On-Premises? Hosted? SaaS? Cloud? There are many software delivery models available to Nonprofit organizations as they consider purchasing fund accounting and other mission critical nonprofit software solutions such as fundraising, grant management, that it can get rather confusing.
First, let’s define our terms.
On-Premises Nonprofit Software
This is the most traditional software delivery model. You purchase (or license) a nonprofit software solution and the software is installed on a server (also purchased by you). The server and the software physically reside within your office – on-premises.
The version of the fund accounting software (or other software) remains unchanged until the publisher issues an upgrade (usually every 12 – 18 months) and you have the upgrade installed on your server. This usually requires down time: those team members who use the software on a daily basis must log off and remain off the system until the upgrade is complete. Periodic upgrades of your software usually require help from your IT staff or your software VAR (value-added reseller) or both. It’s not uncommon for nonprofits to postpone upgrades in order to find the right time to conduct the upgrade due to availability of technical team or because current projects or financial reporting demands make it inconvenient to interrupt access to the system.
There are significant, recurring costs associated with the On-Premises model. Beyond your initial purchase costs for both the server and the software, you will have annual maintenance and support (M&S) fees. It’s not unusual for software M&S fees to be 18% or more of your initial purchase price. That can’t be a hard burden for nonprofit organizations and their budgets.
Additionally, the nonprofit is responsible for the security of the software and server. Your internal team will also be responsible for regular data backup and storage. You will have to make provisions for disaster recovery (thankfully rare for most organizations). Hurricanes return on a seasonal basis and many nonprofits were crippled by Katrina and Sandy. Flooding and fires also pose a threat to on-premises models.
Finally, there is often a need to have uniform devices for accessing the system. For example, you must have Windows PCs – a Mac user cannot access the system. The on-premises software may not be available via a tablet or smart phone.
Most legacy nonprofit software solutions are on-premises software delivery models. These legacy solutions were probably designed in the late ‘80s or early ‘90s.
Hosted Nonprofit Software
In the hosted model, the software your nonprofit has purchased (or licensed) physically resides at a remote data center operated by an expert third-party hosting provider.
Users in your nonprofit organization access the software – a unique instance of the nonprofit fund accounting system (or other solution) – over the Internet, usually using a product like Citrix.
This model along with your hosting fee relieves you of the responsibility of purchasing and maintaining a server as well as housing the server in your office.
The hosting provider is responsible for the security of the server. The depth of those services is something that you will want to investigate before purchasing. But typically the conditions at the server farm of the hosting provider are designed for optimal security. You will still have responsibility for security at the software level (passwords, user permissions, etc.).
In the hosted model, pretty much everything is the same as the on-premises model, except you don’t have to worry about the server component of your technology setup.
Some of the legacy nonprofits solutions offer a hosted delivery model.
Cloud/SaaS Nonprofit Software
The Cloud is really just a physical location – a server farm that employs state-of-the-art server technology (made affordable by economies of scale). SaaS stands for ‘software as a service’ and offers nonprofit software solutions through a subscription model (think Netflix).
The nonprofit software vendor develops a shared, scalable system that users access over the Internet – just like Google, Amazon, WebEx or on-line banking.
Cloud providers deliver their solutions using new technology that ensures that even if you were to make extensive changes to the system, customizations will automatically continue to work across upgrades.
What does this mean for nonprofits?
NTEN (Nonprofit Technology Network) conducted a survey that found that over 90% of respondents were using some kind of cloud-based software solution. Success in one area of the organization goes a long way instilling confidence in using the same technology in another area of the organization.
It’s a big step to place your fund accounting, fundraising, grant management or other mission-critical solutions in the cloud – not because it’s risky, but rather because there are so many benefits to making this move to this new software delivery model.
In the NTEN survey 50% cited “cost” as a factor in selecting a cloud-based application. Another advantage 42% cited was the advantage of “remote access” to their cloud-based solution. There are many advantages that probably could benefit your nonprofit organization.
Robust Nonprofit Functionality
Occasionally it is suggested (usually by legacy software providers) that cloud-based solutions are simply not as mature as legacy software and therefore do not offer as rich a feature set as legacy software. While that might have been true in the early days of cloud computing, it is not true today. And, from our perspective at JOSEPH EVE, if a software solution did not have the functionality that a client or prospective client needed, we wouldn’t recommend it to them.
The cloud-based solution we offer, Intacct, offers full-featured fund accounting and grant management to track grant and fund management by key performance indicators. It ensures appropriate stewarding of donations and grants to comply with federal reporting requirements. Beyond the feature sets, the technology platform reduces costs and reliance on IT as well as number of other benefits.
