Cloud computing is a rip off, says software entrepreneur

clouds

Businesses offering cloud computing software solutions to small firms are using the model as a excuse for hiking up prices, an entrepreneur has claimed. 

Quentin Pain, founder of on-premise accounting software company Accountz, said monthly charges for products in what is known as the 'Cloud', which can be accessed via the internet, are "alarming".

"Small business owners hate recurring charges; they'd much rather pay once for software and have the option to use it forever," he said. "Frankly, I cannot understand why vendors who were charging a £200 for permanent use of their desktop software can justify charging £15-20 a month. Over a decade, what looks like a cheap option easily ends up costing £2,000. Cloud computing is great for software-company shareholders, but a real rip off for their customers."

Pain added that much of the discussion around the benefits of cloud computing is "hype" and many small business owners don't want to manage their accounts in the same way as they check their email while on the move via a mobile device.

"Bookkeeping is something they'd really rather not be doing and they need cheque books, folders of receipts, credit-card statements and red-ink paid stamps laid out in front of them," he commented.

"And those who do want to send an invoice out while on the move can do it more quickly and reliably with software installed on their laptops than with Cloud services that require 100% permanent internet connections."

Read on:
"Cloud Computing is a rip-off": A Cloud entrepreneur responds

Several founders of Cloud software companies have responded in the comment section below which you can see if you're logged in. If you're not registered with BusinessZone.co.uk you can do so here for free.

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Complete Horlicks

 So by implication, the tens of thousands of people happily paying monthly subscriptions for SaaS products are naive idiots?

Duane Jackson
CEO & Founder
KashFlow Accounting Software

JRElder's picture

Not all the time

Sometimes this is indeed the case, but there are other costs associated with packaged software too.

May of them become obsolete, due to updated versions. While for some standalone packeges this does not matter, if you want to share files or get the latest security updates, or even get it to run on a newer OS, you have to pay again to upgrade - maybe not full price, but still a lot.  With cloud software you *should* always get the most up to date, fully patched, totally working version.

The other big benefit is the low entry costs - perfect for startups with little capital, and where the software may or may not be used for long. It's great for companies with flexible staffing, or that are in an unstable industry.

However, as with anything, a business decision has to be made that evaluates all the alternatives.

Jonathan
Splice Marketing: Web Development, e-Commerce

http://www.splicemarketing.co.uk

garyturner's picture

Not the future

Whether Quentin likes it or not, software that resides on a PC will eventually fall out of use. I don't recall the last time I heard about a new on-premise software application coming to market. There is a huge installed based of on premise software still out there and it will take a number of years for it to be phased out completely, but it is happening.

I would have more sympathy for Quentin's comments were they better thought through:

  • "Small business owners hate recurring charges; they'd much rather pay once for software and have the option to use it forever"

Quentin's argument conveniently neglects to account for the fact that unless you pay the Accountz annual service contract you will be charged to upgrade to later versions of his product. If you're happy to run outdated software you can pay once and use it forever, but that's probably not a good idea if you need support or want version updates.

So, looking at a more realistic decade long cost comparison:

1 x Business Accountz Enterprise £391.66
10 x Annual service contract enterprise @ £180 p.a. = £1,800

So, running Accountz for ten with an Accountz maintenance contract would cost £2,191.66

Online accounting software @ £15-20 per month over ten years = £1,800 - £2,280

And that's purely the supply and support argument. There are a host of secondary cost savings just through the efficiences of operating online and practically on any device.

Gary Turner
Managing Director, Xero UK

Nice marketing attempt Quentin

Facts:

Accountz basic software is £83.32 add to that the £60 for your updates (service contract) for one year, that makes £143.32 - in my book that is about £12 per month.

1. Cloud is too expensive?

We offer our comparable software for £5 per month, less than half what Accountz Basic incl service contract costs. Our software is updated all the time free of charge, we do not even mention it to our clients, they just expect that we keep things up to date.

I'm sure other cloud vendors have similar pricing, ergo boxed software - including Accountz Software - is more expensive than cloud!!!

2. People do not like to pay subscriptions?

This from someone who clearly asks for annual subscriptions, for the service contract - annually vs monthly - where is the difference???!!!

3.) The Cloud Difference

a.) anytime & anywhere;

b.) 24/7 backed up for business security;

c.) more functionality and better integration with other vendors;

d.) less initial captal outlay

e.) 24/7 support FREE

and so on and on - not hype but reality.

Quentin, what is it that you wanted to say? Everything you accuse us of, you do yourself? Don't want to develop your business for the future and the benefit of your clients - that is your problem.

Why don't you talk about your product's strength (if you can find any) and stop trying to use, IMO, dishonest and misleading statements to promote your business.

In my opinion, this article is hype, badly researched ( see also Gary Turner comment above) and does our industry no justice nor any good!

Stefan Töpfer

CEO of WinWeb.com

 

Cloud Computing

How quaint of Quentin Pain to suggest that cloud computing is not what businesses want.  The fact that there are so many successful cloud offerings around would indicate that this is not the case.  There is of course a market for both.

Purveyors of desktop software invariably cost their purchasers far more than a one-off cost.  The cost of inevitable upgrades are not a feature of cloud services as everyone using them has the most up-to-date features as they appear included in the price.

The simple, low-cost production of a CD/DVD for desktop software is vastly lower than providing hosting services as cloud suppliers do.  It should be no surprise that they, in some instances, cost more.

Mr Pain also seems to worry about people having to have "100% permanent internet connections".  Well, 1) most do anyway - it's a feature of broadband, and 2) I don't look at my accounts 100% of the day - I actually get on with some work - don't you?

