Cloud-based credit and collections hosting software solutions are, literally, the latest. But are they the greatest?
We decided to look at the pros and cons of migrating credit and collections functionality to the cloud. For the sake of argument, cloud-based solutions are assumed to be hosted by a third party and on-premise solutions are presumed to be fully owned.
Embrace the Cloud if your organization values…
Predictable monthly capital outlay: Generally, cloud hosted solutions are based on an all-inclusive fee: the hardware, the applications, the environment, the backups and the maintenance are all handled for you. This lowers the cost of getting started from scratch and lets you plan your monthly expenses.
Off-site usage/remote access: This could be an asset for a small business where all the principals travel a lot or benefit an office that doesn’t want to hire full time credit and collections staff. Cloud-based solutions can be accessed from anywhere, and typically from any device, with a high-speed Internet connection.
Limited IT and scaling headaches: Cloud-based solutions allow you to pay for what you use and enable you to grow without having to reinvest in additional hardware or system reconfiguration. You will have little or no implementation time lag if you need to suddenly scale up because you don’t have to worry about servers, licenses or operating systems.
However, totally embracing the cloud is not for every organization and it should be approached with Caution…
Integration with legacy system: Cloud-hosted solutions frequently tout the phrase “minimal capital outlay” which can be deceptive based on what your expenses are for an on-premise solution and what they entail. Unless you are outsourcing every company function to the cloud, it’s likely that you will still have to maintain some or part of a legacy system. It’s true that if you were starting from scratch – buying hardware, paying for the operating systems licensing fees, hiring a tech person, etc. – then “renting” space in the cloud makes sense. If you already have legacy systems, software and staff that fulfill 80% or more of your needs – and that you will not be able to eliminate if migrating solely the credit and collections functions, it could be more cost-effective to tweak what you have. The cloud portion will be an additional expense. Also, in terms of full time employees, an IT employee typically does more than simply maintain credit and collections software and you will likely still need help for other functions.
Loss of tax deduction(s): There’s no amortization or depreciation with cloud solutions. This can throw off financial projections if they were made with accrual accounting and you have not reached the end of the predicted life of your legacy system.
Less flexibility: Mature software tends to have many features while cloud-based solutions have relatively fewer. The cloud solutions may be based on best practices, but if you need extreme flexibility, tailored functionality, and/or make frequent or multiple changes on the fly, you might find the limitations of a cloud solution frustrating. In addition, extra fees are inevitable if the cloud vendor can accommodate your customization needs. Furthermore, if you’re used to a fully integrated system across all functions of the company — say where a salesperson can automatically see on his/her CRM screen where a client is behind in payments — you may lose some of that access or need to take multiple steps to facilitate ODBC, SQL, PERL, JDBC interfaces and regain that visibility across functions.
Moving business software to the cloud is all the rage, but you need to evaluate your operational, personnel, and financial needs before moving your credit and collections software to the cloud.