The Real Disconnect Fueling the “Cloud” Craze? It Has Little to Do with Costs and Much More to Do with IT

I spent a lot of time recently at the GP User Group Summit listening to users and trying to get a better understanding on a number of  topics. One topic that was particularly interesting to me was the idea of Dynamics GP in the Cloud.

For clarity, by "Cloud," I mean a hosted Dynamics GP solution where firms pay a monthly per user fee rather than buy the software up front . I was interested in what the demand was like for Cloud solutions and why.

On first glance there are a lot of factors working against cloud solutions for any accounting software. Specifically:

• Cloud solutions can't be capitalized like on-premise implementations.
• There are obvious security and data ownership/access issues as evidenced by customers who have sued their Cloud-based accounting software providers for access to data when trying to change solutions. The irony is that if a company doesn't pay its bill, it is cutoff from the very software it needs to make payments.
• Finally, while software in the Cloud is cheaper in the short run, providers generally agree that on-premise and Cloud implementation costs converge at around seven years. Cloud computing is cheaper up to around year seven and more expensive after that. The average life of an ERP system at a company is around 10 years right now, making on-premise still the cheaper option in the long run.

So with accounting benefits and cost data favoring on-premise implementation, why is there such demand for Cloud computing? That was the key question I had.

Is the demand a cash-flow/cost scenario where firms can't afford the upfront costs? Surprisingly, the answer was no. The ...