Don’t Gamble with Your Company’s Future

Feature Article | April 28, 2004 by admin

Just like his namesake on the 1950’s comedy Father Knows Best, this Robert Anderson offers advice and guidance to anyone in the small and midsize business (SMB) market space, whether you’re the owner of a small business or a provider of solutions or services to the owners.

What’s waiting in the wings?

As someone who is both a learner and a leading analyst for small and midsize businesses (SMBs), Anderson has watched trends come and go. Although he’s sometimes surprised when a technology or a solution doesn’t take off, he looks beyond the facts for the reasons.

Integrated Customer Relationship Management (CRM)

As late as two years ago, few full-fledged CRM solutions were scaled for SMBs. SMBs had to purchase expensive, unwieldy, and over-functioned solutions or enhance a standalone product that typically addressed only one or two features of the CRM equation, such as tracking leads. There are now products on the market that provide the full range of CRM capabilities, including customer service, lead generation and tracking, analytics, and integration with backend applications. Although only 20 percent of SMBs currently use a full-bodied CRM solution, Anderson expects that percentage to increase, and views this as an area where online application services have begun to gain momentum. He noted that while some of the top players now offer a CRM solution, only a few have begun to integrate rich robust CRM capabilities into their SMB products that tie into back-office functions.

Scaled Supply Chain Management (SCM)

Most SMBs that produce or distribute products have, at best, rudimentary software for managing their role as supply chain participants, whether it’s planning based on demand or addressing their supply-chain agility relative to warehousing and logistics. Anderson views the execution side of the SCM equation as a prime area of opportunity for both vendors and users. It’s an area where a well-targeted solution scaled to an SMB’s unique requirements can quickly provide returns that justify the investment.
He also noted that few SMBs have embraced supply chain planning and optimization capabilities. Large OEMs need integrated solutions that extend all the way down to their 7th and 8th tier suppliers. So far, they’ve been successful addressing only the first few tiers. Anderson believes that, as the economy improves and order rates increase, supply chains will have to become much more competitive and make a better overall job of meeting demand, while reducing waste at the same time.
SMBs that participate in these supply chains will be compelled to embrace tools that enable them to seamlessly interact with both their upstream B2B customers and downstream suppliers. The first requirement for most will be to provide inventory visibility, but it won’t be long before large customers want their suppliers to take an active role in both supply and demand planning.
Anderson sees the function of supply chain planning and optimization as a good candidate for BPO. And he envisions that in the next two years, SMBs will begin to outsource this business process to companies that specialize in solutions for SMBs. “Like CRM, we’ll begin to see SCM solutions, particularly around planning, addressed by business service providers that can provide all the required functionality while relieving the SMB of having to develop expertise in deploying and maintaining the underlying technology.”

Morphing application service providers

Anderson thought this was a perfect solution for the SMB owner who was making the initial leap into business management software, but who wanted to avoid the investment in equipment, software, maintenance, and service. However, application service providers (ASPs) never really took off.
With the arrival of the first ASPs, many SMBs hoped they would soon be free of the need to buy, deploy, and maintain complex and expensive software solutions. However, the first wave of ASPs failed to gain mind share for several reasons.
Most ASP offerings were too general to address the specific requirements of users and translate into a quantifiable return on investment (ROI). ASP solutions that were deployed often couldn’t live up to the service-level expectations of users. SMBs failed to understand and discern the need for tailored business processes and key integration points between ASP-delivered and on-site applications in use before ASP deployment.

Improved service provider business models

Anderson sees business process outsourcing (BPO) as the younger, more agile relative of ASP. If you used an ASP, your employees (sales rep, purchaser, or HR generalist) accessed the hardware and software at the ASP. The next ASP wave will be much different than its predecessor.
ASPs that survived the 2001 washout, together with newcomers and traditional solution providers, are bringing forth a new generation of web-delivered solutions. These solutions leverage and exploit net-native technologies and provide a more compelling value proposition and sourcing alternative for SMBs.
As web-native software and new service provider business models (xSPs) evolve, the concept of application outsourcing will begin to gain momentum for SMBs that either can’t or don’t want to make on-site investments in technology. Purchasers will no longer have an applications perspective of what they buy, but a business service (or process) view.
One thing is clear: the technology is beginning to catch up with and strengthen the original ASP concept. Large established providers will drive this future market, and newcomers that do specific things better than anyone else can sustain service levels and show quick return on investment.