Quentin Pain's picture

Load of Tosh

Here's a few conveniantly left out facts from Gary's comment:

1. The service contracts are entirely optional

2. He has picked the top of the range product that has features that cannot be reproduced in a SaaS app simply because SaaS technology is not yet good enough (think Google Docs vs Excel - which would you use if you needed to do a serious spreadsheet? - and who is deemed the best in the world at online app programming... in other words if Google can't yet do it, then I doubt anyone else can)

3. Either way after 10 years the user owns the data and the software and has complete and full access to it forever (no subscription based SaaS solution has this option) - you don't pay you lose it.

Quentin Pain
Accountz UK Accounting Software

Quentin Pain's picture

Idiots?

Hey Duane... you said it, not me.

Quentin Pain's picture

Misleading

Funny how Stefan conveniantly overlooks the fact that a service contract from us is completely optional. It is £83.32 for 10 years compared to £2,000 for ten years. Now that is a real fact.

I highly dispute the 'anytime, anywhere' argument. What about a plane, train, country road, and err, when your ISP service goes down, or your telephone exchange develops a fault, or you move premises and have a delay of a few days reconnecting. None of the downsides are advertised are they!

Note the use of words like 'misleading'...

garyturner's picture

Good luck

 Quentin, I'm bored now.

Gary Turner
Managing Director, Xero UK

On Demand Advice

On premise software is an accountant's nightmare - always has been, always will be i'm afraid.  Client's tend not to update regularly, when they do, it's usually poor and how many times can an accountant keep nagging at them to send in a back up disk without it becoming annoying for both parties?

SAAS changes the dynamics of the accountant - client relationship.  Business owners want on-demand advice and this can only be given with on demand software.

Chris Mollan

Clever Accounts Ltd

 

 

stevie8abes's picture

My jury's still out...

Cloud computing, for me, has one fundamental flaw that makes me think it's not the way forward for my small business - connectivity!

Let's take MS Office for example. I have local copies of all the software I need on my laptop and on frequent train journeys I can happily and reliably work on spreadsheets, presentations, offline admin (that sync's when i get connectivity) without having to worry about whether the wifi will work or I can retain a mobile signal. On several journeys, cloud based working would have been impossible.

If you're in an office with a leased line or other reliable connection then cloud has its benefits but not for a mobile business like mine.

The cost argument also has some justification. Again, MS Office 2010 Pro cost me about £200 and, based on previous versions, will probably last me 3-5 years before I upgrade - apx £70 per annum. So how much will the cloud version cost me? £20 per month? £40? A quick Google search shows me that Office Standard Hosted will cost £27.30 p/mth so that's £327 per year. Potentially costing me £1,600 if I keep it for 5 years.

So actually, there's two compelling reasons why i won't be going cloud cuckoo anytime soon.

jamesandrewbrown's picture

Absolute rubbish

Having on-premise software is a much more expensive, less available and a less secure option for small businesses.

The cost of buying and maintaining servers in your office with the need for expensive IT staff with cover for holidays and upgrades is far more expensive for the average small business.  Not to mention the lack of availability outside the office and the cost and risk of a proper back up solution.

There is also the support that you get from a software as a service provider who provides a "one arse to kick solution" which lets the average small company focus on selling more.

Our small business CRM software combines invoicing, process management, sales pipeline management and product management with CRM to help small companies be more efficient. It would be a step back if sales people or managers working from home could not access the system at a good speed and see live data.

Sorry Quentin but you are living in the dark ages!

Kind Regards,

James Brown

Managing Director

Click Innovation Ltd.

unconsultancy's picture

This is surely a press release wrapped up as editorial!

I rarely feel the need to leave comments but this was an exception.  I shalln't join the debate about relative costs of cloud vs PC based but I will say that several years ago I moved from a PC based accounts package to Xero (cloud based) and it was one of the best decisions I have ever made in business.  NB I have no relationship with Xero.com apart from being one of their happy clients.

In my view this "article" is no more than a press release wrapped up as editorial.  I don't wish your product ill (infact good luck to you). I'm more annoyed with the editorial staff at business zone - I was attracted by the title, spent 3 minutes of my life reading the article (and another few minutes writing this) only to find that I was really just reading a thinly disguised advert!

Dan Martin's picture

Press release

I did receive Quentin Pain's comments as a press release, one of the many I receive every day. As it's the view of an entrepreneur (our audience) on the subject of cloud computing (of interest to our audience) I thought the content was worthy of publishing. As you can see from the author name at the top, it was written by me and not Quentin. It is not a placed article; it's a story I decided to cover. The headline is a direct quote so I don't consider it to be misleading.

As for promoting Accountz, of course it does to some extent. Surely every entrepreneur that sends a press release to a journalist is promoting themselves and/or their business?

Dan Martin
Editor, BusinessZone.co.uk

Kenarf@aol.com's picture

Forever is a very long time

 All the software I've ever bought has had a very limited life - anyone who upgraded from XP to Vista will know what I mean. Cloud computing may or may not be more expensive and certainly relies on broadband/wi-fi. Why not allow the software to be downloaded but then made inaccessible if the monthly payments are not kept up?

Heads in the clouds

My concerns with cloud computing are:

1 Where is the data residing? If it's outside the UK I could have a data protection issue.

2 How is that data secured on the hosting server? Not just a password for us either...

3 How often is my data backed up?

4 Is there guaranteed access, assuming internet connection,  1/7 to 24/7

5 What our strategy if the internet connection is down?

6 Is there an off-site backup to the data server, if so where is that located?

These are my primary requirements - without satisfactory answers cloud computing is a "no-no"

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