The cost of buying Business Software
Beware the total impact
 

Whether your business is large or small, you need software to run your business.  In large companies, when a business buys software to run major parts of their business, they call it enterprise software.  In a small business, the software you buy will often run most, if not all, of your business.  So it comes to the same thing.

 

The reason that I draw this comparison, is that small and medium sized business owners don't look at this purchase on the same scale, but the cost (percentage wise) can be very similar.  The cost of purchasing software is not like purchasing a couch for your living room, it is more like purchasing a new car (there are purchase and ongoing costs to a car).  It is worse than that because, when you purchase a car, you don't have to be retrained, you don't need a new driver's license and you don't have to build new roads (think of early trains with different sized tracks).

 

There are 6 major costs to a software purchase:

1. The purchase price of the software.
2. The cost of the hardware upgrades that you may have to buy (most software identifies minimum requirements, and this assumes no conflicts with other software).
3. Training: Most software companies will tell you it's easy to use, but they don't know the level of skills of your staff.  They also don't know your business, so they don't know what you need to be trained on.
4. Conversion:  If you have software that is doing some of the job today, will you be able to use the data from it?  Will you still be able to do comparisons?  The supplier will convert some of it for you and may include this in the price.  However, they don't understand your business and what you need.  Will you have to work in both systems at the same time?  How will this affect you business productivity?  Will you need extra staff during the conversion?
   
5. Software and hardware installation costs:  Will the supplier handle it?  Do you really want them to?  Unless you have your own IT staff, who will work with them, this will cost you.
6. Productivity:  Your staff currently know how to get the job done.  The new software will be foreign to them.  They will be less productive for some time, until they become totally familiar with the new software.

When you plan to purchase new software for your business,  use this as a general rule.  The total cost will be 3-4 times the purchase price of the software.  If this scares you, think very hard about the return that you need on your investment.  Plan for the costs, and also plan for getting your money back....... and them some.

 

IT should be an investment in your business, not a cost.

 

© 2008 M.E. Lachance & Associates Ltd.