Selecting Service Management Software (that keeps accounting happy)
You know it’s time. You need to purchase software to help streamline your services department. Up until this point, your accounting software has been your biggest investment in technology to run your business.
As tempting as it is to throw away your current system in search for the perfect all-in-one (a mythical unicorn if you ask us), transitioning away from your existing core financial system is risky. On top of that, why change what works for your construction division and back office just to solve the problems in your service department?
While an all-in-one is not the answer, you also know you can’t afford to adopt service management software that doesn’t work with your company’s accounting system.
What are Your Options?
Given that 1) you want to stick with your current accounting system, and 2) you need service management software that works well with this system, you have two options:
An add-on service module to your accounting system
A stand-alone application that integrates with your accounting system
Option 1: Add-on Service Module
Most construction-focused accounting programs have attempted to solve the service management pain point for their customers with an add-on module that talks to the core accounting system. Examples include Sage Service Operations (SSO) as an add-on to Sage 100/300, and FieldEase as an add-on to ComputerEase.
But these add-ons are designed with your accounting system (and ONLY your accounting system) in mind. These modules help gather the relevant accounting information, but how else are they benefiting your company and your customers? More on this below.
Option 2: Stand-alone Application
Integrations may vary depending on what’s possible with your accounting system. Look for a page like this on the application’s website. Integrations with server-based systems require more of an investment than integrations with cloud-based software. You’ll want to ensure the company offering the application has made that investment and knows their stuff. You can address this in the evaluation process during your demo. After the demo, ask for referrals from customers who use your accounting software, so you can hear directly from them how the application works with your current systems.
5 Questions to Help Evaluate Options
Let’s start with the most essential question – one you need to answer for yourself before speaking with vendors.
Question #1: Who Drives the Decision?
Up until this point, your accounting department has likely led the way on technology decisions because they hold the keys to what has been the most important software system in your business. But prioritizing the needs of accounting above all others when selecting a service management application is a common trap for commercial service contractors.
The good news is you can adopt service management software that keeps your accounting department happy, while also prioritizing the needs of your customers – the group of people whose needs must be driving your decision.
Make Your Customers Your North Star
You are operating in a market that is more competitive than ever. You have new competitors that are undercutting you on price, you are finding it more difficult to hire and retain good techs, and your customers are demanding more information, transparency, and convenience.
These customer expectations will only grow. Look at what companies in other industries did to leave the competition in the dust, or worse, put them out of business:
The success of each of these market leaders is in large part due to their relentless focus on meeting customers’ needs and exceeding expectations by delivering an unparalleled customer experience. It’s time commercial service contractors adopt the same approach. A strong service management application will help you do so.
Accounting needs relevant information from service management software so they can deliver an accurate invoice to the customer. But is that all your customers need? Of course not.
Your customers need to know what your techs found on the service call – risks to their business, their severity, and how the customer should address those risks. A strong service management application will empower your techs with tools to collect this information and deliver it to customers quickly and conveniently, which builds trust and generates additional revenue for your business.
Avoid Costly Mistakes – Get Started
So you’re ready to invest in software to improve service management but you need it to work with your current accounting system. You know your decision must be guided by the needs of your customers, not the needs of accounting.
What other questions should you ask when evaluating your options?
To help you along, we’ve developed a simple, straightforward resource for those involved in the software purchasing process for commercial service contracting companies. If your company is ready to take a customer-centric approach to service management software adoption, then it’s time to talk to ServiceTrade.
Cyber Attacks in Fire and Life Safety
In 2019, there’s a fresh wave of ransomware hackers targeting US-based fire and life safety contractors that have legacy server systems. Several have been either forced to pay a bounty or face devastating disruptions when the cyber attack is unleashed. If you believe you are safe because no one is going to notice or care about your business, you are wrong. And the weakest link on your network that hosts your legacy server systems is no match for the professional criminals that are extorting you.
Now is the time to move all of your critical customer operations data to a modern cloud architecture. It is no longer a matter of being competitive in customer operations in your market. It is now about a choice to remain an ongoing business concern or be wiped out by a cyber criminal. The idea that you want to connect all of your technicians and all of your customers to a server on your network for them to collaborate in delivering your service value opens up innumerable vulnerabilities. It is just a crazy idea. If instead, they are all connecting to Amazon’s network (all ServiceTrade applications are protected by Amazon’s security) or Google’s network or Microsoft’s network, you are largely insulated from attack.
No one keeps their financial assets in a safe on their property any longer – they trust a commercial financial institution to be a good steward and use computers to deliver interesting applications to protect those assets while growing their value. It is time to take the same approach with what is arguably the most valuable asset of your business – your customer operations data. Who do you serve? What is the schedule? What equipment do they have? How do they pay you? What is your contract with them? What new opportunities for revenue are at their locations? If this information is protected by Amazon or Google or Microsoft, your business can continue to deliver value everyday. If it is vulnerable because of a legacy server on your network, that value can slip away pretty quickly. Don’t lose what you have worked so hard to build simply because you did not take the time to transition to a modern customer management platform.
Need help buying SaaS software?
