsible, serious and mature Cloud company will have already thought about and addressed the issues around data hosting, service agreements, customer exit strategies and security. For example, which is more likely to lose its data? A company with an out-of-date, unmaintained server hidden away in a cupboard, or a Cloud company using a managed, state-of-the-art, bomb-proof, climate-controlled data centre?  Upgrades may happen at inconvenient times, and cause issues, but this isn’t an issue exclusive to online software - just ask Microsoft customers. And in the Cloud, you’re being kept up-to-date and won’t have to deal with additional costs and huge changes once your existing software eventually becomes obsolete.

And would you rather have the new VAT rates there ready for you on the day they come into force, or two weeks later when your offline software company manages to send something out to you?

The idea that under the Cloud model “the software cannot be changed, making it more difficult to customise or integrate it” is completely untrue. If anything, Cloud technology has the potential to give companies more flexibility, customisation and integration. The development of new kinds of middleware are adding a new refinement to this disruptive technology; we’re just getting to the point where the different Cloud companies, like the rail companies before them, are starting to work together to create a joined-up network.

Cloud computing in the 21st Century, like railways in the 19th, is creating a revolution, but this time in transporting data and virtual goods along invisible tracks, rather than physical goods along real tracks. I for one am glad to be along for the ride.  There will be problems along the way (a man was run over and killed at an early competition to choose a steam train design, but it didn’t stop them being developed!), but we’ll learn from our mistakes and keep improving.  But I would say that wouldn’t I?!

About the author

Matt Holmes (as well as being a bit of a train and canal spotter) is chair of the BASDA Special Interest Group on Cloud Computing and the managing director of UK online accounting developer Liquid Accounts, which won the  Web-Hosted Accounting prize the 2008 Software Satisfaction Awards.


Replies (10)

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By jon_williams
03rd Aug 2009 14:52

Easy Swipes, but real benefits
Some good points are made here.

It's easy to point out some big-boy outages such as those at Google a few months ago, but the benefits of cloud use are very strong when compared with alternatives. It's amazing how many "server in cupboard" and "we take daily backups" stories we hear. Backups where the tape travels across to the other side of the office, or to the top shelf, are numerous. Another classic is lack of going through the restore process regularly to ensure a server can really "be brought back". Only after a problem is it found not to be possible.

A hosted approach dramatically decreases the risks compared with home-spun IT. Professional hosters typically provide regular SAN-based backups and backups to secure off-site storage as well as secure local storage. It makes it easy for companies accounts systems to be hosted in a secure and well managed data centre (We host multiple Sage systems for different customers for example). Not only this but solution vendors supplying services can provide their services as on-line cloud services (example

I think that we'll see not only increasing use of cloud services but also more "hardening" of existing systems through the move for placement of internal servers into online virtual servers (very low price with all the benefits of cloud-based dedicated servers). This supplements the continuing move to hosted dedicated servers - companies securing their data and operations, and limiting their liabilities through improved diligence.

Very interesting times.

Disclosure - we are a professional hosting house, also providing some SaaS. We are agnostic on Accounting and CRM/ERP solutions we host - it's important that any solution matches the real customer requirements. Our business is in keeping your business performing and online at all times.

Jon Williams,
[email protected]

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By surebooks
03rd Aug 2009 16:26

SaaS/Cloud Uptake considerations
Acceptance of new systems is generally the outcome of sufficient critical mass (significant takeup) to ensure new people feel comfortable with the technology

This is where a sucessful launch of Sage Live could have done wonders for the whole perception of SaaS/Cloud because it would have reinforced the credibility all round and by association brought many more to the market; it was just disappointing that it did not go as planned.

Of course there are detractors but generally they fall into one of two camps - either those with existing desktop software who feel threatened or those in the media who sometimes feel obliged to file a cautionary note. There is nothing really wrong with the latter because they provide a few caveats nevertheless there are limits to constantly knocking SaaS/Cloud and after a time it becomes rather repetitive.

Certainly for SME's the benefits of hosted approach are considerable in terms of cost, maintenance and worry. Futhermore to offload their accounting, human resources (HR) etc. problems allows them to concentrate on why they started the business in the first place and not spend all their time maintaining their systems.

On balance SaaS/Cloud is the way forward for the future and the pace of this technology is increasing at an ever increasing rate.

