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When cloud is not the same as cloud

The other day I saw a great post about some of the myths regarding the cloud. While all of these myths relate perfectly to Xero, I think there is still a fundamental question about what makes an accounting solution cloud-based. I don’t think it’s enough anymore to just be online – online is only part of the story.

It’s very easy to get online nowadays. If you have an existing desktop accounting product, then the easiest solution is to host that product using technologies such as Citrix or Terminal Services and for secure access use a VPN. This will get your desktop application online and available almost anywhere, anytime. There’s even a Citrix app for the iPad!

The next approach moves you closer to what I consider the cloud. Most desktop accounting systems utilize some form of database. By pushing the database into the cloud, but retaining the front-end on the desktop, you can get to that next utopia of the cloud, where multiple users can access the same data at the same time from anywhere. Ironically this doesn’t give you online anytime/anywhere access – you still need to host the desktop product behind some kind of Citrix system to get that – but at least the data is in the cloud.

This is the approach that MYOB has been undertaking for the last couple of years with their AccountRight in the Cloud product. By utilizing the Microsoft Azure platform and the Microsoft Sync Framework, they’re developing a solution that will enable a local database to connect to a cloud database, keeping the data in the cloud as up-to-date as possible for other users to connect too. This enables them to keep their existing desktop product going (and to protect their existing installed market).

I’ve seen some presentations on their approach and from a architectural standpoint it’s extremely impressive. But conceptually it’s completely broken.

We see the first stage of the cloud is definitely the “going online” strategy. This should get you multi-user, anywhere, anytime. With our focus on accounting we call this the Single Ledger – removing the friction that currently exists by connecting business owners with their financial advisors.

The next stage is to leverage being connected. We did this from day 1 with our bank feed connections to bank accounts. Recently we announced support for over 5000 bank feeds worldwide. This is a complete business process shift for small business owners – allowing them to do a little bit of work every day to keep their data up-to-date. We’re also able to grab data from XE.com to provide real-time multi-currency solutions – a high value feature missing from desktop systems due to the inherent nature of needing to be connected to an expensive, external data source.

At this point we start to see the MYOB approach completely break down. Instead of just pushing the database up into the cloud, we utilize a fully relational multi-tenanted data model. The benefits to this are immediate and huge:

  • we have a version-less modern web user interface (constantly updated to improve features and to release new ones) and a slick mobile interface
  • we can enable electronic data interchange through the use of our public API or by connecting existing Xero customers to each other enabling Xero-2-Xero transactions (no touch EDI all contained within the Xero ecosystem)
  • we can allow you to access multiple organizations with the same login
  • we can build customer portals so that our customers can connect to their customers
  • we can enable bill payments

I think the API is the big one – it’s not enough to be able to fetch data (bank feeds and currency feeds) but for data to be fetched – for your accounting product to be programmable from the web. We can see this with the amazing software partners we have – best of breed applications working together as tightly integrated suites with Xero becoming the programmable accounting engine.

And then there’s the next phase. Building value into the platform and empowering our customers. We’ve seen this most recently with the announcement of reporting packs in the latest Xero update. By utilizing reporting codes accounting practices can leverage the power of the single ledger across the entire practice – enabling financial advisors to connect to sets of clients all at once. The reporting codes abstraction is completely enabled by our multi-tenanted data model. From there we can build benchmarking across the whole database – as we build critical mass we can answer very important questions such as “how successful is my business?”. The aggregation of the data is powerful – and completely missing from MYOB’s approach.

With that power comes great responsibility which is why we believe that if you write business software that’s truly in the cloud then you’re no longer a software business – you’re the custodians of data, with all the trust that comes with that.

What I’m not trying to do here is redefine or even define the cloud. The cloud is many things – but one thing is for sure, being online is not enough.

 

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10 comments

Richard Francis
20 August 2011 #

Great post Craig, especially for those that think data hosted in the cloud is ‘the real deal’. Nice, understandable riposte.

Lovin’ the API too :) Who else in the accounting software space makes it that easy for partner apps to hook in and do cool extras for users?

lomaxx
23 August 2011 #

I agree that the aggregating of data across the multi-tenant database is where the real strength of Xero and pretty much all cloud based solutions lies, regardless of what market they’re in.

I think we’re only seeing the tip of the iceberg in regards to cloud based computing because we’re only starting to gather enough data to do the analysis required to provide the really meaningful answers to business questions.

Once that becomes mainstream tho, it’ll be lights out for decentralised apps like MYOB.

Alister
23 August 2011 #

Craig, great post. Spot on! A good reminder how important it is to keep educating end users with the differences in solutions being pushed in the marketplace.

[...] When cloud is not the same as cloud [...]

Rashesh Joshi
25 August 2011 #

Craig – good article. You guys dont need to worry about MYOB – the articles too defensive. What you re doing is absolutely on the mark – just dont lose the momentum. Get the annual accounts and IXBRL sorted in the UK and see what happens…

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29 August 2011 #

Wow, Really, This is the Great post, especially for those that think data hosted in the cloud is ‘the real deal’. It’s very easy to get online nowadays. If you have an existing desktop accounting product, then the easiest solution is to host that product using technologies such as Citrix or Terminal Services and for secure access use a VPN. This will get your desktop application online and available almost anywhere, anytime.
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Sandra
7 September 2011 #

We are lovin the bank feeds, however we would really love for Xero to turn up the heat on development of the bankfile export for TSB Bank. The only fully owned NZ Bank who are moving into the business banking space – so would be great to see our whiz kids at Xero deal to our own first. Thanks … waiting in anticipation of making our life easier ….

Mike Block CPA
9 July 2012 #

Re: Xero EDI – Most large companies and their suppliers now use EDI, to vastly increase the accuracy and speed of their sales invoices, purchases, inventory data transmission, payments and more. Quite a few Xero users expressed an interest in Xero EDI, in a Xero EDI forum to which I contributed. I have been very pro-EDI for around 20 years. That is about when a U.N. Committee report said that using common business forms and EDI would save trillions of dollars a year (adjusted for inflation).

At the time of my post, the EDI industry and Xero had not yet been willing to invest in the interface needed for Xero EDI. However, my research showed that DiCental might be a good candidate to do this fairly inexpensively. My email to DiCentral soon resulted in a very long conversation with one of their programming managers. The exciting conclusion was that DiCentral would create the Xero EDI link if they get even one committed Xero EDI customer. I do not remember the exact initial Xero EDI SETUP ESTIMATE, but believe it was only around $500. I also found the transaction fee costs shockingly low, even for small quantities, but do not recall that amount either.

I will gladly help with this, at minimal cost.

Mike Block CPA
14 August 2012 #

One user was unhappy that DiCentral only supported Internet Explorer. Its website said it only supported IE 6 and 7, but they will soon correct that error. It supports any IE starting with 6. They are considering other browser support, but it barely matters. EDI is for computer-to-computer transaction exchange. Once you (or I) set it up, you can use any browser to review imported entries in Xero. I will follow up on whether you need IE to originate EDI transactions to customers or suppliers.

Ross Bowering
21 March 2014 #

Hi Mike I am looking at changing over to Xero but need EDI. Xero does not seem to have this ability so I am interested in more information from you please

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