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Steve Malloy - Turnkey Business Software Limited

The Cloud is coming.. really!

A recent article in an Irish newspaper reported on a 'stramash' (Scottish for 'bust up'; I don't know the Irish equivalent but I'm sure it’ll be something similar) in the council chambers of a small county in the south of Ireland.

The head of business development was being castigated as an ‘Eejit’ (no explanation necessary, I trust) for suggesting that the council should invest heavily in cloud computing. His reasoning was simple as he explained to fellow councillors, “This county is covered in clouds for most of the year so there’s not much investment needed and it’s also going to raise our environmental credentials with the green lobby!”

Now, I will swear to you that I did indeed find this on a BBC news website, I bookmarked it and I sent the link to a few friends including, unsurprisingly, a very good Irish friend who works in IT. He scoffed that it could not possibly be true and then triumphantly emailed that, having tried the link, it didn’t work. Sure enough, when I did as well, the story had been pulled. So, someone somewhere had managed to fool the BBC. Shame, but what a great story though.

When it comes to cloud, I’ve not been as great an advocate as our Irish friend (see past posts) having spent much of my time dismissing the annual hardy perennial IT industry story that ‘This is the Year of the Cloud’, particularly as it relates to accounting software. However, shock horror, I do think we may actually be getting there.

Why?  Firstly, because the software industry wants it to happen and when the big boys decide this is the way forward for you and me, they generally get their way – eventually. It has taken longer than they would have hoped but I shall quote that old mantra ‘It’s the economy stupid’ by way of explanation. Slowly but surely, as the recession weighs over us, users are waking up to the fact that they can avoid upfront costs, expensive IT staff and constantly trying to manage upgrades, backups, anti-virus etc by shifting to a cloud model. And, so long as the costs per user per month keep falling, that shift will build into larger and larger numbers.

To date, the major take up has been in the less than 5 users sector where many are abandoning their old Sage solutions and either adopting Sage’s own cloud-based software or defecting to a number of lesser known newcomers who are under-cutting Sage. Those newcomers often have the advantage of offering a solution that was built exclusively for the web and is simpler to use. They have also been designed to overcome many of the pitfalls that arise from logging in to a system that’s remotely located who knows where. And, the final nail in the old guard’s coffin, many have a ready-made converter that takes your existing Sage data and painlessly transfers it to your new cloud solution.

What will bring along the new wave of larger users is similar price competitiveness and both Microsoft and the hosting companies appear to be recognising this. So, when users can buy a Microsoft Dynamics solution such as NAV (‘Navision’ in old money) for similar prices to the new kids on the cloud block, and combine it with a range of integrated and compatible Microsoft software, then we have a game changer. Later this year, NAV2013 is launched, and a huge amount of time, effort and Microsoft’s dollars has gone into ensuring this is a comfortable web experience. Add to the mix products such as Office 365 and CRM online, which integrate to NAV, and we have a very rich web experience on our hands.

Meantime, the hosting companies in the UK are also embracing the commercial realities of the situation by offering prices that reflect a sincere desire to see that this may yet be the year of the cloud. Indeed, one or two software resellers who dived in a little too early and had their fingers burned have abandoned their own hosting environments and signed up with the major hosting companies, it being so much more cost-effective.

So, a reality check, a recession, a desire to play catch up in a market that’s running away from them and a desire to establish a long and healthy pipeline of regular payments have all combined to offer larger accounting software users a more compelling proposition. When Microsoft launches NAV2013 later this year, expect to see a major step change in the number of users adopting the cloud platform.

As the kids used to say “Are we there yet?” Not quite but it is coming ever closer.

Cloud Computing – 3 key things customers and suppliers need to understand

A recent masterclass by industry guru Guus Krabbenborg issued a "wake-up call" to Microsoft ERP resellers identifying 3 issues that they must get their heads round now, or risk extinction in the long run. Whether or not we agree that ERP solutions are heading to the cloud just as quickly as Microsoft would like us to think, the issues are worth considering by us all, INCLUDING customers:-

1/ The big upfront licence fee will disappear and be replaced by a monthly subscription thereby causing an dip in reseller revenues (and, by default, easing the cashflow of the customer).

