Business On Software

Most of my clients and readers will be aware that we are a small development shop.  And I mean small.  There is basically only myself as the lead developer/analyst, plus I have two other programmers on contract who help me out from time to time on various projects.

Being a fairly disciplined and organised sort of programmer, I have always used some sort of software version control and bug tracking tools to ensure that our development cycle works at it’s best.  And being an Aussie company, I also love supporting local businesses, especially one that has a high profile and excellent customer reviews as Atlassian.

So this month, after out internal open source development platform (CollabNet Enterprise Edition) crashed for the nth time and we lost some data, I decided to look for a commercial equivalent.  Note: I believe that Open.Collab.Net is no longer distributing CEE these days – correct me if I am wrong.  Note2: I actually loved CEE, but it was always too unstable for my liking.

So I decided to check out JIRA, from Atlassian.  Whilst browsing their site, I noticed that they had a JIRA Studio product, which was a totally hosted product that included their excellent JIRA bug tracking, plus a wiki, plus Subversion hosting.  Excellent – just what I needed.

I had a look at their pricing, and it said US$50 per user.  Fantastic – certainly within our budget.  But wait…the fine print said 5 users minimum.  Minimum??  We only have at the most, 2 developers working on any one project.  What am I going to do with the other 3 licences?  US$250 per month is well outside of our budget.  At todays rate, that works out to around AUD$4900 per year.

Hmm, the average project we work on is around AUD$2000.  That means that we will need to bill at least 3 projects every year before I can even start putting food on the table.  Not Good.

Then I browsed the rest of their site.  Guess what?  I noticed that they give free licences for their JIRA bug tracker and Confluence wiki for personal developers.  Great, they must do the same for JIRA Studio too?  Wrong!  I couldn’t see anything.

Note: Yes, yes, I know – the personal licence is for non commercial use only, which excludes us.  But hey, I decided to check on this and to email their sales team to verify.  After all, I am a software developer as well, and I can understand these sort of licencing requirements.

So I shoot off an email to the JIRA sales team:

Good Morning,

I am very interested in the Jira Studio product, however being a small
2 person development shop, the pricing of US$2500 per year is outside of our
budget.  I was wondering if you had a personal/individual licence option
as with your non-hosted Jira product which may be affordable by smaller
companies such as ours?

Thanks,
Devan

A day later, I receive this very nice reply from Douglas:

Hi Devan,

Thanks for the email

Sorry to hear that JIRA Studio is outside your price range.

You might want to consider using one of our free JIRA Personal Licences.
These licences enable you to use any JIRA edition for up to 3 registered
users.

I hope this is helpful - please let me know if there's anything else I can
do to help out.

Cheers,
Douglas

OK, it was worth a shot.  Douglas’ suggestion however caused some ethical issues with me, so I decided to clarify:

Hi Douglas,

Thanks for your email - the only thing concerning me about the personal
licence, is that it states it is for 'non commercial, personal use only'.

Seeing as I actually do 'bespoke' software development for commercial
customers, I did not want to be in breach of the licence terms.

Is it still OK to use the personal licence in this instance?

Thanks,
Devan

Ok, I realise I am clutching at straws here…A day later, I get a reply from Nicholas:

Hi Devan,

Thanks for the update and the additional information.

As per my voicemail you should not use a JIRA Personal license in a
commercial environment such as your bespoke software development.
I recommend you look at purchasing a JIRA Standard license for Blaze.

Thanks Devan.  If you have any queries feel free to get in contact via
return email or 02 xxxx.

Regards,
Nicholas M
---
Please note I am located in our Australian office

Hmmm…Ok, another nice reply, but has anybody realised that I really wanted JIRA Studio?  Also, I had to giggle a bit at the signature tagline on Nick’s email – at least I wasn’t talking to anyone in Atlassian’s Guatamalen office!  But not being one to give up, I thought I would give it one last go:

Thanks for your reply Nicholas - but this leads me back to my original problem,
in that we are a small 2 person development house, and we like the features of
JIRA Studio.  Ideally we would like to use this solution, but the pricing is too
high for our needs.  We really only need 1 developer and 1 collaborator licences,
but having to purchase 5 minimum is a deal killer for us  

I can justify a spend of even $100 per month for such a service, given our size,
but $250 is prohibitive.

