Three Ways Businesses Suffer from Old Software and Two Options to Fix That Problem
I ran a company back in the early 2000s that used more software applications than I can remember. We started with QuickBooks Desktop because it was cheap and easy to get and because every accountant on the planet knows it.
We hired a developer to create an Access database for us, which turned out not to be enough so she created another one. My team was fairly technical, so a couple program managers downloaded and installed Open Source software to track their data. Other team members tracked their info in Excel. Our payroll vendor had their own system. We had Salesforce to track customers and leads.
As the operations manager, basically responsible for everything, I realized there were three big problems with so many data silos, so I set out to find a solution. The three business challenges I needed to address were:
1. Ability to Scale
We had been talking about opening a retail store and were tracking inventory in Excel. I knew we would need at least one new system for inventory and possibly another for point-of-sale. I recall thinking “great, more software to buy, learn, support and probably hate.” That prompted me to wonder, how are we going to scale this operation? What if we want to open other offices throughout the state? How will that look? How much worse is it going to get? Our systems were going to hold us back.
We were a product and service business and I needed actionable reports. A lot of them. I can’t tell you how many times I would ask for a report only to be told “I’ll see when I can get that to you.” How many times I asked myself, “Why does it take so long? Is the report accurate? I just want to know the breakdown of sales by referral source. Why is that so hard? What is the ROI on our last marketing campaign? Why are we entering the same exact information in three different places?” The general sense of wasted time was eating me alive. My organization was healthy from a financial standpoint, but it was nowhere near as efficient as it could have been.
Cost is not the same as price. From a cost standpoint, all of our software was relatively cheap. QuickBooks is cheap. Our CRM and marketing applications were cheap. Our inventory software was cheap because we were using Excel. The amount of money we were spending on software didn’t concern me. What concerned me was the amount of money we were spending using our software.
Determining the Impact of Old Software
With these things in mind, I took six months to analyze and record the amount of time key staff were spending entering and extracting data. I multiplied those hours by their loaded rate and then considered “What if they could have been spending their time on something else? What is that worth? What did we not gain during that time?” (aka, the opportunity cost). I also added up the cost of our software and was surprised to see it actually cost us more than I thought. Over $15,000 per year.
The value of the labor alone was $80,000 over the course of a year. This was split between four different people in key parts of the company. I didn’t bother trying to figure out what it would have been worth had they been able to spend their time on other things. I know we lost business that we never followed up on because we had too many distractions and software that couldn’t keep up.
How to Fix It
Considering the options, I realized there were really only two choices available: either find a way to get all of our software to connect, or put as much as possible into one system. It’s as simple as that. Here’s what I found:
The two applications that are most vital to solving the “too much software” problem, for most organizations, are CRM (prospecting) and financials. For us, that meant connecting Salesforce and QuickBooks.
Specifically, you want customers and prospects entered into your sales platform to show up in your financial software. It would be nice to get actual sales data into the CRM since the reporting is usually better there, but that’s easier said than done. The setup and maintenance can get expensive, and going beyond two platforms is tricky and prone to breaking.
If you have more than three platforms to integrate, for example, inventory, point-of-sale, ecommerce and payroll, the “connector” route may not be the best fit. That’s where option two comes in.
ERP stands for Enterprise Resource Planning. Essentially, it’s one platform that contains as much of your data as possible. ERP provides a single login – the same interface for sales, financials, inventory, etc. When a customer is entered in the system, there’s no application to “synchronize.” When inventory is ordered and received, it’s ordered and received in one system. When inventory is sold, whether at the store, online or over the phone, the orders all happen in the same single system. In some cases, even payroll can be included. Timesheets, HR, project management, marketing… all in one.
And of course, the reporting issue is resolved. Since all of the data is in one place, reports are created, saved and accessible any time. In my case, not only did I not have to wait to get reports and then wonder if they were accurate, I didn’t have to ask for them at all. They were live on my dashboard at all times. For us, ERP was the way to go.
In the near future, you’re likely to hear more about “hybrid” solutions, which is data silos connected via middleware, in the near future, and about ERP solutions that bring everything into one. The solution that’s best for you depends on your current platforms, need for growth, and the viability of the prospective new, integrated or “all-in-one” platform. Nonetheless, if you’re experiencing pain like I was – inability to scale, lack of efficiency and wasted/lost money due to your software, you should look into either of these two options.
About the Author
Jeff Hancock is the President and CEO of Social Data Systems, a company dedicated to helping small to medium social-enterprises gain the benefit of the Oracal|NetSuite ERP platform. He has vast experience in software integrations, network engineering, and business management.