Is that really a huge disaster for the reseller and great news for the customer? The revenue from licences, over the typical 5 – 7 year life of an ERP system, represents quite a small percentage of the total cost of ownership. Savvy customers measure TCO not initial cost. However, Krabbenborg argues that the nature of the system delivered might affect this. So, read on..

2/ Mainstream customers will expect a generic system that does most of what they expect from an accounting solution and crucially, where it doesn’t, they will expect to just work around these deficiencies. Thus revenues a reseller expects from the associated services necessary to deliver a fully-fitting solution will also dip (and customers will pay less for their system, again).

The counter is that actually maybe they won’t! Customers are a lot more demanding of their computer systems than they once were. They know that changes can be made; they’ve been getting it done for quite a few years now. We installed our first NAV site in 1996 and EVERY site since has had changes to suit the customer’s own business model. Why would they accept compromise now? But Guus has some thoughts on this as well, so read on again…

3/ Non-mainstream customers, i.e. those is specialist areas, will demand industry-specific solutions that suit their business and won’t require change. An off-the-shelf solution for EVERY conceivable industry. So, even in such vertical markets, revenue streams will dry up as the customer logs in to his fully-functional industry-specific solution (and, once more, pays a lot less for the privilege).

Hmm – we do a number of vertical solutions such as hire, professional services, log management and builders’ merchants and while we would love to think we’ve covered all the bases, that’s just not realistic. EVERY customer, in each industry vertical, has their own ideas on how their business works. Now you can either say “No, this is what it does, live with it” or provide chargeable services to deliver exactly what the customer wants. Customers will make up their minds.

Lots to think about.

Award Dinners - Don't Get Me Started!

Is it just me or is the award dinner industry running away with itself? Open any business magazine these days and you’re faced with page upon page of glossy articles and ‘grip and grin’ pictures of award dinners, ‘awardees’ and their so-called ‘awards’.

Another chunk of the same magazine will be taken up with details of dinners you could attend and urgent entreaties to vote for someone or push your own company or self forward, blinking, into the limelight as a winner of some spurious award – most green, most innovative, fastest growing, best or smartest or youngest or most entrepreneurial man/woman/child, best use of a plastic bag in the pursuit of carbon reduction…. and on and on. If it’s not magazines, it’s emails or websites. All pushing the same ‘awards’ agenda.

Who benefits? The hotel? Most certainly. “That’s a table of 10 at £100 a head, excellent sir and would you like to pre-select from our over-priced wine list?” The award ‘hosts’? I’d like to think they do it out of the goodness of their hearts; but really? Usually it’s a bank rewarding their loyal, but barely solvent, clients; a magazine rewarding their subscribers; a software company rewarding their biggest (and not necessarily best) resellers; or a recruitment agency rewarding anyone they can persuade to come along on the flimsiest of pretexts (see ‘plastic bag’).

I worked for a software company once. We won an award. We all trooped off to the USA, to Fargo, North Dakota (now there’s a BIG clue for some of you) and stood on stage, a few thousand pounds the poorer for the journey, and grasped our award proudly. When we returned in triumph, the company owner, who was paying for all of this, was unimpressed. “Awards are all very well”, he said “but they don’t jingle”.  

So, if anyone out there thinks we deserve an award, just stick it in the post. If it adds anything to our status in the world , we’ll tell people about it and perch it on a shelf in reception – honest. But don’t force us to come to a dinner somewhere (unless you’re picking up the tab!).

The 3 Marketing Rules that made Apple Computer such a success

I'm about 12% (that's the Kindle for you!) through Walter Isaacson's biography of Steve Jobs. It makes for fascinating reading particularly as I'm at the chapter on the birth of the Apple II, the first micro I ever sold commercially (yes, I am that old).

What really caught my attention and led to me re-read a section was a piece that described the early marketing philosophy of Apple Computers. Written by their first ‘proper’ marketing man, Mike Markkula, it was a one-page summary of their marketing principles and applies just as much TODAY and to ANY business as it did back then.

