Sending Applications To The Cloud

For some business owners, this makes sense.

Kimberlee Augustine and I are both CPAs. But she's a much better accountant than I am.

Her company, Austin-based DMS & Associates, provides outsourced bookkeeping, accounting and tax preparation services. Kimberlee, a CPA for more than 20 years, is meticulous, timely and financially astute. I have held my CPA certification for more than 20 years too. Problem is, I was never too good with details. If it was close enough, it was good enough. You don't want me as your accountant. Which is why I stopped practicing public accounting a long time ago and only sell business software.

So Augustine and I are different kinds of CPAs. She's better with numbers, and I'm better with software and business technology.

And our businesses are structured differently too. Like so many small companies, I have all of our systems and data in-house. I have a couple of servers and workstations. We connect to our servers over our local area network, which is supported by our IT firm. We connect remotely using Windows Terminal Services. This is a typical setup for companies with 10 people, like mine. And Augstine's company too. Except she's not set up that way.

Augustine has thrown her company deep into "the cloud." She does not have a server. She does not have a local area network. All of her software, databases and files are hosted by a company called Rackspace Hosting. Why? "I'm not a technology person," she says. "I'm an accounting person. I'll let someone else worry about the technology."

Rackspace is part of a growing industry of companies that provide dedicated hosting. The company says it has more than 99,000 customers, many like Augustine. Dedicated hosting companies provide their clients with servers, support and up-to-the-minute technology housed in highly secure facilities. Technology is a headache, these companies say. Why go to through the headaches and expense when you can just let the experts manage this stuff? A decade ago this would have been very difficult. But in today's Web-based, broadband world of high-speed connections, it's reality.

Augustine got lucky because her timing was right. She dived into the cloud in 2007. Fast Internet connections were readily available. Cloud computing was getting easier. And she was just starting up her company at this time. So she didn't have to worry about dismantling her existing network and migrating it all to a new setup. There was nothing to un-learn, no baggage to carry into the hosted world.

How did it all work? After signing up with Rackspace, she copied all of her existing files (there weren't too many) from her server to theirs. She then installed her applications, like QuickBooks and Microsoft Office, directly on Rackspace servers using the remote desktop connections it provided. "It was like doing it on a server in my own office," Augustine says. "There's not much difference." From there on, she and her employees just connected directly to the Rackspace server.

The same with clients. A critical part of Augustine's bookkeeping services is that she maintains the accounting systems for her clients. She needed a centralized place to do this, where not only could her employees access the information but her clients could see their books and do data entry when necessary.

Keeping this in-house would be costly and time-consuming. For a company like hers, a managed server setup became the backbone of her business delivery model. "I wanted to focus on bookkeeping and not become a computer expert," she said.

Some software companies offer hosting services for their clients. For example, Augustine could have had Intuit host her clients' Quickbooks systems. But the difference here is that Rackspace, like most companies like it, hosts all of its customers' systems, not just a specific application. In short, they're just renting out their servers. And their expertise. That way you not only get access to the box, but it's always updated with the latest patches, backed up and tuned for optimal performance. Daily. Try getting that from your local IT guy.

Augustine found the performance to be as good as any Web-connected software. "We do all of our work through a browser using a remote desktop connection," she said. "I don't remember the last time we had any network problems." In fact, she feels that her business has minimized the risk of downtime, both internally and for her clients. Without hosting, if her server got into trouble or her Internet service shut down, no one could do work. Today even if her office were to go dark, her employees and clients would still be able to work with their data as long as they found an Internet connection somewhere else.

Listening to Augustine's story, I also found something else that particularly appealed to me. Rackspace gives Augustine the ability (for an additional fee) to also host "virtual machines." This way she can demo third-party applications and other software in a test environment before linking them into her production systems. Being in the software business, this is a great feature. Setting up virtual machines for testing, or to run unique applications in-house, can be a pain the neck and require a lot of resources from a server. Remember that I'm not good with details. So testing my work is highly recommended for all of my clients.

So is hosting the way to go for small companies? For many, like Augustine, it's a great idea and one that will grow even more over the coming years. And you'd think by reading to this point I'd be a convert. But I'm not sold on this kind of service for my business. Surprised? Not as surprised as that client of mine back in 1986 when he got a huge tax bill because I forgot to include a few deductions he had.

Sure I appreciate the benefits. I appreciate the easy access from anywhere. The daily updates and backups. The higher level of security. The accessibility of data for both my employees and clients. And not having to worry about internal networks and other IT-related headaches. I get that.

Except that I don't really have these problems. I have two servers: one of them, as mentioned before, equipped with Windows Terminal Services and a virtual private network. This was setup by my IT guy a few years ago. We access everything through a browser, just like Augustine, from anywhere we want. My system has a daily backup. I'm positive we're not running the most recent versions of Windows and could use some cleaning up, but things are working OK.

I'm even more positive that my data is far less secure than it would be if I let a company like Rackspace host it. But we're not keeping highly sensitive stuff like credit card numbers on hand, so I'll take my chances that some kid in Malaysia wants to know next week's lineup for my softball team. And also, we're not the kind of business where clients access their data from our systems the way Augustine's do.

And the cost is still pretty high. Most of the hosting companies I know charge a monthly fee per user for the use of their servers, generally around $100 per month per user. Augustine says she pays about $1,500 per month for her service, which includes the virtual machines and other premium features. So a 10-person company like mine could be paying anywhere from $12,000 to $18,000 per year to host our systems. I currently pay my IT firm less than one-third of that every year, and that includes all the Red Bull they drink. Even replacing a server, which would last me a good four to five years, would set me back about $3,000 to $5,000. I'm not very good with numbers. But these numbers I understand.

Gene Marks is owner of Marks Group, a technology consulting firm, and author of In God We Trust, Everyone Else Pays Cash--Simple Lessons From Smart Business People.

Commentary

Sending Applications To The Cloud - For some business owners, this makes sense.

Gene Marks, 08.13.10, 06:00 AM EDT

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