Category: Buying Software
Software Advice from Wall Street
There is a saying on Wall Street regarding investment decisions – cut your losses, dump your losers, double down on a winner. The basic philosophy comes from the concept of discounted cash flow analysis. It does not matter how much money you invested (spent) historically, all that matters is what you will invest (spend) in the future and how much cash will flow to you from that investing (spending). If a stock has declined since you bought it, and you are pretty certain nothing fundamental has changed to improve its future outlook, you would be crazy to buy more.
Yet this is exactly what many folks dealing with failed software implementations continue to do. If every experience has been negative, what has changed to make you believe future return on investment will be positive? Is the company behind the application a leader that simply has not yet broken out? Why is another dollar flushed down the drain going to improve the outcome? Think about how much money you would lose in the stock market with the following investment approach:
“I don’t care how much the stock price has declined. I am going to buy more because I have already bought so much.”
Buying more does not change the outlook – it simply accelerates losses. If you are convinced that your experience is an aberration, that the market is wrong, that the company behind the stock is really a high quality opportunity, that a rebound is inevitable, then there is nothing wrong with doubling down on a heretofore loser – you’re getting a bargain at the lower price. If you are not convinced of the foregoing, cut your losses and dump your losers. You are simply paying more money for more pain without the joy of future income associated with the investment.
Download a copy of the “The Practical Guide to Buying Software for Service Contractors” for further reading on making the right software purchase for your company.
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Don’t Get Gigged by Software – Measure the GIG
Lots of companies get “stuck” (or gigged) with bad software because they do not know how to measure the quality of the vendor during the sales cycle. One of the best ways to measure a software company prior to buying the application (aside from the advice in the The Practical Guide to Buying Software for Service Contractors that talks about avoiding dead-end PC apps, non-SaaS products, etc.) is by measuring the software vendor’s GIG – Growth, Innovation, and Gross margin.
These are critical measures of a quality software company, and if your vendor does not meet certain criteria, you will be in a bad situation over the relationship. The reason that they are critical is because performing well on these measures provides a software company with access to capital. Capital is critical in order to drive research and development activities that lead to competitive innovations that help you drive your business forward. Without capital (either in the form of high gross profit or investments based upon high gross profit), the software vendor will inevitably “gig” you over and over again for services charges associated with getting it right for your situation – not a sustainable business model for the vendor or for you. So what should these metrics look like?
Growth – A software company that is not growing at least 20 – 30% a year is dying. They might not die quickly (depending upon the gross margin), but they are certainly not moving forward. Faster growing competitors will ruthlessly devour their customers and slow growth will become no growth and will eventually become death. Ask your prospective vendor how many customers they are adding per week/month/year and the average annual subscription value of those customers. Ask them for how much customer churn they are experiencing – i.e. how many customers quit the platform. Validate this information the best you can, although it might be difficult. Ask for the names of the new customers and the names of the customers that quit. Check them out and make your own assessment.
Innovation – A software company that is not delivering new features every month is dying. Modern SaaS companies deliver new capability monthly (unless they are very large, and then it is often quarterly – certainly not “every couple of years”). Ask the prospective vendor for a list of new features delivered in the last six months and validate that list with customer references. Ask the references how fast the vendor moves, and their level of satisfaction with the rate and quality of new innovations. New innovations drive growth, which, when coupled with gross margin, drives access to capital, which drives growth and so on.
Gross Margin – A software company that is not delivering gross margin of at least 60% is not a software company. It is a service company, and it is dying (unless of course their goal is to be a service company, but that means the application is dying). Service companies are very different than software companies. They don’t innovate. They charge you for services. And you pay a $1 for every $1 of improvement or change in the application. With a great software company, you pay less than a penny for every $100 in innovations delivered because your subscription payments get pooled with thousands of other customer subscription payments to drive research and development which drives innovation which drives growth. Subscription margin typically runs 80 – 98% gross margin. It is the fuel for a software company. Services are simply the smallest required investment on the part of the customer to get onto the application (training, setup, etc). The blended gross margin across subscription and services needs to be above 60%, otherwise the company is dying. And you are throwing your money away when you make them your vendor.
If you have ever been “gigged” by a software vendor, you know it is not pleasant. Avoid it in the future by measuring the Growth, Innovation, and Gross margin before you buy. A big GIG is the best way to avoid getting gigged.
Cloud Computing & Service Contractors – A Perfect Match
Service contractors need the cloud, but over and over again we see companies that are confused or unsure about how moving to the cloud will affect the operations of their business. Change is scary. As human beings, we are wired to avoid change, especially when it concerns a switch from what we are use to.
