Dr. Katherine Jones, Aberdeen Group 
Generally an accounting solution is the first business software package a small business buys; often, unfortunately with very little thought to the future. Even that very first decision should be strategic—the software should not be a throw-away. And there are some simple steps that can prevent acquiring a disposable business solution. What do small companies need to know about their software choices to plan for the future? On This PageExecutive summary: Why software selection is importantSelecting software for a small business can prove a major headache—and selecting the wrong software can be even worse. A small business owner has enough to worry about without the migraine of application mismatch, a syndrome that plagues many in this vital part of the world economy. Application mismatch may not be easily diagnosed, but the symptoms are recognizable: growing pains, migration nightmares, blocked access to data, integration impairment, and often a general malaise stemming from knowledge that managing the software for your small business shouldn’t be so difficult. Will my business application support my growth?First, can the software grow with you? A poor solution choice may not stunt your growth, but it can sure make it harder. Let’s look at some questions to ask as you look for your business solution: Questions to ask your solution provider: | • | How easily can I add more users as my staff increases? | | • | What are the economic implications of adding more users? | | • | How will the software handle increased volume over time? | | • | Can I greatly expand the number of transactions and still have good performance? | | • | Will the software alert me if it has reached its capacity? |
One small manufacturer learned the hard way. The $1.2 million (annual revenue) company had used the same financial software since it was founded. After four years of use, data overload suddenly occurred, causing failed backups and corrupt files. The managers of the application were given no warning signals by the product until data could not be restored after a failure. The result was three months of corrupted data that could not be recovered. The issue here is the total inability to scale to support increased volume and increased transactions. The result for the manufacturer was the loss of one entire quarter’s worth of financial data. Migration: It's not just for the birdsMigration and transition are two issues that can impact access to business processes that rely on automation and the potential downtime of the systems the applications run on. Migration refers to the result of a product upgrade; transition refers to the move to another product all together. In both cases, you need to know that your data will survive intact and that after either the new revision or the new product is installed, you can access and use the data and it is still accurate. Even if you seek to dispose of your current business application, don't even consider disposing of your data. Did you know...? The U.S. has 4,678,371 small businesses with 1-50 employees. The importance of these small firms is reflected in the fact that they account for the employment of 26,547,222 people. In 2002, 50.1 percent of the U.S.’s 112.4 private-sector workers were employed in small firms. The only private sector employers that added jobs in 2001-2002 were those with fewer than five employees. They added 67,000 jobs to the economy. There are 19 million of these small businesses in Europe, providing jobs for 140 million people. |
Questions to ask your solution provider: | • | How will the solution provider ensure continual access to the data I already have? | | • | How long does an upgrade process or a software conversion take? | | • | When can I access my computers during a migration or transition? | | • | Does the supplier charge extra to convert my existing data into the new product? | | • | Will any customizations I've made migrate or transition with my data easily? | | • | Is there an articulated product life-cycle growth path to support my planned (or unplanned!) growth? |
A small southeastern manufacturer of cable assemblies learned a painful lesson as it moved from one financial application to a second—the first years of the company’s financials would have to stay behind; the new product would only allow for data entered at the time of installation and beyond, unless a very expensive conversion and data re-entry project was undertaken. Inquire about migration and transition costs before you are even close to outgrowing your solutions! Integration: Getting it togetherWhen a business, large or small, has a hodge-podge of disparate solutions, predictable problems can arise. But even small companies can acquire software with fairly seamless mobility between different applications that manage employees, accounting, or operations. There are two issues to be alert to: first, the time you spend switching between various applications to get the full picture of your business, and second, the labor cost and loss of productivity associated with reentry of data. The first issue may just be inconvenient and a waste of time, but the second increases the risk of errors and inconsistencies. This risk stems from the manual entry and reentry of data, as reentry increases the risk of error. Thus, a key selection criterion for application purchasers in small business is the ability to access and transfer data across business applications without repetitive data entry and without expensive maintenance and support costs. Alleviating any redundant data entry will save administrative time, decrease the likelihood of errors, and, overall, reduce costs. Questions to ask your solution provider: | • | How easily can I move data between applications? | | • | Do I have to pay a lot for product customization or integration to support automatic integration so I can update data in one place and have it automatically change wherever that data is used in the business applications? | | • | Do I need to batch data between one application and another? | | • | Can I easily access and use the data in the tools I use every day? |
Because of a lack of product integration, an upstate New York Headstart agency manager of 12 child development centers manually enters most employees' human resource data three times, which is both a productivity drain and increases the risk of error. To add insult to injury, two of the three unintegrated applications used by the manager are from the same vendor. If you are planning for a growing business, avoid entering information anywhere more than once! You decide: Vote for decision supportNot only do you need to provide employees easy access to data, you need the tools to make that data meaningful and actionable. Business decisions impact your future and they must be based on accurate and timely data. Fortunately, today’s solution suppliers include decision support applications which allow analysis and reporting in almost all business applications. When applications are integrated you can anticipate that the results of analysis are consistent as well. Questions to ask your solution provider: | • | Does the solution provide the reporting tools I need to thrive and grow? | | • | How will I see the data I need daily on my dashboard? | | • | Can I easily change my view of the data displayed? | | • | What reports are included with the solutions? Do they meet my needs now? How does the application accommodate future reporting or analytic requirements? | | • | How hard is it to use? |