You’ll always make good software-buying decisions when you follow the 6 pieces of advice in the Software Buying Guide for Commercial Service Contractors. Download and read it here.
The All-in-one Software Fairy Tale
There is no such thing as an “all in one” software application for anything. Like a unicorn, it is a neat idea (who wouldn’t want a friendly horse with a horn) that is nothing more than a fairy tale. Yet it is probably the most popular unicorn that commercial service contractors (and others as well) search endlessly to discover. And yet it just will not die in the minds of those that seek it.
So what do software vendors do? They play to market bias and adopt the “all-in-one” promise into their marketing messaging. They pique your attention with claims of the elusive all-in-one software. However, when you take a closer look, you find the unicorn is simply a horse with a horn taped to its head. And the vendor trying to sell it to you is a charlatan. Their website sucks. Their technology is server-based. (Which nobody should be buying in 2019). And their LinkedIn page shows they have like 9 employees, with the trendline going down, not up.
We have debunked the idea of a magical “all in one” application over, and over, and over, and over again. So you can imagine my shock when I saw a company that I admire marketing their application as an “all-in-one”.
ServiceTitan: “All in One” for Home Service Companies
ServiceTitan is a very successful company that offers a high-quality, modern customer service application for home services companies. I admire their growth. I admire their management team. I admire their technology architecture. And in their marketing, they use the “all-in-one” label to get your attention. I get the idea. I suppose it just makes sense if everyone is looking for “all-in-one” you might as well have them look at your application and decide for themselves which “all-in-one” is best for them.
But it’s just not true.
How do I know?
Straightaway, ServiceTitan tells potential customers they will need to buy an accounting application such as QuickBooks or Sage Intacct. “Wait a minute!” you say, “I thought ServiceTitan was an all-in-one?” Nope. Not really. That was just marketing.
Second, they promote several other integrated partner applications to their customers so that they can get greater value from the platform. These include GPS tracking, pricing, and online review applications. “Wait, what about the all-in-one?” you declare again. Nope. Sorry.
Finally, they publish extensive documentation for developers to extend the application and integrate it with other applications via their Application Programming Interfaces (APIs). “Wait!” you say again, “A true all-in-one doesn’t have to integrate with other applications because it should already do everything.” Sorry. That’s just not the case.
Separating the ServiceTitans from the Charlatans
So how do I square all of my admiration for ServiceTitan with my historical disdain for companies that, like them, make the “all-in-one” promise? More on that in a minute.
First, let’s answer a more important question. How can you, the commercial service contractor, know how to quickly spot a charlatan promising a unicorn but secretly selling you the same, tired horse with a taped on horn?
Do a little research and answer some basic questions to look for red flags:
What does their website look like? Is it modern and mobile friendly, or does it take you back to the 1990s?
Is their software cloud or server based? No one should be buying server-based software in 2019.
Check out the company LinkedIn page. How many employees do they have? What are their backgrounds? Has the employee count grown in the last few years? Growth is good.
Can their software easily connect with other applications? Look for a list of integrations or search for API documentation. It should be obvious how the software can connect with other interesting applications to further extended its capabilities.
(For a more in-depth resource to help you with vendor selection and software buying, download our free software buying guide here.)
Rethinking “All in One” – What ServiceTitan Taught Me
I’ll admit it. ServiceTitan forced me to stop and table my typical disdain for “all-in-one” promises from software companies. They are a sound company with a high-quality product. And while they may not be an “all-in-one” application, they are “all-in” for their customers’ success. Plus they are very focused on who that customer is – home service companies – and it shows on their website.
My advice to you? Stop chasing that elusive unicorn – stop looking for an “all-in-one” system because – just like the unicorn – it’s only a fairytale. And it’s not what you really need.
Instead, look for the vendor that is “all in” for your success. A vendor like ServiceTitan. They know your business, they understand their strengths and limitations and can connect you with trusted partners who can meet your needs that are outside their scope. They’ve blazed a new trail for companies just like you in your industry who want to be innovative, and they’ve guided hundreds down the path before you. Just like ServiceTitan is “all in” for home service providers, ServiceTrade is “all in” for commercial service contractors. If you want to learn how ServiceTrade is “all in” for our customers, schedule a demo today.
The Road to Success is Paved with Good Integrations
As VP of Customer Success at ServiceTrade, what everybody calls me at work is “that guy who can answer your questions about integrations.” The number of meetings I’ve been called into to discuss integrations with customers has gone up dramatically in 2018. I’ve noticed a theme in a lot of these conversations: customers aren’t really comfortable talking about integrations. They don’t know the terms, they don’t know where to start thinking about it. So today I want to tell you some basics about how to integrate good software with ServiceTrade.
Good software should have an easy-to-find API. If you aren’t sure whether a software application you’re considering has an API, it should be as easy searching Google for “____ API documentation.” No search results is a bad sign! Good software is often found on Zapier.com, which is an integration platform that moves information between web applications automatically. If a software application is on Zapier, you can be assured that it definitely has an API, it’s modern, and that it should play nicely with other pieces of good software. If you’re buying good software, you can avoid getting trapped by bad software decisions.
