Considering that in the fourth industrial revolution, in which we find ourselves, the aspect of software has become so predominant that it is now considered by all to be the real brain behind every company; in the previous articles we analysed some of the most essential features that a thought-out choice must take into account. In this issue, however, we will stop analysing the technical aspects – which we will resume in the future – to touch one of the most delicate topics: the price.
How much does software cost? Well, it’s not hard to find out. Just reach out to some salesmen and, between functions, modules and services, you’ll quickly have a clear idea of the money needed to get a fresh brain into the company, always ready to simplify our lives for the next few years. (or for many years, in case you get a crafty one).
So is the cost of a software represented by the purchase price?
Many people believe that, but this belief is as widespread as it is wrong and superficial.
And as any good entrepreneur should know, when you face things superficially, you often expose yourself to unexpected and unpleasant surprises.
For example, is the cost of a device just the purchase price? Is the cost of a van merely the purchase price?
Is the cost of a warehouse just the purchase price?
For software, this is exactly the same thing; the purchase price is just a part of the total cost that will need to be invested over the years.
So, let’s try to play the game of the good entrepreneur by placing on the table all the cards that allow us to really evaluate the investment needed to insert in the company a tool that helps us in our daily activities.
The first item we encounter is, as we have said before, the purchase price.
This is the easiest value to consider, just ask any specialized company for an offer and you’ll commonly find it at the bottom right.
What does the purchase price include? Usually, for specific software such as those used in carpentry, it’s comprised of two parts.
One part are the functions (or modules) or essentially “what I can do with the software”, while the other part are the services.
In other words, services are the training of staff for the software usage, the input of data to adapt the software to the specific needs of our company and finally, in the presence of production machinery, any checks on the machinery to certify the correctness of projects, before proceeding with mass production.
In addition to the purchase price, there are also a number of costs that are often not thought of, but in the case of a good entrepreneur it would be wrong and harmful not to consider them.
The first of these “hidden” costs is related to software learning.
Although normally a training course can be included in the purchase price, this is only a fraction of the time that our employees (or ourselves) will spend to learn how to use the new computer tool.
In fact, once the course with the supplier’s technician is over, it will inevitably take more time before we can really master the software properly.
And of course this additional time represents more money than anything else.
Is there a way to minimize this time?
The main advice I would like to give, is to really pay attention to the simplicity a software demonstrates to have, through its user interface.
For example, both Lewis Hamilton and I know how to drive a car, but the difference is in “how”.
The “how” makes the difference in all the things in this world, and that also applies to software.
So it’s natural that if we buy software with a simple, current, guided interface, where by pressing a few intuitive keys we get results, even the learning time will be shorter and we will save money.
If instead we buy a tool, maybe cheaper but with interfaces from over ten years ago, mainly textual, not very intuitive and cumbersome, then we must take into account that it will take many more hours for our employees (every hour costs a lot in Italy) to become autonomous.
This is valid both for current employees and for employees who over time will join the company; hence, the longer it takes to learn the software, the more money the company will pay out.
Another malice related to learning is the tools that the software provides to recall functions and operating modes, just in case you forget those.
By norm there should be a manual, but as we know, in carpentry manuals are often overlooked, and by having a lot of experience in this field I noticed that very few people read them.
However, some particularly appreciated tools are tutorial videos. That is, videos that show how to use the program step by step.
The advantage of these videos is that they are always available to our employees, so they can be reviewed as often as required, while also being used by new employees joining the company.
Thanks to these tools we can avoid doing new training courses, so that we can avoid spending more money and our employees can freely refresh their memory or to elaborate on certain issues, as and when they want.
Another cost that is not always given the proper importance is the cost that the company will have to bear to populate the software database with their data.
The entry of data (customers/ windows/essences/ processes/…), price lists, production tools, and articles managed in stock, working times, working on machines and much more.
This is a very variable cost. First of all, it depends on the parts of the company that we want our new software to manage, then once again, on how much the software is oriented to make the data entry easy and fast.
For example, a very appreciated function that helps to speed up this phase is the possibility to prepare data on Excel tables, and then import the data automatically within the software.
Then again if the software provides an interface designed to display only strictly necessary parameters, I’ll avoid wasting time, distracted by thousands of unnecessary parameters.
Moreover, if the interface asks for parameters through large, clear, self-explanatory images and with a preview of how the data will be applied, it also avoids errors that not only certainly waste time, but that can also generate economic damage.
The next cost to keep in mind in the supply of software is called the upgrade contract and in a nutshell, this is money that software companies ask to be able to stay up to date with the latest version of the software.
Knowing this market quite precisely, I can say that the amount for the upgrade contract does not differ much from one software to another, so the smart question to ask is “but if the amount that is asked every year is more or less the same on every software, does that mean that everyone has the same capacity when it comes to innovation?”
Because if not, many software that every year ask for money as if they had inserted a hundred new features, have in fact inserted less than ten.
I’m sorry to say this, but unfortunately it’s just like that, and it’s also easy to prove it; in fact, there are companies made up of three or four people that try to take care of everything (sales, software development and assistance) and there are companies that dedicate ten engineers to software development alone.
It seems clear to me that the possibilities of development and innovation of the first companies are dramatically lower than those of the second.
Nevertheless, service contracts often have similar costs, so a good entrepreneur should take this into account too, to avoid paying more than he eventually gets.
We have arrived at the last item with which you need to familiarize yourself the moment you want to invest in new software, namely the support or service contract.
In essence, this amount allows you to call the support service of who provided us with the software and ask for help.
I could need help because maybe I forgot something, or because I don’t know how to get a certain result, maybe because I can’t get a certain result back, or because I think there is an error with the program, etc.
This point is a very critical step which I suggest you pay close attention to, because it brings to light the business model of the software company.
There are two types of business models for software companies operating in the carpentry industry: service-based companies and product-based companies.
Service based companies aim to keep us connected to their services. In the service-based business model, there is no reason to provide a product that is too simple to use, because then we won’t renew the service contract and their source of income will be lost. In addition, there is another consideration that a good entrepreneur should make. What is the mental approach with which an employee might address a hypothetical software problem?
The approach will be more or less this: “Why should I bother? The customer service can fix this.”.
Who pays for the time spent by our employee on the phone? What are the chances that the next time you mention a similar problem, our employee will say… “I can do it myself.”?
By marrying a software company that relies on service, our employees become lazy, turn off their brains, become dependent on an external company and increase our external and internal costs.
The business model based on the product, is the opposite, and has as its objective to provide software that is increasingly simple and intuitive, to make us autonomous and minimize requests for assistance. In this model, customers are encouraged to know the software, to be autonomous, independent and for this reason they are rewarded, paying only for the time they require assistance. And this over the years also translates into enormous economic savings. Considering that, as we have already said, today the software is to all intents and purposes the real brain of every company and therefore, an evaluation based solely and exclusively on price is stupid regardless. It is also true that the price is part of the criteria with which a good entrepreneur should use to choose the best brain for his or her company.
It is precisely for this reason that in this article I tried to go into more detail, listing the set of costs that sometimes are not thought of, but which in the mid-term really make a big difference.
So a good entrepreneur should understand now that even if we only analyse the price, the cheapest choice is not the one that costs less to buy, but the one that will cost us less after five years (everything included).
See you next time!