Maximize Your Software Technology Investment March 24, 2004

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Maximize YourSoftware Technology Investment
March 24, 2004

• Presented by
• Marcia McLean
• CapeCoder, Mashpee, MA

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About CapeCoder

• In business since 1998, incorporated in 2000
• Specialize in web-based, database-driven custom
  business applications
• Current projects use Microsoft .NET
• Former manager with the MITRE Corporation, the
  ASK Group, Freedom Newspapers
• Former Board member of the New England Employee
  Benefits Council
• President of the Cape Cod .NET User Group
• Member of the Cape Cod Internet Council

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A Major Investment

• Total IT costs are around 2.3 of revenue, or
  5,000/employee
• Software and associated expenses account for
  10-40 of total IT costs
• Failures in information technology cost the U.S.
  economy 100 billion annually, with the price of
  software defect repair alone estimated at 59.5
  billion
• Computerworld 1996
• WorkSoft, automated software testing company

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5 Steps to Maximize Your ROI

• Analyze needs, define requirements
• Inventory what you have
• Options available
• Build or buy new software
• Training, testing, maintenance, hiring
• Evaluation
• Case study

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Case Study

• Background
• Motorcycle dealership with four retail stores
• Safe riding school with 500 students
• Requirements
• Enroll students online and from the stores
• Enforce business rules
• Accurate enrollment headcounts
• Change and correct customer (student) info
• Reconcile credit card charges
• Make information available among departments
• Send info to Commonwealth RMV

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Case Study (contd)

• Challenges
• High administrative overhead
• Long time to train new administrator
• Hard to prevent overbooking
• Information collected from various sources
• Could not make changes easily
• Burdensome to create reports to RMV
• Different people needed information
• Competition
• Web hosting company was expensive and unresponsive

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FIRST STEP

• DEFINE REQUIREMENTS

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Software Requirements

• Collection, organization, reporting, distribution
  of information
• Start and end with your business needs
• Examples
• Sales, cash flow and profit
• Scheduling
• Customer contact info
• Inventory

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Questions to Ask

• What information do I need to collect, organize,
  report and distribute?
• Who provides this information?
• How is the information provided?
• Who collects, maintains and distributes it?
• How is the information stored?
• How is the information used
• How is it reported?
• Who needs this information?

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Case Study what information was needed?

• Inventory class sizes, codes, schedule
• Method and amount of tuition payment
• Customer contact and demographic information
• Attendance and grades
• Credit card payment authorization codes

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Case Study who provided the information and how
was it stored?

• Sales staff -gt school administrator
• Customer call-ins to administrator
• Instructors
• White boards, notebooks
• Legacy dealer management system

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Case Study (contd) who needed the information?

• Customers
• Instructors
• Controller
• Stockroom
• General manager
• RMV

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Points of Failure

• Information was lost
• Hard to retrieve
• Not organized
• Not current
• Hard to make corrections, changes
• Not easily shared

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Define Requirements - Recap

• Determine what information you, your employees,
  your customers and your vendors need
• Who provides it?
• Who needs to see it?
• Will it need to be changed?
• How and how often does it need to be updated and
  reported?

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SECOND STEP

• INVENTORY WHAT YOU HAVE

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Types of Business Software

• Basic
• Office Productivity Suites (Word Processing,
  Spreadsheet, Email)
• Accounting
• Virus Protection, Firewall
• Website
• One Level Up
• Database
• Specialty POS, inventory, HR, medical
• Server-based, multi-user

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Youve Made An Investment

• Software accounts for up to 40 of total IT costs
  of 5,000/employee
• 8 to 15 of software spending wasted
• Goes to purchasing, renewing, and supporting
  contracts for shelf-ware, software which is not
  used because
• Requirement no longer exists
• Point solution whose functionality has been
  replaced by newer applications or suites

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Basic Software

• Business Applications
• Anti-virus
• Spam, Spyware Filters
• Website
• Security
• Firewall
• Encrypted data
• Restrict access to files and network
• Backup
• CDs
• Tape
• External hard drive
• RAID-configured internal hard drive
• Online backup service

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Servers

• 8 reasons your business needs a server
• File-sharing is easier
• Easier back-ups
• Specialized collaboration software
• Mobile work force
• Share high-speed Internet access
• Offload files and tasks to server
• Consolidate email accounts
• Easier to set up new computers and deploy new
  applications
• http//www.microsoft.com/smallbusiness/reasonsfors
  erver.mspx

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Inventory - Recap

• Bundled office productivity applications
• Specialty packages, like accounting
• Custom software purchased with your business
• Legacy database
• Externally hosted web site
• Utilities for network admin, anti-virus,
  firewall, spyware detection

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But Does It Work?