Cheers,
Devan

Pulled out the violins…weeping angels and all the stops.  Alas:

Hi Devan,

I'm sorry to hear the pricing for JIRA Studio is prohibitive for your team.

If you have any other queries feel free to get in contact via return email or
by calling 02 xxxx.

Regards,
Nicholas M

That’s it.  A 2 line ‘go to hell’ response.  Oh OK, perhaps not a ‘go to hell’, but a fairly final notice nonetheless.  I must admit at feeling a little bit deflated at this stage.  I thought that a company with a reputation for good customer service, and an easy going corporate nature might at least have turned around and said something like ‘we’ll check with the boss and see what we can do’…but perhaps not.

It looks like other people out there have had their fair share of similar experiences with trying to purchase from Atlassian.  Rob Di Marco from Innovation On The Run has written an article, as well as Zoli Erdos from Cloud Ave.

Ah well, looks like it’s back to evaluating Project Locker and Code Space, who seem to offer the same sort of services, but at prices friendlier to our business.  If anyone out there has any other recommendation, please do not hesitate to leave me a comment.

One piece of new that oddly seemed to slip under the radar here this week, was the announcement by Microsoft and Telstra regarding their new alliance in Australia.

This alliance will basically see Microsoft deploy their applications and mobile services to businesses and end users in this country via the Telstra network infrastructure.

Microsoft have been making a lot of announcements lately about their improvements to collaboration, communication and wide are networking in their application software, and this alliance is a logical step.  The timeline for the first services to be rolled out is as early as mid next year (2009).

Read more about the announcement via the company press releases from Microsoft and Telstra here.  I expect local reaction to this news will be quite low key for a while, until the first services begin deployment.  Then I expect most small business in Australia will transition across to these new platforms.

I have just found out about the winners list in the UK Software Satisfaction awards, which is a roundup of the most popular accounting systems in the country, as voted for by the users.  I was very interested to see that the overall winner, KashFlow, is a web based system – and it topped other established players such as MYOB and Quicken.

Other winners were NetSuite and Really Simple Systems – also web based systems.  The UK based AccountingWeb magazine also has a more detailed write up on the winners, and the implications of more web based systems taking out the gongs.

Interestingly, a lot of the winners were not even around when the awards started back in 2006.  This is quite astounding, and shows a lot about the rate of innovation going on in this space (not to mention the rate of acceptance and take up by end users).

Microsoft have this week announced that they will be releasing a version of Microsoft Office which is entirely web based.  The new edition is not designed to compete with their desktop based Office products, but rather to complement it, and allow you to get to your documents and information anywhere in the world.

From early news, it looks like their web based Office offering will be available in straight HTML/AJAX, and also a version that runs under Silverlight for an even richer client interface.  This product line has been designed to work in with their upcoming Office 14 desktop software, where they will be showcasing some truly impressive real time collaboration tools.  This is not your daddy’s Office suite!

Eran Kampf over at CloudAve has a post which goes into a bit more detail, and asks a few questions about Microsoft’s revenue plans around this new offering.

New Zealand based online accounting vendor Xero have recently launched their product for Australian businesses.  This means that our local GST tax laws and conditions are (hopefully) supported.

From a brief look at their online tour, their system looks quite aesthetically pleasing, and should be quite easy for users to learn and understand.  I am hoping to set up a test account on their system so I can have a more in depth look and report on here.

Their service costs just $49 per month, with any additional companies adding $29 per month on top of that.  Cheap as chips when you consider that you do not have to install anything, and any future upgrades are automatically done for you without even thinking about it.

Readers of this blog will know my passion for online based systems, but my biggest question with online accounting systems is the quality of training that the end users will get.  From many years of experience, we find that the level of training the end user has obtained in the early stages will have a great impact on the quality of information going in and out of the software – even true for those ‘easy to use’ systems such as MYOB and Quickbooks.

I will keep you updated with my findings.

UPDATE: Ben Kepes over at CloudAve has done a thorough and informative review of Xero.  Check it out!

I have just heard that Quicken is now providing their online version of their personal finance service for FREE!  I believe the service previously used to be around USD$9 per month.  I think that the powers that be at Quicken have realised that there is some serious competition from other players in the market for free web based financial recording tools, and have reacted accordingly.

At this stage, I believe that this service is only available in the US, but I will do some further checking and let you know.

