Cloud accounting was first introduced in 1999 by NetLedger (now Netsuite) and Intacct. Seventeen years into the cloud accounting revolution, we now have dozens of products from which to choose. Every accounting software company on the planet now has at least one offering for cloud accounting, and dozens of new companies have sprung up to build innovative new products around the central idea of cloud-based, SaaS offerings for accounting.
There are many benefits to moving your accounting to the cloud, but the most fundamental benefit is that it allows anytime-anywhere access to your accounting data. This key feature is what facilitates many changes to business processes, staffing assignments, flexibility in office and staff locations, mobile access, and business model changes for the accounting profession.
Today, adoption rates of cloud and mobile accounting solutions are going through the roof, but for many small businesses the cloud is still a scary place to store data and operate a business. A big part of the resistance is due to the reality that today’s Internet lacks a “trust layer” to provide security, identity management, and data validation.
I Want a New Drug
As Huey Lewis wrote in his 1984 hit song, “I want a new drug/One that won’t hurt my head … Or make my eyes too red.”
The analogy here is that with today’s solutions, as wonderful and popular as they are, most business owners and accountants are forced to perform complex “gymnastic feats” to trick their accounting software into providing the tracking and reporting they require for smoothly operating their business
What We Face Today
Let’s take a tour of the current landscape of accounting solutions in five key areas:
1) Today’s solutions are just cloud versions of yesterday’s processes. For the most part, even today’s cloud-based solutions are really just software implementations of yesterday’s paper-based processes. This is preventing vendors from truly delivering solutions that meet changing customer demands and delivering on the needs from vertical markets. In addition, deployment of standardized software ignores the fact that each business has unique business process needs.
2) “Chunkification” is in full bloom, but is it a pendulum? As early as 2006, I started predicting that chunkification (splitting up separate parts of the overall business management systems into discrete parts) would blossom, for the following reasons:
- All-in-one products were “out of gas” as far as being customizable enough for individual businesses.
- Vertical markets were increasingly off-loading important functions away from accounting software and using custom apps and/or Excel.
- All-in-one products were almost all desktop, and therefore unable to deliver on the anytime-anywhere, mobile- and cloud-based functionality.
So, 10 years later, what’s the picture? Are accountants really recommending chunks, or just closing their eyes to the reality? If we’re witnessing relatively low adoption of add-ons, for example, it would mean big vendors feel pressure to build vertical functions into their cloud products.
The pendulum is perhaps swinging back toward all-in-one solutions. We’re already seeing many “chunks” being either competed with by big vendors or integrated in such a way as to “hide” the fact that they are chunks. Examples include Single sign-on (SSO), unified interface features of Bill.com, and TSheets direct integration with QuickBooks Online and Debtor Daddy in Xero.
One reason I think chunkification hasn’t delivered the best results for accounting is that the accounting vendors seem to think accounting should be the hub, and the “chunks” should be connecting to the accounting hub. But in my opinion, CRM belongs in the center, not accounting, so the whole industry seems to be running in the wrong direction. The only vendors that embrace the CRM-centric idea are Sage and Zoho, so good for them! Sage Live and Zoho Books represent a major shift in how accounting systems should be architected. I expect these products to do well in the long run.
3) “Digital Plumbing” is the current challenge. Every business is struggling to connect data between software solutions. While digital plumbing using APIs (application programming interface) is maturing, it is still lacking in many areas. And even when connecting systems together, we’re frustrated by how the connections often fail to really solve the problem.
4) Security issues are everywhere—and often left to users to figure out. Security is a huge concern across all these connected systems, and often the digital connections fail to abide by security policies set in any of the component software solutions.
5) Bad data frustrates everything. Because data has “context” wherever it is stored, moving data between systems, often causes BAD (see Part 2) data to multiply. Beware of big bad data! Of all my worries, it’s BAD data that tops the list. Why? Because big data is really just an aggregation of small data, and as many of you can attest, we have lots of bad “small data” in our accounting systems, customer relationship management (CRM) software, and social media feeds.
In my opinion, the “new drug” for accounting needs to be a solution that:
- Automates transactions without causing errors in the data
- Ensures that truth is represented to all parties involved in every transaction
- Delivers accuracy that everyone can trust (no more audits—or continuous auditing of every transaction?)
- Cannot be defrauded by nefarious humans
- Is global from the start, not as an additional translation
- Provides a secure, trusted Internet storage mechanism
Good luck with that, you’re thinking, right? Well, I think I’ve found something that gets us much closer to achieving nearly all of these goals.
I believe Blockchain (see Part 1) technology will do for global commerce what Postscript did for publishing back in the 1980s.
Some background: In 1984, I joined a small company called Adobe Systems. Yes, that Adobe Systems—the one you know today for Photoshop, Acrobat, and the Adobe Creative Cloud. In the 1980s, when the company was just starting out, we created a language called Postscript that seemed to be just another language, and who knew where it would go. The goal was to create a language for driving laser printers that suddenly had millions of tiny dots compared with the daisy wheel and dot-matrix printers with a tiny fraction of addressable “dots” to turn on or off.
Fast forward to today where Adobe is one of the largest, most successful software companies in the world, and virtually every large document published on the internet is in PDF (Portable Document Format), which is essentially a Postscript “program” that describes the page to display and/or print.
In a very real sense, Postscript transformed the entire publishing industry. Postscript technology is at the foundation of:
- Digital Typography
- Digital typesetting
- Digital scanning and raster-to-vector conversion technology
- Graphic design and printing
- Global document format standard
I believe Blockchain is as big as Postscript, and will be the foundation for a complete transformation of global commerce in the next decade.