Why business size is more important than you think.
Posted Jun 1, 2006
When it comes to business automation, most organizations are constantly looking for the competitive edge. Today, acronyms like CRM and ERP have been so misused that end users can find it hard to make sense of it all. Add the marketing message from vendors claiming their wares are designed for businesses of all types and sizes, and you've got a recipe for utter confusion.
So how does a typical business cut through the noise to obtain a tight, concise list of solutions to review that provide the automation they actually need? The first thing to remember is that no one solution by itself can do it all. Despite what the vendors claim, solutions are always designed with an ideal target customer in mind, and it's up to you to figure out if you're that target customer.
It's no secret that business application rollouts meet with more failure than success. I'm constantly hearing potential customers talk about past mistakes, so I've become somewhat of an expert. "I'm calling you guys because we got into this mess, and now we need to fix it" is a common cry for help. After hundreds of these conversations, you start to see patterns emerging. (I should state that almost all of these data points come from small businesses of perhaps 10 to 200 employees that got in over their heads.)
So what's the common pattern, you ask? Well, in putting together a requirements list, almost everyone puts all the emphasis on license or rental price, features, and brand recognition. And, yes, business size matters. I get many cries for help because too many businesses failed to understand how the solution they chose failed to impact them in this one regard.
What you need to know about software design and your business
When a software company sets out to develop a new application, regardless of whether it's vertically or horizontally focused, there are two design criteria that determine what type of customer the application is best suited for (which usually has absolutely nothing to do with the marketing message). To understand this, you first have to look at the unique needs of smaller businesses versus those of larger ones. Think of these in terms of shades of gray rather than black and white, as there are no hard and fast rules here, just a gradual change in needs that directly relates to business size.
At one end of the spectrum is the typical small business. These companies need solutions they can easily fit into--endless tweaking is not allowed. The goals here can be summed up in two words: easy and inexpensive. They apply to installation, configuration, customization, training, and maintenance. This is because small businesses have fewer people, who must spread their skills across a broad array of job functions, and so must accordingly adjust their time investments.
At the other end of the spectrum are the larger businesses. Here, the software has to fit them, not the other way around. These companies might have committees or task forces that define every last detail about what they need and how they need it. This means that software has to fit their exact requirements. A high degree of customization flexibility is needed because large businesses have more employees, and thus can afford to apply their resources to more specialized job outlines. For example, you'd rarely see a salesperson at a Fortune 500 company helping the AR department collect from a client, whereas in a small business this is a common practice.
Ease of use is a relative term to both of these types of companies. For the small firm it means "I don't have time to learn a system that does the same thing 10 different ways, so pick something that does it just one way, so I don't forget, or I won't learn, and thus will not use the system." In the larger business it means "Make sure it caters exactly to the design outlined by our 40-page requirements specification, developed by our consultants or committee members."
Now, imagine how this translates to a software application. The needs at one end of the spectrum are diametrically opposed to the needs of the other. As a software company, you could build your application to be super flexible and customizable, so that it caters to large businesses, or you can make it very rigid with limited customizability so that it's easy to install, configure, optimize, and use (i.e., cheaper to implement), which caters to the needs of small businesses.
How size affects the decision to go modular or with an all-in-one e-business suite
The appeal of an all-in-one solution, where all the business modules usually implemented separately can be rolled out as a single preintegrated e-business suite, is obvious--but it's not for everyone. Products like NetSuite and Bizautomation CRM + Business Management do exactly that. In answering the question "Who's best served by such a solution?" one should realize that the same dynamics that explain the reason small and large businesses have opposing needs also explain why the all-in-one solution offers huge benefits to small businesses precisely because it's a recipe for disaster to large ones. Again, we're fighting marketing hype here, but the evidence is clear. Tight integration of this type is greatly beneficial to small businesses because they don't have to worry about the technical and financial complications that a modular approach can create, not to mention the cost of implementation and maintenance. Anytime you're simplifying the process of automation, you're helping the small business cause.
What you need to know about business automation software vendors
What most marquee-name software companies do is design for large companies (because they're the most profitable) and sell to all companies, letting their marketing departments (which are considerable) figure out how to create a value proposition at the small-business end of the spectrum, then evangelize through their legions of partners. It's the classic one-size-fits-all strategy, but the strategy is really about crafting the software design to larger businesses, and hoping that marketing can create the illusion that they're also a great fit for smaller businesses. The small guy gets the short end of the stick.
So how does one determine exactly what size of business a package is designed for? First, you should demo the system and talk to someone at the software company about how your specific type of business can benefit from the system. Don't just ask the sales guy "Can it do this or that?"--the answer is always going to be "Sure it can." Here are other things to look for:
1. Do the company selling the system and do those that review it talk about how they're trying to appeal to larger companies? Remember that if it fits the needs of a larger business, it's going to take lots of tweaking to get to its full potential for a smaller one.
2. Are partners required to install or configure the system? If so, this is a sure sign that the system is geared towards larger businesses.
3. When you ask them for a price, they turn you over to a partner who's unwilling to talk price with you until you agree to a long, arduous interview.
4. Does the software company have a large network of partners? Remember that partners make their money from fees and billable hours, and a large network of partners came to be that way because of lucrative billable hour inclusions. Also remember that large networks of partners have lots of lobby power, which is how customer-driven software companies become partner-driven software companies. It's not uncommon for a $500 per-seat price to become $2,000 per seat when factoring in the total cost of ownership. Also, don't assume that software services are immune to cost creep--they're not.
About the Author
Carl Zaldivar is president and CEO of BizAutomation.com. He can be reached by telephone at 408-705-4370, x301 and by fax at 419-791-4262. Please visit www.bizautomation.com
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