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March 31, 2012

QuickBooks to Cloud: Compare the TCO

Posted by Lindy Antonelli

TCO icebergOutgrowing QuickBooks is a gradual process. Unless there is a compelling reason to migrate, such as an acquisition, organizational inertia tends to take hold and delay the process of selecting a replacement. Just staying put seems like a safe option, but is it?

The only way to find out is to calculate the total cost of ownership (TCO) of your current QuickBooks set-up and compare that to your options for replacing it.

The direct costs for your current set-up are obvious.You simply add up license costs for the number of QuickBooks instances you have, the costs of the servers they run on, and the portion of your IT costs attributable to QuickBooks. The challenge is to properly quantify the hidden costs of lower productivity and poor data quality – not to mention the sheer frustration of trying to manage the spreadsheet farm in your finance organization.

There is a very good webinar from Intacct that helps you identify those hidden costs as well as potential revenue gains and cost savings. It’s called Advice from the Trenches because Sinohe Terrero, VP of Finance at Etsy, and Marc Linden, CFO of Intacct, share their experiences of running finance in the cloud. Etsy migrated from QuickBooks. Intacct started in the cloud; they eat their own dog food, as the saying goes.

The alternatives to QuickBooks fall into two categories – software installed on-premises and Software as a Service – each of which have their own cost structure.  Since I have discussed this in earlier posts, I won’t go into detail here. Suffice it to say that TCO is like an iceberg. The part you see above water – the software license fee – represents only a portion of the total cost of ownership. Comparing only the license fees will give you a misleading result; you have to measure and compare the two icebergs.

According to The Yankee Group, the above-water portion for the average on-premises software accounts for only 9% of its total cost. All the underwater things you have to buy and pay for to run the software successfully make up 91% of the dollar cost. By contrast, the tip of the SaaS iceberg – the subscription fee – represents the bulk of the TCO –  68%. The remaining 32% of the total costs cover implementation, configuration, and training. These are costs that you would incur no matter what solution you chose; in the on-premises example that the Yankee Group used as a benchmark; these expenses represented 44% of the total cost.

I can offer you two free tools that will make your TCO comparisons and ROI analysis much easier. When you sign up for a free membership in the Cloud Accounting Institute, you can download my BusinessSimple (TM) worksheet for decision makers and the “On-Premise Versus On-Demand Rapid TCO Comparison” tool from Nucleus Research.

The direct and indirect costs of running QuickBooks are so specific to every user’s organization that I hesitate to generalize about them. Except for this: they are higher than you think. Settling for lower productivity and questionable data quality don’t just cost you money and time. They are like driving with your handbrake on. Business moves fast in the world around you. You are missing opportunities if you slow yourself down.

If you move to a SaaS application, you will probably also be surprised at how short the payback period is – anywhere from 4 to 18 months is likely, depending on your situation. Your ROI can come from many different sources. Etsy, which had struggled with financial consolidations on QuickBooks, shaved ten days a month off its close.  Another company might realize its ROI from reduced hardware/software costs. The point is, you won’t know unless you calculate your total costs and determine the investment required.

Register now as a Cloud Accounting Institute member to receive the tools I mentioned – and other benefits to come. Please keep coming back, commenting, and sharing the word with your network. Follow us on:

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Lindy leads Armanino’s Cloud Accounting Solutions Practice. She is the Founder & Chair of the Cloud Accounting Institute and has over 25 years of experience in public accounting.

As the Founder and Chair of the Cloud Accounting Institute, a clearinghouse of information on software as a service (SaaS) and cloud computing, Lindy is at the forefront of the dynamic Cloud Technology landscape. She has published numerous blogs, whitepapers, and articles in this space.

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