The 3 principles are:

Empathy: This concerns having an intimate connection with the feelings of the customer. As Markkula wrote “We will truly understand their needs better than any other company.” Who would argue that Apple won out more often than not by getting the product absolutely right, even when technically better and cheaper products existed?

Focus:“In order to do a good job of those things that we decide to do, we must eliminate all of the unimportant opportunities.” Steve Jobs was possibly one of the most focussed, driven men on the planet. His turnaround of Apple when he returned was testament to this trait.

Impute: This emphasised that people form an opinion about a company or product based on the signals that it conveys. As Markkula explained to a youthful Steve Jobs, “People DO judge a book by its cover. We may have the best product, the highest quality, the most useful software etc.; if we present them in a slipshod manner, they will be perceived as slipshod; if we present them in a creative, professional manner, we will impute the desired qualities.”

 
These 3 became known collectively as “The Apple Marketing Philosophy”. It worked pretty well for Apple so should be well worth considering for your own organisation

Support or Die

Microsoft recently posted some stats that broke down the average business software system costs. The most interesting stat was that the actual purchase of the software represented about 5% of the overall system cost and expenditure on hardware was roughly the same. That probably comes as a bit of a surprise to many but, if you examine the figures, it's actually pretty self-evident.

A business purchasing a new ERP system will expect to get somewhere between 6 and 10 years out of their new software. We have many customers who have been on Navision with us for at least as long as that, and a number who have been with us since the 90's so we concur with Microsoft's findings.

Over that period, the majority of the expenditure will be on annual support charges and people costs - installation, training, ongoing development and so forth. So, extrapolate the numbers over the life of the system, and the initial costs of buying the software and hardware quickly drop to a fraction of the total expenditure.

Software companies who understand this should also understand that if they fail to provide good levels of support or be perceived as not providing value for money, then all of the good work done in winning the initial sale will be for nothing. Microsoft also revealed that the average time to win a new software site was 6 months. That could be 6 months hard work wasted if someone else picks up the ongoing revenues.

Looking after customers and constantly monitoring feedback of our services is a fundamental element of our business plan. It has served us well bringing us well over 100 Navision sites and the income from those is set against the cost of a dedicated support department and support systems to ensure we maintain satisfaction levels and customer numbers.

The result is a strong and loyal customer base and a regular stream of defections from competitors. Someone somewhere spent 6 months winning those customers but then passed on the revenue stream to us. Not good business and certainly not sustainable.

Economic Indicators Just Got Weird... But Oh So Credible!

The Economist recently reported a raft of 'alternative' recommendations on how to gauge upcoming economic conditions. One reader suggested monitoring the sale of suppositories as "financial worries and austerity changes in diet cause intestinal disorders".

Meantime, a vet reports that he believes he's six months ahead of the market as he pays attention when pet owners start to cut back on non-essential ops for their little furry loved ones.. if neutering ops start to drop off, start selling those shares.

Others think we should be watching the hairdressing world. A rise in the use of basic barbershops combined with  news that sales of badger bristle brushes are going through the roof is apparently a result of a return to old-fashioned masculinity as a response to troubled economic times.

Me, I preferred a more telling sign. Edward Ritchie, an investment analyst, tracks some particular Google searches. His analysis of the search term 'gold price' indicated a worrying correlation with the peaks and troughs of economic uncertainty in the US. And, what's really scary is that the searches are now way beyond the previous peak in 2008, a portent of a double dip to come.

For Turnkey, in the world of business software sales, the indicator we look for is more basic. While our new business sales continue to show year on year rises that defy the doomsayers, an ever present discussion point is annual support and, in particular, does it represent value-for money? The more people querying support, the more likely that times are tough and likely to get tougher.

Fortunately, we keep a very detailed log of work performed for clients and can provide chapter and verse on the services provided in the last 12 months. This confirms that the support contract is an essential not a luxury. And our cancellation rate on support is the best in the business i.e. non-existent!