Transcript Maximize Your Technology Investment March 19, 2004

Maximize Your
Software Technology
Investment
March 24, 2004
Presented by
Marcia McLean
CapeCoder, Mashpee, MA
About CapeCoder
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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
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
5 Steps to Maximize Your ROI
Analyze needs, define requirements
Inventory what you have
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Options available
Build or buy new software
Training, testing, maintenance, hiring
Evaluation
Case study
Case Study
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Background
• Motorcycle dealership with four retail stores
• Safe riding school with 500 students
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Requirements
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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
Case Study (cont’d)
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Challenges
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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
FIRST STEP
“DEFINE REQUIREMENTS”
Software Requirements
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Collection, organization, reporting,
distribution of information
Start and end with your business
needs
Examples:
• Sales, cash flow and profit
• Scheduling
• Customer contact info
• Inventory
Questions to Ask
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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?
Case Study:
what information was needed?
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“Inventory”: class sizes, codes, schedule
Method and amount of tuition payment
Customer contact and demographic
information
Attendance and grades
Credit card payment authorization codes
Case Study: who provided the
information and how was it stored?
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Sales staff -> school administrator
Customer call-ins to administrator
Instructors
White boards, notebooks
Legacy dealer management system
Case Study (cont’d):
who needed the information?
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Customers
Instructors
Controller
Stockroom
General manager
RMV
Points of Failure
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Information was lost
Hard to retrieve
Not organized
Not current
Hard to make corrections, changes
Not easily shared
Define Requirements - Recap
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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?
SECOND STEP
“INVENTORY WHAT YOU HAVE”
Types of Business Software
• Basic
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Office Productivity Suites (Word Processing,
Spreadsheet, Email)
Accounting
Virus Protection, Firewall
Website
• One Level Up
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Database
Specialty – POS, inventory, HR, medical
Server-based, multi-user
You’ve Made An Investment
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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
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Requirement no longer exists
“Point” solution whose functionality has been
replaced by newer applications or suites
Basic Software
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Business Applications
Anti-virus
Spam, Spyware Filters
Website
Security
• Firewall
• Encrypted data
• Restrict access to files and network
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Backup
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CDs
Tape
External hard drive
RAID-configured internal hard drive
Online backup service
Servers
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“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/reasonsforserver.mspx
Inventory - Recap
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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
But Does It Work?
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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?
No?
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Consider upgrades
Consider new software purchase
Consider consulting assistance to
integrate, enhance
Consider consulting assistance to
develop custom solution
Case Study:
what was their investment?
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Legacy accounting and POS
Bundled office productivity suite
Servers, hardware, network
Integration was minimal
School information was kept on white
boards and in notebooks
THIRD STEP
“BUILD OR BUY?”
Buy
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“Shrink Wrap”
• Advantages
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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
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You get it “as is”, no customization
Vendor’s tech support may be inadequate
You can’t legally copy it or redistribute it.
Buy (cont’d)
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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
Licensing
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Grants you the right to use the software
developer’s intellectual property
Single-user
Multi-user
One computer
Multiple stand-alone
Multi-user site
(limited)
Multi-user site
(unlimited)
Network
OEM
Pre-installed with
computer
Network, unlimited
Volume Licensing Discounts
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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
Freeware, Shareware
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Freeware
• http://www.tucows.com
• http://www.download.com/
• http://www.macoszone.com/
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Shareware: “try before you buy”
Demo versions of commercial
software
Beware of spyware, adware
Build
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“Customize”
• Advantages
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You have a resource your competition doesn’t
Meets your business’s unique needs
You and your vendor have complete control if you want
changes, enhancements
You can negotiate licensing and ownership (buyer’s market)
• Disadvantages
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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?
Build
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Checklist before “building” software
• Shop Around
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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:
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Statement of work
Budget (fixed price, hourly)
Payment schedule (typically 1/3:1/3:1/3)
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
Build AND Buy
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Combination: Build & Buy
• Advantages
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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
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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.
Business Software Recap
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Upgrades may be available
Buying new
• Integration
• “Hidden” costs of installation, running parallel,
training, purchasing more licenses
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Building
• Requires good communication with vendor, indepth knowledge of your requirements
Case Study: BUILD
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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
FOURTH STEP
“TRAINING, MAINTENANCE &
HIRING”
Training Resources
for Commercial Software
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Colleges, training centers , trade
schools, community adult education
Vendor resources
Online forums
User groups
On-site training by a specialist
Maintenance: “Hidden” Cost
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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
Hiring Employees
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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
Hiring a Vendor
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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
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Courses, user groups, publications
Hiring a Vendor (cont’d)
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Warning Signs
• Moonlighters, limited professional experience or
just out of school
• VAR for a specific software package (okay if you
already own it)
• Won’t sign or don’t 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!
Case Study
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Had a full-time IT manager
Ability and desire to perform backend system administration (web and
database servers)
Hardware and network was in place
School administrator (high turnover)
FIFTH STEP
“EVALUATION”
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
But Is It Working For You?
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Mercer Human Resources Consulting Study
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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
Uncovering YOUR ROI
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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?
Primary Reasons for Failure
Failure to Clearly Define Requirements
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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
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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
Primary Reasons for Failure
Failure to Understand the Challenges of Integrating
with Other Systems
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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
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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
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“Pay $5,000 in the beginning to get it done right vs. $50,000
over the course of the technology’s lifespan to undo the
wrong and get it working efficiently.”
Case Study (conclusion)
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“The system” paid for itself in the first year
The system is in its fourth year
Training costs reduced
Overhead costs reduced: 1 FTE -> 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-> more successes
Moving Forward
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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
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
[email protected]
(508)477-6141