Pricing: Web-Based vs. On-Premise Accounting Software
Most small businesses will want to consider cloud-based accounting solutions. Because these systems are hosted online by the vendor, they eliminate the need for you to have a dedicated IT team for managing and maintaining your own server. Conversely, an “on-premise” deployment means the software is hosted locally, on your company’s own servers (which you are responsible for maintaining).
Choosing a Web-based system drastically reduces upfront investment and installation costs. In addition, these systems typically offer monthly subscription pricing, which makes them scale well for fast-growing companies that need to add additional user licenses or features down the road. On-premise systems, on the other hand, come with a steeper, one-time fee to use the software in perpetuity.
At present, some businesses may still see savings with an on-premise system, especially if they already have the necessary hardware to host the software on-site. While on-premise solutions usually require purchasing an expensive perpetual license up front, this may still be the cheaper option if you use the same system over an extended period of time. However, keep in mind that with on-premise solutions, you might also pay additionally for upgrades, customizations and maintenance.
Our recent report shows that the great majority of accounting buyers are undetermined about whether they want Web-based or on-premise deployment. Among those with a preference, buyers are split approximately 50-50. According to experts, these preferences may soon change, as Web-based accounting programs become more widely available and as on-premise options are no longer supported. This change will likely mirror preferences in other software markets, where Web-based systems are more popular and have surpassed preferences for on-premise.
Key Considerations for Small Businesses
With so many options and feature sets to choose from, selecting the right accounting solution can quickly become an overwhelming task. To narrow things down, here are three key factors for small businesses to keep in mind while evaluating different products:
Best-of-breed vs. integrated suite options. Because accounting encompasses so many functions, from fund accounting to billing and invoicing, many entry-level products are actually “best-of-breed” solutions. This means they focus on only one of the core applications listed in the table above. “Integrated suites,” meaning solutions combining multiple applications in one software package (often billed as “professional” or “enterprise” editions), have much greater functionality, but are also are much more expensive.
So before you begin shopping, start with a clear assessment of exactly which functions you need. The “Best for...” column in the chart above provides recommendations as to which applications are best for which types of businesses.