We are back from leave now!  Had a fantastic time in the US.  Gosh Boston is a lovely city.

Now that I am refreshed and all recharged, I intend to step up the frequency of postings on this blog.

One of the emails that was awaiting my flooded inbox when I got back was a short missive from the Australian Tax Office (ATO).  They routinely send out statistics to subscribers of their software development newsletters, and in this one, they reported that as of the financial year ending 30/06/08, about 16.7% of ‘pay as you go’ (PAYG) submissions were done via their electronic ECI interface.

In raw terms, 32543 submissions were made via their ECI software, and 194513 submissions were done via the usual disk, CD-ROM and other magnetic media.

It is refreshing to see the uptake of electronic submissions with Australian businesses.  This is pointing to a better awareness of managers and owners that electronic data interchanges can save time and cost.  I look fotward to next year’s statistics to see if this percentage picks up again.

Photo by markhoekstra

With the massive surge in online accounting systems over the past two years, I am getting quite a few questions from my clients to explain the various advantages and disadvantages of these system versus the traditional accounting software which is installed on your server or PC.

I will try and provide a neutral analysis of both systems in this post, and hopefully give you enough information to make an informed decision. I will also try to refrain from naming specific software vendors unless absolutely necessary.

Disclaimer: My business currently sells and supports installable accounting software, but we also are in the process of developing online accounting software solutions for our clients.

Installed Software

This is the style that most business people are familiar with. You either go to a computer store and purchase an accounting system off the shelf, or else you engage a consulting firm to provide you with software, and one of their consultants will descend upon your network with a swathe of CD’s and manuals to install the software for you. At the end of either process, you have at least one, if not more, nice shiny CD’s to safely store away.

If you are really lucky, over the course of the coming months and years, you will regularly get updated CD’s being sent to you in the mail – or else you will keep saying the same abovementioned consultant sneaking around your server on a regular basis.

Doesn’t it give you a nice, comforting feeling – having your own software in your little hands, under your own control? No one else can come in and steal the original programs, and your data…all your data is safely secure on your server down the hall. Only your own immediate staff can get access. Oh happy days…

Or not! In my experience, only about a third of our customers can safely say they have reached this cozy nirvana – and of those, about 75% of them are living precariously close to the edge.

Let’s face it – the average small business does not have a fool proof IT system. We rarely find servers with all the security patches installed, and we routinely find loopholes in firewalls and other ’security’ measure that have been hastily slapped together, or done on a budget.

With the average machine on the internet being sniffed for a hostile attack at least several times a day, are your confident that your server will be safe from all forms of intrusion? What about your trusty staff members? All it would take is for one of them to download an infected email which will unleash a trojan horse or key logging software that can compromise your network passwords or even transmit your precious accounting data externally.

Even your premises – what if the office was destroyed by fire? Would you be thanking your (un)lucky stars that you insisted that all backups and copies of your data were kept within the four (now smouldering) walls at all times?

I dont mean to paint a bleak picture here, or seems that I am pushing you towards an online solution, but in my extensive experience, not many small or medium sized businesses really spend enough on their IT infrastructure to ensure that they have 99.999% uptime or are secure from nearly all hacking attempts.

Too many businesses still have antiquated servers which were ’slapped together by their brother in law who was studying computers at night school 6 years ago’. Don’t trust these sorts of systems to be safe or reliable.

You may find that as you upgrade your business software, you will accordingly have to upgrade your computer hardware to suit. What if the latest version only works on XP and Vista? What happens to all your trusty old Windows98 workstations? What if the new version needs SQL server installed on your network server? Can you increase the memory? Will you have to buy new hard drives to cater for the increasing amounts of data?

Lastly, we see a large number of clients who simply lose their installation CD’s, or else they try and keep them all, and have the wrong versions in the ‘current software’ folder. Very few of our clients actually manage their software installation CD assets well, and we find a lot of time is wasted trying to get all CD’s the match their currently installed setup.

Web Based Software

A friend and colleague of mine predicts that we are the last generation of users who will have to run an installation CD. Such is the uptake of online software and services these days.

The Upgrade Cycle

The Hip Pocket

Conclusion

As with all business decisions, you will need to weigh up the pros and cons before making the big step, and I certainly hope that I have given you enough information here to be able to make a decision that suits you and your business. Please feel free to share you experiences or suggestions in the comments.

