Cloud vs. Traditional Fund Accounting Software: Comparing the True Costs
In the good old days, comparing the cost between different financial management solutions was fairly straightforward. They were built on similar technology platforms and were going to be deployed in roughly the same fashion. The only considerations were subtle differences in system requirements and pricing. The advent of subscription-based (SaaS) cloud applications for fund accounting made price comparison a whole lot murkier—the only similarity between the two is licensing costs.
This creates a lot of confusion for nonprofits finance teams. While they express concerns about the ongoing costs of a SaaS subscription, they often believe that the costs of servers, upgrades, remote access, and other infrastructure are unavoidable. This is easy to do if your IT costs are buried in an administrative budget and allocated to departments in an opaque fashion.
Here are some factors to consider when weighing the costs between a traditional and cloud solution:
- Understand your total cost of ownership. For a true apples-to-apples comparison, you need to understand the total cost of ownership of your application platform or infrastructure. Alex Hobbs, a cloud computing expert, recommends a costing model that includes the internal costs of infrastructure, licensing, and support so you can accurately compare the cost of eternal hosting in the cloud. Even if you already have the infrastructure in place, servers require maintenance, patches, upgrades, software, and replacement. Be sure to include a fairly allocated cost for the infrastructure required to deploy an on-premises application.
Don’t forget the cost of providing secure remote access. For distributed offices or for flexible work arrangements, most traditional applications require things like web servers, VPN, Citrix, and potentially other advanced networking tools, not to mention competent IT support. Presumably in a true cloud-based SaaS environment these costs are built into the subscription, giving you secure access from anywhere at any time with no incremental cost.
- Factor in the time to value says Hobbs. Unlike the traditional model, SaaS cloud applications are already installed and configured. You have the advantage of provisioning the server for an instance in the cloud and in a couple hours have the application ready for use. This reduces the time spent in installation and configuration, and can reduce the issues that can impede software deployment.
In addition, SaaS vendors are responsible for the ongoing management and operations of the cloud environments, and dedicated cloud operations teams will readily assist customers. If your project is under a tight schedule, the cloud may be the way to go. If, however, other factors are dictating your implementation cycles, on-premises deployment may allow your organization to realize an equal time-to-value benefit.
- Consider the fit. Just as no two funds or grants are alike, no two financial management applications address your organization’s critical business requirements exactly the same way. No organization should choose or disqualify a cloud application just because it is a cloud application. Capability and compatibility with your organization’s unique requirements and goals should be an overriding concern and factor into your comparison of any two systems, regardless of technology or business model.
- Remember the future. Sometimes the most feature-rich, capable application is also the one built on the most archaic technology platform. If your system has passed its prime, technology-wise, expect to be subjected to a major, disruptive upgrade at some point in the future—or be prepared to slowly watch that application lose relevance as the march of technology pushes forward. The viability of the technology in question both today and where the world is likely to be in five to 10 years is an important consideration.
Rely on JMT Consulting, your nonprofit technology experts
Comparing the cost between a traditional or cloud solution is not easy. That’s where the experts can help. At JMT Consulting, we’ve helped organizations commit to the cloud, even though the nominal subscription costs seemed higher than traditional, locally installed alternatives over time. We’ve also matched organizations with those same on-premises applications because it made sense to do so, namely because JMT Consulting is not beholden to any single software vendor. We choose what is best for your situation.
Don’t dismiss either option out of hand; instead, employ a fair, systematic approach to evaluating your options so that you can make an informed, deliberate decision. The professionals at JMT Consulting can help. Contact us today.