The Risks of Cloud-Based Software

What? Risks of cloud-based software? As anyone who regularly reads my blog, you may be startled by that headline!

Well, of course, there are risks in everything in life, and cloud-based accounting is no exception.

The risk in using cloud-based accounting software is there, and I have written about this before, so this Blog is a new perspective on this issue. The reason I am writing about it is because we – ourselves – just experienced it!

Ok, so the primary risk is this – make sure to always choose online software that does not just give you a great software tool with amazing bells and whistles…

You must also look at the company behind the software. The company itself must be very stable.

The company that created the software must have 5 things going for it:

  1. It must be in business for at least 3 years;
  2. It must be profitable or very close to it;
  3. It must have mostly 5 star reviews from users;
  4. It must have a large number of paid monthly subscribers;
  5. Ideally, it is best if it has “deep pocket”, high-profile investors.

Why are all these crucial?

Well, because you will want to have access to the software over the long-term!

I will go through these point by point…

In Business For 3 Years

A start-up company will very likely be unprofitable, and in the software as a service business (in other words, cloud-based accounting), it takes a long time to reach profitability.

It takes a long time because each subscriber is often paying a small monthly fee, and so it takes many, many subscribers to reach break-even.

So, find out how long they have been in business.

Is the Company Profitable?

This is clearly important, as the odds are, they will keep growing and expanding if they have reached profitability.

It may be a bit harder to discern this one from your online research.

However, by asking you would be surprised how open people are open about this.

Does it Have Mostly 5 Star Reviews?

I always read the reviews carefully on any software I use or recommend.

I read the top ones, the middling ones, and the worst ones.

When reading the worst ones, I try to discern whether this is a one-off disgruntled person who has super-high, unreasonable expectations of what the software can do, or am I seeing a pattern of breakdown or lack of deliverables in what people are saying about the software.

I have moved away from signing up for a software based on even a 4 ½ star average after reading just a few 1 star reviews.

Does the Company Have a LOT of Monthly Subscribers?

Sometimes you can kind of guess at the size of the subscriber base by the sheer volume of reviews online.

How to find out the number of subscribers?

Just ask!

When they have a lot of subscribers, the company will most often be very proud of that fact. If there is a lot of hesitancy, the number is likely low.

When they haven’t a lot of subscribers then they will be far from profitability and the risk is high they might fail…

Are There Deep-Pocket Investors Involved?

Often a dynamic, award-winning software will have a handful of high-profile investors who are backing a winner.

This is important because of the long period of time to go profitable in subscription based software.

This will give you the assurance they will make it.

What Happens When a Software Disappears?

Recently we had this happen.

About 1 and ½ years ago we converted a client to an award-winning software for inventory management. It is an amazing software and all 5 points above are a “yes” – profitable, high subscriber base, deep-pocket investors, been in business 10 years, and loads of 5 Star reviews. (It has a few 1 star reviews – mostly complaining about complexity – but for us that was a good thing. It was complex because of all the amazing things it can do!)

The break down we just experienced arose from a software service they recommended. We needed to sync online sales orders from our client’s online ordering portal to the inventory management system.

The software they recommend worked great – until last month. They seemingly went out of business. Servers down. No phone calls returned. No emails returned.

Our client is recovering by using an alternative software that will do the same thing.

This, by the way, is a big upside of cloud-based accounting – there is a LOT of competition out there, so we can always find an alternative.

What they are doing now is integrating a new software service to sync their online orders to the inventory management software.

By the way, all the software we recommend for our core platform hits all 5 points mentioned above.

Oh, and lastly, getting a subscription stopped when being paid on your credit card is a bit of a nightmare, and that will be the topic for another blog…

Thanks for reading…