Busi ness management softtuare To bug or not to bug

By James E. McGowan Everest Software

QELECTING the right kind of busi\)ness manasement software can help growing Jompanies address the challenges of competing with their larger counterparts. Cost, productivity improvement potential, and IT issues are all factors in the decision-making process. Companies must select the solution that works best for their business at different stages, whether the software is deployed in a hosted environment ("on-demand") or on the firm's own systems ("on-premise").

Traditionally, business management software has been sold on a perpetual license basis and requires a sophisticated IT infrastructure for ongoing maintenance and upgrades. In recent years, however, with broadband proliferation, more affordable IT equipment, improved security, and more advanced Web application tools, on-demand software has become a popular alternative.

ls 0n-Demand Right for You?

On-demand applications offer a number of benefits for small businesses. It is considered a relatively lowrisk investment because it has a lower cost of entry. There are no IT readiness issues. The time to productivity is shorter. All of these benefits result in initial cost savings and less burden on an understaffed IT department-or a non-technical office manager who must serve as the de facto department.

Many businesses prefer the "payas-you-go" aspect of on-demand. There's no escaping the economic reality that on-premise software requires a larger upfront investment due to the software licenses. hardware. and ongoing services required to operate and maintain it. For a small or early-stage business, this investment may be considered too risky.

The on-demand model eliminates most of the major upfront costs associated with deploying a multi-user business software solution on a company's premises. On-demand providers typically charge on a subscription basis and do not require an investment in IT infrastructure. The software is also managed at the vendor's data center on the vendor's hardware on behalf of the customer, reducing the ongoing hassles of IT maintenance.

Generally speaking, the smaller the business, the less likely it possesses the time, money or expertise to purchase, manage and maintain an IT infrastructure. An on-demand application can eliminate many of these IT issues by outsourcing the setup and administration of the hardware and software to the software vendor that has already built and staffed a data center. While on-demand never completely erases the need for on-site technical skill, it dramatically reduces the technical burden associated with

Inside the Hosted [nuironment

The idea ofbusiness data residing at remote locations causes some distributors to hesitate. For many owners, comfort is found in keeping data physically present in the back office. LBM distributors are hands-on with their business and take the same approach with inventory, pricing, and customer data.

Security and data reliability should be a top priority in any business. How much time do you (or someone else in your company) spend maintaining servers, backing up data, and updating virus software? Do you test your backups to ensure that if a crash occurred your back-ups would actually work?

Most distributors don't have time to properly maintain data. Smaller companies can't afford to hire someone to maintain server architecture. You want your people selling building materials-not worrying about the next security patch. If you could pay someone else to do this. then vou could focus the ongoing management of software.

To gain a competitive advantage, smaller businesses must use their size and agility to respond to opportunities faster than large businesses. Because on-demand software is typically preconfigured and pre-installed by the vendor's IT staff, it can be up and running in significantly less time than an on-premise solution.

Access to both on-demand and onpremise is identical, whether employees are in the office, at home, or in the field. With both, a sales manager can update customer relationship management data from a new customer's office, or a business owner can view sales reports from home after hours.

0r 0n-Premise Softtuare?

It would be a mistake to assume that on-demand is the risht solution more on your business and eliminate the ongoing hassles of managing and updating technology.

Not all hosting solutions are created equal. Ask tough questions before selecting a partner. Does the hosting partner provide both application and hardware support? Do they have guaranteed up{ime? What are their backup, recovery and security procedures? What are your options for growth? The two most important things to look for are a company with experience hosting your specific application and a long list of customer references. DMSi, for instance, has 74 LBM customers with over 1,000 users running Agility in its hosted environment.

Hosted solutions simplify your life by building, managing and maintaining your application server for you. Server hardware and software reside at a remote, secure and expertly maintained data center, and back-ups are completed nightly. With a hosted solution, there's no worrying about how your IT demands will grow when your business grows, the risk of obsolete technology, for every small business. On-premise solutions offer several advantages that can be very compelling for smaller businesses, depending on their size and other characteristics. or the scarcity, expense and management of IT technicians.

