Balmori Software Inc.

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Is price all you look at when you're evaluating a software solution? Not the smartest way to go. But if you're going to be price-fixated, you might as well consider the whole price you're going to pay. Because pay it you will.


The two parts of software price First, be aware that a software product has two parts to its price tag. You must look at both if you're to make a sensible comparison of competing solutions. The figure below right shows the price profile of a typical software package.

Part One of the price Most people evaluating a software package just look at its explicit price tag. Don't make the mistake at ending your scrutiny here, because there is also a...

Part Two of the price: THE HIDDEN COSTS. Whether you're talking of a package costing a few thousandpesos or a few million, the hidden costs are typically far larger than the initial purchase price. You could break the hidden costs down into (1) conversion costs, (2) opportunity costs, and (3) the costs of complexity. To do your comparative evaluation, you might want to draw up an evaluation scorecard, scoring each of your final candidates side by side on the following factors (see the scorecard provided at the end of this article):

Conversion costs

1. TRAINING COSTS. These will include any training fees the developer might charge, hotel and transportation bills, plus the salaries and wages of the trainees while they are undergoing training and not yet productive. Most packages will require several days, even weeks, of training. Obviously, the longer the needed training time (a function of the complexity of the software), the higher these costs. Equally obviously, a software product that can be learned in a very short period of time will incur much less of this type of cost.

2. The cost of re-training replacement workers when the original users leave or get promoted. Because employees inevitably come and go, training costs are never a one-time thing. Every time your in-house expert-of-the-moment leaves to have a baby, emigrate to the U.S., or take a job elsewhere, your organization has to go through the expense and time of training new users all over again. With most software products, the departure of the in-house expert triggers a major disruption, because of these products' typically long learning curves.

A simple, robust, easy-to-master software product incurs far less of this type of cost, because a new user can be just as easily, quickly, and inexpensively trained as the original user.

Opportunity costs

You incur opportunity costs during that twilight zone between the decision to buy a system and the actual day it is finally installed and usable. These include:

1. The cost of missed business opportunities. You decided to computerize precisely because your current way of doing things is too slow, too defect-prone, and has been causing you to miss valuable business opportunities for a long time. The longer the transition and training period to implement a software package, the greater this cost will be. Stories abound of companies that took a year or more to roll out an application. (If it takes a year to implement a package, what does that say about its likely complexity in actual use?) The faster you are able to roll out an application, the fewer missed opportunities you are likely to rue.

2. The cost of salaries and overtime that continue to be paid out during the transition period while the intended users are still training to use the software. While waiting to roll out the software, you continue doing your processes manually, and paying people to do so.

Complexity-related costs

This is one consideration most people overlook altogether: Complexity has real costs, whether we realize it or not. In fact, complexity has at least three costs:

1. The cost of additional specialists or ''high priests'' to run the software. If a software product is complex to learn, use and maintain, it becomes necessary to have high priests who will be the system's maintainers, masters, and conduits to ordinary mortals in line management.

    High priests generate two costs, in fact. First is the cost of their salaries and benefits, obviously. Second is the less quantifiable but still real cost of managers being totally dependent for their information on the high priests, because they are the only ones who can deal with The Beast.

    A business owner or manager needs to know his market, his products, and, not least, the nuances and peculiarities of his industry. This person is highly experienced, highly skilled, and is crucial to the success of the business. If all of his information is being mediated by a software high priest, then there will always be a lag in the manager's access to crucial company information, and thus his ability to respond quickly to his environment. Decisions come slower, and the frustration level within the organization rises.

    And what's to become of you if the high priest leaves you for any reason?

    A package that can be easily understood, easily learned, and easily mastered will eliminate the need for the high priest, his built-in delays, the internal politics, and all his attendant costs.

2. The cost of increased maintenance. It's an immutable law that a more complex software will always require increased maintenance. More maintenance equals more expenditures on consultants' fees and vendor support fees. Plus more system downtime. A software product may seem to offer supreme flexibility, infinite customizability, and a long list of sophisticated features and capabilities; but if deploying it means a two-year preparation period and indefinite reliance on a high priest thereafter, then you may merely be swapping the frustrations of a manual system for a more exotic family of frustrations. A simple-to-use, robust package lets you steer away from this type of cost.

3. "Viscosity" costs, or the quiet damage from a general slowing down of things. Experience teaches us that the more complex a software package is, the more difficult to use it is. And the harder to use it is, the greater is the likelihood of data encoding taking longer, and the greater are the chances of errors and omissions, and of report generation getting as slow as molasses, permanently. Hmmm... delayed reports, defective reports... it's like being back in manual mode all over again!

How can you tell if a solution is truly user-friendly?

Every vendor of course claims that their product is user-friendly. But the PC being already over 25 years old, and hundreds of thousands of software applications having come and gone, Philippine business now has sufficient experience to be able to tell if an application is truly easy to use or not. Here's what experts say user-friendly software should look like:

There is no programming involved in using the application.

Most of your employees can learn to use it in a half-day training course. Some will learn in less time.

Accountants, marketing assistants, and line people can obtain information directly from the application without requiring assistance from a specialist.

At the end of the training, the user is sufficiently confident about his understanding of the application to work with it on his own.

At the end of the half-day of training, the trainee can get real work done through the application.

The trainee can go on two weeks leave right after training, and upon returning can still use the application without repeat training.

The program provides online help at the touch of a button; and if additional support is needed, the user can get effective technical support from a real human being by calling a phone number.

Users stay with the application for years at a stretch.

The bottom line?
You are in business to do business, not to start a parallel career as a computer maven. Neither do you relish being hostage to your in-house computer specialist, having to rely on him for all your critical data. Ditto outside consultants and vendors. Robust, well-designed, easy-to-use software lets you do business at truly low lifetime cost, and with true independence to boot. -rsr

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Questions? Reactions? Write to balmori@balmorisoftware.com.

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