Worth the Risk? You Decide - aplication service providers - Brief Article

California CPA, July, 2001 by Clar Rosso

Application service providers who offer Web-based accounting programs are blazing a trail in cyberspace. CPAs and businesses who use these ASPs have weighed the benefits of innovative solutions, time-savings, flexibility and accessibility against the risks of provider viability, costs, security and privacy, and chosen to pioneer this fairly new technology. Will you?

PROVIDER VIABILITY

In May, eLedger closed down its ASP, which offered a Web-based accounting program and business services. Industry insiders say the shutdown was due to a small initial investment that wasn't able to sustain the company until it could build up its client-base. ASP skeptics read eLedger's fate as an omen.

"I have no interest in Internet-based bookkeeping programs," says San Diego-based sole practitioner Steve Kramer. "I'd be terrified that the ASP provider with the software and my data could go belly up--or decide to hold the data ransom, raising the fee beyond what I am willing to pay."

Allan Rosenthal, a CPA and ASP user (Netledger), says he shared his peers' fears of viability, security and other issues, but that he conducted his own due diligence, which included investigating the various providers' financial backing, and concluded that the benefits were worth the risks.

The biggest names in the Web-based accounting solutions field include: ePeachtree which is offered by Sage; Intacct which counts Deloitte & Touche and Goldman Sachs among its funding sources; Netledger which was initially financed by Oracle's Larry Ellison; and QuickBooks for the Web which is an Intuit product.

ANYTIME, ANYWHERE

Anytime, anywhere access is a top selling point for these ASPs. If you can access the Internet, you can access your client's data.

"With Netledger I am more efficient," says Calabasas-based Rosenthal. "I have instant access to my client's data and no longer have to worry about a disk being outdated by the time I drive back to my office. I also can log on 24 hours a day, 7 days a week."

Mike Smith, CPA, who manages the Chicago office of Langan Associates, says Intacct allows his firm to service its nonprofit clients remotely and breakdown regional barriers. "Not only can we work with any of our clients from any of our three locations," says Smith, "but our clients' board members and treasurers also can take a more hands-on role." He explains that Intacct allows each customer to choose who can access selected online information, while at the same time restricting the user's ability to manipulate that information. It's a time-saver for auditors and investors who can interrogate the system to find answers rather than asking clients for information.

BUT IS IT SECURE?

"A major obstacle to people using ASPs is security," says Carlton Collins, an Atlanta-based CPA and lecturer on accounting software. "Those fears are erroneous. In reality, your data is probably less safe with you." Collins cites examples of data disks disappearing from desktops, hard drive crashes, unauthorized users logging on, backups that are stored on-site and destroyed in a fire, flood or any of a number of inconvenient ways.

At anytime, says Rosenthal, "Netledger will give me a backup file that is downloadable to Quickbooks." He says that this feature, and knowing that data is backed up daily and stored off-site, increases his sense of security.

ASPs address security and privacy issues on several different levels. Protective measures include: raised floors, security guards, HVAC temperature control systems, seismically braced racks, Internet firewalls, secure socket layer data encryption, 24-hour biometric security access to data vault, host and network-based intrusion detection systems, regularly scheduled backups, off-site storage and more.

VALUE

Although paying an ongoing fee to an ASP may seem costly, a more indepth analysis is warranted. ASP costs should be compared to the costs of purchasing software and regular updates, backups, server hardware, infrastructure and IT support, all of which generally are included in an ASP package. According to Collins, for firms and clients who need remote access, an ASP solution will actually be less expensive than hosting an inhouse product such as a Citrix-based system that might cost $15,000 to install.

ASPs work best with high-speed Internet connections. Here, potential users will have to consider the reliability of their service provider, and since ASPs sometimes have connectivity issues, savvy users may want to negotiate a service-level agreement with the ASP.

Intacct CEO David Thomas parallels the ASP model to 20 years ago when accountants resisted transferring client data to computers, "People ran double books for a long time, but how many accountants are still doing their books by hand?"

Clar Rosso is CalCPA's managing editor.