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The evolution of modern accounting software has paralleled the development of hardware and operating system platforms. Accounting software evolution started with mainframe applications in the 1960’s which evolved to other host-based and mini computers in the 1970’s, then PC systems originated in 1982 and later evolved into LAN-based networking systems, then client/server accounting systems were introduced in 1992, and finally with the turn of the century came the advent of thin-client systems which were originally called ASP (Application Service Provider) solutions, however, have since claimed the monikers of hosted accounting software, Software as a Service and cloud computing.

Mainframe Accounting Applications

The earliest accounting systems were based on the mainframe computers of the day. These systems were punch-card based and, therefore, limited to batch processing systems. They required significant hardware and infrastructure investments, and were focused towards the largest of enterprises. The earliest applications were generally written by the hardware vendors such as IBM, Sperry, and Data General. As these companies realized that the barrier to entry was too high for most businesses, they began to offer the applications in a shared environment called “time sharing.” A business would be billed for how much time their applications used on a common mainframe computer.

By the 1980’s punch cards had been replaced with text terminals, or “green screens”. While still exorbitant by today’s standards, the cost of hardware and operating systems had decreased to a point where larger businesses could own and operate their own computer systems. This decade also marked the widespread adoption of the minicomputer as a departmental system for larger corporations, or a full system for mid-sized organizations. IBM’s System 36, System 38, and later AS/400 were especially successful minicomputer platforms for business applications. SAP with R/2, McCormack & Dodge, and Management Sciences of America (MSA) were prominent accounting software publishers of this era.

PC Based Accounting Systems

The birth of the personal computer (PC) in 1982 spawned the adoption of PC-based business software programs for companies of all sizes. From an accounting systems standpoint, early PC’s were usually either standalone small business applications, or they were terminal emulators for the existing mainframe and minicomputer applications. As networking and file sharing technologies improved, stand alone applications were modified to work in multiuser environments utilizing networking programs such as Novell Netware and rudimentary file management technologies like CTREE, BTRIEVE, and dBase.

By the early 1990’s, several robust relational databases began to emerge such as Microsoft’s SQL Server, Oracle, and Sybase. These databases enabled the development of client/server applications where the server or database managed the most data intensive application processing tasks, the appliation logic could be distributed between a server and a client (depending upon where the task was most logically performed) and the client (usually PC’s) managed the presentation and end user experience. These applications were finally able to match the transactional throughput of the older, mainframe systems at a much lower cost and with an improved user experience.

Hosted Accounting Software

In the late 1990’s, data communications became more robust, reliable, and less expensive. Several software technology manufacturers and suppliers began to offer client/server applications in a “hosted” environment much like the time sharing arrangement from the prior era mainframe applications. This model permitted a firm to operate a functionally rich accounting system with little investment other than PC’s that can serve as terminals and basic communications infrastructure. Due to the client/server applications 'fat client' architectures and the limited bandwidth of the Internet, this model quickly gave way to the next era of web-based, on-demand or SaaS financial systems.

Software as a Service (SaaS) Accounting Systems

Finally the last decade has brought the introduction of “on demand” accounting software or Software as as Service (SaaS). A SaaS application is designed to deliver a functionally rich accounting application through a thin client web browser and permit the customer to purchase only that functionality needed at the time. SaaS delivery methods are innovative because the costs are based upon the functionality or usage delivered, rather than the number of users or modules purchased.

Continued Outlook

The business software industry is facing both significant challenges and opportunities. While functionality and ease-of-use have improved dramatically, the price of software is expected to continue its downward trend. In order to stay competitive, and continue the massive research and development investments, several publishers have responded with a wave of consolidations from the late 1990’s through the current period. The remaining publishers are now faced with a product mix that cannot be reasonably maintained while continuing to meet the market’s demand for constant improvements. At the same time, the consulting and professional services ecosystem that has grown up around these products is getting squeezed by reduced margins on a declining price and smaller project budgets because the products are more functional and easier to deploy. Customers will be the winners in this environment and will continue to get increasingly robust, easy to use systems for reduced investments.

Accounting Software Evolution  

Accounting Software Evolution

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Accounting Software History
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Mainframe Accounting

Host Based Accounting
PC / LAN Accounting Systems
Client/Server Systems
Hosted Accounting Software
Software as a Service



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accounting software evolution, mainframe financial application, hosted accounting software, accounting suite, ifrs, sarbanes-oxley, gaap, edi, client/server accounting software, on-demand finance, saas accounting software















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