As most businesses start to make the transition from a one man show to becoming a growing enterprise, owners are faced with the difficult but crucial task of identifying information systems and processes, a major part of which today is procuring the right software and hardware. Even all large corporations are consistently faced with this task of improving the systems, redefining processes and procuring the correct hardware and software to either support the growth of the business or deliver efficiency in times of downsizing.
So what really should you consider when investing in systems? There’s a plethora of factors you will need to consider, and most of them will be driven by your organization, its structure, your employees, the culture and above all, your budget. With the technology world making leaps of progress every year and business and corporate strategy evolving with time (especially given the economic crisis of today), it can be difficult for executives and business owners to choose between what is available to them in the current marketplace. Business technology is evolving to bring more flexibility, better functionality and higher return on investment to most businesses, but getting this right means more than just going with a big name brand.
First and foremost is the illusion that businesses have about technology: it will solve their problems. It won’t. What technology will do is make available to you tools which when used properly will solve your business problems. However, the idea that spending money will result in problems going away is simply false. Getting the right technology that supports your business will certainly do this, and such technology does not necessarily need to be expensive or backed by a big-name brand.
When businesses starting thinking about procuring ERP or enterprise class solutions they often turn to the likes of Oracle, JD Edwards (now Oracle), SAP or Microsoft for answers. Whilst this is not a bad thing (given the experience these companies have with developing such software), it’s not the most efficient or effective way of going about getting a comprehensive information system. Since these companies develop solutions that are generic in nature and applicable to all businesses, they need customization that will tailor the solution to your business. What happens when business invest thousands of pounds in such software is that they expect it to start producing results from day one, an error that many major corporations today are guilty of. What you must essentially realize is that buying an off the shelf solution in this category with a powerful brand behind it will cost you an arm and a leg and will require further customization, time and money before it will start doing what it is supposed to do.
Add to this the cost of remote functionality and licensing, and you may very well be paying a lot more than your vendor originally told you it will cost. It’s all part of the game of selling technology solutions: everyone is trying to sell you their product and will undermine any other cost you may incur in getting the entire solution. You can avoid this by planning ahead. So whether you’re a business owner, an IT manager or a CIO, here are some helpful tips.
Do you really need the ‘best’ solution in the market?
Most businesses make technology and information systems decisions based on the intel they get about their competitors. Especially in times like these, many think that if a competitor is doing well it’s most likely because of their technology. That’s not always true. You should never simply invest in or buy a product or service because your competitor uses it. Neither should you make a technology investment because it is the ‘latest and greatest’ in the market.
Each business operates in a unique way with its own culture and model, and each business decision requires thinking along those lines. It is this business model that, along with what the requirements of your particular project are, should drive your technology decision.
Getting the Numbers Right
When calculating costs for a particular technology or information solution, you need to split it up between the 6 phases of the Systems Development Lifecycle. So, in essence, you need to budget the cost of:
- Planning – Must use external help for this to get a better view of the situation and your business.
- Analysis – External help over here is a must. It will help a third party clearly interpret what you need, thereby making the requirements of the entire project or solution clear.
- Design – Contrary to the popular belief that you won’t need this if you buy an off the shelf solution, you will always need this. Software does not design a system or vice versa.
- Development – For most complex pieces of software that you procure, the will need some customized development. So don’t forget to budget for this whether you’re costing.
- Implementation – You always need a contingency plan. What if implementation does not go right? What can go wrong and how will you tackle the situation. Not planning for this can be very expensive.
- Maintenance – You’ve heard that prevention is better than the cure. Well, it’s true of systems and software. Reactive maintenance is very expensive. If you’re proactive and stay on top of this, you’ll save millions in the years to come.
I’m not going to get into the details of each one of these phases, but it is absolutely imperative that businesses seek some external help or consultancy whilst involved in the first 2 phases. The reason for external involvement is necessitated by the fact that an external view to your problem can greatly aid in creating a better solution or coming up with a better proposition for business or particular situation. Planning and Analysis is imperative and this is essentially what will drive the other four phases and, in essence, the cost of the entire product or solution.