James Chrimes
Managing Director
SureBooks Online Accounting & Human Resources

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By carnmores
04th Aug 2009 16:27

you can talk it up till your blue in the face thats what Mandy
your analogy with trains and canals is absolutely wrong and typical of the huff and puff

it is perfecty reasonable for people to want to work on their hard drive as opposed to online software especially as not everybody wants constant upgrades etc

i am not convined that it will win out in the long term tho it will ceratinly win in a lot of specific areas

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By User deleted
05th Aug 2009 12:03

nEW tecknology
you no, with sum upgrades on your systim, you cud have spoll checker and even a CAPITALS key, but I suppose that would be just a little too much progress.

Oh and punctuation, there's another modern invention.....


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By raybackler
05th Aug 2009 14:32

Trains and Canal Boats
You are so right in your article. So many people decry new technology and then wonder where their business went. I remember companies who refused to allow salemen to have mobile phones and then wondered why customers went somewhere else. I remember companies who refused to invest in e mail and look where that got them when they relied on snail mail. We live in a world of online collaboration. Online systems allow clients to collaborate with their clients in real time, so they can help with current issues, rather than provide some outdated historical service that calculates the tax and complies with the statutory accounts requirements, whilst adding nothing to client's businesses.

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By geoffwolf
06th Aug 2009 11:34

I understand the concept
of online accounting or bookkeeping.

Please explain how it currently links in with all the taxation systems and databases that I currently use.

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Andrew Grant
By grant170479
06th Aug 2009 11:35

So What do you do online then?
I note the point about allowing online collaboration rather than simply preparing historical data. This does provide a more attractive service to 'sell', so what do you actually do online with your client base that has becomeor is becoming a core service offering?

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By jairorojas
06th Aug 2009 12:23

Good Article Matt
Matt, very good article. It will generate debate which is what we need. I would appreciate if you could add these views to the BASDA Cloud Computing Forum.

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By haseet
10th Aug 2009 17:50

The power of choice
I don’t think Matt Holmes has really grasped the points in my article . Our clients need not fear the decision of having their software in the cloud or on premise, we offer the power of choice: they can switch their software from the cloud to on premise or vice versa, it works the same whether it’s in the cloud or on premise. Just to clarify, customers are used to making purchase decisions for on premise software; we’re advising potential customers about the areas to consider for SaaS software. Going back to your railway analogy, if you don't ‘gauge’ your infrastructure properly, you won’t get very far out of the station!

Haseet Sanghrajka

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Dennis Howlett
By dahowlett
14th Aug 2009 16:42

The BIG problem for me in much of this discussion comes in two flavours:

1. The binary either/or discussion doesn't tease out the different arguments and positions very clearly or in a manner where a decision taker can objectively assess the relative strengths and weaknesses. That means the arguments end up dumbed down to lowest common denominator questions that are often peripheral but eye catching. Mention a Google outtage and everyone is up in arms but show me data losses?
2. Saas vendors only have themselves to blame at this juncture, not helped by the way the headline is written. The vendors have been pretty poor at spelling out the value saas can bring, have allowed the debate to become obscured in definitional arguments around the latest 'cloud' buzz and failed to provide numbers that back up their position. The original post is a classic example - largely apologetic, strange metaphors etc that don't take the fight to the on-prem vendors and naysayers.

Is it any wonder that people are at best confused and at worst prepared to jump back to safe harbour positions?

But rather than simply spray you all with accusations check out: which talks about 24% CPAs indicating saas spend on their list. That's a pretty healthy number. Going further back, Access Accounts last year commissioned research which, from memory, indicated something like 35% of accountants looking at online. In the US, whatever intentions were last year has now solidified into definitive buying decisions.

From my soundings, the US is ahead of the UK (no surprise there) but not by as much as people might imagine. There are plenty of similarities in attitudes and understanding of the landscape.

Returning to some facts: Freshbooks - with 800K sign ups - recently had its first 'unplanned downtime' in 5 years. They handled it responsibly, no data was lost and the company benefited. Events like that and they way they're handled are absolutely indicative of an industry that should be taken seriously because it expresses a different mindset that is core to saas/on-demand/cloud/whatever.

However, the practices/firms that are reaping the real benefits remain in a tiny minority. You'll likely not hear about too many of them because they are doing so well.

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