Cloud Computing
At a recent HVAC convention, our VP of sales witnessed two different speakers advocating the benefits of cloud computing for service contractors. Obviously, we are always pleased to have others singing the same tune. Here are a few excerpts of what was said:
The Cloud is Secure – One attendee described how all company data on their PC server was held hostage with Ransomware that cost more than $10,000 to remove. Huge organizations like Amazon, Google, and the US Government store billions of documents in the cloud. Virus protection and security are an integral part of data management and these large organizations would never store data in a location that wasn’t secure. Do you trust technology experts to build strong security or do you trust one of your administrative staffers to know about the latest virus, bug, or software flaw?
The Cloud is Cheap – There’s truly no reason to maintain a mail server anymore (or any other type of server, for that matter). Dozens of cloud applications can not only provide a hassle-free email solution, but a more feature rich solution as well. No one wants to pay an outside IT professional to be their problem solver. The cloud has lowered the price of software solutions by allowing software companies to put more power and more features into the hands of users. Cloud storage is essentially free. There’s truly no need to buy more file cabinet or PC hard drives.
The Cloud Empowers Your Customer Service – Items stored in the cloud can be accessed from any device – PCs, tablets, or smartphones. Your technicians can answer questions faster and with greater accuracy, even when they are in the field. Customers expect speed and accuracy. (Don’t we all use Google for fast answers?) Showing clients before and after photos, online work acknowledgements, past work history, or old invoices make you and your team shine.
The key point is simply this: Cloud computing is a perfect match for service contractors and their business operations. Embrace the cloud and prosper.
How Good Software "Learns" to Help Service Contractors Over Time.
Operating a business in a vacuum is a handicap. There’s a limit on information you can gather about smart business practices when you are swamped with managing the details of your enterprise. How helpful would it be to have “partners” in your business that are constantly on the lookout for solutions to your most challenging issues?
Here at ServiceTrade, we constantly solve problems that our customers face. Because we provide such a high level of support, our clients regularly bring us new challenges and ask our team for solutions.
An intrinsic part of good software is that it improves over time. Software deployed via the cloud, gets those improvements immediately into the hands of customers. Imagine if your car had a feature that allowed it to immediately implement new improvements as soon as the manufacturer created them – brighter headlights, lighter bumpers, improved braking systems. Well the physical world can’t do that. You have to buy a new car.
Software is different. Every improvement made for one customer is available to ALL customers (when applicable, proprietary customer data is NEVER shared). If a client asks us to make an adjustment or add a feature that we feel will benefit others, then it is a win-win for all of our clients. After review and testing, an improvement is added to the product and available to everyone. The software has “learned” how to solve a new set of problems.
Let ServiceTrade show you the path to better management of your service contracting business.
The Only Certainties in Life – Death, Taxes…& Software as a Service (SaaS)
– Apologies to Ben Franklin – . The actual quote is “In this world, nothing can be said to be certain, except death and taxes.” If Mr. Franklin were alive today, there’s little doubt that he would add a third item to this list – Software as a Service (SaaS) …aka Cloud Computing.
Why is SaaS as inevitable as Death and Taxes? Why am I using Mr. Franklin’s quote to segue into a discussion about the cloud? To make a simple point — Change is inevitable and a dramatic shift is underway in the world of software.
Smart consumers of software know the advantages of the cloud and thus are demanding solutions based online. (Rather than on desktop machines.)
Here’s a great example: QuickBooks. This product is the king of accounting software for millions of individuals and small businesses (SMB’s). Because QuickBooks is such a popular accounting system for customers of ServiceTrade (all SMB’s) , it also serves as a great example for this discussion.
Here’s a quote from Oct. 2014 – “QuickBooks Online hasn’t received much attention over the years. Launched in 2000, it only had 100,000 paid subscribers in 2009, compared to QuickBooks’ four million desktop subscribers. However, Intuit says at the end of last year they acquired a higher number of users online than on desktop — marking a shift in consumers. Now the company is rolling out all sorts of features to their online product.”
Do you think that QuickBooks is rolling out a ton of new features for their “desktop” subscribers? Doubtful. Will QuickBooks have a desktop version of it’s products in a few years? Very Doubtful.
The reason? The cloud delivers a better product, period – 1) No hardware to purchase/upgrade. 2) Connect from any PC or mobile device anywhere in the world. 3) New features added weekly instead of every few years.
SaaS Solutions are better. Contact ServiceTrade and let us guide you towards the best software solution for your Trade Contracting SMB.
