Does the Cloud Make Sense for Your Business?

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While there are benefits to the cloud, such as lower cost of ownership, reduced IT requirements and ease of implementation, contrary to the market hype, the cloud is not always for everyone or every application.

By now, you have likely heard the ubiquitous yet nebulous term “in the cloud,” an umbrella term for a wide range of technologies available online. While there are certainly benefits to the cloud, such as lower cost of ownership, reduced IT requirements and ease of implementation, contrary to the market hype, the cloud is not always for everyone or every application.

For tax departments trying to find the right technology solutions to help them finish their long to-do list, they simply need a way to quickly determine which is better: on-premise or cloud? Unfortunately, the answer is: it depends. And it’s often not so much a tax department question as functionality may be exactly the same, whether the application is within your IT firewalls or on the cloud. In such instances, it may often be internal IT resources that voice the stronger opinion.

One of the key selling points of the cloud is the minimal upfront investment requirements. In the cloud model, companies don’t have to invest hardware, nor do they have to expend their internal IT resources in the maintenance cycles and upgrades that accompany software which is brought “in house.” While many companies that opt for the cloud are still concerned about data back-up, security and functionality, the cost benefits as compared to maintaining such applications with internal IT resources typically outweigh these concerns. In addition, cloud providers may often have higher levels of security, and better back-up and redundancy protocols than a company can maintain in house.

However, keep in mind that because cloud solutions are often priced on a subscription basis, the cost over the long-haul may be equal to or even more than an on-premise solution. The difference is how the fee will be paid, mostly upfront (on-premise) or over time (cloud), depending upon the solution’s particular pricing models. On the other hand, while on-premise provides complete control over security of data, the up-front costs are higher in the form of hardware, software and IT resources.

The table below outlines the typical major differences between the cloud and on-premise delivery model:

Also, it is important to take into consideration that the type of application may dictate which model your company selects. For example, some applications, such as CRM, back-up systems for on-premise hardware/software and marketing software, are ideal for hosting in the cloud. They require little customization, and the system’s functionality is generally the same even across varying industries.

It’s helpful for the tax professional to keep in mind that there is a significant difference between solutions requiring customization versus those requiring maintenance, such as tax content updates. Solutions requiring customization will require “coding” by IT professionals, which is not often possible with cloud solutions, whereas solutions requiring that tax content be updated can easily be maintained in the cloud.

In addition, it is critical that you factor in your company’s size and therefore available resources. For example, for a start-up company with limited resources and employees already wearing multiple hats, a cloud-based solution is almost always the solution. However, for more established companies with existing IT resources, complex needs that require customization, bigger IT budgets, and a need for complete control of security and data, an on-premise solution may be a better fit.

The bottom line is there is no right or wrong answer when it comes to on-premise versus the cloud, but there is a right or wrong answer for your company. It really comes down to the specific needs of your company. As with any business decision, the key is to examine the internal structure, the specific problem that needs to be solved and available resources in order to select the right software delivery model for your company.

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A blog from Thomson Reuters, a source of intelligent information for businesses and professionals.

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Carla Yrjanson

Carla Yrjanson is the Vice President of Tax Research & Content for Indirect Tax within Thomson Reuters. She leads the Tax Research & Content Team which is responsible for delivering Sales/Use...

J. Harold McClure

Dr. James Harold McClure, senior manager of transfer pricing at Thomson Reuters, has over 18 years of transfer pricing and valuation experience and has authored a number of papers on the subject....
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