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The Wonderful World of Add-Ons: How the Cloud Has Revolutionised Accounting

Where did add-ons come from? What are they? And how can they help you to improve your accounting system? This article focuses on the changes the cloud has brought us. But before we dive into the wonderful world of the cloud, let’s have a look at the era before it existed (which may feel like the Dark Ages, but is actually not very long ago).

Before the Cloud, a.k.a. the New BC

Before the cloud, accounting systems started out as bare-bones software. Just enough to enter transactions and reconcile. Over time, vendors added functionality so the full range of accounting functions was present – think accounts payable, receivable, payroll, inventory, reporting, and business intelligence.

At the same time, vendors added features for certain use cases, or those that appealed to certain industries and verticals. By adding those features for 20% of their clients, they added features the remaining 80% didn’t need. That led to feature bloat.

If your business didn’t fit into the available accounting systems, you could try to find an industry-specific solution. If you couldn’t find an industry-specific solution, then you would revert to a base system and use a third-party product, an add-on, to fill the gaps and hope it didn’t blow up your business.

Chaos + baby databases + weak computers = slow and brittle accounting systems that made mistakes.

You see, there were many restrictions on how third-party vendors could interact with the software back then. Because the software grew in spurts and had features added over time, the database of the program, its core structure, evolved into chaos. Desktop-based database technology was also in its infancy. The last nail in the coffin were vastly underpowered computers compared to today.

Chaos + baby databases + weak computers = slow and brittle accounting systems that made mistakes.

Developers would work on the program code for most of the year within their own little areas of responsibility. Then they passed it off to Quality Control. Those guys had to manually run through hundreds of test cases to make sure nothing broke in the new release. If there was an issue, then that chunk went back to the developer for fixing. The program was then released once or twice a year in a ‘big bang’ approach.

Third-party vendors had to work within boundaries dictated by vendors. They had to know how the program worked, and what the business logic was underneath certain screens. The logic went like this: if I post this ‘Spend Money’ transaction, it will affect data in tables X, Y, and Z, and also change this record over here and that one over there.

As the main accounting system vendors made changes to their program, they had to communicate the changes to the third-party vendors. If the vendors missed something or a third-party vendor misinterpreted the change, they ran the risk of corrupting the accounting system.

Third-party products used the first set of technologies for transmitting and communicating data, such as SOAP/XML or ODBC. The way those technologies worked with such chaotic data structures, given the networking limits of the computers at the time, meant data could only be transferred between programs in very simple ways.

These are all reasons why third-party programs were so brittle. They resulted in third-party programs having a poor reputation and limited their scope. But then the cloud came along…

Let’s compare the same points for the new generation of cloud accounting systems.

The New Age of the Cloud

We have come to realise that one-size accounting systems do not fit all. Alternatives have arrived to shake up the status quo.

New web-based public ‘APIs’ are the glue that links cloud-based applications together.

Accounting systems are now expected to be a platform, a base for other applications to build on. Businesses need custom solutions that increase their advantages but also keep track of the detail. Hence, new platforms have been created and older platforms have been revised to fit the new environment. We will talk more about philosophical differences between vendors later – they all differ in their approaches to ‘platforms’.

New web-based public ‘APIs’ are the glue that links cloud-based applications together. Developers use API requests to get data from other programs and bring them back to their own applications.

These APIs present an abstracted business logic layer, which makes it easier for a developer to figure out how to get data in and out of the program (e.g. how to create an invoice, how to spend money). The documentation of APIs can now be mostly automated based on the underlying code.

In other words, when the code changes, so does the documentation.

Moving the database to the cloud increases the computing and network speed available to a vendor’s developers. New and better database technologies mean that the application’s performance is an order of magnitude higher. Processes that used to take a significant amount of time, now finish much faster.

Developers have changed the way they work, from the older waterfall-style project method to newer, agile methods. ‘Agile’ means there are lots of frequent releases (generally a couple a day) rather than one or two big ones per year. ‘Agile’ also changes communication and emphasises people communicating instead of huge specification documents. Tools for ‘continuous integration’, i.e. automated tests that run on each mini-release of the software to catch bugs, are also robust now.

These points all reduce the brittleness we saw in the ‘olden days’ and increase the value that add-ons can provide for your business in the cloud – you can now build very sophisticated ‘stacks’ of apps that are tailored to your business. In other words, now is a great time to work in accounting: we have never before had so many efficient tools and resources to make our jobs – and lives – easier.

Over the next two instalments, I will take you through what add-ons are and how they work in more detail, so that you can ask your clients and vendors the right questions and select add-ons that will really move the needle.

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