Looking for Software Innovations? Look for Loosely Coupled Integration
ServiceTrade integrates with any other application you might find necessary to run your business through what we call “loosely coupled integration.” What this basically means is that the two (or 3 or 4 or more) applications DO NOT SHARE the same database. Instead, data is synchronized across the applications in a manner that is based upon which application controls that bit of data and which application simply needs the information for reference purposes. As often as the information changes for the “control” application, that is how often the reference value changes for the “reference” application.
The benefit of this approach to integration is that each application, whether 2 or 4 or 10 or more, can evolve with features that make them more valuable to you without a strong dependency on the other applications to evolve their respective data models. As I pointed out in my blog post on Software Communism, central planning by a single government committee does not deliver the innovation and value creation of the free market. The same is true for software applications – the free market chaos of competition and innovation will yield great opportunities for you to improve your operations by using multiple applications that happily work together via “loose coupling” and in most cases application programming interfaces (APIs).
In the “bad old days” of “tight integration” you would spend a fortune for a “certified” integration based upon some logo you saw on your accounting software provider’s website. You would have to shut down operations for a few days or setup an expensive dual environment while some expensive consultant installed software and “re-configured” the database to accept insertions, changes, and deletions from both applications so that both applications operated on the same dataset at all times. Then, after the expense and pain, you never changed it again until you were forced to upgrade one of the applications. Then more expense and pain ensued. Then no more innovation and no more operational improvements for another 5 or 6 years, and then pain again – a miserable existence that takes years off your life each time you want to receive new features or functions.
It is not acceptable anymore to deal with this pain and this lack of innovation. Modern Software as a Service (SaaS) application providers deliver new features on a weekly basis with ZERO PAIN. Technology moves fast. Your competition moves fast. Your customers expect fast. Being caught in the slow lane because of a requirement for all applications to share the same database is RIDICULOUS. Loosely coupled integration is how the modern applications work in order to provide the innovation demanded by a modern world.
Here are some examples from integrations we have delivered to our customers here at ServiceTrade:
Customer Account Information – The accounting system should be the master record holder for “who pays my invoices and how do I get them to pay me.” ServiceTrade needs this information for reference, so each time the accounting system updates a record, a file is fired to ServiceTrade via the APIs to update that record – typically within 2 seconds.
Location Service Information – The customer service application, ServiceTrade, should be the master record holder for “how do we deliver great customer service at this location.” The accounting system does not need to know that the alarm code is 987876 and “never send Shawn because they do not like him.” The accounting system does not even need to know this type information for reference purposes. However, when a service is delivered, the accounting system needs to know what “items” were consumed/delivered in order to process the invoice and calculate Cost of Goods Sold (COGS) and Revenue, and also to update inventory. In this case, ServiceTrade sends a file to the accounting system indicating “Job Complete/Invoice Ready” with all the details necessary to invoice the customer and calculate Revenue, COGS, Gross Margin, etc. Typically this synchronization happens every couple of minutes to once an hour, depending on the needs of the customer.
In both of these examples, there is absolutely no reason for both applications to operate on a single dataset simultaneously. I could give hundreds more similar examples, and the lesson is the same. It is also practical if you think about it. Who hires accountants to deliver technical services in the field? Who hires technicians to be their accountant? Why would you expect your accounting system to be good at customer service management? Why would you expect your customer service management system to be a good accounting system? Let each deliver its own value and insist that they cooperate – exactly as you insist the various members of your management team cooperate. They do not each need to know everything the other knows or does – only what is necessary for effective operations across both functions. Assuming that they all share the same “brain” (i.e. the database) is crazy. Their brains are different so that they can be good at what they do.
At ServiceTrade, we happily use Salesforce.com, Marketo, Google Apps, Intercom, and a handful of other applications. They all work together flawlessly using this concept of loosely coupled integration via APIs. We never once looked for a logo on a site to determine what application might have “tight integration” because we knew with great SaaS software the integration would certainly be there and it would certainly meet our needs. You should buy the application that suites your needs and is the best application for the functions it serves. Integration should be cheap and easy. If it is not, then you bought the bad stuff. Spin the purchasing wheel again until it lands on the good stuff.
The Rich Get Richer: Why Smart Service Contractors Make Smart Software Decisions
I have noticed an interesting trend with ServiceTrade customers: the large majority are already in the top 10% of the industry regarding both systems capability and typical service contractor metrics – growth, gross margin, net margin – when they first engage with us, yet they readily buy ServiceTrade (typically with only about 2 weeks of free trial). Simultaneously, I see prospects who would receive extraordinary benefit from an upgrade to better service contractor software (terrible systems, very poor execution metrics) and they are absolutely unable to make a decision and move forward.
