10 software buying tips for SMBs

Ad hoc purchases and a lack of commitment from management are surefire ways to a bad software investment, industry players say.

The mistakes small and midsize businesses (SMBs) make when purchasing business software boil down to a lack of proper planning and a fear of change.

According to Bryan Tan, vice president of sales at Epicor Asia, it is not uncommon to find an SMB that is hesitant about committing and investing in business software. This, he said, can be attributed to several factors.

First, there is a fear of technical challenges, Tan noted. Second, there is also a fear of commitment to the costs involved. Such concerns, he said, will lead to "the mistake of trying to cut costs by purchasing a product that only meets present needs".

"In the long run, the company loses efficiencies and incurs heavier administrative costs as the software has to be replaced to meet changing needs," Tan added.

Adrian Johnston, vice president of application product solutions for Oracle Asia-Pacific, highlighted that another big mistake SMBs often make is buying software on an ad hoc basis.

Basing the purchase on the most pressing operational need at a particular point of time is not a good idea, Johnston said. "Over time, they would have implemented a variety of disparate software to run different parts of their operations. This leads to significant risks of operational disruptions and increased costs associated with system integration and maintenance," he explained.

Having a well-thought-out IT strategy around integrated and standards-based systems is critical to a company's long-term success, as it enables the organization to fully optimize its resources and software budgets. "This also ensures that the systems are easily managed and can deliver speed, agility and business continuity," Johnston noted.

Here are 10 tips for SMBs looking to purchase business software:

1. Ensure there is executive sponsorship
For any IT project to be successful, it is important to have commitment from the top management to lead the company throughout the implementation process, Tan said.

2. Have defined business processes
According to Tan, business processes are critical to any organization, and only when a company is clear about them can it execute IT systems successfully.

3. Get the right people
He added that companies need to ensure good process owners and managers are overseeing the project. "They must have undergone rigorous training and are able to maintain high levels of enthusiasm to keep the team going, while keeping business objectives in mind," the Epicor executive said.

4. Plan well
Consider IT as an ongoing capital cost. "By mapping out various scenarios and setting realistic long-term goals, a company can come up with a contingency plan where an estimated 20 to 25 percent of the overall computed cost is factored in for unforeseen occurrences," Tan noted.

5. Establish a steering committee
This committee should ideally include the process managers involved in the project, as well as directors from the various departments. "Their purpose is to evaluate the project, resolve possible conflicts of interest and make forward-looking plans," Tan said.

6. Don't forget to get references
Two heads are better than one, he added. Tan said: "To ensure the software delivers the promised results, it is wise for companies to consult with others that have successfully implemented the software."

Reviewing the software supplier's Web site for references and case studies is also a good practice. "Having dialogues with past users allow a company to make informed buying decisions, and be aware of the risks involved. This will give a good indication whether the software is worth the investment," Tan said.

7. Go for flexibility
According to Oracle's Johnston, companies today need software that is able to meet their growing business requirements.

"They cannot afford to rip and replace their systems in order to keep up with growth," he explained. "With flexible, adaptable IT infrastructures, a company can ensure that its business system will grow right along with its business demands. This is critical to enabling midsize companies to respond quickly to new business opportunities, customer demands and changes in operating conditions."

He noted that being able to choose from a range of deployment models should also be a key consideration for SMBs. "They should leverage vendors that can offer a full menu of flexible deployment options, from software-as-a-service (SaaS) to full 'on-premise' options, or a hybrid approach of combining SaaS and on-premise."

"With on-demand software, all that is needed is an Internet connection and a Web browser," Johnston said. Midsize companies can also outsource the hosting and management of their software to a third-party provider.

8. Look for best practices
Midsize businesses benefit from implementing software designed to meet the unique needs of their industries. According to the Oracle executive, companies can opt for industry-specific applications that contain hundreds of preconfigured industry process flows, which allow midsize businesses to enjoy "best-practice implementations that deliver faster time-to-value, as well as low and predictable costs".

9. Start small but think big
SMBs should map out their requirements for both the present and the future, and then select a vendor that has a clear technology roadmap to ensure their IT system will be supported in the long run, said Johnston.

10. Know what to look out for in the proposal
According to Tan, in the RFP (request for proposal) or RFI (request for information) process, the vendors should include a breakdown of costs and suggested implemented stages.

Another thing to remember is the 80-20 rule, he said, where software has 80 percent fit, while 15 percent should comprise adaptability of the software and the remaining 5 percent provides room for customization and amendments.