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Maximize Your Software Technology Investment March 24, 2004. Presented by Marcia McLean CapeCoder , Mashpee, MA. About CapeCoder. In business since 1998, incorporated in 2000 Specialize in web-based, database-driven custom business applications Current projects use Microsoft .NET

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Maximize Your Software Technology Investment March 24, 2004

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Maximize your software technology investment march 24 2004 l.jpg

Maximize YourSoftware Technology InvestmentMarch 24, 2004

Presented by

Marcia McLean

CapeCoder, Mashpee, MA

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About CapeCoder

  • In business since 1998, incorporated in 2000

  • Specialize in web-based, database-driven custom business applications

  • Current projects use Microsoft .NET

  • Former manager with the MITRE Corporation, the ASK Group, Freedom Newspapers

  • Former Board member of the New England Employee Benefits Council

  • President of the Cape Cod .NET User Group

  • Member of the Cape Cod Internet Council

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A Major Investment

Total IT costs are around 2.3% of revenue, or $5,000/employee*

Software and associated expenses account for 10-40% of total IT costs

Failures in information technology cost the U.S. economy $100 billion annually, with the price of software defect repair alone estimated at $59.5 billion **

*Computerworld 1996

**WorkSoft, automated software testing company

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5 Steps to Maximize Your ROI

  • Analyze needs, define requirements

  • Inventory what you have

    • Options available

  • Build or buy new software

  • Training, testing, maintenance, hiring

  • Evaluation

    Case study

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Case Study

  • Background

    • Motorcycle dealership with four retail stores

    • Safe riding school with 500 students

  • Requirements

    • Enroll students online and from the stores

    • Enforce business rules

    • Accurate enrollment headcounts

    • Change and correct customer (student) info

    • Reconcile credit card charges

    • Make information available among departments

    • Send info to Commonwealth RMV

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Case Study (cont’d)

  • Challenges

    • High administrative overhead

    • Long time to train new administrator

    • Hard to prevent overbooking

    • Information collected from various sources

    • Could not make changes easily

    • Burdensome to create reports to RMV

    • Different people needed information

    • Competition

    • Web hosting company was expensive and unresponsive

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Software Requirements

  • Collection, organization, reporting, distribution of information

  • Start and end with your business needs

  • Examples:

    • Sales, cash flow and profit

    • Scheduling

    • Customer contact info

    • Inventory

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Questions to Ask

  • What information do I need to collect, organize, report and distribute?

  • Who provides this information?

  • How is the information provided?

  • Who collects, maintains and distributes it?

  • How is the information stored?

  • How is the information used:

    • How is it reported?

    • Who needs this information?

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Case Study: what information was needed?

  • “Inventory”: class sizes, codes, schedule

  • Method and amount of tuition payment

  • Customer contact and demographic information

  • Attendance and grades

  • Credit card payment authorization codes

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Case Study: who provided the information and how was it stored?

  • Sales staff -> school administrator

  • Customer call-ins to administrator

  • Instructors

  • White boards, notebooks

  • Legacy dealer management system

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Case Study (cont’d): who needed the information?

  • Customers

  • Instructors

  • Controller

  • Stockroom

  • General manager

  • RMV

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Points of Failure

  • Information was lost

  • Hard to retrieve

  • Not organized

  • Not current

  • Hard to make corrections, changes

  • Not easily shared

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Define Requirements - Recap

  • Determine what information you, your employees, your customers and your vendors need

  • Who provides it?

  • Who needs to see it?

  • Will it need to be changed?

  • How and how often does it need to be updated and reported?

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Types of Business Software

  • Basic

    • Office Productivity Suites (Word Processing, Spreadsheet, Email)

    • Accounting

    • Virus Protection, Firewall

    • Website

  • One Level Up

    • Database

    • Specialty – POS, inventory, HR, medical

    • Server-based, multi-user

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You’ve Made An Investment

  • Software accounts for up to 40% of total IT costs of $5,000/employee

  • 8% to 15% of software spending wasted

    • Goes to purchasing, renewing, and supporting contracts for shelf-ware, software which is not used because

      • Requirement no longer exists

      • “Point” solution whose functionality has been replaced by newer applications or suites

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Basic Software

  • Business Applications

  • Anti-virus

  • Spam, Spyware Filters

  • Website

  • Security

    • Firewall

    • Encrypted data

    • Restrict access to files and network

  • Backup

    • CDs

    • Tape

    • External hard drive

    • RAID-configured internal hard drive

    • Online backup service

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  • “8 reasons your business needs a server”

    • File-sharing is easier

    • Easier back-ups

    • Specialized collaboration software

    • Mobile work force

    • Share high-speed Internet access

    • Offload files and tasks to server

    • Consolidate email accounts

    • Easier to set up new computers and deploy new applications

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Inventory - Recap

  • Bundled office productivity applications

  • Specialty packages, like accounting

  • Custom software purchased with your business

  • Legacy database

  • Externally hosted web site

  • Utilities for network admin, anti-virus, firewall, spyware detection

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But Does It Work?

