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Should your SMB rent or buy its cloud financial management software?

"Rent or own?" is a question that might pop into the mind of anyone considering a move to a new city. Renting and owning have their respective perks and drawbacks depending on the local property market. A person's budget as well as the area's average rents, selling prices and taxes will all factor into the decision about which path to go down.

A similar question is often worth asking about financial management software. There was a time when "own" was more or less the only option, since the vast majority of all applications were licensed in perpetuity and installed on local machines. Think of something like an old version of Microsoft Excel or a desktop solitaire game.

But now SMBs can "rent" or even "lease" if they want to, via cloud accounting software and hosted solutions, respectively. So what's the best route for these businesses? As with property, the answer must account for the situation at hand.

Renting
Software-as-a-service tools provide similar convenience to renting an apartment. Essential infrastructure such as backup servers and security updates are handled by the service provider, just as building maintenance is often overseen by a management company.

"SaaS is particularly convenient for SMBs."

SaaS offers a predictable monthly cost and is particularly convenient for SMBs that may have little to no traditional IT infrastructure already in place. The expenses are low enough to be preferable in many cases to sinking lots of cash into software and hardware purchases, provisioning and upkeep.

Leasing and owning
Hosted solutions are similar to leasing a building. That is, the operation (in this case, the software itself) is yours, but the basic supporting infrastructure is someone else's.

Costs can vary widely in hosting scenarios, depending on the specifics of the contract and which party has rights to equipment. The arrangement is typically somewhere in between the lean approach of SaaS and the self-managed position of on-premises tools.

"Renting" software via SaaS can be very cost-effective for SMBs."Renting" software via SaaS can be very cost-effective for SMBs.

Switching to cloud software can make a huge difference. For example, the Missouri State Teacher's Association transitioned from Microsoft Dynamics GP to Intacct and was able to save $50,000 in headcount costs while cutting receivables by two-thirds. Often, "rent" is the best answer to this question if your business wants to streamline its operations.Speaking of which, legacy desktop solutions still have a foothold despite their limited scalability and relatively steep maintenance requirements. There is an advantage in terms of control, but costs and IT headaches can pile up.

Tagged With: Cloud Financial

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