To set the stage to talk about good software integrations, it’s important to understand that everything in life – including software – has a special purpose. It has one thing it was designed to do and if you expect much more out of it, then you’re going to have a bad experience.
Let’s use an analogy. If you had to choose between those two vehicles: If I want you to hop into one, head around town, pick up groceries, drop off the kids. Which one would you choose?
The car. That’s an easy one.
I’ll ask you another easy one. What if I want you to tool around the bay, do some fishing, and some sunbathing.
Right. The boat.
Let me make it a little bit harder. What if I ask you to do both of those things? What if I ask you to run some errands, pick up the groceries, then head out and do some fishing and some sunbathing, then head on back home?
I think you’d tell me that you’d hop into the car to do the first set of things and head down to the boat to do second of things, then you’d get back into your car to head home. That seems pretty obvious.
But when it comes to software, a lot of people think, “You just asked me to do car things and boat things . . . I’ve got to have a carboat! How am I going to do car things and boat things unless I go buy one of these?”
This looks a little ridiculous, it doesn’t make any sense, and I think it’s obvious when you look at this photo why. This is not a very good car. And it’s not a very good boat.
When you’re looking to solve your business problems, that is the perfect time to be thinking about choosing the right software application for each of your specific problems. It’s also the perfect time to make sure you’re not about to make a carboat-buying decision.
So what should you look out for? If you hear:
“Well, it wasn’t designed to do that, but it could.”
They mean that 8 months and thousands of dollars later, it still won’t do what you want.
“I think there’s a workaround.”
They mean it’s going to be harder and more complicated than you want.
“It doesn’t have all those things you said you needed, but it should get the job done.”
They mean it doesn’t have the things you need and it won’t get the job done.
We do not tell people that ServiceTrade is going to solve all their business problems. We often point out all kinds of things that we aren’t the best choice for like payroll, accounting, truck tracking, payment processing, and sales CRM. We like to talk about ServiceTrade as good software that you can integrate with other good software to solve those problems.
So rather than focusing on making a carboat, focus on easing the car-to-boat transition. Or, bringing it back to software, easing the transition from one piece of software to another piece of software. At the end of the day, that is what integrating is all about – easing the data transition from one system to another system.
But if you aren’t careful, you’re going to end up with a very bad car-to-boat transition.
Let’s define 4 stops on the road to success so we don’t drive a boat into a car.
1. Know what you want. You’re going to have all kinds of questions about how things work, and that’s good. I recommend working a structure around those questions called “if this, then that.” It’s very simple: If this thing happens, then this other thing should happen. If you use this formula to think about what you want to happen in an integration, you can hand this to any software developer and you’ll be way ahead of the game. 2. Document your ideas.
Determine the source of record – where your information originates and what direction that data should sync. Here’s an example using Pipedrive (a CRM) and ServiceTrade.
Create a Flowchart. Create a visual representation of your integration. Check out this example from the online cloud-based application at app.flowmapp.com. I used this tool to document the service workflow for a ServiceTrade customer to clearly demonstrate where ServiceTrade fits into their existing business process. You get a really nice visual representation of your integration and gives you a good way to make sure you’ve covered all your requirements.
Document a scope that includes:
Description
Requirements
Desired user behavior
Deliverables
BudgetFor documentation, use online collaborative tools like Google Apps. The sharing feature and version control of shared files gives you a single source of record for your integration documentation.
Test cases This is a more detailed version of your “if this, then that” thought process. It’s clearly-defined step-by-step processes that ensure that you can test that the integration is working like you expect.
3. Manage the project. Use project management software to organize your thoughts, your plans, and your team around the integration. Take a look at Asana and Trello.
4. Do the work. Who is going to do the work? Is it you? This is the reaction you should have to that question:
There are lots of places to find qualified developers to write integrations for you. The first stop you should make is ServiceTrade. We’ve gotten pretty good at integrating various web apps with ServiceTrade. But we’re not the only game in town, you can look at hiring a freelancer from Fiverr, Upwork, and Freelancer. With everything you’ve documented, toss it to a developer and let them bid on it. You’d be surprised by what you can get done on these sites.
If someone else is doing the work for you, what are you responsible for? Testing, testing, testing, testing, and testing again. You’ll also be responsible for documentation for the business processes that you want everyone to follow. No matter how obvious steps are to you as the creator, it’s definitely worth documenting it for the rest of your team.
Here’s a list of applications that ServiceTrade customers have integrated with our app to expand the power and functionality of our application. It includes things like CRM, custom notifications to customers, after-service surveys, general data sync for additional file backup or sending notifications to Slack channels, custom forms, accepting credit card payments onsite, the possibilities really are endless.
AI, IoT, M2M, Big Data – The Alphabet Soup of Technology Jargon You Need to Understand (Part 1 of 2)
In 1984 I was seventeen years old and working as an usher in a movie theater when the science fiction thriller The Terminator was released. It was a surprise hit, and I must have seen the movie a couple of dozen times. In case you are not familiar with the movie, Arnold Schwarzenegger plays a human-like cyborg, a Terminator, sent from the future with a mission to kill Sarah Connor, the mother of the future resistance leader that is fighting the Terminator’s artificial intelligence master, Skynet. Aside from the obvious standout qualities of Schwarzenegger’s physique (a former Mr. Universe and Mr. Olympia) and the incredible strength demonstrated by the cyborg, the Terminator looks and even acts somewhat human. To remind the audience that the Terminator is actually a very sophisticated computer, director James Cameron sometimes displays the action from the perspective of the Terminator.