• Does my software collect ALL the information I
  need?
• Does it provide helpful built-in or ad hoc
  reporting tools?
• How easily is the information shared?
• Can multiple people use it at the same time?
• How easy is it to learn and to use?
• How expensive is it to maintain and upgrade?
• Are my existing systems well integrated?

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No?

• Consider upgrades
• Consider new software purchase
• Consider consulting assistance to integrate,
  enhance
• Consider consulting assistance to develop custom
  solution

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Case Study what was their investment?

• Legacy accounting and POS
• Bundled office productivity suite
• Servers, hardware, network
• Integration was minimal
• School information was kept on white boards and
  in notebooks

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THIRD STEP

• BUILD OR BUY?

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Buy

• Shrink Wrap
• Advantages
• Tested by vendor, support available and often
  part of purchase price
• Forums, user groups and other resources readily
  available
• Maintenance, upgrades, patches readily available
• Fixed price, no surprises
• Disadvantages
• You get it as is, no customization
• Vendors tech support may be inadequate
• You cant legally copy it or redistribute it.

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Buy (contd)

• Checklist before buying software
• Pricing, bundled (Office)
• Single or multi-user
• Shop around for best price and special programs
• Release date of at least 12 months ago
• Establish procedures for installation, updates
  and patches
• Test and run parallel, especially mission
  critical app and/or on production servers

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Licensing

• Grants you the right to use the software
  developers intellectual property

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Volume Licensing Discounts

• Transactional of purchases (new, renewed,
  maintenance)
• Forecast spreads orders and costs over fixed
  period, e.g., 2 years
• Site multi-user limited or unlimited
• First order price of future licenses receive
  same discount as your first order
• Points - value of purchases

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Freeware, Shareware

• Freeware
• http//www.tucows.com
• http//www.download.com/
• http//www.macoszone.com/
• Shareware try before you buy
• Demo versions of commercial software
• Beware of spyware, adware

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Build

• Customize
• Advantages
• You have a resource your competition doesnt
• Meets your businesss unique needs
• You and your vendor have complete control if you
  want changes, enhancements
• You can negotiate licensing and ownership
  (buyers market)
• Disadvantages
• It always takes longer than expected to build
• It is often more expensive that expected this
  is controllable through contract negotiations and
  managing scope creep
• It really is Beta are you set up to deal with
  unexpected bugs?
• Do you have time to work with the vendor on
  testing?
• Do you understand your business processes well
  enough to help your vendor write a reasonably
  good statement of work?

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Build

• Checklist before building software
• Shop Around
• In 2000, there were 127 technology consulting
  firms in Barnstable, Plymouth and Bristol
  counties providing custom software development
  services
• There should be a contract and it should include
• Statement of work
• Budget (fixed price, hourly)
• Payment schedule (typically 1/31/31/3)
• Schedule
• Protection of privacy, ownership of code
• Warranty
• Expectations need to be clear up front
• Work out communications (regular meetings,
  emails, phone calls)
• If you are putting the job out to bid, tell your
  vendor

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Build AND Buy

• Combination Build Buy
• Advantages
• Can be best of both worlds tested software that
  can be modified to your specific needs
• Tech support MAY be available user groups and
  other resources may be available as well.
• Disadvantages
• Comes with a price more expensive. Companies
  need to recoup their development costs, and this
  kind of software is harder to write.
• You HAVE to find a vendor who has deep knowledge
  of the software and that may be hard to do.
• Your vendor needs to provide excellent
  documentation and training one more thing to
  worry about!
• A good vendor is expensive customization is a
  higher skill set.
• Vendor is probably a VAR, which means they may
  try to upsell you.