  • Does my software collect ALL the information I need?

  • Does it provide helpful built-in or ad hoc reporting tools?

  • How easily is the information shared?

  • Can multiple people use it at the same time?

  • How easy is it to learn and to use?

  • How expensive is it to maintain and upgrade?

  • Are my existing systems well integrated?

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  • Consider upgrades

  • Consider new software purchase

  • Consider consulting assistance to integrate, enhance

  • Consider consulting assistance to develop custom solution

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Case Study: what was their investment?

  • Legacy accounting and POS

  • Bundled office productivity suite

  • Servers, hardware, network

  • Integration was minimal

  • School information was kept on white boards and in notebooks

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  • “Shrink Wrap”

    • Advantages

      • Tested by vendor, support available and often part of purchase price

      • Forums, user groups and other resources readily available

      • Maintenance, upgrades, patches readily available

      • Fixed price, no surprises

    • Disadvantages

      • You get it “as is”, no customization

      • Vendor’s tech support may be inadequate

      • You can’t legally copy it or redistribute it.

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Buy (cont’d)

  • Checklist before buying software

    • Pricing, “bundled” (Office)

    • Single or multi-user

    • Shop around for best price and special programs

    • Release date of at least 12 months ago

    • Establish procedures for installation, updates and patches

    • Test and run parallel, especially “mission critical” app and/or on production servers

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  • Grants you the right to use the software developer’s intellectual property

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Volume Licensing Discounts

  • Transactional – # of purchases (new, renewed, maintenance)

  • Forecast – spreads orders and costs over fixed period, e.g., 2 years

  • Site – multi-user limited or unlimited

  • First order – price of future licenses receive same discount as your first order

  • Points - $ value of purchases

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Freeware, Shareware

  • Freeware




  • Shareware: “try before you buy”

  • Demo versions of commercial software

  • Beware of spyware, adware

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  • “Customize”

    • Advantages

      • You have a resource your competition doesn’t

      • Meets your business’s unique needs

      • You and your vendor have complete control if you want changes, enhancements

      • You can negotiate licensing and ownership (buyer’s market)

    • Disadvantages

      • It always takes longer than expected to build

      • It is often more expensive that expected – this is controllable through contract negotiations and managing “scope creep”

      • It really is “Beta” – are you set up to deal with unexpected bugs?

      • Do you have time to work with the vendor on testing?

      • Do you understand your business processes well enough to help your vendor write a reasonably good statement of work?

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  • Checklist before “building” software

    • Shop Around

      • In 2000, there were 127 technology consulting firms in Barnstable, Plymouth and Bristol counties providing custom software development services

    • There should be a contract and it should include:

      • Statement of work

      • Budget (fixed price, hourly)

      • Payment schedule (typically 1/3:1/3:1/3)

      • Schedule

      • Protection of privacy, ownership of code

      • Warranty

    • Expectations need to be clear up front

    • Work out communications (regular meetings, emails, phone calls)

    • If you are putting the job out to bid, tell your vendor

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Build AND Buy

  • Combination: Build & Buy

    • Advantages

      • Can be best of both worlds – tested software that can be modified to your specific needs

      • Tech support MAY be available; user groups and other resources may be available as well.

    • Disadvantages

      • Comes with a price – more expensive. Companies need to recoup their development costs, and this kind of software is harder to write.

      • You HAVE to find a vendor who has deep knowledge of the software – and that may be hard to do.

      • Your vendor needs to provide excellent documentation and training – one more thing to worry about!

      • A good vendor is expensive: customization is a higher skill set.

      • Vendor is probably a VAR, which means they may try to “upsell” you.

