We look at whether it is worth improving your processes with new software. Typical processes might be quotation software, or complete system processes such as quotes, jobs / sales orders / projects, delivery notes, time sheets, purchase orders, invoices and stock control. However, this article applies to any software implementation in a small or medium size business (SME).
Before deciding whether it is worth making an investment of time and money in a new system you should first assess the situation by answering these questions:
- Is Your Current Process Stable or is it Constantly Changing?
- What is the Cost of a New System?
- Can You Split Up Your System?
- What Are the Benefits?
- What are the Non-Price Costs?
- Should You Invest?
How to assess and answer these is discussed below.
Is Your Current Process Stable or is it Constantly Changing?
If your processes are stable then you can go onto the next stage. If they are changing frequently, usually when a company expands rapidly or changes the way it works, then it might be worth delaying putting in the new system until your processes have stabilised.
However, if you have a high-volume system or a very manual one then the investment in a new system might be repaid quickly enough to justify a short-term solution.
What is the Cost of a New System?
Obviously, a big factor in your calculations will be the cost of the system. You can expect these kinds of levels for the different types of software:
- Bespoke -> Highest
- Customised – > Middle
- SaaS -> Cheapest
If you find a system that already exists and does what you need it will probably be the cheapest solution for you, as well as requiring the least implementation time.One caveat to this is that you could also implement a bespoke solution that uses simple technology, such as Microsoft Excel or Microsoft Access. A system built with ones of these will not be the best in technical terms, flexibility or usability. However, if relatively simple and built within the limited capabilities of these tools it can be a cost-effective approach.
Can You Split Up Your System?
If this is possible and you can just do one part to start with there are advantages:
- Lower initial investment
- More manageable
- Lessons learnt can be applied to later phases
Where Can You Split It?
First, look for any natural breaks in the process. These usually follow the different areas or departments in your company, such as sales, operations, accounts, etc.
Next focus on issues within the sub-processes. If there is one process that is time-consuming or has a high-impact on the business then it might be a candidate for change. An example might be procurement. If staff are struggling to find out whether items have been ordered or when they are due to come in and this is affecting deliveries and scheduling an automated purchase order system should have a positive impact.
When you are looking at a sub-process you need to work out what other functionality is required to provide this. In the purchase order system example, you will need a suppliers’ and possibly a products’ database and the screens to manage them so this will add to the effort and cost. As a result, it might not be as quick or cheap to implement as on first sight.
Of course, once you have implemented common functionality, as in this example of the suppliers and products database, you can use these for all the other areas in the business in later phases.
Finally, make sure the impact of implementing on sub-process first will not adversely affect those further up the process. You might want to make sure that you don’t implement an automated invoice creation system where the database structure doesn’t take account of the requirements for quotes or jobs. The details required for a product to be invoiced will probably be less than those for it to be ordered or built so you need to take account of those before starting.
What Are the Benefits?
The calculation of a Return on Investment (ROI) can be assessed using these measures:
- Time saved (and for who)
- Increased output
- Improvement to work quality
- Increased speed of response to client
- Better visibility of processes
- Better control of processes
You can employ mathematical equations to calculate these if you are sure of your forecast improvements in time saved. However, some of the measures are more based on opinions, such as better visibility, so are harder to quantify. Most SME’s know where their processes struggle and the probable benefit of a new system without in-depth mathematical analysis.
What are the Non-Price Costs?
Don’t forget that management will have to get involved in the design, selection, implementation and testing of the software. Staff will have to test and be trained on the new system. These will involve some internal costs. You also need to allow for the management involvement in the project implementation. Exactly what to expect is covered in a later article.
Should You Invest? And Calculating Your Return on Investment (ROI)
There are risks to implementing a new system which is covered in a later article. Looking at your return on investment and your known cost you can now balance them out to help you make a decision. It is sometimes useful to write these on either side of a sheet of paper to (costs and benefits) to help you make your decision. As the calculated figures are forecasts, ultimately this is down to your feel for your processes and business. Of course, this is different to the ROI calculations for the purchase of machinery where you can clearly forecast productivity improvements and therefore base your decision on the maths.
If you think it makes sense to invest in a new system, you next need to assess the risks, which is covered in our next article.