Tag Archives: AMR Research Inc.

About 1723 days ago Business Software

Software-as-a-Service Vs. Managed Services

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With all the technological terms so lightly bandied about today, determining the best way to deliver software to your small mid-sized business — whether via the managed service or the software-as-a-service model (SaaS) — can be confusing. Here are the pros and cons of both models and some tips on which model works best for your business’ particular needs. In a nutshell, a SaaS vendor hosts, maintains, and upgrades its software on its own servers and your employees access it via the Internet. Managed services are a more comprehensive outsourcing of information technology business functions, such as security and networking, says Robert Mahowald, director for SaaS research at IT research firm IDC. Examples include the customer relationship management application Salesforce.com from the company of the same name, as well as many payroll software packages. SaaS vs. managed services Because SaaS applications aren’t sold as software packages for download or purchase, users don’t buy licenses or upgrades. Instead, they pay a flat, usually monthly, subscription fee. The software resides on the host server from which all users — no matter their organization — access it. Vendors rely upon economies of scale here, spreading the cost to run and host the application across many users. This makes for costs lower than with other sales models, Mahowald says. Though SaaS applications can be configured in minor ways — companies can often make changes to how the application presents on the desktop — the code itself can’t be customized expressly to an organization, he adds. Businesses that partner with managed service providers (MSP), on the other hand, purchase a software license for each application they ask the MSP to run. They essentially hire the provider to run the software and to run maintenance and install upgrades and, depending on the model, to host the application, says Charles Weaver, president of the MSPAlliance, a professional organization for MSPs. Consider the costs Though the cost for a SaaS application is often much less than for a managed service application, users pay for for up-close attention, maintenance and support, seamless upgrades, and customization that MSPs can offer, he adds. When weighing one model against the other, first consider how integral the software you’re purchasing is to your organization, says Robert Bois, research director at AMR Research, which conducts IT research. “Most companies outsource payroll using SaaS because it’s not a differentiator or a competitive advantage for their company,” Bois says. Some applications may be vital to the organization but may not need much differentiation from those used by competitors and a SaaS is fine here too, he adds. The customer relationship management (CRM) application Salesforce.com is one example. For areas of the business that need customized software or software that must be tightly integrated with other areas, consider the hands-on help an MSP can offer, Bois says. “There’s a kind of continuum in making these decisions,” he says. “In virtually every part of the organization you have to ask: do we really want to own all of the software?”

About 1846 days ago Tools on Managing Technology

Let’s Get Visible: Supply Chain Technology

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To understand why small businesses should care about supply chain management software, you could read a bunch of analysts’ reports explaining the good that can come from automating the process of turning raw materials into finished goods and getting them to customers. Or you could just talk to people such as James Van Dyke and Taylor Gordon. Van Dyke is president of Electronics Assemblers Inc., a 60-person custom electronics manufacturer in Hood River, Ore., an hour’s drive east of Portland. Gordon is a supply chain analyst at Myers Container/CMS LLC, a 91-year-old Portland company that makes industrial steel drums and containers. Listen to either long enough and it’s clear how important it is for a small company to manage its supply chain in the most efficient, cost-effective and collaborative way possible. Big corporations have used supply chain management and enterprise resource planning (ERP) software, for years, as well as newer technologies such as radio frequency identification (RFID) chips. Not so small businesses, many of which still rely on paper and pencil or outdated software because upgrading would be too costly and time consuming. Supply chain management that works That’s changing, as more small businesses see the value in having a better window into their supply-chain process. In fact, according to a recent AMR Research survey of 336 U.S. and European companies, in 2008 mid-market companies will be “aggressive” in buying supply-chain management software, due to continued pressure to reduce manufacturing costs and to help customers reduce their own costs. Customers “expect their own suppliers, regardless of size, to comply with their demands, which more often than not require investment in supply chain technologies,” AMR Research analysts John Fontanella and Eric Klein write in the report. Van Dyke’s business, Electronic Assemblers Inc., makes electromechanical and cable subassemblies for HP and other local high-tech companies. According to Van Dyke, supply chain management technology can be as basic as using Microsoft Windows programs. EAI relies on four – Windows Explorer, Exchange, Internet Explorer and Excel – for everything from restricting access to proprietary customer documentation to handling purchase orders to scanning websites for deals on electronics components. “Without it we’d be nowhere,” he says. The other part of EAI’s supply-chain management process is a material requirements planning (MRP) system called Alliance Manufacturing from Exact Software Americas. It tracks purchase orders, work orders, inventory levels and all other aspects of a manufacturing job. The software is expensive and it takes time to train people to use it. But it’s been worth every penny, Van Dyke says. “Ultimately where you end up is with a tool that allows you to treat materials planning like you treat your toaster. You don’t need to know how it works, you just use it to toast your toast,” he says. Fixing what’s broken Without good supply chain management, a company may lack access to vital information and the deficit can stop production from being as fast or efficient as possible. That’s the current situation at Myers Container/CMS, which has been limping along on paper-based systems and ERP software purchased in 1999 that wasn’t ever completely implemented, according to Gordon. “It’s not good enough to have the technology. If nobody’s using it, it won’t work,” he says. When new owners acquired Myers in late 2007, they hired Gordon to bring the company’s supply chain into the 21st century. As part of that, Gordon is analyzing existing software to decide if it can be upgraded, or if the company would be better off going with something completely different. The hope is that by upgrading “it’s very likely we’ll see high cost savings,” Gordon says. To learn more about supply-chain technology, Gordon joined the supply-chain management special interest group of an Oregon manufacturers’ consortium. He’s learning about innovations by visiting fellow special-interest group members’ factories to see the problems they’re facing first hand and to help brainstorm solutions. SIDEBAR: Supply Chain Management Technology Resources Some additional resources for learning about small and mid-sized business supply-chain management technology and practices include: Supply-Chain Council — This Washington, D.C., international non-profit publishes supply-chain standards and benchmarks used by more than 1,000 member companies of various sizes and industries. Supply Chain Management Review — The online version of this industry trade magazine has articles, white papers, newsletter, blogs, webcasts, message boards and links to other resources. The Supply Chain Management Research Center — The website for this research center housed at the University of Alabama’s Sam M. Walton College of Business has industry news, white papers and links to other resources. The center also sponsors an annual supply-chain management research conference.