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Business Software Recap

  • Upgrades may be available

  • Buying new

    • Integration

    • “Hidden” costs of installation, running parallel, training, purchasing more licenses

  • Building

    • Requires good communication with vendor, in-depth knowledge of your requirements

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Case Study: BUILD

  • Maximize current IT investment

  • Unique business rules

  • Wanted exclusive ownership of the software

  • Enroll students at four stores and at trade shows

  • New central database independent of legacy system

  • Customer self-service component

  • Ability to administer servers and access data independent of their outside hosting service

  • Competitive advantage

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Training Resources for Commercial Software

  • Colleges, training centers , trade schools, community adult education

  • Vendor resources

  • Online forums

  • User groups

  • On-site training by a specialist

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Maintenance: “Hidden” Cost

  • Install upgrades and patches

  • Integrate with other systems

  • Administer permissions and privileges

  • Protect from viruses and other attacks

  • Testing and deployment

  • Server tuning

    Hosted software model is an alternative

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Hiring Employees

  • Degree/equivalent and 3-5 years

  • Network administrator: $44-60

  • Sr. network admin: $60-65

  • Tech support: $34-44

    2003 Cape Cod Compensation & Benefits Survey

    Cape Cod Human Resources Association

    Conducted by The HR Consulting Group

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Hiring a Vendor

  • Good Signs

    • This is a full-time business for them

    • Have been in business FT for 2 or more years

    • Have clients who have been with them for 2+ yrs

    • Have experience with similar projects

    • Have at least 3 credible business/technical references

    • Website is current (no dead links) and easy to use

    • Keeps skills current by participation in continuing education

      • Courses, user groups, publications

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Hiring a Vendor (cont’d)

  • Warning Signs

    • Moonlighters, limited professional experience or just out of school

    • VAR for a specific software package (okay if you already own it)

    • Won’t sign or don’t have a written agreement which includes a statement of work, fees and payment schedule and confidentiality agreement

    • Not forthright about their strengths and weaknesses – NO ONE knows everything!

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Case Study

  • Had a full-time IT manager

  • Ability and desire to perform back-end system administration (web and database servers)

  • Hardware and network was in place

  • School administrator (high turnover)

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A Major Investment

Total IT costs are around 2.3% of revenue, or $5,000/employee*

Software and associated expenses account for 10-40% of total IT costs

Failures in information technology cost the U.S. economy $100 billion annually, with the price of software defect repair alone estimated at $59.5 billion **

*Computerworld 1996

**WorkSoft, automated software testing company

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But Is It Working For You?

  • Mercer Human Resources Consulting Study

    • 50% of respondents indicated their organization was either ineffective or very ineffective when it came to capturing ROI from technology investments

    • Only 16% of respondents indicated they were effective in capturing ROI of their technology investments

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Uncovering YOUR ROI

  • Evaluation Checklist

    • Have you been better able to deal with unexpected trends in the marketplace (e.g., an increase in demand for your services?)

    • Are you/your staff better able to make changes and corrections?

    • Are you able to respond to internal and external customer needs more quickly and/or more thoroughly?

    • Have you replaced overhead with a profit center?

    • Are you seeing other areas where technology could make your business more profitable?

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Primary Reasons for Failure

  • Failure to Clearly Define Requirements

    • Before leasing, purchasing or designing any software, organizations need to have a clear understanding of what it is they need the software to do. Define objective and goals

  • Failure to Consider All Costs

    • Annual maintenance fees and upgrades, the internal resource costs for implementation and the costs for training and change management are typical cost categories most overlooked in cost/benefit analysis

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Primary Reasons for Failure

  • Failure to Understand the Challenges of Integrating with Other Systems

    • Integration is the hottest topic in IT today. “It ranks as one of the chief concerns due to the proliferation of applications within an organization”

  • Failure to Train

    • Introducing new technology does not automatically result in cost savings.

    • By-in and acceptance by users

  • Failure to Procure Adequate IT Staff for Implementation and Maintenance

    • “Pay $5,000 in the beginning to get it done right vs. $50,000 over the course of the technology’s lifespan to undo the wrong and get it working efficiently.”

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Case Study (conclusion)

  • “The system” paid for itself in the first year

  • The system is in its fourth year

  • Training costs reduced

  • Overhead costs reduced: 1 FTE -> ½ FTE

  • Able to respond to unexpected changes in the marketplace – enrollments tripled over time

  • Errors reduced or eliminated

  • Can make changes easily

  • Can share information easily

  • Success-> more successes

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Moving Forward

  • Software is an ASSET

    • Analyze your business needs

    • Seek information and professional resources

    • Select from variety of options what is best for business

    • Evaluate it

    • Train staff to use it

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Online Resources







  • Search engines

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Questions? Comments?

Marcia McLean



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