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2012: Cloud climbs towards plateau of productivity

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27th Dec 2012
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This year’s Business Cloud Summit in November was an eye-opening experience for a practising software sceptic.

After spending several years questioning the claims of cloud evangelists, I was genuinely surprised by the number and scale of the 300+ organisations that sent along representatives.

By no means am I a cloud denier, it’s just that I have been watching the accounting profession’s disposition towards the cloud very carefully over the past decade and initially held back from announcing the dawn of a new era of computing because plenty of other people were already doing that, and members of AccountingWEB (and accountants in general) were reluctant to ditch systems that had won their trust.

Figures from our Software Satisfaction surveys provide an indication of how and when the profession’s attitude began to change, driven, it has to be said, by the small and start-up businesses that were picking up cloud accounting systems.

Back in 2006, cloud accounting was non-existent in the UK - only two users out of 2,000 respondents reported using such systems in that year’s Software Satisfaction Survey. Since 2007, the uptake has exploded to the point that nearly six out of 10 respondents in 2012 (58.8%) were using cloud-based accounting systems. Cloud users have been enthusiastic participants in the survey numbers, so the proportion in these samples is probably higher than in the wider market, but the growth rate identified by our survey data is clear enough:

Cloud accounting - proportion of Software Satisfaction survey responses

Cloud accounting adoption - Software Satisfaction survey results

Everywhere I’ve turned this year, I’ve encountered confirmation of the same findings. After going through the inflated expectations of 2005-7, cloud computing has quietly spread through the profession, and continues to do so by meeting the needs of users and fulfilling its promises of better convenience, productivity and cost of ownership. (NB: my data and analysis is somewhat at odds with Gartner, the industry analyst responsible for the Hype Cycle model).

What was remarkable at the Business Cloud Summit was the discovery that web-based applications weren’t just the domain of start-ups and online bookkeeping users. Some very serious corporate and government organisations were represented at the event.

Craig Sullivan, vice president of international products at NetSuite, told me he was “not surprised” at the kind of organisations coming to the summit. “From the type of customers we’re signing up, some of the largest enterprises in the world are now looking seriously at cloud solutions, where they wouldn’t have been doing so 3-4 years ago,” he said.

The UK experience was representative of what he sees elsewhere in the world: “When a business looks at run entirety of its systems, a cloud solution becomes even more relevant because it instantly connects people in multiple locations and addresses workflows across departments.”

The other significant shift we have seen in 2012 has been towards the application of cloud tools within practice. This trend is not as well advanced as the corporate stance on cloud computing, but means that we are likely to see the picture develop more rapidly over the next year.

When I asked attendees at our Practice Excellence Forum how many used cloud accounting, more than half the delegates put up their hands - but only a smattering of them kept their hands up when I then asked if they were using the cloud system as a platform for sharing and reviewing financial information with clients.

Several of the firms shortlisted in our awards scheme had already progressed beyond using online software as a DIY bookkeeping for clients, and were using their systems to devise and deliver KPI reports to clients and pro-actively highlighting both errors and meaningful trends to clients.

Strangely, however, tax and practice programs have so far shied away from the cloud. While the developers steadfastly maintain that there has been no demand for it, the demands placed on them by successive changes in online filing (new SA forms, iXBRL and more recently RTI) have also diverted their resources away from creating innovative new cloud systems.

For tax, in particular, this is odd, because having just the central application code in one place makes it so much easier to maintain and update as the rules change.

Adrian Pearson, who has found a niche for the Ledgerscope online application in this twilight zone, explained some of the difficulties he has had to overcome: “The 58.8% in your survey who are using cloud solutions are using front-end accounting software, such as Xero, KashFlow and FreeAgent. These have been produced for the small business market generally, with potential customer numbers in the millions. In reality, it is actually clients who are the software users with the accountants collaborating with them on the same platform.

“The reason that there has not been a move to cloud tax/practice software is that the potential customer numbers are much lower - around 30,000 firms in the UK - so the cost of re-engineering something like IRIS is a big commercial risk. So those accountants who are forward thinking enough to embrace cloud solutions in their practices are stymied because the software does not exist. If it did exist, I know plenty of firms who would jump at the chance to use it.”

In September 2011, after seeking views from AccountingWEB members, cloud advocate David Terrar surveyed the prospects for non-accounts tax and practice software and concluded: “There is a real opportunity for tax and a properly integrated practice management solution in the cloud, but nobody seems to be building it.  Regulatory issues and worries about security get in the way of the more internal applications for a practice when the real action is about doing work for the client rather than the tax man.  Practices should be worrying about efficiency but the tools aren’t there.”

But some of the profession’s software suppliers have taken notice of the underlying shift, with IRIS buying a stake in FreeAgent Central and CCH acquiring Twinfield.

It took some time for the tax/practice specialists to work out how they could build on these links to online bookkeeping, but the fruits of their efforts started to emerge this year. Driven by Phill Robinson (formerly of Salesforce.com), IRIS is building an entire Open apps infrastructure to bind online tools into its client/server practice suite.

CCH is heading in a similar direction, although it is currently focusing more on the direct links between its ProSystem tax/practice software suite and Twinfield.

Over at Xero, UK managing director Gary Turner has also spotted the potential of this market. In a recent survey on AccountingWEB, he found that (83%) of respondents were using online accounting applications and having courted small businesses for the past few years is now switching his focus to practitioners.

According to Turner, the acceptance levels reported in the recent survey confirm a significant change in the way accountants are using technology in practice. The next step for all of these suppliers will be to build on the footholds they have gained and to meet the challenge laid down by Terrar to come up with tax and practice tools.

It’s always tempting at this time to declare it’s “the year of the cloud” or something similar. I won’t fall into that trap, as we have seen that the transition has taken place over several years. But what I can confidently predict from the evidence we’ve seen this year is that there will be a lot more focus on specialist online practice applications in 2013.

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By Paresh Patel
03rd Jan 2013 09:32

Cloud based tax compliance software

 

Hi John,

 

May I take this opportunity to introduce our new company: Taxfiler Ltd. Our aim is to deliver the best tax compliance software on the market. Taxfiler has been founded by a team of developers with extensive experience of providing tax software solutions to practicing accountants for over 25 years. Formerly with Solution 6 and MYOB, our team were the original architects and designers of some of the most celebrated products in the industry, including the Solution 6 PerTAX Family, SecTAX and CorTAX.

 

Our new product Taxfiler is recognised by HMRC to comply with filing requirements for individual self assessment personal tax returns as well as partnership tax returns and is currently provided as both a hosted Web version and a .NET installation. These are the first products in a full compliance suite that we are building which aims to be easy to use, fast and powerful.

 

I would be grateful if you would take some time and look at www.taxfiler.co.uk for more information. You can also access the demonstration system where you can investigate what we are currently offering online.

 

If you require any further details please contact me for additional information.

 

Regards

 

Paresh Patel

Director

[email protected]

 

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