Flexibility: How adaptable is your solution?Your growth trajectory means change—the business processes you set in place when the company was founded may be holding you back. Whether you grow organically, through mergers, through the acquisition of another company, or if your company is acquired, your processes will change. Thus, the software you use needs to be flexible enough to support those changes. The ability to be flexible doesn’t mean you should be rewriting code; it does mean that there should be user-selectable choices for screen presentation, workflow, sizes of data fields, and the like that can accommodate change. How you conduct your business today may not be at all like you will conduct it tomorrow, so ensure that you have the facility to change—and to change without a team of those proverbial rocket scientists. Questions to ask your solution provider: | • | Will this software dictate how I run my business? | | • | Is it flexible enough to allow be to change and grow as I want? | | • | Can I change it myself or do I need to hire someone to do it? |
Accountability mattersGood corporate governance begins at the inception of your company. You want to manage your company with good business practices and provide your customers and your employees the assurance that you are fiscally accountable. Solid business applications that support Generally Accepted Accounting Principles (GAAP) and Financial Accounting Standards Board (FASB) guidelines support accountability across the business and reduce your risk, both now and as you grow. If you expand to become a publicly traded company, you will need to comply with Sarbanes-Oxley and other rules. It is far easier to plan for compliance rather than band-aid it on at a later date. Seek applications that support GAAP and provide a foundation for auditable record keeping. Questions to ask your solution provider: | • | Does my financial software support audit trails? | | • | Is it designed around GAAP practices? | | • | Can it alert me to overspends or irregularities? |
Instilling sound governance procedures from the beginning will prove imperative if you are seeking to become publicly traded, become a candidate for acquisition or are acquiring a company yourself. You have no idea where the future may take your business, but your early planning and care in your investments in technology can insure that you have solid underpinnings for the long haul. The life-long view of solution acquisitionA small business life cycle has a concomitant technology life cycle. Generally a company's business solution requirements change over time, becoming more complex, more sophisticated, more robust, or broader in scope and functionality. Your requirements may also change—you need functionality you didn't need before—or new technologies that increase your competitive potential arrive on the market. Points to consider: | • | Vendor viability—you want your solutions provider to be here tomorrow. While you cannot control that, at least do you homework and look for a reliable provider with a healthy balance sheet. | | • | Solid support—look for the support you need where you need it at an affordable pricepoint. If you work with a channel partner that supports your organization, check references to find one you can really trust with your business. | | • | Global presence—you may be small, but you may have a global business presence quicker than you think. Select solutions that will support small business globalization! |
Your technology solutions should have a growth path that is clearly defined in terms of its future ramifications on your business. Some companies, though they are small, have very complex business processes—the business applications then need to support complexity from the get-go. Plateaus should be defined so you recognize the next step or the next application. In addition, the ramifications of the transition should be articulated, with cost, time, and risk factors clearly delineated. The solution should address your specific requirements as a small business (rather than present a watered-down version of big business software) and should be flexible enough to allow you to conduct your business the way you want to. Wherever you are in your business life cycle today, seek out a solutions portfolio that will not only allow you to grow the way you want to, but will provide the technical foundation for that growth—and will support that growth for the entire future of your business. Calls to action| • | Take a long-term view of your business applications. | | • | Look for good metrics early—you cannot improve what you cannot measure. | | • | Make financial accountability inherent in your company's DNA. | | • | Consider carefully the ramifications of integration, product migration, and solution flexibility as you consider purchases. | | • | Plan for the future—not just the present. |
Katherine Jones is a Research Director within Aberdeen’s Empower the Enterprise practice. She focuses on the fundamental processes of business operations and strategy and the effects of technological change and innovation on these processes within the global organization, rather large or small. In addition to traditional enterprise environments, such as business, industry, and manufacturing, Jones addresses the application of enterprise solutions in education, the public sector, and the federal government. A veteran in enterprise applications, she has been responsible for technical product marketing and strategic alliance management in several computer companies since 1984. Before pursuing a high-technology career, Jones was a university dean, involved in academic administration, research, and teaching. Jones is a frequent speaker and is widely published in the U.S. and abroad. Jones has a B.S. degree from the University of Minnesota, and an M.A. and Ph.D. from Cornell University. Get more information about Katherine Jones, including contact information, at the Aberdeen Group Web site. © 2004 Aberdeen Group, Inc. All rights reserved. August 2004. This document is the result of research performed by Aberdeen Group that was underwritten by Microsoft Corp. Aberdeen Group believes its findings are objective and represent the best analysis available at the time of publication.Founded in 1988, Aberdeen Group is the trusted advisor to the Global 5000 for value chain strategies and technology advice. Through its continued benchmarking and analysis of value chain practices, Aberdeen offers a unique mix of research, tools, and services to help G5000 executives assess their value chain performance, develop improvement strategies, and select value chain solution partners. For more information, visit the Aberdeen Group Web site.
| |