About 3612 days ago Computer Security

The Price Is Right

Technology Bob Olsen, president of Peregrine Outfitters, a Vermont-based sporting-goods wholesaler, recently discovered he was losing money on two-thirds of the 6,000 products he sells. Ouch. But he also learned that by adjusting the terms under which the products were sold, he could lower some prices and still make a profit. Olsen could have used that information a lot earlier. His 15-year-old company serves as the middleman between 600 manufacturers and 1,800 retail stores, including L.L. Bean. “We have the thinnest margins on the food chain,” he says. But with just 38 employees, Olsen lacked the resources needed to analyze the myriad factors — from shipping charges to order sizes — that affect Peregrine’s operating costs and determine those margins. Up until now, that is. Peregrine is one of the early adopters of a new breed of profit-analyzing software that promises to transform the dark art of pricing into an exact science. The software, just now becoming available for small and midsize companies, isn’t cheap. But it could prove indispensable — especially for companies struggling to maintain margins at a time when revenue growth remains frustratingly elusive. Kent Monroe, a marketing professor at the University of Illinois at Urbana-Champaign, says such applications are based on pricing concepts he’s been teaching his students for years. Imagine you’re a pharmacy owner trying to figure out how much to charge for a bottle of aspirin, Monroe says. Sales are steady at 99¢, but what if you could charge more? To find out, raise the price, say, 20¢, to $1.19, and observe whether or not customers continue buying the aspirin. If sales fall off, cut the price back down to what the market will bear. If they remain steady, keep pushing up the price. Sounds simple enough. The problem is that most businesses lack the people or time to continually analyze all their products and customers. That’s where the software, which has its roots in the yield-management strategies used in the airline industry, comes in. It uses intricate algorithms to analyze years of raw data (culled mostly from already existing company databases) to churn out a detailed analysis of the profitability of every level of the business. Business owners can then study the results and figure out how to adjust their operations accordingly. Olsen, who installed pricing software by Houston-based Acorn Systems last March, learned that some customers were placing only very small orders of some lower-priced items. By the time his salespeople took the calls and located the products, he was already losing money. “It costs $30 to make a trip down the aisle,” he says, “so why not get the order up to the $30 level?” He began offering customers a price break for ordering more products. Olsen also altered his approach to shipping. The company had long offered two-day delivery. By switching to three days, Olsen learned he could save enough to cut some prices without cutting into margins. Mike Jarmusz, CEO of AP Wagner, an appliance parts distributor in Buffalo, N.Y., was similarly surprised by what he learned from Acorn’s system. With 85% of his 175-person company’s $35 million in revenue coming from its wholesale business, that had been management’s main concern. But, after reviewing the profit-analysis results, Jarmusz realized that the company’s smaller retail arm was much more profitable than he thought. So he poured more money into local Yellow Pages ads and beefed up the stock at its 20 branch locations to keep up with demand. Both wholesale and retail sales at those locations have since increased. “The software has changed our company culture,” says Jarmusz. “Instead of just thinking about selling more, we’re looking at the bottom line.” Such results don’t come cheap. Acorn Systems software cost Peregrine some $80,000. Of course, that’s a bargain compared with similar products by vendors that include Zilliant Inc., Vendavo Inc., and I2 Technologies. For instance, I2 is charging big corporations as much as $1 million. Despite the hefty price tag, the market for such software is expected to grow 800%, to $900 million, by 2007, according to AMR Research. Is it worth the investment? That depends on the scope of your business. If you only have, say, 10 customers and one or two products, you can probably live without it. Just encourage your sales reps to follow the lead of the diligent pharmacist by breaking down each order by customer, product, and order size to figure out where money is being saved or lost. But the more complex your business is, the more valuable the software becomes. Olsen says Acorn’s profit analyzer software was worth the investment, which he expects to recoup by March 2004. “What the software’s taught us about our business is invaluable,” he says. “After 15 years, we’re finally focused on profitability.”