The biggest advantage of onpremise software is that it allows a business complete control over its own data, because it is physically located on the premises and does not require the transmission and storage of data off-site. This option also is considered a more cost-effective alternative over a three- to five-year period.

On-premise may also be the right choice for a larger or more transaction-intensive business. The architecture of on-demand software is not always designed to support high volumes of transactions (over 50 to 100 transactions a day), particularly in shared environments where users are at the mercy of Internet bandwidth and processing resources. Depending on time of day and season, the performance of shared server/on-demand software can fluctuate significantly.

On-demand vendors can't guarantee the communications link between the user and the vendor's data center, although they can set service standards for the servers in their own data centers. An on-premise solution does not have any remote-connectivity issues to contend with, which can be a critical consideration for a growing business.

One common pricing model in a hosted environment is to pay a monthly fee per user. This allows you to pay for only the technical resources your busi ness needs today. In the traditional onsite server model, you have to decide between investing money in a server you may soon outgrow or buy a much larger server than you currently need in hopes of one day growing into it.

Hosted solutions offer incredible flexibility. All you need are a PC and a reliable Internet connection, and you're instantly connected to up-to-the-minute inventory information from anywhere in the world.

Transitioning to an established hosting environment requires much less effort than configuring a new hardware infrastructure. In fact, companies who decide to host their application locally still use hosted environments to get a headstart on their application setup while they are buying and testing local hardware.

Hosted software solutions are criti-

An on-premise solution allows a business to retain complete control over its entire hardware and software environment, which also provides the flexibility to select the peripherals and third-party applications that best complement and support the business' processes. Typically, on-demand applications do not support external hardware systems that may be critical to a company's business model. One example would be the inability of an on-demand application to offer pointof-sale hardware integration.

While an on-premise implementation requires a larger up-front investment, it can deliver a greater return on investment over time. Although ondemand solutions have a lower upfront investment, there is an obligation to pay ongoing subscription fees and, typically, there are no volume discounts or declining marginal costs for additional users.

lUhich ls Best for Your Business?

Both options can benefit growing businesses. The key is to understand what issues are most important for you, and weigh the pros and cons of each. There will always be trade-offs between lower initial payments versus lower long-term payments, convenience versus control, accessibility versus security, and so on. When selecting between on-demand and on- premise software, it's a good idea to consider the following: back-up. The risk is that if their computer system failed the day before the accountant performed a back-up, they would lose a month of business. In this scenario, how many distributors have the time and energy available to regain this invaluable information? cal to a business, too, because they protect against unexpected events. During one particular site visit, an owner of a small distribution firm was asked if they had a server on site. The owner pointed over to three boxes sitting in the corner of the room and replied, "I think one of these is a server." This company had an accountant come in once a month to create an extemal tape

Cosf.' Does your company haveor have the ability to obtain (through leasing or other financing options)the funds necessary to invest in onpremise software?

Availability.' What level of "uptime" will the on-demand software provider guarantee and how quickly will it respond to a problem?

Control and Dsta Security: Are you comfortable with your data being housed off-site, or potentially residing on the same data center server as your competitors' business data?

F eature -S et and C ustomization Capabilities: Do your changing business processes require more configuration and customization than an ondemand provider can-or is willing to-handle? Or do you need (or plan) to integrate the software's capabilities with in-house applications or other software to which you may subscribe?

Scalability: How prepared are you to change your business management software as your company grows? Would you prefer to grow and replace your software, or let your software grow with your needs?

- James E. McGowan is president and c.e.o. of Everest Software, provider of both on-demand and on-premise software. He can be reached at (800) 382-0725 or via www. ev e r e s ts oftw ar e i nc. c om.

Distributors who know the pain of losing data love hosted models. A hosted solution eliminates the possibility of losing data after server crashes, power failures, and natural disasters. Too many distributors with multiple branch locations are crippled across their entire business when one site crashes. The costs to recover lost data and keep a business running after a risk event are staggering. And the chance of complete recovery is slim.

Do you have a customer list with accurate contact information? Do you know who owes you money? Do you know to whom you owe money? What do you charge for each item in your inventory? If an unexpected event occurs in your business and compromises your data, can you accurately and quickly answer these questions?