Between March 22, 2011 and March 25, many of Intuit’s online services, including QuickBooks Online, some payment services and payroll systems were down for pretty much 3 business days, paralyzing a large number of small businesses. As you may imagine, Intuit is in a frenzy, apologizing to clients and promising fixes for the future, but what can we learn from this?

If you look at the uproar that the QuickBooks Online outage created on various bulletin boards, it makes you realize how vulnerable we are to applications running in the cloud (ie. Web based applications). Does it mean that we should shy away from web-based applications? Absolutely not. Web based applications are quickly becoming the foundation of our IT infrastructure. If you decided to go back to desktop applications to “play safe”,  you’d be rolling back to the previous century and you’d be cutting yourself off from 90% of the innovation and development out there. The cloud needs to be embraced, but it needs to be tackled carefully.

If you look at what happened with QuickBooks Online, despite the 3 days of outage, not a single piece of data was lost in the process. Talk about looking at the glass half full! I know, but it is still worth noting. If QuickBooks had been on someone’s desktop and the hard drive had crashed, data would have been lost. Even if a backup had been made offsite, the data entered between the time when the last backup was made and the time when the crash happened would have been lost. Loss of data is often much worse than down-time. Instances when data is lost in the cloud are very rare.

When it comes specifically to QuickBooks Online, does it mean that it’s still worth taking a chance with this product? I would argue against it pretty vehemently and this for two reasons: 1. QuickBooks Online is an inferior product to the desktop versions of QuickBooks and 2. Intuit is still a long way from demonstrating that they know how to operate applications in the cloud reliably enough.

Over a year ago, I wrote a blog discussing the weaknesses of QuickBooks Online Edition. My assessment hasn’t changed since then. No material progress has been made on this application since. Hosting the desktop versions of QuickBooks on a remote server is still a much more robust solution for bringing QuickBooks into the cloud.

Intuit is a remarkable company and they do a number of things extremely well: understanding customer needs, designing user friendly applications, etc…. The impact that QuickBooks has had on the productivity of small businesses in the US cannot be underestimated. However, their capability to run online applications with an enterprise level of reliability is their Achille’s heal. They have had this problem since the advent of the Internet in the 90s. Last’s week’s problems with QuickBooks Online, Intuit Payment Solutions and QuickBooks Online Payroll are only the tip of the iceberg. Many of their applications experience outages and overloads on a regular basis, albeit not as acute as last week’s event. For instance, TimeTracker, their online timesheet system, would systematically become unusable on Monday mornings when most business owners would download the timesheets from the previous week. They eventually had to jettison the platform at the beginning of this year and replace it with a new product called “Time & Billing”. Even that product has had its share of problems since.

So, my recommendation is to not put too many eggs in the Intuit online basket. The desktop version (on your PC or hosted) is unavoidable, but diversify your online applications providers and select reputable online companies. As Intuit shows, the size of a company is not an indication of their competency in running online applications. Often, a medium size player focused on a vertical will take better care of you because their whole livelihood depends on the stability of their main application.