Cloud computing “will be the default way of delivering technology in the future,” according to a recent Forbes column. While this prognostication may sound a tad exaggerated, there is plenty of evidence to support it, including this data point: 69 percent of organizations already use at least one cloud-based software application or use the cloud as part of their IT infrastructure, according to IDG research.
Given the rapid adoption of cloud-based and hosted business applications – and their increasingly central role in the enterprise-IT model – tax professionals should familiarize themselves with some basic terms. Like many technology concepts, cloud can get confusing, particularly when terms that refer to different processes and activities are used incorrectly.
Here are three of the most common, and most important, cloud phrases that relate to its use in tax applications, as well as across an enterprise:
- Cloud Computing: This umbrella term describes the technical environment that enables a company to access and use software and IT infrastructure that is located outside of the company’s physical boundaries. In practical terms, “cloud computing” does not imply one of the business models described by the more specific phrases that follow.
- Hosting: This term refers to a model in which a company outsources IT infrastructure while maintaining ownership (through licensing) of the software.
- Software-as-a-Service (SaaS): This phrase describes a software-subscription business model through which the software is rented rather than owned. The software is hosted remotely and is accessed through an Internet connection, instead of through an interface that is part of an on-site software installation.
As cloud computing – in the form of hosted applications and SaaS models – spreads to nearly every corner of the enterprise, tax executives and professionals will need to understand cloud technology’s applicability to their function, the technology’s benefits, and how cloud applications are purchased, deployed and managed. Each of these topics is addressed in a new Vertex white paper on Cloud.
Please remember that the Tax Matters provides information for educational purposes, not specific tax or legal advice. Always consult a qualified tax or legal advisor before taking any action based on this information.