In these “look through” scenes, the audience is presented with a screen that is apparently the field of vision of the Terminator. The film color quality is replaced with mostly red, white and black imagery. Superimposed on the imagery is a bunch of scrolling text gibberish and some highlighted, flashing square boxes to call attention to certain data elements the Terminator may be analyzing – a person’s body size for suitable clothing, weapons in the hands of potential antagonists that must be foiled, etc. Of course, if the Terminator was really a sophisticated computer cyborg, there would not be an internal display barfing computer gibberish onto a screen in a manner that was readable by humans. Computers do not need human-readable text to operate on data the way humans need it. The computer would simply be ingesting external data via the cyborg’s camera eyes and his microphone ears along with any other external sensors for temperature, pressure, odor, and what not. Based on this observed data, the Terminator would be making judgments and taking actions that would have a high probability of creating a path to accomplish the mission – the termination of Sarah Connor. All of this would be happening without a human readable screen display.
Why am I talking about The Terminator? Why is the detail of the Terminator’s view of the world as depicted by the movie director important? I am talking about The Terminator to illustrate the point that artificial intelligence (AI), the Internet of things (IoT), big data, and all of the other alphabet soup puked up on a daily basis by technology media and vendors hyping their products is generally nothing more than the collective, gradual evolution of computers. In 1984, James Cameron could imagine a computer that understands and speaks natural language, sees real-time imagery, reacts to its environment, and takes actions to accomplish the mission. To portray the Terminator as a sophisticated AI being, Cameron showed the audience a visual model that generally represented what computers looked like to the masses in 1984 – a somewhat low-resolution screen with digitized text scrolling on it with an occasional selection option that would become highlighted if you tabbed a cursor to it (remember, the mouse was a new thing in 1984 as the first Apple MacIntosh computers just shipped that year). Cameron could not assume that the audience would make the leap to his futuristic interpretation of an AI-enabled cyborg, so he showed the audience a 1984 computer interface to make certain they got the connection. All this stuff in the media about AI, IoT, machine learning, big data, blah, blah, blah is just the real world catching up to what James Cameron predicted would happen way back in 1984.
Today we are talking to our phone to have it dial our best friend. We are issuing verbal commands to our Alexa assistant to have it order pizza or play our favorite music. Our Nest thermostat is monitoring our habits, such as when we come and go, along with our preferences for ambient temperature in order to take actions regarding raising and lowering the temperature where we live. These common applications of AI would have been totally foreign and inconceivable to a movie audience in 1984. But James Cameron had a vision of what artificial intelligence could potentially accomplish in the future, and he did a really good job presenting that vision to the audience in a way that they could understand it. Let’s do a quick reset on some over-hyped terms – AI, IoT, and big data.
Artificial Intelligence – AI is just the trend toward computers ingesting more diverse data in more formats (i.e. images, audio, natural language, pressure, temperature, humidity, etc.) to enable analysis that leads to judgments and actions related to accomplishing a mission or objective. Because AI is more of a trend than a definitive end-state, AI can simply be classified as Hofstadter, a famous AI scientist, describes it – “AI is whatever hasn’t been done yet.” More accurately, AI is simply the leading edge of new capability for computers to operate more intelligently on a broader diversity of data.
Internet of Things – IoT is simply a trend where more and more things are connected to the Internet to send or receive data or to act upon data received. Historically connections to the Internet were people staring at screens (and increasingly listening to audio speakers) and entering data or responding to data received. “Things,” whether a cyborg like the Terminator or a $10 temperature sensor, don’t need screens (nor keyboards or a mouse or speakers) to send and receive data or to act upon data received.
Big Data – Big Data is simply the collection and analysis of data sets that are too large for humans to effectively parse, analyze, and extract intelligence from using simple programs like Excel. Ever cheaper storage and computing cycles lead to ever-increasing data collection, storage, and analysis. Again, big data is simply a trend and not a definitive end state.
Over time, computers will progress to read a broader spectrum of inputs, make more sophisticated judgments, and take an increasing variety of actions that lead to desired outcomes. No one was talking about AI in 1984 – no one in the mainstream media anyway – because the topic was confined to a small group of computer nerds at top technical institutions like Stanford and MIT. Yet the director of The Terminator could imagine a future where a computer becomes so powerful that it can measure its environment in a humanlike manner, make judgments based upon those measurements, and take intelligent actions to execute a mission – in this case, the termination of Sarah Connor. It is unlikely that anyone who saw The Terminator in 1984 remembers the on-screen effects that Cameron used to connect the audience to the idea that the Terminator was a computer. I bet everyone who saw the movie remembers the Terminator’s mission, however. What was the mission? To terminate Sarah Connor of course.