Mobile business solutions, portals, and workflow-based alerts

The past two years may have been slow economically, but the downturn gave technology companies an opportunity to refine, redesign, and realign some of the concepts and products that may have been released prematurely in the boom times of the late 90s.
Role-based portals, workflows and alerts, and mobile technology have coalesced to provide a solution that SMBs can use for their sales force, service reps, warehouse workers – any employee who is away from the home office, workstation, or desktop PC. Now that role-based portals are integrated with workflow, it makes good business sense to equip employees with mobile devices that support advanced mobile messaging capabilities.
The CEO who’s running the business by running around (the 21st century take on management guru Tom Peters’ advice to “manage by walking around”) needs to be connected to business events wherever he or she is. And the alerts have to be triggered by exceptional events. Flooding a manager’s mobile device with non-critical information adds to the problem, but alerting the manager with appropriate event-driven notifications is the solution.
Anderson envisions that, in the not-too-distant future, business-alert-driven applications will become “smarter” as they “learn” from the business events that they monitor, not only reporting on process anomalies and deviations but also suggesting corrective actions. Companies and their employees who are evolving from reactive to proactive processes are in line for the next level: pre-emptive. Just as a good planner can spot trends almost before they start, pre-emptive solutions will scan all relevant processing activities and alert appropriate employees when situations are going from green to yellow, rather than waiting for the “code red” event.

Take Bob’s advice

Timing is everything, whether you’re an athlete, an investor, or the owner of a small business that needs to update its IT landscape to survive. Surprisingly, when it comes to technology, most SMB owners are risk averse. They may be innovative entrepreneurs in their area of expertise, but when you mention IT the general feeling is that if the green light’s blinking, there’s still life in the old system.

Anderson has this advice for you: Identify the pain

Stop for a minute and take a critical look at how your employees are working. Do you see sticky notes plastered all over computer monitors? Do you even see a computer monitor? Do you see stacks of spreadsheets with handwritten notes? Ever watch your employees in the warehouse filling orders? Are you thinking about rodents in a maze?
And what do you hear? Are your customer service reps yelling across the office at the sales rep to get information about the new customer? Or maybe they’re helping customers place orders on your website that was promised to be “user friendly”?
Do you like what you see and hear? If not, it’s time to play catch up. It’s time to start thinking that your business cannot survive another day without business management software that supports integration and collaboration.

Get your house in order

Get your own data, business processes, and applications in order before opening up your system to suppliers or customers. No customer wants to retrieve an order via your portal only to find incomplete or inaccurate information. Your suppliers must have 100 percent accurate information when they access your inventory. Before you think about online shoppers wheeling their electronic shopping carts around your online catalog, clean up the store. Get rid of catalog items that you haven’t stocked since Cabbage Patch dolls died on the shelf.

Build the bridges

If you don’t have any applications that you care about, the decision is easy. You start with a clean slate. However, if you have legacy systems that you want to preserve while upgrading your IT landscape, then you need to be more careful in your vendor selection. You need a solution that supports easy integration of your legacy systems, ensuring that those critical applications are not sitting on their own impenetrable islands.

Pay the price

One trend we didn’t mention above is the movement toward software financing. You probably don’t have a spare $50,000 lying around your small business. Or maybe you do, if you only had a financials system that could produce a reliable report in a timely manner. But if you don’t, there are now software vendors and partners who have teamed up to provide one-stop shopping that includes hardware, software, implementation services, and financing.
Anderson sees this as a viable trend, one that allows SMBs to spread out payments in a predictable way – not only the standard amount per month, but also the more creative approaches based on number of transactions, transaction complexity or number and size of records stored.

Reduce the risk

You may have heard this advice before, and it can apply to anything that you purchase – a car, an office building, a warehouse, or business management software.

Where does it hurt?

Recognize your current pain points. Look at solutions that address those – BUT look beyond the pain. You have to get your products out the door now and that’s where you’re focused. But think about what’s going to happen when that product gets to the customer. Customer service? Product warranty issues? Inventory may be today’s hot button. Tomorrow it’ll be customer service.

Growing pains?

Remind yourself that you will grow – and you need a solution that grows with you. That cute red two-seater makes sense when you’re 18, but it’s hard to fit a couple of kids and a dog in there with you. Same logic applies when you’re purchasing a software package. Make sure that the off-the-shelf and out-of-the-box solution doesn’t go back in the box and back on the shelf next year when you add 100s of customers or SKUs or a new warehouse.

What’s the difference?

You don’t have to be an English major to learn the difference between embedded, integrated, and linked. The sooner you know that those words are not synonyms, the happier you’ll be. Embedded software is one database and platform for your IT employees and one face to your users, whether they are suppliers, customers, or employees.
Linked means tethered and lashed together, and in the case of applications, it often means customized software that must be written by someone not on your staff and rewritten each time the product is upgraded. It may mean software from a different vendor, with a different database, platform, and user interface.

Is there a future?

Pick a vendor that has staying power. The rest of the advice is relatively easy, but picking a vendor that’s going to be around in the next five years might take more luck than beating the dealer at blackjack. Do your research. Read reports from analysts such as Gartner, IDC, and others. Talk with other SMB owners.

It’s your choice

It may not be your father’s world anymore, but you could follow your father’s advice on this one. Your next business software package must:

  • Meet immediate and future needs
  • Scale to match your growth
  • Integrate all business solutions
  • Reduce TCO and increase ROI
  • Deliver ease of everything: use, maintenance, integration, customization

Act now. Make the choice that’s right for your business – now and in the future.

Brenda Mackay

Brenda Mackay

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