My best guess is that the guys with better systems and better metrics have the confidence to move ahead again and again. They have seen success with upgrades and technology, so seeking greater success is second nature to them. The folks with horrible systems and poor metrics have never had a good experience with systems (and it shows), and therefore they are jaded and so overwhelmed dealing with the messiness of the business that considering an application like ServiceTrade (or other best-of-breed vendors like NetSuite and Salesforce) is not an option.
But where does this dynamic lead? I suppose it leads to the “rich getting richer” and the “poor” continuing to struggle. I suppose it is inevitable, but I am disappointed that those that really need help cannot get it because their history with bad systems and bad actors has painted such a miserable picture of change. I cannot tell you how many times I hear:
“The last time we changed our application, it was a horrible experience that took years off my life. I hate what I have now, but I will not change ever again.”
Here’s the thing about not changing anything: nothing changes. The world moves forward, and companies with this mindset are trapped. Most owners are from the baby boomer generation, and they are just hanging onto the income from their business (to the extent there is any income, otherwise they are just hanging onto a tax shelter) because the 2nd generation has moved outside the business (i.e. doesn’t want to run it) and there are no other potential buyers out there. When they retire, the brand that took so much effort to build will just die. The only way they can escape this dynamic is with a leap of faith to modern capability, where effective systems and processes can help institutionalize customer service and operational management at a fraction of the cost and aggravation they suspect will be necessary. They can then transition the business to another operator and reap the value they deserve…but it will not happen without change. Without change, the rich will simply continue to get richer, while others will work for pennies until they disappear.
Give Yourself a Raise – 5 Ways Service Contracting Software Puts More Money in Your Pocket
One of the consistent themes we hear from our service contractor customers is how expensive, slow, and cumbersome basic administrative tasks become when they attempt to scale their business with their on-premise PC server-based applications. Scheduling, inventory management, billing, payroll, customer service requests – all of these activities seem to get choked up with an administrative staff that always needs more capacity and ultimately holds the business hostage to the arcane knowledge that is trapped in their head regarding “how things work around here.” Progress and growth in the business grinds to a halt because the administrative burden becomes so complex. The mantra of the business becomes “don’t change anything because we can’t profitably manage what we have going already.” or “Grow? Grow! Are you kidding? Everytime we grow we lose money!”
The primary reason for this calcification of process and the resulting steady escalation of administration expense is the application structure – all communication and information MUST run through the office to be processed. Traffic cannot “flow” without being directed by a “traffic cop” sitting inside the office. Every car has to get attention when it hits the traffic circle, and all other cars must wait until the cars ahead are pushed through. Plus, batches of traffic show up at rush hour (in the morning and in the evening) and further clog up the highway, preventing progress until it is processed out. The key to breaking this miserable traffic jam in the office is to create a continuous flow of work that is not constantly interrupted by the need for “immediate” communication. Getting continuous flow means eliminating the daily phone rodeo and migrating from physical paper to digital data.
Stop the “Phone Call Rodeo”
The only calls you want burning up the phone lines in your office are either customers with an urgent need or happy customers calling to gush about the service they just received. All the other calls simply interrupt the workflow and prevent forward progress. If instead, all the information from the techs arrives in a queue where it is visible, actionable, and subject to prioritization, it will get handled with much higher efficiency. In the same manner that processing through an email queue is easier than taking an equivalent number of calls, processing through real time update information in ServiceTrade is easier than taking all those update calls. A phone ringing provides no information until you interrupt your work, accept the call, hear the situation, then triage your response. A dispatch board with visual cues on status (enroute and distance, arrived, photo memo, audio memo, problem found, etc) allows the work to flow without the interruptions and real time triage. Instead of one dispatch person for every 6 – 8 techs, you move toward best in class where one dispatcher can handle 15 – 18 techs.
Migrate to Digital Data
The biggest problem with paper is not the bad handwriting and lack of professionalism displayed to the customer (although these are issues which create other problems). The problem with paper is that it is slow and clogs up the office with administrative tasks that are cumbersome and batch oriented. When digital data arrives continuously through the day and it is organized in a manner that makes it actionable, you can close out more jobs faster and get the invoice to the customer faster (in the field if you like). Which means you get paid faster. When you stop being the payroll bank because you have effectively aligned your billing and collections with your service expenses, you can give yourself a raise from the enhanced cash flow.
The other “side” benefits of this streamlining and continuous flow include:
- Burning Less Fuel – when you can complete the job and invoice without dropping the paper at the office, you burn less fuel.
- Performing More Jobs – when your techs don’t have to call the office for updates and instructions, they deliver more jobs per month. When they know their activities and performance can be monitored in the office via digital data, they deliver more jobs per month.
