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Starting Up: No More Software in a Box?
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April 7, 2008
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JULIE TRELSTAD, THE founder of White Plains, N.Y., publisher Plain White Press, is a self-proclaimed Internet junkie.
But she's not just surfing the net and checking email. "I probably spend 15 minutes of every hour (two to three hours a day) working on Internet applications," says Trelstad.
As the only full-time employee of her two-year-old shop, Trelstad has tried out dozens of inexpensive web-based software tools known as "software as a service" or SaaS products, which seek to organize and boost her business's productivity. For instance, she says New Zealand's PlanHQ was instrumental as she wrote her business plan. Other applications that regularly play a role in her business include Amazon.com's JungleDisk, which automatically backs up her files every hour. Basecamp, made by 37signals, helps her manage about 20 projects and collaborate with a number of freelance editors and writers. She sends invoices to clients via FreshBooks, creates to-do lists at Remember the Milk and does her bookkeeping at QuickBooks Online. She even tracks, down to the minute, how much time she spends online with RescueTime.
"It's all kind of a blur," says Trelstad. "I'm still in the early stages of my company and I think of these online tools as being similar to any other software I use, like Word or Excel." Plus, they're cheaper. At Basecamp, for example, "I spend about $50 a month and it gives me a one-stop shop," she says. Right now, her biggest challenge is to resist experimenting with more web-based software products, which is easy to do since the cost is typically low.
Internet-based software products, which are generally delivered and managed remotely by one or more providers, can be cheaper than their desktop-based software counterparts that get downloaded to individual PCs, says Dominic Thomas, an assistant professor of information systems at Emory University's Goizueta Business School in Atlanta.
While businesses that select SaaS products typically pay monthly per user fees, the implementation and management costs are negligible. And since applications are updated and managed by professionals outside of your organization, business owners "can purchase leveraged expertise at a lower cost," he says.
In contrast, the total cost of ownership of on-site software includes not only the cost of the product, but also maintenance fees and labor costs. Additionally, major upgrades of on-site products can be as much as 30% of the initial deployment cost, according to research firm Gartner in Stamford, Conn.
To be sure, web-based software products aren't for everyone, and entrepreneurs who use them must come up with a plan to combat drawbacks that range from kinks to incompatibility. Here are some best practices to follow when using SaaS products:
Even if you're dealing with household names, such as Microsoft and Oracle, make sure you back up your files and store them locally. "If Google goes down, you can re-update those files to an alternative provider," Ray says. Be sure to inform the staff of your contingency plans and let them know where important documents can be found in case of an emergency.
To combat this lack of participation, Trelstad has essentially made using applications mandatory, at least for the freelancers who work for Plain White Press. And by simply introducing web-based software to editors and authors, she hopes they'll warm up to it. "In my industry, people are accustomed to hard copy," she says. "As they start to use [these services more] and get excited about them, they'll come around."
For these reasons, Peter Marston, an analyst at Forrester Research in Foster City, Calif., says businesses that use SaaS sparingly will benefit the most. "For some organizations that want to streamline their headcount and cut costs, they will go for SaaS in pinpointed areas," he says. For instance, a business might want to try out SaaS to manage content like electronic documents or handle administrative tasks such as payroll or bookkeeping, he says.
Additionally, Ray of Smallbiztechnology.com suggests seeking out applications that provide a number of functions within one service. NetBooks, for instance, offers accounting capabilities, customer-relationship management and enterprise-resource planning, which includes invoicing and inventory management.
John Jordan, the executive director at the Center for Digital Transformation at the Smeal College of Business at Penn State University, agrees. If your company's processes are particularly sensitive, having an outside company manage certain aspects of your business may be a mistake. Also, doing business abroad often requires a heightened degree of security, he says. The European Union, for example, has strict privacy rules. "There's no question that there's a cost savings [with using SaaS], but then you have to look at the limitation of what you can't do," he says.
• Starting Up: Business-Plan Contests
("Starting Up," a weekly column written by Diana Ransom for smSmallBiz.com, follows entrepreneurs through the early stages of launching a business. Write to her at dransom@smartmoney.com.)
But she's not just surfing the net and checking email. "I probably spend 15 minutes of every hour (two to three hours a day) working on Internet applications," says Trelstad.
As the only full-time employee of her two-year-old shop, Trelstad has tried out dozens of inexpensive web-based software tools known as "software as a service" or SaaS products, which seek to organize and boost her business's productivity. For instance, she says New Zealand's PlanHQ was instrumental as she wrote her business plan. Other applications that regularly play a role in her business include Amazon.com's JungleDisk, which automatically backs up her files every hour. Basecamp, made by 37signals, helps her manage about 20 projects and collaborate with a number of freelance editors and writers. She sends invoices to clients via FreshBooks, creates to-do lists at Remember the Milk and does her bookkeeping at QuickBooks Online. She even tracks, down to the minute, how much time she spends online with RescueTime.