Whether an innovation can correctly be labeled as AI (or with any other overhyped term of the day) is far less important than whether the innovation helps accomplish the mission. The Terminator’s mission was to terminate Sarah Connor, and the Terminator was extremely well suited for carrying out the mission (although it actually failed in this case). Defining the mission that you would like to accomplish with AI, IoT, big data, etc. is actually much more important, in my humble opinion, than the actual technology you select to achieve the mission. Have you thought about the mission that you want to accomplish using technology?
I believe the mission you are generally attempting to accomplish through technology is to maximize customer equipment performance while eliminating equipment failures so that your customer experiences the least risk, expense, and disruption in their business. The reason that technology is important as an enabler of this mission is because it is generally cheaper and easier to manage (sometimes) than people. If you accomplish this mission, your customer will spend zero dollars recovering from disruptions (lost output, spoiled inventory, damaged property, emergency services) while maximizing the amount of money they spend with you relative to other suppliers.
I will continue this topic next week with real-world examples of how AI, IoT, and big data are being used by service contractors today. I’ll also have some advice to make sure that what you’re building is more like a high-performing Terminator than a cobbled-together Frankenstein monster.
ServiceTrade sells software, so we spend a reasonable amount of time coming up with ideas and content (like this blog post) to help customers make better and faster decisions about buying software (preferably from ServiceTrade). We are particularly fond of catchy, summary phrases and slogans that are memorable for the same reason that consumer marketers come up with jingles that stick in our head. Humans are impressed by and gravitate to rhythm and rhyme (along with images and stories) as a mechanism for storing and retrieving information. It is easier to learn the lyrics to a song than to memorize a speech. If it has rhythm and rhyme, you are more likely to remember the phrase.
So what is the catchy breakthrough I am seeking with this post? I have been writing a lot about how to evaluate and purchase software applications to increase the value of your business. You can check out some of that content here, and here, and here. My latest breakthrough in measuring software value is what I call the “bank bandit barometer” (note the meter and alliteration of that phrase! nice huh?). Why did Jesse James rob banks? ‘Cause that’s where the money was held. Banks are more dense in money than restaurants, or retail outlets, or hotels, for example. A robber is going to get more bang for his buck (or more bucks for his bang if he has to deploy his weapons) by focusing on banks instead of these other cash-poor outlets.
So what does any of this have to do with software? Well, the “bank bandit barometer” for software purchases would say to look for software that helps bring more bucks into the business. What is the metaphorical bank for a service contractor? Where is all of the money? I would argue that the biggest hoard of cash to go attack with software is the cash that is in the hands of the prospective customers in your market. Cash that is currently being spent with other vendors or not being spent at all due to lack of attention. The potential customer spending in the addressable market that can be reached by your services represents probably 1,000 times your current revenue. Maybe only 100 times your revenue if you are a larger contractor in your market.
Contrast this bank vault of customer spending with the focus of most service contractor software consideration – how do I lower my payroll by being more efficient internally? How do I lower my administrative costs? By definition, your administrative costs are some small fraction of your overall revenue. Maybe 10%, or .1 times your current revenue. If you were a bandit, you would be doing poorly using software to “stick up” your administrative payroll. Wringing dollars from administrative payroll is like a bandit sticking up the local neighborhood kids lemonade stand. There just ain’t much money there, so any robbery that is focused on extorting dollars from the lemonade stand is doomed to marginal success at best.
So, what do you think about the “bank bandit barometer” for software purchases? Are you focusing on innovations that help you take more money from the bank that is the market you service? Innovations that help you sell to the customer accounts that you covet? Innovations that help you charge more? And deliver new capabilities? And attract a better class of customer to your business? Are or you content to hold up the lemonade stand because the poor kids running it are a soft target? Think like a bank bandit next time you go out shopping for software applications.
When I joined ServiceTrade to begin its services division in 2012, Billy greeted me with the welcoming threat “if you screw this up I’ll fire your ass.” I’m still with the company, so here is my advice for how to buy good software and not get fired in a growing company.
Use the right tool for the job. I didn’t set out to solve our CRM, marketing, accounting, and payroll challenges. I was looking for the right tool for customer service. Any software that says it can solve all of your problems is going to be terrible at everything. I focused on choosing the right tool for one problem at a time.
Choose good software. Two of the most important elements of good software is open APIs that allow for integrations with our other applications and that it is SaaS. The picture below shows what integration looks like with bad software. Nobody at ServiceTrade is spending time managing our own servers. We have better things to do with our resources.
This is what integrations look like in a server environment.
Blow it up from time to time. When I started, I chose ZenDesk to run customer service. About five years later, we blew it away because something better came along. We discovered that Intercom offered a few more integration options and we like its online chat. So one morning in about four hours we unplugged ZenDesk and plugged in Intercom. It didn’t require us to change our accounting system. It didn’t bring down our CRM. It was just like when you get a flat tire – you pull over, change the tire, and leave the rest of the car alone.
Enable more integrations. In making the change to Intercom, we added more options for creative integrations. We rely heavily on Zapier to connect our apps to each other, so compatibility with Zapier is a must. Search for “Zapier library” to get an idea of how an application you are considering can connect with other apps in your company.
