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Hosting AP Solutions in the Cloud vs. On-Premise

As 98 percent of companies now use at least one public or private cloud for their business applications, is it time to move away from on-premise versions of accounts payable solutions for good?

For most companies, the cloud has become a familiar way of hosting IT applications for critical business operations. According to the Flexera 2020 State of the Cloud Report, the overall portion of companies using at least one public or private cloud is now 98 percent. This number has been growing steadily in the past few years. Many large-sized companies in particular have increased their cloud maturity by moving more technology to cloud services.

The future is pointing more and more towards the cloud, but some businesses are still hesitant to move key business operation applications (including accounts payable) there. Some companies even have policies in place to keep financial systems within their proprietary IT infrastructure and servers. Professionals should understand the pros and cons for hosting AP solutions in the cloud or internally with a so-called on-premise solution.

Main Differences Between Cloud and On-Premise Solutions

With an on-premise accounts payable automation solution, the application is installed and maintained on the company’s internal servers as opposed to a server hosted in the cloud.

There are different cloud services on the market:

  • Public cloud is when the services and infrastructure are provided offsite over the internet. This is what is sometimes referred to as “true cloud” because it is the only type that brings you all the benefits of a cloud community and its shared resources.  
  • Hosted or private cloud is when the service is maintained on a private network. Here you will still need to purchase and maintain the software and infrastructure; you’ll also miss out on the benefits of sharing resources on a public cloud.
  • Hybrid cloud includes a variety of public and private options with multiple providers. One possible downside here is that you will need to keep track of various platforms and make sure that their different business solutions can communicate with each other. 

When buying an on-premise accounts payable automation solution, you get the features and functionality available at the time of purchase; it is up to you to initiate regular upgrade projects to gain access to news, fixes, and updates. In these times of rapid technology development, an on-premise solution will very soon feel outdated. With a cloud solution, new releases are published regularly and automatically to all users. This is one of the benefits that users of cloud-based AP solutions appreciate the most, since it removes much of the pain of time-consuming upgrade projects and ensures the most up-to-date technology.

The IT Perspective – Security, Stability & Maintenance

IT leaders may have hesitations about the cloud for security reasons, especially when operating in sectors with strict data requirements. However, the accounts payable process is not usually subject to such restrictions. Implementing a cloud-based AP solution can often be an excellent first step in increasing your company’s cloud maturity.

According to Flexera, central IT teams take a stronger governance role in advising on which applications move to cloud, managing costs, setting policies, and brokering cloud services. When initiating the search for a new AP solution, make sure your IT Manager is on board to include questions and requirements in the RFP process. For example, it is essential to ensure the AP solution provider can provide detailed information about the cloud service used and support compliance with data protection legislation, such as the GDPR, that we have covered in a previous article on Untapped.

IT leaders often struggle to provide high-quality service to their business due to limited bandwidth. According to a Computerworld survey, IT leaders look at the cloud as a way to help them deploy new applications faster, reduce their internal data center infrastructure and free up resources for new innovative projects to support their organization.

The Finance Perspective – Availability, Speed & Cost

One might think that finance and AP leaders care mainly about core features and functionality when selecting an AP solution. But it is important to recognize that the chosen hosting technology will profoundly affect the benefits for direct users of the solution. For finance and AP users, these are the main differences between cloud and on-premise:

  • Cloud solutions can be made available 24/7 and on mobile devices, so that invoice approvers can complete their tasks at any time from wherever they are. On-premise solutions often require users to be logged in securely (via VPN or similar) to the company’s internal network.
  • Cloud-based AP solutions are fast to implement (and easy to integrate with other cloud-based business applications), whereas on-premise installations often require a lengthy and complex IT project.
  • The total cost of ownership (TCO) is usually substantially lower for cloud solutions, since they offer subscription billing models with product upgrades included. This translates to predictable costs over time and fewer surprises and headaches for the CFO.

Hosting your accounts payable solution in the cloud provides many benefits, both for the IT team and for finance and AP users. Know the limitations of on-premise installations and engage the relevant internal stakeholders in your discussions when selecting an AP automation solution provider.

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