Business Software Investment: A Recipe

Investment in business software for your company is one of the most important choices you will make. The process can either be painful and disruptive, or it can be liberating, depending on the approach. There are four primary drivers in the decision to evaluate new software. The recipe you use to combine them determines success or failure.

1.    Necessity

Companies can be forced into the evaluation of new software for several reasons.

  • The existing system may no longer be supported.
  • The system may have failed to change with the industry.
  • Customers or vendors may require new technologies for processing orders.

In any case, companies who find themselves forced to make a business software investment on necessity alone are starting off on the wrong foot. Depending on how they choose to evaluate new platforms, they may find themselves with a failed investment.

2.    Growth

Many companies evaluate new software as a growth and planning initiative. This can be driven by a multitude of factors, such as entry into new markets, expansion of existing infrastructure, and the ability to manage more commerce with the fewer or the same number of employees.

Growing companies need management tools that provide financial vision, and increased process oversight. Growth should always be one of the primary factors for evaluating new business software, and failure to consider growth requirements ALWAYS leads to failed business software investments.

3.    Profitability

Over time, companies create internal processes that require duplication of labor, additional data manipulation, and often result in an increasing number of costly errors. Management time also becomes a factor as the business becomes more complex. Companies that approach the evaluation of new software with an understanding of the capital they burn up every day in these processes will make better decisions.

Evaluating a software platform based on the return on investment (ROI), leads to an understanding of the real cost of that system. Over a relatively short period, a more expensive system investment, may save the company millions over the purchase of a cheaper system.

4.    Budget

This is an excellent consideration when making consumable capital investments, but should never be the primary factor in evaluating business process related investments such as software. The purchase of paperclips, notepads, and lightbulbs can all be approached from a budgetary standpoint. While this is certainly a consideration in evaluating new business software, budget can be very dangerous based on where it appears in the recipe. If you run out of paperclips to manage your day to day operations, you can always send someone to the store for more. If you run out of software, you will find yourself shopping for another platform out of necessity very quickly. Budget restrictions can create costly software investment mistakes, especially when they are blind to ROI and growth.

With the four ingredients above you can assemble several different recipes for evaluating new business software. Here are how a few taste:

Necessity > Budget > Growth > Profitability = Hasty Project Pudding

A rushed decision that does not place as much importance on the software’s functionality as it does on availability or cost. The result is typically regret. A company may limp along for years on a bad software decision because the expense to correct it (re-implement a new package) is beyond their budget, or would represent an admission of failure. If they survive this disaster, these companies are typically tainted against the business software industry for years, or until new management is introduced.

Budget > Growth > Profitability > Necessity = Thin Solution Soup

This typically happens when ownership or senior staff passes the job of software evaluation to a manager or consultant. A budget is established ahead of time, along with specific growth metrics, and an expectation of return on investment. This is “the cart before the horse” in a very literal sense. There are likely a vast number of systems just north of the established budget that would quickly produce an ROI capable of exceeding the difference in investment tenfold. Most of these systems will never make it to the demo stage, because they are disqualified on initial investment alone.

This recipe results in a languishing decision-making process that may take years and feature many missteps, as ownership ultimately steers the decision based on budget. Usually one of the least expensive systems is selected and becomes the most expensive to operate, or is abandoned entirely as the process is repeated.

Growth > Profitability > Necessity > Budget = Perfect Software Soufflé

This is the best recipe. It puts the goals of the company first, takes into consideration the profitability that the system delivers, recognizes that choosing the right system will produce an improvement in operations that cannot be achieved with current technology, and understands that the budget is a function of the investment minus the increase in profitability. Companies that take this approach recognize business software as an investment rather than an expense, and work with their chosen software partner to achieve the most profitable solution.

As you ponder your path towards a software investment, be sure to approach the problem from the right direction. Software is unlike any other capital investment, because it shapes the process, productivity, and in many cases changes the way you work with people internally and externally. When done well, implementation of a new business software will free up capital previously trapped in non-productive activity, and feed the growth of your company.

For over 30 years, we have helped companies achieve excellence through technology investment and support. Please contact us for more information about how SouthWare can make your company more profitable.

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