Mobility and Remote Access
Mobility and remote access are especially important for nonprofits. Whether program managers work offsite, grant writers work remotely, or board members are on the road, mobility and remote access are a requirement for efficiency and productivity. Sharing data and 24/7 Internet access great improve an organization’s efficiency and provide real-time management insights and action. With the mobility capabilities of cloud computing, internal and external stakeholders gain full access to metrics, approvals, and finance reports – regardless of location.
The second driver of adoption for cloud computing in nonprofits is reducing IT costs. With the cloud, organizations can dramatically reduce the Total Cost of Ownership (TCO) by eliminating hardware costs and reducing software and IT costs. The cloud eliminates the burden of installing, maintaining and upgrading software solutions, reducing dependence on scarce IT resources, and freeing up employees’ time to focus on the organization’s mission. With cloud computing, nonprofits also get the benefit of reducing their technology risk with enterprise-class security, backups, and disaster recovery – at a much lower cost than doing it themselves.
Concerns Around Cloud Computing
It’s easy to see why these key features are the motivators to the cloud, but what about the questions and concerns surrounding the other critical aspects of cloud computing? The NTEN survey revealed that 59% of respondents cited security, privacy, control, and access as concerns about the cloud. Let’s look at these key issues and examine how the latest advances in cloud computing technology have addressed those concerns for nonprofit organizations.
Privacy & Security
With increased compliance requirements surrounding privacy and the need to protect sensitive donor information, privacy and security should be at the top of the list for computing requirements. Many nonprofits believe that on-premises systems offer more privacy and security because the hardware is physically located at the organization. Yet, IT and data security are certainly not the primary focus and expertise of nonprofits. In fact, by utilizing the investment of major cloud providers in accumulating the greatest collection of computer science and data security expertise in the world, nonprofits can benefit from levels of privacy and security that far exceed what their on-premises solutions can offer.
Unlike on-premises solutions that may be located in a closet or in an unsecured part of a local facility and managed by a few resources, cloud providers can scale for millions of users via a few major providers to create more secure environments for servers by incorporating the latest standards and controls for physical access. This capability results in a level of security that individual organizations cannot match.
Data Controls & Access
The specific concerns of nonprofit organizations around data controls and access include the fear of outages, ensuring they maintain ownership of their data, and guaranteeing that no data is lost in disasters or emergencies. Hurricane Sandy brought a reality check for nonprofits that previously felt their data systems were secure. Trying to restore data from thumb drives and personal computers caused some nonprofits to realize how unsecured their data was in an on-premises environment.
In order to be adequately prepared, nonprofits need to keep data concerns fronts and center as they evaluate cloud applications. Nonprofits need to: verify the historical performance level of the prospective provider; make sure that they receive 24/7/365 real-time information on performance levels; and expect guaranteed performance at 99.8% or better.
While nonprofits may not be managing the servers directly, they still have responsibility for their data. When evaluating cloud providers, nonprofits should review a service’s audit or certification of security, backups, and maintenance practices, and then keep reviewing these things regularly while utilizing their service. Nonprofits also should make sure they still own their information and can take it from the cloud when they want it. Due diligence in the selection process is critical to maintain the data control nonprofits want. Typically, many organizations find when they compare their internal on-premises processes against the cloud offerings, cloud offerings offer more benefits.
We can help you make the comparison, so that your priorities are met as you move forward with a new fund accounting system. We understand that this is an important decision for your organization. A sound financial system is the foundation of a strong, vibrant, and sustainable organization positioned to serve its constituents today and well into the future.
Other resources for nonprofits offered by JOSEPH EVE
Nonprofits Turn to Intacct – Here Are the Reasons
Nonprofit Outcome Metrics – Nonprofits Wise to Focus on Outcome Metrics
Nonprofit Accounting System Checklist
Four Nonprofit Accounting Trends to Watch in 2016
Nonprofit CFO’s Survival Guide
JOSEPH EVE welcomes the opportunity to answer your questions. At your convenience, give us a ring 406-752-5225 or Email Us.
About JOSEPH EVE, CPAs
Founded in 1983, JOSEPH EVE, CPAs is a team of more than 60 Certified Public Accountants, Certified Fraud Examiners, and experienced team members providing a wide range of services for clients in more than 28 States. JOSEPH EVE has a passion for helping our clients succeed. In addition to assisting clients with the selection and implementation of accounting software solutions, JOSEPH EVE has developed specialty software solutions, all powered by Intacct Financial Accounting, including: AssetEdge, CasinoEdge, and ContractEdge. The firm’s unparalleled services include external and internal audit, financial management software, Title 31/AML assessments, finance process optimization, accounting assistance, fraud investigations, and controller/CFO advisory services. Additionally, the company consults on information technology, PCI compliance, accounting system implementation, tax services, business advisory, and conducts national seminars. For more information, visit our website.