I’ll discuss a brief example of the typical defect a service-based company will make in its cost planning for procuring and implementing a new software system. For the sake of simplicity, let’s assume that this business needs a comprehensive financial management system along with project management and CRM functions to get a complete solution which can help manage projects from start to finish.
The options available to such a business are Microsoft Dynamics, Oracle, Quickbooks Enterprise or SAP. None of these solutions are cheap. Quickbooks is probably the most low-cost solution here, with annual licensing fees for 10 employees topping US $ 12,000. For each additional user you will end up paying an extra annual. Unfortunately, the same goes for Microsoft Dynamics, Oracle to SAP. Then, you’ll need to customize the interface and processes within each system to suit your business model, hire staff to manage the servers and user licensing and for maintenance. Add to the $12k additional cost for CRM and Project management modules (which may or may not work to your requirements and may or may not be available depending on which solution you choose) and you’re fast looking at an annual bill of US $50,000 a year plus initial costs and fees for deployment and any other updates and upgrades as they become available. Basically, at every point in time, you will need to spend money: whether it’s adding an extra user, adding an update for a bug fix or getting an update.
So, in this example, even though the numbers may not be fully accurate, you’re looking at a cost of around US $50,000 a year with a growing business, not US $12,000. Plus, if you are company that requires its employees to work remotely, you’ll need to pay licensing fees for Citrix or GoToMyPC, which can add up in thousands pretty quickly for multiple users.
Think Web 2.0
The world of systems and software is changing. Leading businesses and technology professionals need to think in innovative ways to bring new solutions into their business that cut cost, increase productivity and make their businesses more competitive.
With the advent of web 2.0, businesses that do smart, intelligent thinking can avoid the cost of paying for a brand name, user licensing, or extensive server management costs. From a business standpoint, it would be great to not be penalized for growing your business by having to pay extra for each license every time you hire a new employee, or drop $10,000 every time you need an additional module or add-on to your software.
If you’ve run through your planning and analysis properly, you could spend your annual licensing and maintenance fee just once (that’s right, ONLY once) and get exactly what you need, with remote access from anywhere at any time, anywhere. You won’t have to customize this. It will be built to specification. It’s also documented and you own it, so you can add as many users you want, make whatever changes you want and get internal staff to help improve or add functions at their regular salary as opposed to paying an Oracle or Microsoft certified consultant over $1,000 per day.
That’s right. When you move into the realm of complex systems and business management enterprise class software, customized web 2.0 solutions can be a cheaper and more effective option for many businesses. They’re better suited to the business model and can save businesses hundreds of thousands of dollars in the years to come. Best of all, open-source web 2.0 technology is scalable and can grow with your business. Server and hosting costs will be minimal in most cases compared to other solutions, simply because, if built right, web 2.0 software should require nothing more than what your browser needs.
That’s right, you could run your entire business from a web browser. It is the way all software is headed, so you need to consider this.
Think Open Source
I work for a firm that’s been a Microsoft Partner for years. Microsoft products are generally very dependable and they offer great support and unparalleled documentation, but they have their place. Open source software is becoming effective and powerful, and with the pool of technological talent out there and investment in open-source technologies by some of the world’s largest private equity firms, it comes as no surprise that open source software can very well support enterprise-class functions today. Whether you are a small or large business and depending on your business model, you can save thousands in licensing fees by simply using OpenOffice and Mozilla Thunderbird. Microsoft Office has its place, its user base and its functionality, but this is a cost many businesses can save with the right consulting and implementation.
Make your Own Decision
With the economy taking a plummet, sales teams across the globe have become far more aggressive than before. Businesses are fudging statistics and some are outright lying to get your business, so there’s all the more reason for you to do your homework, consult a business technology consultant and make your own carefully considered decision as opposed to believing what sales consultants tell you.
However, technology is useful if its timely and effective; so you do need to move fast.
Continue Reading
Loading ...
