You know you can’t run your business on Word and Excel only, unless your plan is to stay very small. With all the options popping up, how do you go about making the right software investments today, that will best balance your current resources with future growth?
In my previous post, Business Software Strategy: 3 Options, I outlined a generic approach, typically suited for well established corporations, or at least those at the upper-mid range. However, considerations for Software Solutions for SMB may be different.
When starting a business, and even during its first years, many seem to pay little attention to their Information Systems (or software solutions). Why? Because it’s one of those things that doesn’t stop the show. Also, it isn’t really taught in business schools as a strategic enough lever. There are much more pressing issues to cater for.
While this may be acceptable, your Information Systems strategy may be the advantage you’re seeking and prepare you for true growth tomorrow. What is the right approach to carve out a strategy here?
Identify your current situation
Your first step would be to investigate your current situation, business horizon and foreseen requirements. Main points to investigate include:
- What is your core business process(es)?
- Distinguish your core process from your context processes (see below)
- Identify your business functions and their role in the business process?
- What is your organizational structure?
- What software solutions are you using today, what business processes are they covering? To what extent?
- How much are you spending in total on Information Technology (IT)? How does it compare with your competitors in your industry?
- Prioritize your business goals and their matching required software solutions
Summarized the above investigation in a document that will serve your next explorations. Take the opportunity to re-visit old processes or habits in the process. Refine your business machine as a bonus. Most companies call for an external consultant to investigate and prepare this document.
As an SMB, you should have an advantage here, as your current processes, organizational habits and culture are not too ingrained to be re-visited.
What solutions are there for you?
Your next step would be to go out and do some shopping. Typically, an experienced consultant will short-list potential software solutions for you, based on the document you (or he) created in the previous step. While it is tempting to start shopping around on your own, it is strongly advised to have an experienced consultant lead this process for you. The number of pieces at play here is significant, so are the market offerings. Identifying the best vendor, software and implementation partners is a key strategic decision that will impact your business for years to come. You don’t want to save a penny today in exchange of grave investments that will hider your business, instead of grow your business.
A key consideration would be to always keep in mind that your business is growing. A solution that allows you to “start small, grow big” should receive positive attention. Future migrations of processes, data structures and data from one system to another may prove a headache. Some Software Solutions for SMB do not even offer flexible enough data exporting capabilities.
Distinguish your core process from your context processes
In your business, you must be doing something unique, something that gives you the pinch of advantage over your competition. This is your core process. Other than that, you’re probably doing much of what everyone else is doing: managing employees, money, customers, inventory, production, etc. These are your context processes.
You want your operating costs of context processes to be very low. You achieve this by using standard processes, just like many others do. This is where standard, packaged software solutions excel.
If you have a core process that gives you the edge you need in your battle field – this is where you want to invest to be the best.
Why not develop your own, special software?
The short answer: because you’re not a software house.
Here’s an advice any decent consultant should hand out to you up-front: If there’s a packaged software solution out there that is supporting 80% or more of your context (non-core) processes fairly well, with all other checks in place (vendor reliability, software stability and market footprint, etc.) – go for it. How do you bridge the 20% gap? Mostly by changing your processes to adapt to the software – this is probably the most standard and economical way to do it. You can always complement missing parts you really must have locally with point-solutions you’ll either buy from other vendors or develop for your specific needs. Rarely will there be a standard solution covering 100% of your requirements. You’ll want to narrow the missing parts to a minimum.
The Two Main Reasons to Buy and not to Develop
The main reasons for buying and not developing software solutions, when available, are:
- Enjoy the know-how. The know-how instilled into these packages is worth gold. Translating many years and businesses experience in your industry into a standard software package that fits most requirements is an exercise you won’t be able to pull on your own. Enjoy all this know-how as you adapt your business to the standard!
- Be prepared for market changes. Over time, your market will change, regulations will change and technology will advance. If you will need to keep up with all those changes with your development team (or software house) you’ll soon find yourself maintaining a small (or not so small) software house yourself. you’ll struggle for more and more funding just to keep the lights up – no innovation even considered. This will take its toll in two currencies. First, you’ll never be able to keep it up like the software provider specializing and selling the standard software package to hundreds of companies can. Second, your little software house will hinder your focus on the real business you’re promoting and will make it hard for you to introduce creative innovation and business flexibility.
Implement and complement
Implementation of software packages (or cloud-based solutions you subscribe to) can be very efficient and quick these days for a small to mid-sized company, if done properly. I’m talking about weeks to several months. What’s “Properly”? I covered that in this Blog post. Assuming you are implementing the best 80%-match for your business today, you still have the remaining 20% to cover. Oh, and your core process of course. In general, I’d consider the following steps:
- Adapt your business to the software package. This is not applied to your core processes, of course, but otherwise – don’t get wise. Aim for lean, low operating costs with no special tricks.
- Seek 3rd-party solutions from the eco-system. Most software solutions nurture an eco-system of partners that expand the total coverage and diversity of their platform offerings. In fact, choosing an open platform with a healthy eco-system of partners for implementation, education and software solutions is one of the things to consider when shopping for your solution.
- Seek independent 3rd-party solutions. You may find out that a software provider has just what you need, even though it is not designed to work with your chosen software. There will be interfaces to be developed and maintained, but it is usually better than your next option.
- Develop the missing parts. Either with your own resources, or using an external software house, a tailored solution may be needed.
Last word: Re-visit of your strategy every 5-7 years, or at lower frequency if you’re not large enough or things in your business changes frequently.