Do you use an online spreadsheet? There are several on the market, with the most popular one being Google Docs – however, most people have avoided using them, because, quite rightly, they just don’t seem to have quite the power to achieve real business results.

Even Google themselves say that their spreadsheet is really only meant for casual home users who want to do simple checkbook balancing or organise a soccer training schedule.

Another player that has been on the market for a while is Zoho. These guys have slowly and quietly built a suite of online applications which I think will take the market by storm in the following year. They recently announced their millionth user signup, and this week, they have announced that their Zoho Sheet, which is an online spreadsheet, now supports macro recording and playback. More importantly, these macros are actually Visual Basic code, which is the same as Excel uses.

Image by mcastellani via Flickr

Technology wise, this is an awesome achievement, and if the Zoho crew can build on this, their software suite will actually be a serious contender against Microsoft’s own Office suite.

Would you try and tow a 40 foot yacht with a small 4 cylinder family car? Conversely, would you drive a Ferrari down to the corner shop to pick up some milk?

It may come as a surprise, but the capabilities and functions of accounting software vary in the same way. It is vitally important that your business operates on the appropriate level of software in order for you to gain the maximum benefit.

What people do not realise is, when it comes to small and medium business accounting systems, there are really 4 distinct levels of software.

Simple Cashbooks

These can be something as simple as an Excel spreadsheet on which you keep your expense records, or a very simple Cashbook Manager software that allows you to record income and expenses in a very straightforward ledger style.

Most of these systems are a simple data-in, data-out type which simply collect the data you enter and then provide reports in different breakdowns and sort orders so that you can see where your money is going (or coming in). At the very most, they help you to balance your checkbook and prepare very basic tax reports.

Typical business size: 1 to 4 employees
Typical turnover: < $150K
Typical category: Small, self owned service based business (e.g. plumber, electrician)

Basic Accounting

These systems are a step up from the above, in that they can also generally let you create invoices, keep track of payments due and create statements for your customers. Some of the more powerful ones will also have some sort of inventory management capacity built in.

The advantage of these systems is usually the level of integration between the different modules – for example, when you create an invoice for your customer, the income is automatically recorded in your general ledger for later profit and loss reporting.

The level is by far the most popular one for most smaller businesses as it helps you to keep track of your customers, suppliers, inventory and ledger/cashbook in one. You may even by lucky and get payroll management in the bundle!

Typical business size: 3 to 10 employees
Typical turnover: $100K – $1M
Typical category: Retail or shop based business, consulting or community service organisations

Integrated Systems

Now we are getting a little more serious. Some complex businesses such as manufacturers or wholesalers will require a bit more functionality than basic accounting. For instance, they may need some form of Job Costing or Kit Building which is far more elaborate than basic accounting.

These systems are also generally multi user, in that more than one operator can be using them at the same time, and the system will automatically handle situations whereby two users may be trying to do the same thing at the same time (e.g. invoicing).

One common trait of these systems is that they generally run on an SQL based database as the underlying data store (more on this below).

Typical business profile: 10 to 100 employees
Typical turnover: $500K – $10M
Typical category: Large retailer, manufacturer or wholesaler

ERP & SCM

We are now in the domain of much larger businesses. ERP (Enterprise Resource Planning) and SCM (Supply Chain Management) are generally terms used by very large companies who may have several offices in scattered locations, and many hundreds of staff members.

This level of the market is generally outside the scope of this blog, but there are plenty of resources available on the web which discuss this software.

Typical business profile: 100+ employees
Typical turnover: $10M+
Typical category: Mining, Finance, Transport, Health

How do I choose?

Now that you understand the distinct levels of software, you can see which profile your company matches above. Note that the figures above are simply a guide, and your business may fall into the category above or below the guidelines above. Here are some more important factors to consider:

Scalability

It is important not just to look at where you business is today, but where you are going in the next few years. If you just wanted to be a one man band and keep a small client base and turnover, then a simple cashbook system may be all you ever need.

However, if you are thinking of building the next GE or IBM, then you will need to carefully consider your software growth path. This may of course mean starting out with a simple accounting system now, and moving up to a full blown ERP system within 5 years.