Be decisive. The Practical Guide to Buying Software for Service Contractors gives you six things that should be easy to determine when you’re working with a good software company. It’s important to us that our applications keep up with the pace of our growth and new ways to help our customers. If that means adding new software, we’re decisive and act fast by following the tenets in this guide.
This blog post is adapted from a 2017 Digital Wrap Conference presentation by ServiceTrade Vice President of Customer Success James Jordan. Presented here without the rooster photo.
What’s Technology Worth? How to Value Your Technology Investments.
I hear customer prospects cry out for “the perfect application for my business that does everything” in nearly every sales call that I make. It does not exist. I have argued again, and again, and again that every business of any size will ultimately buy multiple applications to serve the diverse needs of their business functions.
Look at your phone. One application? Or many? Displaying the weather is different from transferring money from your bank account is different from measuring the intensity of your workout is different from keeping up with your social network.
Likewise, your accounting function is different from your sales function is different from your customer service function is different from your marketing function. The idea that one application will be sufficiently good for your business to remain competitive in all of these different functions is silly, and any software vendor promising you that outcome is a silly vendor. But what about the follow-on questions:
If I am going to buy many applications, how much should I expect to spend?
How do I value applications that make my business more competitive in a world where technology innovation increasingly determines market competitiveness?
Guideline 1: Select Modern Software With Open APIs
Well, before you even consider how much to pay, you need to perform the first and most basic test in the software buying cycle. Go to your favorite online search engine and enter the following query:
[INSERT NAME OF SOFTWARE APPLICATION HERE] API documentation
The first organic link below all of the advertisements from the software vendors that are trying to sell you a competing application should be a link maintained by the vendor of the application in question. That link should lead you to detailed documentation for how the application you are considering can be integrated with other applications that you use. Application Programming Interfaces (APIs) are the key to a new world of connected innovations for your business. Without good APIs that are publicly documented, the application you are considering is worthless. You should not pay anything for it.
Go ahead and try the search for a couple of high-quality applications that are on the market today. Insert “ServiceTrade” or “ZenDesk” or “PipeDrive” or “Marketo” or “Hubspot” or “Slack” into the query above. Check out the first organic link below the advertisements. What do you see? This query is the first test to determine if an application is worth at least a penny.
Guideline 2: Judge the Technology’s Value to Your Business
Let’s say that your application passes that first test. What now? How much is it worth? Well, it sort of depends on how much it increases the value of your business. In a prior blog post, I argued that the questions that determine the value of your business are How Many? How Much? and How Long? How many customers do you have and how many can you attract with your value proposition? How much can you charge those customers for the services that you provide to them? How long can you keep those customers when you are charging a significant premium compared to your low price competition? These are the questions that you should use to evaluate how much a new software application is worth to your business. The more the software impacts these measurements, the more you should be willing to pay because it is going to make your business more valuable.
Does the new application help me attract new customers? Does it help me charge them more because it provides my service with some new features that customers value? Does it help my business become sticky so that it is difficult for customers to fire me and replace my service with a low-cost competitor? If the answer to these questions is “yes, absolutely, definitely” then the application is probably very valuable. If the answer is “no, not really” then the application is only worth some fraction of the money it might help you save by eliminating administrative burden.
The problem is that you are probably significantly overpaying for administrative applications like accounting and underinvesting in applications that drive new customer acquisition, service differentiation, and revenue. And I also bet your accounting application provider is telling you “we have a plugin for sales, and customer service, and technician management, and every other thing you might need” in order to justify the crazy price you are paying for that application. Am I right? Probably.
So how can you alter your portfolio of applications through time to push down the expense associated with administrative applications so that you can reinvest those dollars in applications that actually drive up the value of your business to its shareholders? Applications that enhance your ability to add customers, charge them more for your services, and hold onto them longer?
Conclusion: Recommendations
My first recommendation is to only consider modern software as a service (SaaS) applications that have publicly documented APIs. These will generally be cheaper than the older, legacy server-based applications, and they will deliver more innovations to your business going forward. Software investors are NOT investing any of their precious capital in old server applications, so these legacy applications are going to stagnate and die. No point in throwing your money away on a dead horse.
My second recommendation is to ask the basic questions around How Many? How Much? and How Long? for new applications you are considering. If the applications you are considering do not contribute to these value metrics, then simply look for the low price alternatives that meet the SaaS and API criteria and determine how much administrative expense they might save you. You can spend up to 100% of the savings on the administrative applications to eliminate manpower spending.
If the applications do in fact help you attract more customers, charge them more for valuable new features, and hold onto them forever, open up the wallet and let fly for up to 2 – 3% of the revenue you expect to drive by being the most innovative service contractor in your market. I assure you that the best service contractors will collect a 15 – 25% revenue premium in their market, which easily justifies the spending on the applications that drive that differentiation. I will also assure you that competing on technology innovation is much more fun than competing on price.
Case Study: Investing 3% of Revenue in Technology
Let’s look at some examples from ServiceTrade’s business to set some benchmarks for how much to pay.
