While it wasn’t quite what I had expected, I continue to think about cloud computing and how it will affect small businesses and, in particular, the QuickBooks community.
One of the areas of discussion which really resonated with me was the discussion on scalability, and how cloud computing was most beneficial in larger organizations compared to smaller ones, and to distributed organizations compared with local organizations.
This makes sense. A primary purpose of cloud computing is to simultaneously enhance services while reducing costs. An organization of 500 will benefit more from the cloud than an organization of 10, as the costs of managing the larger organization is substantially higher as well as more complex. The same holds true for an organization with 10 offices either nationwide or worldwide compared with an organization with either a single location or a handful of locations within a small geographic area.
For example, one organization represented at the meeting had multiple offices across the U.S., but just the local office had telecommunications expense of $10,000 per month. Clearly, with the level of infrastructure needed to manage their telecom needs, VoIP or VoPI can make a lot of sense. In a similar fashion, CRM or Time and Billing applications may make good sense to move to the cloud.
Now think about QuickBooks. Take a small business with just one seat of QuickBooks Pro ($200). How much is that user willing to pay on a subscription basis for a cloud application? Same question for a three seat user ($550) or a single seat of Premier ($400). Even a three seat user of Premier ($1,100). Now, considering that many users don’t upgrade every year, those costs are distributed over two or three years (or more). On a three year upgrade cycle, that brings the annual cost of a single seat of Pro to $67/year; of a three seat Premier user to $367.
How much are those customers willing to pay, month in and month out, for SaaS? There’s an expectation out there — if your application sells for $150, will your customers be willing to pay more than $4.17/month (at $4.17/month, over three years, that equates to $150)? Will you be willing to make the necessary investment to earn $4/month per customer?
Another issue is bandwidth. Discussions centered around use of T-1 through OC-3. I’m not sure about QuickBooks users overall, but my anecdotal experience indicates that a norm is DSL/Cable, and I’m in a major metro area. What about users on dial-up (yes, they still exist either due to being in a location that doesn’t support broadband or due to “last-mile” issues)?
Cloud computing has it’s place, and I believe it is here to stay. Some applications make much more sense than others (for example, online backup makes sense as a normal strategy of backups is to maintain backup copies off-site). I continue, however, to wrestle with the issue of the relevance of the general premise of cloud computing to the small business owner and QuickBooks users.