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Business Software Recap

• Upgrades may be available
• Buying new
• Integration
• Hidden costs of installation, running parallel,
  training, purchasing more licenses
• Building
• Requires good communication with vendor, in-depth
  knowledge of your requirements

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Case Study BUILD

• Maximize current IT investment
• Unique business rules
• Wanted exclusive ownership of the software
• Enroll students at four stores and at trade shows
• New central database independent of legacy system
• Customer self-service component
• Ability to administer servers and access data
  independent of their outside hosting service
• Competitive advantage

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FOURTH STEP

• TRAINING, MAINTENANCE HIRING

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Training Resources for Commercial Software

• Colleges, training centers , trade schools,
  community adult education
• Vendor resources
• Online forums
• User groups
• On-site training by a specialist

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Maintenance Hidden Cost

• Install upgrades and patches
• Integrate with other systems
• Administer permissions and privileges
• Protect from viruses and other attacks
• Testing and deployment
• Server tuning
• Hosted software model is an alternative

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Hiring Employees

• Degree/equivalent and 3-5 years
• Network administrator 44-60
• Sr. network admin 60-65
• Tech support 34-44
• 2003 Cape Cod Compensation Benefits Survey
• Cape Cod Human Resources Association
• Conducted by The HR Consulting Group

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Hiring a Vendor

• Good Signs
• This is a full-time business for them
• Have been in business FT for 2 or more years
• Have clients who have been with them for 2 yrs
• Have experience with similar projects
• Have at least 3 credible business/technical
  references
• Website is current (no dead links) and easy to
  use
• Keeps skills current by participation in
  continuing education
• Courses, user groups, publications

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Hiring a Vendor (contd)

• Warning Signs
• Moonlighters, limited professional experience or
  just out of school
• VAR for a specific software package (okay if you
  already own it)
• Wont sign or dont have a written agreement
  which includes a statement of work, fees and
  payment schedule and confidentiality agreement
• Not forthright about their strengths and
  weaknesses NO ONE knows everything!

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Case Study

• Had a full-time IT manager
• Ability and desire to perform back-end system
  administration (web and database servers)
• Hardware and network was in place
• School administrator (high turnover)

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FIFTH STEP

• EVALUATION

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A Major Investment

• Total IT costs are around 2.3 of revenue, or
  5,000/employee
• Software and associated expenses account for
  10-40 of total IT costs
• Failures in information technology cost the U.S.
  economy 100 billion annually, with the price of
  software defect repair alone estimated at 59.5
  billion
• Computerworld 1996
• WorkSoft, automated software testing company

44
But Is It Working For You?

• Mercer Human Resources Consulting Study
• 50 of respondents indicated their organization
  was either ineffective or very ineffective when
  it came to capturing ROI from technology
  investments
• Only 16 of respondents indicated they were
  effective in capturing ROI of their technology
  investments

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Uncovering YOUR ROI

• Evaluation Checklist
• Have you been better able to deal with unexpected
  trends in the marketplace (e.g., an increase in
  demand for your services?)
• Are you/your staff better able to make changes
  and corrections?
• Are you able to respond to internal and external
  customer needs more quickly and/or more
  thoroughly?
• Have you replaced overhead with a profit center?
• Are you seeing other areas where technology could
  make your business more profitable?

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Primary Reasons for Failure

• Failure to Clearly Define Requirements
• Before leasing, purchasing or designing any
  software, organizations need to have a clear
  understanding of what it is they need the
  software to do. Define objective and goals
• Failure to Consider All Costs
• Annual maintenance fees and upgrades, the
  internal resource costs for implementation and
  the costs for training and change management are
  typical cost categories most overlooked in
  cost/benefit analysis

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Primary Reasons for Failure

• Failure to Understand the Challenges of
  Integrating with Other Systems
• Integration is the hottest topic in IT today.
  It ranks as one of the chief concerns due to the
  proliferation of applications within an
  organization
• Failure to Train
• Introducing new technology does not automatically
  result in cost savings.
• By-in and acceptance by users
• Failure to Procure Adequate IT Staff for
  Implementation and Maintenance
• Pay 5,000 in the beginning to get it done right
  vs. 50,000 over the course of the technologys
  lifespan to undo the wrong and get it working
  efficiently.

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Case Study (conclusion)

• The system paid for itself in the first year
• The system is in its fourth year
• Training costs reduced
• Overhead costs reduced 1 FTE -gt ½ FTE
• Able to respond to unexpected changes in the
  marketplace enrollments tripled over time
• Errors reduced or eliminated
• Can make changes easily
• Can share information easily
• Success-gt more successes

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Moving Forward

• Software is an ASSET
• Analyze your business needs
• Seek information and professional resources
• Select from variety of options what is best for
  business
• Evaluate it
• Train staff to use it

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Online Resources

• http//www.cnet.com
• http//www.zdnet.com
• http//www.tucows.com
• http//www.capeinternet.org
• http//www.ccdevgroup.net
• http//www.techsoup.com
• Search engines

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Questions? Comments?

• Marcia McLean
• CapeCoder
• http//www.capecoder.com
• mmclean_at_capecoder.com
• [phone]