Over the past few months you may have received a call from one of your software vendors telling you that they have plans to bring their technology into the clouds. If you were too embarrassed to ask what impact that transition would have on your company, this high level overview will give you a basic understanding of this latest technological craze.

According to The National Institute of Standards and Technology, the five key attributes of Cloud Computing are:

• On-demand, self-service
• Location independent
• Multi-tenant-pooled resources
• Rapid elasticity/scalability
• Pay-per-use

The bottom-line is that cloud computing is leveraging the power of the Internet, allowing for anywhere-anytime access to resources (applications and data) stored offsite in an environment that allows companies — small to large — to take advantage of an infrastructure that in the past was only available to very large companies with large technology budgets.

Some of the trends and market behavior that we have witnessed since this technology was first deployed include:

• Proven cost savings
• Increased awareness of benefits
• Shorter time to deployment
• Reduction of risks
• Small and medium-sized business adopting faster
• Enhanced security
• Increased personalization and integration

Why Utilize the Cloud Computing Model?

There are two primary reasons:

1. The services that are offered on this platform are generally related to common business applications and are accessible via a Web browser. By far, the most common deployment on this platform, that our industry has seen, has been in back-office accounting and integrated accounting system. This model allows all interested parties to access a single common database and have rights and responsibilities that will generally vary from one user to another. For example, in a CPA/client relationship, the CPA may perform certain accounting functions directly to a client’s database. The client would also have access to that same database, possibly performing other functions directly or simply running reports on transactions which have taken place.
2. This platform allows a company to leverage a technology infrastructure that would otherwise be financially out of reach. Cloud computing is scalable. Companies, both small and large, have the ability to attach to the same infrastructure and pay as they go. In the past small companies would have to invest in internal storage, redundancy and security and only be able to implement low-end, low-cost applications. Today, thanks to cloud computing, those same companies gain a competitive edge, by taking advantage of the same systems and services, in the past only offered to the very large.

Client Accounting Services Aspect of Cloud Computing

Under this model, the CPA firm, their staff, their clients and any other interested parties share access to financial information. This model totally changes the CPA/client relationship from one that very often is reactive to one that would be proactive.

The AICPA has jumped into this arena with CPA2Biz and Intacct joining forces to offer such a platform to CPAs and their clients.

This report shows how the CPA gets to take advantage of a powerful, high-end system, and leverage such power to access all of their client’s financial information from a single console.

Clients then have access to visually appealing reports and also have the ability to input other data and depict results in many different ways.

As some firms look to implement workflow solutions, paperless products, document management applications, portals, secure e-mail, etc., others are realizing that this model has many of these features already built in. Add financial reporting capabilities, ad-hoc reporting, charting, analytics and budgeting and the result is a very powerful tool that the CPA firm can leverage to create a competitive advantage in the marketplace.

Client accounting services is not the only area in which we see companies taking advantage of the cloud computing model.

A popular player in the Web-search space, Google, also has an offering in the cloud computing arena.

The Google Apps Platform depicted above offers a better way for companies to do messaging, collaboration, security and compliance.

Like the key features associated with client-accounting services, Google Apps offers financial benefits such as:

• Smooth, predictable cash-flow;
• Pay on actual usage with no long-term contracts; and
• No depreciating assets weighing down the balance sheet.

Where Does the CPA Firm Go From Here?

Many firms have found Web-based applications are ideal for preparing tax returns, storing client documents, performing write-up, managing time and billing functions. Cloud computing takes all of those applications to a new level allowing the applications to be placed in an environment in which collaboration of such functions can take place.

As you are approached by vendors introducing you to their cloud offerings, definitely give them serious consideration, as this new way of doing business will help your firm to keep its competitive advantage.

James C. Bourke, CPA.CITP, is a partner at WithumSmith+Brown where he is director of firm technology. He is a past president of the New Jersey Society of CPAs and currently serves on AICPA Council and the chair of the AICPA CITP Credential Committee. He was recently named by Accounting Today as one of the Top 100 Most Influential People in the Profession.