Pay More for Business Software

April 30, 2010

I recently heard a radio commercial asking me to pay more for my power. See http://www.bullfrogpower.com/ for more information on this. Given that it’s not every day a company solicits your business by asking you to pay more, it got me thinking…

Perhaps for business software vendors, this is an object lesson. Too many vendors try to seal the deal by competing on price. The flip side is that too many companies select key business software based, at least partly, on price. And that’s a dangerous game. Why? The obvious answer is that “you get what you pay for”, and that’s true in this context, but it’s not the whole story.

Pay More For Your Software

These Feel Better

Let’s use a shoe analogy: I used to buy cheap shoes, mostly because my preconceived notion was that it was a commodity. But a few years ago, I realized that my shoes did not last very last long, and my feet were always sore at the end of the day. I now buy more expensive, better quality shoes. They last much longer – partly because they of superior quality, but (and here’s the point – finally!) mostly because I spend more time and effort looking after them. Because I spend more, my shoes have now become an investment, not a commodity. My feet feel great, and over a period of time I’m probably not spending that much more (because as stated they last longer).

This analogy seems to apply to business software as well. The company I work for sells wholesale distribution software, and with very few exceptions customer satisfaction is directly proportionate to the amount of money invested in the solution.  When customers take the implementation of the software more seriously, they derive many more of the benefits on offer. And it seems the more they invest, the more seriously they focus on proper implementation.

Questions:

  1. Will you pay more for your power?
  2. How about your business software?

Pivot: The Web as You’ve Never Used It

April 20, 2010

Pivot is an experiment from Microsoft Live Labs that promises to make it “easier to interact with massive amounts of data in ways that are powerful, informative, and fun”. Pivot allows you to view and interact with massive amounts of data on the Web, spread across many web sites,  and zoom in and out to different levels of detail.

The basis of Pivot is “collections” of information from numerous web sites. Each collection can be used to view relationships and patterns between and across the pages in the collection. For example, here’s a collection of  world leaders (presidents and prime ministers) grouped by age:

Click to enlarge

We could re-arrange to group (or filter) by country, continent, gender, role, and many others, with one or 2 clicks. We can filter further by specific  age group, as shown here:

Click to enlarge

And at any stage we can click on one specific element (in this case, one leader) to get a search page of web resources for that leader (using Bing, of course – this is Microsoft Labs, not Google).

For a more detailed demonstration of this technology, watch this video.

You can also download it and use for real – there is no charge as it’s an “experiment”.


Denial: the first stage of business software implementation

April 13, 2010

Implementing new business software (such as ERP software) can be daunting. Most people are averse to big changes in life. Why? Because change is disturbing, and can cause feelings of anxiety and insecurity. Think about any major change in your life – even moving from high school to university or a full-time job can be quite difficult to manage emotionally, at least in the beginning.

One factor that’s frequently overlooked is denial. Denial is the classic first reaction in the face of trauma or loss. But the same basic human reaction comes into play when you face major changes in life (and work) – things have changed, and even if they’ve changed for the better, the initial reaction is often to believe that life will go on exactly as before – and therefore resist accepting that change.

You see this when a batch /paper based ERP system is replaced by a date-sensitive modern system. The old system required printing and filing multiple copies of customer invoices. With the new system, you need only print the customer’s copy – any other copy you may need can be retrieved online. Now that’s clearly a change for the better, yet many people in this situation either continue printing and filing those multiple copies, or if they’re unable to do so, become resistant to and negative about the new system.

As implementors, we need to understand and accommodate this. In this example, it may help the user to continue printing and filing some copies initially, and there’s really no harm in accommodating this as long as there is a clear plan of action to re-visit and eliminate it after a certain period of time – namely after the denial stage.

A good business software implementation consultant needs some soft skills to complement business, analytical and technical expertise. In my experience, though, very few actually do – many seem to want to browbeat their clients into accepting the systems and procedures.

Has your experience been the same? Please let me know your thoughts in the comments section below.


Inventory Management Saves Money

April 8, 2010

“So what if I carry a little too much inventory? I’ll sell it eventually, and at least I can always fill orders…”

I’ve heard this logic frequently, and it can be tough for those not schooled in inventory optimization concepts like carrying costs and EOQ to fully understand the real cost of carrying (holding) inventory that does not turn over quickly.  Here’s a great real life example of a small company using inventory management and analysis tools to save money.

The company leases a warehouse, and the lease term ends later this year. The company has run out of space in the existing warehouse, and so the intent was to move to larger premises at the end of the lease term. Moving costs would run at close to $100,000, and monthly costs would of course increase by a significant amount too.

Before committing to a new lease, the company (with outside help) ran an analysis of their inventory. They managed to very quickly identify a large number of SKUs in inventory that did not contribute significantly to gross margin. Of those, a number of SKUs that they always kept in stock were large items, taking up quite a bit of space. They then reviewed these items in terms of shipment urgency, and looked at the availability and costs of having these items, when occasionally ordered by customers, drop-shipped directly by the manufacturer.

The cost of the drop-ship option would substantially reduce the gross margin on these items. However, the number of items sold per year was low enough that the overall impact on annual gross margin would be less than $30,000.

Now here’s the best part: after eliminating those items from their warehouse completely, they had plenty of space in their existing location. They simply extended the lease and cancelled all plans to move. The net annual savings in rent more than offset their diminished gross margin, and in addition they saved the moving costs (not to mention the aggravation).

The cost of the software tools and outside help to perform the analysis? Less than $10,000. Not a bad return on investment.

Take a look at a tool and methodology for analyzing dead stock here.


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