Maximize Your Software Technology Investment March 24, 2004

1. Maximize YourSoftware Technology InvestmentMarch 24, 2004 Presented by Marcia McLean CapeCoder, Mashpee, MA

2. 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

3. 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

4. 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

5. 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

6. 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

7. FIRST STEP “DEFINE REQUIREMENTS”

8. 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

9. 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?

10. 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

11. 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

12. Case Study (cont’d): who needed the information? • Customers • Instructors • Controller • Stockroom • General manager • RMV

13. Points of Failure • Information was lost • Hard to retrieve • Not organized • Not current • Hard to make corrections, changes • Not easily shared

14. 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?

15. SECOND STEP “INVENTORY WHAT YOU HAVE”

16. 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

17. 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

18. 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

19. Servers • “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 http://www.microsoft.com/smallbusiness/reasonsforserver.mspx

20. 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

21. 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?

22. No? • Consider upgrades • Consider new software purchase • Consider consulting assistance to integrate, enhance • Consider consulting assistance to develop custom solution

23. 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

24. THIRD STEP “BUILD OR BUY?”

25. Buy • “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.

26. 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

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

28. 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

29. Freeware, Shareware • Freeware • http://www.tucows.com • http://www.download.com/ • http://www.macoszone.com/ • Shareware: “try before you buy” • Demo versions of commercial software • Beware of spyware, adware

30. Build • “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?

31. Build • 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

32. 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.

33. 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

34. 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

35. FOURTH STEP “TRAINING, MAINTENANCE & HIRING”

36. 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

37. 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

38. 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

39. 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

40. 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!

41. 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)

42. FIFTH STEP “EVALUATION”

43. 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

44. 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

45. 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?

46. 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

47. 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.”

48. 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

49. 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

50. Online Resources • http://www.cnet.com • http://www.zdnet.com • http://www.tucows.com • http://www.capeinternet.org • http://www.ccdevgroup.net • http://www.techsoup.com • Search engines