Many companies have often wrestled with the idea of “owning” software. While most people now understand the concept of intellectual property, business owners are feeling the pain behind keeping up with the barrage of updates, patches, and major releases of the army of software products now required to run their daily business. To mitigate risk, many companies see a value in outsourcing areas of their business that are not their core competency. This has led to the SaaS (Software as a Service - see SalesForce.com) model gaining ground. The thought is that it is typically cheaper to rent the software than to own it. In my experience stand up time is very quick, but integration costs and subscription fees can get to be a little expensive over the life of the solution.

While SaaS in the DMS space has a bit to go before it reaches any true level of maturity, a fast growing example of seed-change can be seen where political campaigns are turning to Salesforce.com’s Campaignforce to help control costs, increase the speed of deployment, and leverage the social-network phenomena to gain votes. Most channel or direct software vendors see this type offering as a loss leader to create a funnel in order to bring more customers to their core offerings. To some extent, this is a bit concerning in that an offering such as this would not necessarily be the best solution for a customer, if a channel or direct vendor is only angling to bring a customer to their core offering.

There also seems to be a division within the SMB segment itself that is causing some introspection among the software vendors and service providers alike. Much like the “copier-industry”, this segment 1 customer base does not have the expertise or budget to manage intensive software projects, nor do they feel they need a “big software package” to manage their business. Generally, this segment 1 ranges from 1-10 seats (possibly ranging to 25), whereas the medium sized, or segments 2-4 customers might have 25-250 seats (ranging as low as 10 or as high as 500). The truly ’small company’ (less than $1 million in annual revenue) simply does not have the cash flow to invest in an offering unless subscribing to a SaaS model, nor does it want a big, complex software package to manage - as being nimble in the market place is a key advantage to scrapping with the big guys. However, some savvy business owners quickly realize the opportunity to apply this type of technology to their businesses, and the ability to offset future costs. As this type of business gains acceptance among the general SMB business community, expect DMS in the segment 1 and 2 markets to grow dramatically. Much like the HP inkjet printer business, the goal is to make money on the residuals across a large base of customers; this helps keep the costs low for the software vendor and partner and keeps prices competitive for end-customers.

With all of this said, there are many dangers that are lurking around the corner for every SMB, some of which have been mentioned above. The greatest obstacle I have seen is still project success and cultural acceptance, by far. While IT project failure has decreased over the decades, it is still dangerous to embark on IT projects in general. The Standish Group, widely regarded as the leader in IT Project risk assessment, publishes the Chaos Report. In a 2006 study, only 35% of IT development projects were considered successful, whereas a project that encountered cost or time overruns or did not meet user needs requirements was a staggering 46%. Even though this study references software development projects, I can tell you from experience many projects are doomed to failure before they even start.

The responsibility of conducting due diligence still rests squarely with the prospective customer - caveat emptor; it has become obvious to me the CMS/DMS companies have inventory to sell and that’s what they aim to do - even if the solution is not everything the customer needs. Only a provider that is willing to truely form a partnership is worth evaluating in the long run, since their business is dependant upon your success.

Integrating emerging technologies into a business can bring important benefits to the company. Look at how revolutionary facsimile technology was at the time, and what a game-changer e-mail has become. An owner must be extremely cautious not to bet the farm on an emerging technology unless they fully understand the value-benefit proposition as well as the cardinal rule, the culture must adopt the solution or it will fail. DMS technology will be important to decrease file-room sizes, allow for quicker access to documents, and aid in the processing of “hard-copy” documents. For all those reasons, I think it is a growing priority from which SMB owners cannot afford to turn away; however, they do have to ensure they understand their business and choose a good technology partner that understands theirs.

In the overly saturated market of electronic content and document management there is a deep divide developing between the enterprise-class content management systems (CMS) and the small and medium business document management systems (DMS). What is interesting to me is there are some programmatic differences between the applications, but the key differences tend to come in with the levels of professional services offerings and general approach or offering to the target account.

Many larger CMS/DMS vendors, like EMC, see the SMB marketplace as a ripe opportunity since their upper end client-base has been saturated. I am not completely convinced they understand the SMB marketplace as it requires strong channel partners or seriously commercializing the offering, thus reducing the lucrative professional services divisions’ opportunities. The smaller players have some interesting offerings, but with all of the chatter in the space, it is difficult for potential customers to determine the best offering for their business without simply jumping in the proverbial water. Therefore, what do they do, they turn to trusted technology partners in their area for advice.

This prompted many software companies into looking at channels instead of investing in a direct sales force - or at least, augmenting direct sales forces. This is a stable model and has some unique advantages, like allowing for localized service - which SMB customers identify with quite well.  However, there is often a wide variation in the level of expertise at each channel partner, so SMB owners would be well served to dig in and understand the bench strength of the local provider as well as what certification programs the software vendors require.

Another disadvantage of a channel-sales model is simply a cost factor. With each hand through which the inventory passes, the costs rise to the end-customer. Add to this any installation, training, maintenance, and customization fees and the price tag for an SMB can quickly rise to a dollar figure that could make an owner’s head spin. But, what an owner must way is whether the expertise of the local provider and on-going support offset a slightly higher cost, many times the answer is, “Yes.”

Learn the tricks to control costs in a DMS project and the benefits and risks of Software as a Service (SaaS), in Part 2 of this story…

SFA, CRM, ERP, ERM, DMS, CMS, MPS, and SaaS… Wow, we hear these acronyms and probably use some versions of them in our daily business - and even to run our business. So what’s in a name?

Well, evidently a lot according to “them”, the software manufactures and industry experts alike. We hear all about the wonderful productivity enhancements and time saving tools there are, and don’t get me wrong… “they” may be on to something there. It’s a wonderful commercial the salesperson puts on for us, and we blindly subscribe to the fantasy while skipping lightly through strawberry fields.

Oblivious to the pending chasm we are hurtling towards, a reality of costly acquisition and lengthy integrations eagerly awaits the unwary. This grim picture painted, what really boggles my mind is how often companies do not have the stomach to keep down the ugly truth that you must understand where you stand before you can decide where you must step.

What does that even mean? What I see time and again is that companies fail to comprehend software alone cannot solve their problems, only focus and attention to aligning business goals and metrics to actionable and corrective plans. Software is much like a coat of paint. If you have spent time sanding and priming and buffing then a good paint job can bring new life to something; however, if you simply slop new paint over old to cover some rust spots the paint job will always look splotchy and eventually the rust spots will resurface.

My advice is to spend what is the hardest, but arguably the most rewarding, time in understanding why you run the business the way you do. Create metrics to help measure your business, like a report card, but do not let the metrics dictate success alone, as they are simply an indication of what is working and what is not. If the metrics indicate something is working, ask, “Why?” If the metrics indicate something is not working, ask, “Why not?” Perhaps, the most important advice I might offer is that change is inevitable and on going.

Remember, there is no magic bullet, but I’m sure you can find a silver lining if you know where to look.

Regards,

Ken