An interesting post from Scott Cytron in Accounting Software 411. He interviews Jim Hart, practice manager of SingerLewak Systems where he oversees the firm’s cloud computing (SaaS) practice.

It’s an interesting read as Jim describes the success that his firm has had with Intacct as a SaaS offering for their clients.

What stands out for me the most is when Scott asks him to describe one of his greatest success stories.

One of our clients is a franchisor providing centralized operations, billing and a call center to more than 60 franchisees across the nation; the business is also rapidly growing. Intacct enabled the client to deploy a central accounting system allowing all of its franchisees to access the system and create expense reports, view dashboards, receive billings and collaborate on financial decisions affecting the overall enterprise.

If this were deployed with traditional on-premise software, our client would have needed to create a secure network and infrastructure for the 60+ franchise locations. Beyond the purchase of servers, operating systems and network services, they would have had to install software on desktops within each location, and maintain that software with patches and upgrades. With Intacct, all they need is their favorite web browser.

The key takeaways for me from this article is that SaaS knocks it out of the park in situations where:

1. The company using SaaS is fast growing
2. The company using SaaS has multiple locations with a strong need for remote access
3. The company using SaaS has failry simple core accounting needs (GL, AP, AR, Reporting)
4. The company using SaaS has a CPA or financial advisor who is forward thinking and proactive in assisting them in establishing a modern financial reporting system.

Right now I’m not seeing the demand for SaaS for large numbers of companies who don’t fit into most (or all) of the four above categories. Given time and market pressures I expect that to change drastically.

To capture a more significant market share SaaS will come down in price by a factor of 50% and lose some of the pricing complexity that you won’t learn about until you try to configure a workable setup.

There will always be companies more comfortable keeping their accounting records “in house” on servers they control. These will primarily be transaction heavy wholesale distribution and manufacturing. 

I’m watching for SaaS computing to pick up real steam in 2011 and 2012. A SaaS offering is a great tool for CPA firms to provided a higher level of service for their clients while completely removing technology complexity that drove many of them from supporting clients on pre-packages (on-premises) accounting systems.

On premise providers will be forced to look very closely at their offerings and ensure that upgrades not only deliver customer perceived value (my suggestion is that each upgrade contains 12-14 features that wow the bookkeeper - not the IT department) but also greatly streamline the upgrade process.

Upgrades for on-premise solutions are too difficult and some publishers have done nothing more than off-load the labor and troubleshooting to the field rather than make their installation routines trouble free.

The next two years are going to be interesting as SaaS ramps up their offerings and on-premises publishers look to compete. Competition is a good thing in the marketplace and should result in a better overall customer experience.