"It's all kind of a blur," says Trelstad. "I'm still in the early stages of my company and I think of these online tools as being similar to any other software I use, like Word or Excel." Plus, they're cheaper. At Basecamp, for example, "I spend about $50 a month and it gives me a one-stop shop," she says. Right now, her biggest challenge is to resist experimenting with more web-based software products, which is easy to do since the cost is typically low.
Internet-based software products, which are generally delivered and managed remotely by one or more providers, can be cheaper than their desktop-based software counterparts that get downloaded to individual PCs, says Dominic Thomas, an assistant professor of information systems at Emory University's Goizueta Business School in Atlanta.
While businesses that select SaaS products typically pay monthly per user fees, the implementation and management costs are negligible. And since applications are updated and managed by professionals outside of your organization, business owners "can purchase leveraged expertise at a lower cost," he says.
In contrast, the total cost of ownership of on-site software includes not only the cost of the product, but also maintenance fees and labor costs. Additionally, major upgrades of on-site products can be as much as 30% of the initial deployment cost, according to research firm Gartner in Stamford, Conn.
To be sure, web-based software products aren't for everyone, and entrepreneurs who use them must come up with a plan to combat drawbacks that range from kinks to incompatibility. Here are some best practices to follow when using SaaS products:
Have a Back-Up Plan
A major concern of business owners using web-based products, says Ramon Ray, editor of Smallbiztechnology.com, is what if the service is not available? "As lost service can turn into lost sales, you have to be prepared with alternative solutions," he says. For example, if your domain name provider goes down, make sure you have a back-up provider. If your phone service goes down, you'll be glad you listed an alternate number on your web site.Even if you're dealing with household names, such as Microsoft and Oracle, make sure you back up your files and store them locally. "If Google goes down, you can re-update those files to an alternative provider," Ray says. Be sure to inform the staff of your contingency plans and let them know where important documents can be found in case of an emergency.
Establish Rules of Engagement
While having a back-up plan is paramount, Trelstad says, "the hardest part about using [SaaS products] is getting the people I work with to use them. They either pick up the phone or send an email back." While there's no need to download anything, "a lot of people don't trust web applications; they're just not used to them," she says.To combat this lack of participation, Trelstad has essentially made using applications mandatory, at least for the freelancers who work for Plain White Press. And by simply introducing web-based software to editors and authors, she hopes they'll warm up to it. "In my industry, people are accustomed to hard copy," she says. "As they start to use [these services more] and get excited about them, they'll come around."
Watch for Compatibility
Trelstad also found that getting various programs to talk to each other can be tough. As a result, she suggests looking for programs that are compatible. For example, she was delighted to find that FreshBooks works with Basecamp. She adds that you might also consider the compatibility of the application with your web browser. When she wants to use QuickBooks Online, for example, she has to switch from Firefox to Internet Explorer.For these reasons, Peter Marston, an analyst at Forrester Research in Foster City, Calif., says businesses that use SaaS sparingly will benefit the most. "For some organizations that want to streamline their headcount and cut costs, they will go for SaaS in pinpointed areas," he says. For instance, a business might want to try out SaaS to manage content like electronic documents or handle administrative tasks such as payroll or bookkeeping, he says.
Additionally, Ray of Smallbiztechnology.com suggests seeking out applications that provide a number of functions within one service. NetBooks, for instance, offers accounting capabilities, customer-relationship management and enterprise-resource planning, which includes invoicing and inventory management.
Be Cautious About Security
Steer clear of entrusting sensitive data to new software providers, says Ray. For starters, that new company might not be around in a month. If you're relying on a program that folds, your business may face service disruptions. Not to mention, you and your employees will have to spend added time being re-trained on another application. Additionally, the security of your business information may be an issue. While a company may claim to protect vital customer data, for example, there's no way to know for sure — especially if that company is unfamiliar and there isn't an 800 number to call. "If you are giving your employees' payroll information over to a new company, be careful," he says.John Jordan, the executive director at the Center for Digital Transformation at the Smeal College of Business at Penn State University, agrees. If your company's processes are particularly sensitive, having an outside company manage certain aspects of your business may be a mistake. Also, doing business abroad often requires a heightened degree of security, he says. The European Union, for example, has strict privacy rules. "There's no question that there's a cost savings [with using SaaS], but then you have to look at the limitation of what you can't do," he says.
Other recent Starting Up columns:
• Starting Up: What's CRM?• Starting Up: Business-Plan Contests
("Starting Up," a weekly column written by Diana Ransom for smSmallBiz.com, follows entrepreneurs through the early stages of launching a business. Write to her at dransom@smartmoney.com.)
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