There are many advantages to using cloud based software. One that is near and dear to my heart is it allows you to hold onto cash. Typically cloud software has a lower cost of entry since a monthly service contract is signed rather than having to invest significant dollars in hardware and software. Often implementing cloud software can save up to 40% in consultant fees and in-house personnel costs versus purchasing and installing software on your company server.
With cloud software, smaller companies that don’t have an IT department outsource the IT responsibility allowing the business owner and their staff to focus on what they know, the operations of the business. I have a client that operates a finance company that makes loans to automobile buyers. He uses a cloud based software product that is industry specific and does an excellent job of keeping track of the individual finance contracts and overall finances of his company. He, his staff, and I can access the program from any computer at any time. Further, the software provider has a full staff of knowledgeable technical advisors that are intimate with the program and available to answer any question we have. He pays a fee on monthly bases and avoids having to maintain a server and in-house IT expertise.
Of course cloud software can be an excellent solution for large companies as well. In addition to the benefits mentioned above, larger companies may have bank line of credit covenants that could impact their decision. Often times a bank, when extending a line of credit, will restrict the amount of annual capital spending a company can make or require a minimum EBTIDA. These types of financial restrictions may determine if a company decides make the purchasing decision or get its software needs satisfied through a cloud based solution.