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Who Should Host Your Accounting Software?

Published on by Luke Wagner

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Technology is ever changing. One of the biggest buzzwords in relation to software is “cloud” computing. But what does “cloud” computing mean and is it a fit for your company? The reality is that there are several ways to host and run your software solution—with each option offering its own advantages.

Locally installed

The first option for installing a new software system is the most common solution and has been since computers started. That option is to install the software locally on your own systems. This could be through a peer-to-peer network or on a server environment.

Peer to peer network

A peer-to-peer network is the most basic of networks. This is a solution that basically connects several computers to one main computer. The software is installed on a stand alone desktop and the other users access that desktop by connecting directly to that desktop. A peer-to-peer network allows for shared access to all computers connected together allowing users to shared files, peripherals and other information without the need for a central server.

While a peer-to-peer network may be one of the most cost effective solutions up front, there are a few downfalls. First, each user has equal access to information and files. You have the ability to access other computers without restrictions. In relation to accounting software, this is not the best scenario as you likely have employees that do not need to see specific information such as financial statements or payroll. A better way to install the accounting software would be on a server.

Server

A server is a computer that is designed to hold large amounts of data. The server is often overseen by a network administrator who can create permission levels for each user allowing them to access particular files or programs. The accounting software is installed on a server. Each user is connected to the server computer, not to the other computers on the network. When installing the software, you typically also install a copy of the program on your desktop computer which, when accessed, directs you to the server where you are accessing the database and shared information.

The administrator sets up user restrictions in the software program allowing them to define who has access to key financial data including general ledger and payroll and who can access basic customer information including creating sales orders and updating customer contacts. A server network allows for greater control and security, but also allows for a larger amount of data to be stored as opposed to consuming space on each individual PC in a peer to peer network environment.

Hosted systems

There are many companies who now offer software on a hosted basis for you. Often times the hosting model also determines how you pay for the software, as well.

The first option is to buy the software and have a third party host and manage the system for you. This option is gaining in popularity as more and more companies are looking to cut expenses. With this option, you make the investment into the software program up front by purchasing the users licenses, implementation, training and set up of the program. Instead of installing the software on your server, a third party vendor will install the software on their systems and you will access their system remotely.

The remote setup can be one of two ways: browser based access or client server access. Client server access is very similar to the locally installed option listed above. The software program is installed on the server and another program is installed on each user’s desktop. To access the system remotely, the user will need to utilize the program on their computer which directs them to the vendor’s servers and helps the user log in.

Browser based access simply requires an internet browser. Users utilize a web-browser such was Internet Explorer, Google Chrome, Firefox or Safari. When they open up the dedicated browser link, they have to enter a user ID and password to access the information.

As stated above, you can purchase the software outright. However, there is a monthly or annual cost to the third party vendor that hosts the software. At minimum, you are paying them for utilizing the storage space on their servers but may also pay for the ongoing support monthly. This option will save you from purchasing servers and hiring a large IT staff to maintain the system.

Software as a service

The final major option is software as a service (SaaS). Software as a service options are also gaining in popularity. These are solutions that are browser based, hosted solutions and paid for on a monthly subscription, as opposed to an up front purchase price.

There are a number of advantages to software as a service:

  1. You don’t have to purchase server hardware equipment. The software vendor hosts the system on their own servers. The cost for them to host is rolled into your monthly fee.
  2. You have accessibility from virtually anywhere. As long as you have an internet connection, you can go to the company’s website, enter your user id and password and access the information you are privy to.
  3. You pay for the software monthly. Buying a software solution can be expensive, especially to get all of the features you need and number of users. Many companies don’t realize the true cost of purchasing a solution which is why a software as a service solution can be a good fit. You pay a setup fee for initial licenses, implementation and training. Beyond that, you pay a monthly fee for the software which allows you to budget monthly for your software needs.

The most common objection to hosted and software as a service solutions is, “I don’t want my information floating around on the internet.” Supporters of hosted options will note that most people are now very comfortable with online banking relationship and this is no different. You have a login and password which you enter on your bank’s website. Once entered, you are likely taken to another page that asks for additional verification before you are finally connected with your accounts.

While logged into your profile through your financial institution, at minimum, you have the ability to review all transactions associated with your accounts. Most financial institutions allow you to pay bills, set up ACH transactions to pay vendors and contractors, or transfer funds to another financial institution. Depending on the size of the institution, they spend tens of thousands, if not hundreds of thousands of dollars on security alone. Some of the larger banks spend millions each year on security and data backup.

The same goes for software companies that host the software for you. These companies spend a great deal of money on security and backup each year and those costs are rolled into your the costs of hosting the software. There are some experts who contend that generally having a solution hosted for you can be more secure due to the amount of time, money and effort vendors spend on keeping a secure system.

Luke Wagner

is a Project Specialist at Find Accounting Software. He's been helping software buyers make informed investments in business software since 2005.

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