Technology for Tough Times

Monday Nov 17th 2008 by Gerry Blackwell
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Can spending money on technology help your small business survive the economic crunch? Let the debate begin.

In an economic crisis, cutting costs tops the list of most every business. But can spending money on technology help your small business survive the tough times ahead? We asked professional advisers and got some surprising, and occasionally contradictory, responses. The short answer: yes, but.

Yes, but you don’t have to spend much to see results. Yes, but sometimes spending less than you normally would, or nothing at all, makes more sense. Yes, but making better use of the technology you already have can help as much or more.

What new technology does it make sense for small businesses to acquire, even when money is tight?

Free or nearly free technology, for sure, said Andy Woyzbun, lead analyst at Info-Tech Research Group Inc., a research and consulting firm that specializes in small-medium enterprises.

Various vendors offer online backup, collaboration and productivity tools for free or a nominal amount. If you have a need, it's time to take advantage. Here are a few examples:

Perhaps more importantly, Woyzbun said, many small businesses have not, for whatever reason, invested in basic business software. He cited three key areas: labor management, customer relationship management (CRM) and accounting.

Small businesses should act now to protect themselves in a tough economy, Woyzbun said, and he pointed out that it doesn't have to cost a lot or require a huge implementation effort.

“Small businesses can get into the swing of things without the historical pain of implementing an [enterprise resource planning (ERP) system]. You can achieve the same business value for relatively little effort,” he said.

Smarter Scheduling

Labor is a huge cost component for many small businesses, yet most don’t use readily available time-and-attendance products that could give them a clearer view of how they’re spending their labor dollars, help them use resources more efficiently and reduce costs and absenteeism. 

Small firms don’t need sophisticated enterprise-grade systems that tightly integrate with payroll and time clocks, Woyzbun noted, just simple software that offers basic scheduling and, most importantly, reporting functions.

Several, such as Attendance on Demand, are Web-hosted or software-as-a-service (SaaS) offerings, which means no capital or IT management costs, and minimal implementation hassles.

CRM may have made deeper inroads among small businesses than time-and-attendance, mainly because of high-profile SaaS products such as SalesForce.com. But lots of small firms still don’t have a CRM capability, Woyzbun said. And it’s more important now than ever.

As well as helping manage the sales function and make it more efficient, CRM can help answer critical questions about which customers are buying which products and how much they’re spending.

“If a customer wants you to increase their credit line – which is fairly common and even more common in this kind of economy – you want a little history on that customer,” Woyzbun said. “If you only have two customers altogether, maybe it’s not so important. But if you have 50 or 60, you have to be making decisions based on real information.”

Again, implementing CRM need not break the bank. Companies such as SalesForce.com and Microsoft with Microsoft Dynamics CRM offer SaaS options that keep cost of entry low. The aforementioned Zoho has an online CRM product that is free for up to three people.

Money Matters

Woyzbun’s suggestion that small businesses need to implement accounting systems came as a surprise. Haven’t most long since done that?

With excellent and inexpensive small-business accounting packages available, such as QuickBooks from Intuit and Simply Accounting from Sage Software, it’s a wonder they haven’t. But Woyzbun said too many still use spreadsheets and manual methods. And today it’s more important than ever to have a good handle on your finances.

“When times are tough, you want to be smart,” Woyzbun said. “How can you make smart business decisions if you don’t have an [up-to-the-minute] view of your business situation?”

Basic reporting from an accounting system can give early warning of any deteriorating aspect of your financial situation – and the chance to react to it. Customers stretching out their payables is just one example.

Most small business owners will want to keep this critical function on their own computers or servers (although there are now SaaS options such as QuickBooks Online). Prices start as low as $50 for Simply Accounting First Step.

Small-business accounting products are easy enough to set up and learn that you don’t need to hire a consultant to help you, Woyzbun said.

Vic Berger, a technologist at CDW, a computer and network equipment reseller and small business systems integrator, argued that buying software – in good times or bad – will almost always save you money.

“There’s a cost trade-off – you’re paying out money to buy the software,” Berger concedes. “But there has traditionally always been a good pay-off with software investments.”

Patching It Up

We’re not sure the business case for investing in software is always such a slam dunk, but Berger added at least one other idea for relatively low-cost (or free) software that can save money immediately.

Patch-management solutions automatically install operating system and application program security patches and upgrades over your local network, which eliminates the need for someone to go to each machine and do it manually.

