This blog was last updated on February 23, 2024
Should we move our tax engine to the cloud or keep it on-premise? This conversation is taking place in many organizations as they assess their approach to sales tax management. In this three-part series, we’ll explore some of the problems IT is working through to maintain on-premise solutions that may not always be visible to leadership, but that are creating issues of efficiency, scale and effectiveness.
Part I:
In my role, I speak with customers and potential customers on a regular basis about their plans to migrate tax to the cloud. The reason most often cited as the motivating factor in making this move is a better way to manage tax content updates. This is not a new area for IT by any means. In a typical day in the life of an IT team managing an on-premise sales tax engine, the IT department has to download the content files, deploy it in all environments affected, and conduct comprehensive testing while readily supporting any internal transition hiccups. And if you’re required to download the content twice – you must do all of the above… TWICE. Does this sound familiar?
Modern tax is embracing its own digital transformation. What does this mean for your IT department? It means regulatory changes come at you at a pace that eclipses what can reasonably be planned for and managed with any level of efficiency. When new regulations and mandates are introduced, you are looking at very small windows to update the system and push them live. While it may be possible, it is extremely disruptive to the IT organization.
When IT is forced to update tax software ad hoc and not on a regular maintenance schedule, it negatively impacts all areas of the organization. Depending on the nature of the update, it could take up to several hours to implement, test and put online. Unlike other types of updates that can be scheduled and planned for, tax changes can come at you fast and furious. It is not uncommon to receive several new updates in the span of a week or less. All which require IT to take its focus away from other critical initiatives to make the changes. This can be a very expensive operating model in terms of both dollars and productivity.
Reasons for On-premise solutions
Now a natural question to ask may be, if this is such a problem, why do some many companies continue to employ on-premise solutions to manage their tax obligations? There are two primary reasons for this, and they are interconnected.
- On-premise solutions do work, they just don’t work very efficiently or scale in a cost-effective way.
- When you are dealing with the modern tax landscape of frequent regulatory updates and rapid-fire changes, this is a tough way to operate.
Which leads directly to point number two. When leadership is looking at IT operations holistically, they are verifying that things are getting done right and on time. They often don’t have the visibility into the issues that are popping up along the way. They see that the tax software is operational, but they don’t see what it took to keep it that way.
Tax is an application that demands constant vigilance. For on-premise, this means high-touch, low efficiency. Think of it this way. You can get from one side of the country to the other by walking, but it makes a whole lot more sense to fly. That sums up the difference between on-premise and cloud.
Be sure to read Part II of this series on the cost of supporting tax with dated technology.