- Spending Less on Paper and Postage – triplicate paper and stamps for invoices are expensive. When your job data is digital along with your invoices, you save money on these items.
All of these are simple changes that enable you to give yourself a raise. Isn’t it about time?!
5 Tips for Spotting "Good Software"
As ServiceTrade grows, I am reflecting on the responses we get from customers on their purchasing criteria for service management software. As it turns out, buying software is not much different than buying anything else you might consider in your life – which is the way it should be. Here are some tips for spotting good software:
Pretty
Turns out that good software is usually attractive and easy on the eyes. If the interface reminds you of the early days of Windows 3.1, you probably don’t want to sign up as a customer. If it looks like something that you would see on an iPad in your living room, it might be good software. If it looks ugly and clunky, it probably is ugly and clunky.
Cloudy
There are few companies in the world that should be running their own servers and administering software infrastructure, and most likely you are not one of them. If you see “free download” or “server requirements” or “installation manual” anywhere in the advertisements or documentation, it is probably not the solution for you.
Tiny
Not every element of every application will be mobile and portable, but many of all should be. Business does not stop and start at the threshold of your office building. The more functionality that is able to fit into your pocket, the better.
Inexpensive
If it does not feel like a good deal, it probably isn’t. I cannot think of a single software product we use at ServiceTrade that does not feel comfortable on the income statement. If it hurts the wallet, it is probably because the vendor does not serve a broad market (or has no ambition to do so), and therefore you must pay the price. Question closely the business model and ambition of the vendor. You want vendors that serve large markets efficiently so you do not get trapped by high cost and low functionality.
Reference-able
Ask for lots of references, call all of them, and ask lots of questions. If the references are not people and companies that you admire, if they do not gush about the partnership or functionality, if they seem uncomfortable talking about the details of their experience, caveat emptor. Keep looking for something better.
I absolutely believe that all of these elements for qualifying a software purchase (which coincidentally are easy to determine with a moderate amount of inspection) are better than the often touted “Return on Investment.” ROI can only truly be calculated via the rearview mirror as you ponder the actual results. At that point, the wreckage you see behind you may have cost you a huge amount of money with no positive ROI in sight as you shift your focus to the windshield and the road ahead.
If Communism Failed, Why do Software Vendors Continue to Embrace It?
With the winter games taking place in the former Soviet Union this month, it got me thinking about “Software Communism” – the practice of central planning by a single vendor that prevents the users from ever leaving. At the AHR Expo in NYC, I met with more than one prospect that was irate because he was being held hostage by their current software vendor, while there were others that had bought into the vendor’s utopian pitch of “a job for every worker and a chicken in every pot.”
The basic premise of communism was that a central committee planning for the needs of the state’s constituents would be far more effective in meeting those needs than the free flowing chaos of free markets and democracy. When it did not work out for anyone but the central planners who enriched themselves via corruption and graft, the state erected large fences to prevent the citizens from leaving. Longing for the innovations produced by free market commerce was a crime, and fleeing to a better situation was punishable by death.
I think of these failed communism experiments when I see software vendors promoting the premise that only through a single software package can you achieve effective business outcomes, or when I see a failing vendor erecting “high fences” (i.e. holding customer data hostage) to prevent mass exodus. Fortunately, the failure of state communism plus the success of free markets tells us how Software Communism will ultimately end – software that enables innovations by interoperating easily across multiple vendors will win, and Software Communism will be a part of history that is conveniently omitted from the timeline during the software olympics opening ceremonies (should such a thing as software olympics ever come into existence).
At ServiceTrade, we use Salesforce.com, Marketo, Google Apps, and Echosign, among others. Each sends or receives data from the other seamlessly thanks to Application Programming Interfaces (APIs). We get to enjoy the terrific innovations and features that each offers without feeling burdened by high walls siloing off the data each application holds. The idea that any one vendor will deliver every innovation you need to run your business is silliness anyway; no company is big enough or smart enough to do everything and do it well.
Even the biggest symbols of Software Communism (i.e. Oracle, IBM, SAP) are slowly being dismantled by free market innovations and yielding to the requirements for free flowing innovation. Now, companies like Salesforce, Google, and ServiceTrade are showing the way for customers to have the innovations they want no matter where they originate.
So as you think about your next software purchase, don’t be sold by the theoretical allure of Software Communism. It did not work for state planning and it does not work for software planning either. Look for the best features and value and then ask “How easy is it to integrate your application with others?” The correct answer is “It is not hard because we offer a rich set of APIs for you or your integrator to do what works for your business.” If the answer comes back “The only way to get great software features is through central planning by a single vendor,” then you should run the other way…towards software freedom.