The biggest technology application expense category that ServiceTrade faces is for infrastructure services that power our customer’s experience with our product. Amazon and Google charge us for technology that provides neat features in our application. The ability to send a quote to a customer via an email with a link that presents the quote online with photos and video and audio and a “one click to approve” button that drives revenue for our customers is largely dependent upon capability provided to ServiceTrade by Amazon. The ability to map customer locations for scheduling efficiency, see the locations of the technicians in real time, and prefill the fields for setting up new customer location records is largely dependent upon capability from Google. The applications from Amazon and Google are VERY valuable to ServiceTrade because they help us attract new customers and charge them a premium, and we spend about 6% of our revenue on these types of applications.
Now, ServiceTrade makes about 80% gross margin on the applications we sell, so we can afford to spend heavily on making these applications great. If your service to your customer drives a lower margin, say 35%, then 6% of revenue makes no sense for any technology. The apples-to-apples comparison, in this case, is probably close to 7% of gross margin (roughly), which would equal 2.6% of revenue for an application that really helps you deliver differentiated value to your customer. So for a $10 million dollar service contracting business generating 35% gross margin, the equivalent amount would be $260,000 per year.
The next biggest category of technology expense at ServiceTrade is for sales and marketing applications. We have Salesforce, Marketo, Salesloft, and a handful of other applications that help us present our value proposition to customers in a way that drives new sales. These applications help us increase the How Many customers metric. We spend about 1.5% of revenue on these types of applications. Again, to adjust for gross margin, that would be about .6% of revenue for a 35% gross margin business. So for a $10 million dollar service contracting business with 35% gross margin, the equivalent annual expense would be $60,000.
The next biggest category of technology expense at ServiceTrade is for customer service oriented applications. These are the applications that help our engineers and our support staff keep track of how things are going for our customers and to monitor the application for errors or potential signs of trouble. We spend about .4% of revenue on these types of applications. They are tangentially oriented toward helping with the How Long can we keep our customers question. Clearly, these are far less valuable than Google and Amazon, and also less valuable than the sales and marketing applications, both of which help us drive up the How Many? and How Much? elements of our business value. Adjusting for gross margin again, and you get .16 as the percentage of the revenue in a 35% gross margin business. A $10 million service contracting business should consider spending $16,000 per year on customer service infrastructure.
Finally, there are the administrative applications like accounting, email, file sharing, calendar, reporting, office productivity, etc. These are the applications that every business needs, but their value is simply in keeping the administrative burden of running a “tight ship” as low as possible. ServiceTrade spends about .3% of revenue on these type of applications, and it is unlikely that the expense of these will scale linearly as we grow. When we double in size, I would expect that percentage of revenue to be about .2%. So for a $10 million dollar service contracting company generating 35% gross margin, the administrative applications in the business should be on the order of .08% of revenue, or about $8,000 per year on accounting, email, reporting, calendar, office productivity, etc.
If we total all of these up for a $10 million service contracting business, the percentage of revenue spent on technology applications is about 3.44% of revenue or about $344,000 per year. Now my ears are almost bleeding from the screams and bellows of “That’s Crazy!” that I can hear coming from service contracting customers reacting to this number. But is it so crazy? Are applications that help your business become competitive in attracting new customers, driving new revenue, and charging a premium price really worth that type of spending? Consider these two examples. How much do you pay for an application like Square that helps you collect money from a customer in the field? It consummates the sale by getting the cash now. You happily pay about 2.5% of revenue for this type of application. How about the central station monitoring application that enables you to sell a high margin monitoring service? You happily pay between 30% and 50% of revenue for this valuable addition to your service arsenal. So no, 3.44% of revenue is absolutely not crazy for a full set of applications that help you drive value in your business.
Case Study: Ressac Implements Sage Intacct with ServiceTrade Integration
For more than 85 years, Ressac has established itself as a high quality, low-cost commercial contractor for heating, ventilation, air conditioning, and refrigeration systems. Specialties include low-rise office parks, mall retail, and big box retail sites.
THE CHALLENGE
Ressac recently implemented ServiceTrade to improve their service management and customer service. While this solved their challenges on the service side of their business, they were still using an outdated version of Dynamics NAV, a server-based accounting platform, to maintain financial records. “We were so focused on making improvements to the service side including customer service and earning more revenue that accounting was an afterthought,” explains Nick Rohan, CEO at Ressac. “We lacked real-time visibility into our financial information,” he says, “and we had to double key everything.”
With no transparency into financials such as working capital and cash flow, decision-making was more like guesswork. In a very competitive industry, and with a profit margin as low as 5-7%, it was critical to know the current situation when making business decisions. And since data wasn’t being shared between the accounting system and ServiceTrade, the finance team carried a large time burden related to too many AP and AR manual processes.
“Connecting to the old accounting system was cumbersome,” Mr. Rohan explains, “and we had a lot of issues getting into the system.” And with no AP approval process in place, service managers had to approve purchases, which took them away from more strategic job-related activities and created time-consuming invoicing of their clients. Additionally, data siloed within spreadsheets led to inefficient and time-consuming reporting processes throughout the organization.