“If you’ve got one IT guy and 20 machines, that saves valuable time,” Berger said. “If you have three IT guys and 100 machines, they desperately need this.”

Upgrade management products are often thought of as enterprise solutions, but they’re typically priced low enough that small businesses can use them too, Berger said. Indeed, some, such as Microsoft’s Windows Server Update Services, don't cost a thing.

While Woyzbun said there isn’t much in the way of new hardware purchases that could help a small business cope with the economic downturn, Berger sees it a little differently. Mind you, CDW sells hardware.

He argued that replacing old gear with new “green” equipment – choosing power-efficient Energy Star-compliant products – can produce immediate and long-term savings. Electricity to run information technology is an increasingly significant cost factor for businesses of all sizes, and Energy Star products reduce consumption.

Berger also made a case for replacing individual printers, faxes and photocopiers with modern all-in-one or multi-function products.

They save electricity – one device instead of three – and also supplies. The best of them foster a money-saving reduction in printing by making it possible to send faxes as PDF documents that never need to be printed.

“Ask a business owner what’s the bigger budget item, supplies or IT equipment, and most will probably say they spend more on supplies,” Berger said.

But you don’t have to buy all new equipment to reduce power costs.Just aggressive use of the power management features on existing equipment can help.

Berger also recommended a “green” power bar such as the APC Essential SurgeArrest 7 ($35). You plug a computer and peripherals into the bar, and it senses when the computer automatically powers down and turns off attached peripherals as well.

“It’s very simple and it gives you a tremendous power saving,” he said. Without such a product, peripherals can end up staying on, unused, 16 hours a day and all weekend.

Spending Less

In general, though, Woyzbun said, it makes more sense to curtail or reduce spending on IT. For example, delay upgrading operating systems to save both capital costs and overhead related to the transition.

“There is nothing wrong with running Windows XP for the next two to three years,” he said.

If you absolutely must buy new hardware, scale back – buy “utility-grade” products or even used gear. Small firms may over-buy because of exaggerated concerns about system reliability and performance, Woyzbun said.

“The reality in this economy is that the big risks to your business don’t come from the fact that your hardware is too slow or fails. They come from not being able to sell your products, or your customers not paying you.”

Besides, the reliability of even discount-priced hardware is fairly high, he said. And you can always upgrade to a unit with more bells and whistles when times are better.

Berger, interestingly, argued almost the exact oppositposition. Don’t buy used gear, it’s too unreliable. Do buy up-to-date equipment to get superior performance. Don’t buy from low-priced big box stores – you need expert guidance from technology specialists.

Who to believe? We’re going to side with Woyzbun on this one. At least until the economy improves.

Making the Most

Both men point out that small businesses can exploit technology at virtually no cost simply by taking advantage of more of the capabilities and features in products they already own. Berger estimates small firms use as little as 20 percent of available features.

“Many are losing productivity just because they never took the time to learn and adopt all the capabilities. Sometimes whistles and bells are just that. But a lot of times, people are missing out on core features.”

He’s often frustrated by small business employees who never learn basic office phone features such as how to transfer calls. Result: they waste time getting up to go and find the person they want to take the call.

Another easy example: not using automatic data backup software included with external hard drive products. Recovering or recreating lost data that was never backed up is a huge productivity drain, Berger pointed out – to the tune of “thousands and thousands of dollars” in small businesses.

Squandering productivity, especially in a tight economy, can drive a small firm under. And it’s often avoidable by using tools you already have.

Woyzbun says many small firms also fail to take advantage of valuable analytical and automation features in software. Companies use CRM to help manage a sales force, for example, but they don’t use included analytical and reporting functions that could provide intelligence – intelligence that could be even more valuable now.

“Many businesses can’t identify their top ten customers, or say how much revenue they represent,” he said. Having that information would help them focus on their most profitable customers – a smart strategy in a tight economy.

Another example: continuing to use spreadsheets and manual methods to help reconcile requisitions, purchase orders and receivables when the general ledger program you already use could automate the process.

“If you don’t use [these features], at the very least you’re spending labor unnecessarily,” Woyzbun said. “In the worst case, you calculate things incorrectly, and then you have reconciliation problems.”

Can technology save your bacon in a tanking economy?

Maybe not on its own. But ensuring you have the basics covered and making the best use of technology you already own can certainly help. And it doesn’t have to mean spending a bundle.

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