The days of shrink wrap are gone. There was a time if you needed software to operate your business, you purchased an off the shelf solution. It might not fit exactly but it was close enough and you could most likely work around it.
We’re living in a new world, the age of the customer which had its beginnings with the advent of the internet. Companies like the book seller Amazon entered the marketplace and showed us the possibilities. They were originally an online store front and dedicated their resources to technology. Now they’re at the forefront of the marketplace in any number of ways that far exceed book sales. Technology is here to stay and those who embrace it stand to gain an edge in the age of the customer.
Introduction:
When you’re considering adding custom software or features to operate your business, it’s essential to understand the return it will have as well as the outlay of time and money it will take. Decision makers who have the ultimate sign off authority will need accurate information about what can be expected both in cost and return.
- What are your goals for the solution?
- How will you measure success?
- Is it intended to?
- Generate new sales
- Reduce hard costs
- Improve the user experience
- Accelerate business processes, improve productivity, or reduce the effort to accomplish a given task
- All of the above
Whatever the parameters may be, there must be agreement of the value to the organization in the beginning. As you identify cost factors the end value will help you establish a baseline for calculating the ROI for the effort.
Cost Factors:
We’ve attempted to list out some of the cost factors that contribute to the FINAL COST OF THE SOLUTION in this paper. Our goal is to stimulate a thoughtful approach to the evaluation process. In no way should this list be considered exhaustive, it’s only a guideline.
- Actual cost of development – If the work is performed in-house, then the TIME x COST OF EMPLOYMENT is a key indicator. If the work is to be outsourced then the provider’s estimate should be factored in along with the EMPLOYMENT COST for in house oversight and assistance. Note: A provider’s hourly rate shouldn’t be considered as a standalone factor since the time required to build a solution will vary from provider to provider.
- Quality of work delivered – The quality of work will have a bearing on several other factors in this list. In the most extreme case, poor quality may result in reworking the initial effort which will in turn drive up the final cost and delay benefits.
- How long will it take to deliver the solution – Time is money! If the timeline is shortened, having the new features in production could offset production costs. Also, phased roll outs, or periodic feature releases are preferable to a longer duration or single release.
- Wasted effort – Regardless of the cause; a misunderstanding, loose specs or a lack of clarity, there’s always the potential for wasted effort which will negatively impact the final cost. It’s recommended that new features should be rolled out in ‘small batches’ to reduce the chance for wasted effort.
Once an organization acknowledges that software drives their business and is here to stay, ‘software evolution’ is a matter of course. The associated costs for ongoing enhancements need to be considered. A nimble business welcomes routine feature enhancements as a way to keep pace with the business and improve processes.
- Feature enhancements are expected and can be planned and budgeted for.
- User need shifts or process changes will drive new features and process improvements
- Involving end users early on improves acceptance rate and provides visibility into future needs
- Ongoing support
- Software updates and scheduled maintenance
- Version control
Since technology has enabled the customer with more information and options, they now have the power to evaluate their options without ever visiting a physical location. The age of the customer compels both for profit and non-profits alike to embrace the principles of the software-powered business. Becoming a software-powered business should be at the top of your business technology agenda.
For more information about how to think through the possibilities of becoming a software-powered business, give us a call @ 501-801-6700.