Ressac desired a cloud solution that could streamline its AP workflow and approvals and provide real-time visibility into its multiple locations’ financial results. Sage Intacct’s financial management software was selected and was seamlessly integrated with ServiceTrade to eliminate many hours of manual data entry and reduce costly errors inherent in their old system.
THE SOLUTION
Nick recalls, “We relied heavily on ServiceTrade’s recommendation of Sage Intacct. When we looked at various systems,” he says, “what sold us on Sage Intacct was the reporting.” And selecting Wipfli as the service partner was easy. Wipfli provided full-service implementation, integration assistance, and ongoing support through a collaborative team approach as Ressac navigated through the process. “We liked the feeling from Wipfli, and had confidence in the team we were talking to,” explains Nick.
Everyone worked together to ensure a smooth integration. “The ServiceTrade integration is behind the scenes, so you don’t really notice it,” reports Nick. “With the Sage Intacct and ServiceTrade integration, we’re operating differently now,” he says. “The time we’ve saved on double data entry allows us to code our transactions, which allows for better financial reporting.”
With real-time visibility and transparency into their financial results across their multiple CA locations, Ressac now has the “right information at the right time” to make critical business decisions. “We’re getting more information out of our systems and doing a lot more meaningful work,” he says. The improved financial reporting means Nick Rohan and his team can easily see where their financials stand on a day-to-day basis.
What’s more, according to Nick, “the thing we really enjoy with Sage Intacct is our ability to access it anywhere from a browser, whether we’re at home or out of town. We can get in and see our daily runs and see how cash is doing,” adding, “it’s been fantastic!”
Overall, with Sage Intacct in place, Ressac taps into deeper financial and operational insights and is able to tackle more strategic issues, keeping the whole organization focused on their customers. Now the pressure of competition is less of a burden as Ressac has the insights its team needs to “grow strategically in existing markets and into other regions.”
LEARN FROM RESSAC’S EXPERIENCE
Key Requirements
Implement cloud-based financial solution to automate and streamline workflows and provide financial visibility
Integrate their new system with ServiceTrade to allow for one single set of data to run the business reliably and remove the guesswork
Key Challenges
Remove data from spreadsheet silos and make it available for decision-support across organization
Save time and reduce costly errors associated with manual data entry
Enable managers to focus on strategic initiatives
Key Outcomes
Gained real-time visibility into their financial results across locations
Saved time, money, and effort through automating processes, enabling greater focus on customers
Positioned to make long-term strategic plans for company
EXPLORE INTEGRATIONS
ServiceTrade can help whether you’re looking to integrate your current accounting system with our application or explore a new accounting solution. Call your representative to talk about the best way to start weighing your options and understanding the scope of integrating ServiceTrade with your accounting or other operational applications.
I bet the grocers that had a bad day when Walmart got into groceries about fifteen years ago are having a really bad week now that Amazon has announced their intention to buy Whole Foods. The innovations Amazon is going to bring to grocery buying go well beyond low price and internal operational tweaks. Amazon is going to use technology to transform the grocery buying experience, and the old competitors focused on their tired, old, internal metrics will be toast.
Marc Andreesen, a famous internet entrepreneur and venture capitalist, once said: “Software is eating the world.” You can read his editorial in the Wall Street Journal here. It’s true. Customer service innovations driven by software are transforming every industry. Netflix to Blockbuster. Uber to taxis. Amazon to booksellers, hosting companies, and now grocers. When will it be your turn? Which side of the statement will your company be? The eater? or the eaten?
Do you suppose the first innovation Amazon is going focus upon is how Whole Foods does accounting? Is that where they are going to put their innovation muscle? I ask the question because it seems that accounting remains the first priority of service contractors when they think about how to apply technology to their business. But it sounds really silly in the context of the Amazon acquisition of Whole Foods, doesn’t it? As I have said before, your perfect accounting process is perfectly irrelevant to your customer. You should have a good one, but it will not save you from an innovative, customer-focused competitor.
I am not going out on a limb when I say that Amazon understands that accounting is irrelevant, and their focus with Whole Foods will be transforming how customers buy groceries. They will eliminate aggravation and uncertainty for the customer through technology. I bet there will be an awesome mobile app for pricing your groceries in the aisle and eliminating the checkout line. I bet you will use that app to find the groceries you seek without wandering up and down the aisles. I bet you will get interesting recipe ideas based on the ingredients you buy often. I bet your buying preferences will lead to deliveries to your house via drone for the items you buy on a regular basis. I bet the best customers with the most money to spend on groceries will gravitate to Amazon and their innovations. I bet I cannot even imagine the things they will do to make grocery shopping more convenient, and none of it will relate to how they do accounting.
So when will it be your turn? Will you be the eater, or the eaten? Are you considering how to upgrade your customer’s buying experience with your services? Or are you piddling around with how to extend your accounting to wring a small bit of extra margin from your internal processes? Are you building an innovative and growing brand that attracts customers to you? With an experience that they cannot easily trade for the low price guy? Think about it. Who do you want to be in your market? Amazon, Uber, Netflix? Or the other guy?