If this is the case, you certainly don’t want to be re-entering data into newer and bigger accounting systems every 12 months. You will need to evaluate getting a system which is probably a little bit too large for you now, but one that will handle the volumes to expect in 2 to 3 years time. You may also have to consider software vendors that offer different levels of software and more importantly, provide you with a migration path upwards in the future.

Price

Yes, the cost of the software IS important, even if many vendors say it isn’t. What almost all businesses forget, is that it is not just the initial price of purchasing the software, but also the cost of ongoing maintenance and support that has to be factored in.

With a lot of smaller systems, it is usually quite straightforward. You usually buy the package for a fixed cost, along with an initial training package and then you are left on your own after that. With larger systems though, the pricing is quite complex and varies depending on which modules you choose, or how many users need access to the system. There are also usually ongoing maintenance and support fees or contracts which will carry over for the life of the system.

As a general rule of thumb, companies should consider spending about 3 to 8 percent of their turnover on their software infrastructure. This includes the ongoing support and maintenance. As another general rule – for every $1 you spend on the initial software licence fees, expect to pay another $1 to $2 for implementation, training and support.

Technology

It is surprising how many businesses don’t consider their hardware infrastructure when selecting their software. A lot of larger accounting systems require you to have a dedicated server, or the latest operating systems. Bear in mind that you may have to do a major hardware replacement & cleanout as part of your new accounting system implementation.

I mentioned before that some of the larger systems operate on SQL databases. This means that you will almost certainly need a dedicated server with a lot of processing power and disk space to handle these sorts of databases. You may also need a consultant database administrator to help you manage and tune your database from time to time.

Apart from computers, you may also need to upgrade or replace your printers and email systems to accommodate the new software. Always be sure that the vendor you are talking to is prepared to spend some time evaluating your current hardware setup and make recommendations to you.

What do I look for in a vendor?

Just as important as which accounting software, you need to know which provider you are going to choose to sell it to you. Remember, you will be building a long term relationship with them, and they will be privy to the innermost working of your business, so trust and integrity and very important factors here.

Who do I choose?

My recommendation, whilst not scientific, seems to work almost all the time. Go with your gut feeling. You can generally tell very early on at the first meeting whether the people you are talking to are interested in helping you to grow, or whether they are just ‘order takers’ who are just trying to meet their quarterly sales targets.

Set up a meeting with at least 3 different vendors. Some of the larger software companies may have more than one representative in your area, so talk to all of them and see which one is a good fit for you.

Tip: If they talk more about your business than theirs, that is a good sign.

Experience

The second thing to look for in a vendor, is a good track record. No two businesses are alike, so you will need someone who can demonstrate a good understanding of yours. Get them to explain to you in plain English terms, just how they are going to solve your business ‘pain points’.

Tip: Don’t be too quick to describe your key problem areas to them – a good consultant should be able to pick up on them by asking you leading questions. However, be sure not to hide any problem areas from them if they miss it – a lot of the time, they will have some very useful ideas on solving them. After all, they may have solved the very same problems for other businesses in the past.

Attention to detail

As I have mentioned previously, a good vendor or consultant will look at all aspect of our business when helping you to evaluate what software to implement. This includes hardware, and your staff as well.

Look for a proposal which is careful in detailing exactly what they will (and will not) do. All pricing should be explained clearly, including any ongoing charges. Support and training fees should be clearly explained, including what will be covered in training sessions, number of staff to be trained, and what hours support will be provided.

Do not be afraid to question anything in the proposal that you may not understand. Avoid vendors who try and disguise support charges or have escape clauses which enable them to charge exhorbitant rates at a later stage or if you miss a ‘support’ payment.

Be sure that all parties understand exactly who is responsible for what. Sometime, the task of entering customer and supplier contact details into the new system will be your own responsibility, sometimes the vendor may do it themselves as part of the implementation, and sometime they may import it in from your old system. Be aware of these facts.

Conclusion

This about wraps it up for this particular posting. Please check back on this blog for more information over the coming weeks on traps and pitfalls that can happen when implementing a new accounting system. We are here to provide guidance and the benefit of our experience which stems from over 20 years in this industry.

Please note that we have refrained from mentioning any particular names of software vendors here. We would like you to be assured that our blog is completely neutral and that we do not favour one provider over another when it comes to accounting software. We just want to provide you with enough information to go out there and make an informed choice on your own.

We would appreciate any feedback or ideas that you may have for improvement or future topics in the comments below.