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Posted on Thursday, October 3rd, 2013 by

Gene Austin

After several false starts, Microsoft, IBM and other technology firms are finally delivering software for small business owners and entrepreneurs.

When it comes to small-business software, Gene Austin has huge expectations.

Austin is general manger of the Fischer Group, a small marketing firm in Orange, Calif., that has fewer than 50 employees. The company represents major manufacturers of commercial foodservice equipment, such as Hamilton Beach and Reynolds Food Packaging (an Alcoa company). In 2003, The Fischer Group was seeking a software platform that would let the company’s sales team collaborate more effectively with partners and customers. Austin turned to Microsoft Corp. for an answer and deployed the software giant’s Small Business Server (SBS) package, which starts at $599 for a five-user license. SBS runs on standard server hardware from Dell Inc., IBM Corp., Hewlett-Packard Co. and other PC makers, and includes e-mail, database and Internet software. The complete package, bundled with the Windows Server 2003 operating system, is designed for businesses with 75 or fewer employees.

Although it is tailored for small businesses, SBS closely resembles Microsoft’s more advanced software packages for large enterprises. The built-in database, known as SQL Server, is widely deployed by Fortune 500 retailers. And the e-mail package, Exchange Server, is the most popular messaging system within corporate America.

Software companies spent much of the 1990s trying to tailor their enterprise products for small business. The results were mixed because of rushed product deadlines and the strain to serve small, midsize and enterprise customers equally.

After several false starts, small-business software packages from Microsoft, IBM Corp., Novell Inc., Red Hat Inc. and other technology companies are finally leveling the playing field between small and large companies. At the Fischer Group, for instance, employees use SBS’s built-in collaboration software, known as SharePoint, to find, share and edit documents with fellow employees. “We estimate that improvements in inside and outside sales productivity, combined with direct employee cost savings, will generate an additional $315,000 to the bottom line,” asserts Austin.

 

Finding the right small-business software package isn’t easy. Many entrepreneurs can become overwhelmed by the lengthy list of options in the marketplace.

Booting Up

Plenty of small businesses are embracing similar software packages. Indeed, global spending on information technology (IT) by small businesses will rise about 11.4 percent in 2005—easily outpacing the 3-percent IT spending increase in large enterprises, predicts the Meta Group Inc., a technology research firm in Stamford, Conn. Overall, U.S. small businesses spend about $90 billion on IT products and services each year, according to AMI-Partners, a market research firm in New York that tracks small businesses. And according to a mid-2004 survey by the National Small Business Association (NSBA), seven of 10 small businesses have taken advantage of new tax incentives (specifically, a 2003 revision to Section 179 of the tax code) to invest in technology. “The sweet spot of the software market is small business,” says Craig Plunkett, a technology consultant in East Northport, N.Y., who assists small retailers with their IT needs.

Still, finding the right small-business software package isn’t easy. Many entrepreneurs can become overwhelmed by the lengthy list of options in the marketplace. Others aren’t willing to spend $500 or more per employee to license server-based software packages. And most small businesses don’t have a full-time technology expert onboard to conduct software evaluations and make purchasing decisions. “Entrepreneurs want to run their businesses, not test software,” says Jill Cherveny-Keough, director of academic computing at the New York Institute of Technology (NYIT), which has an MBA program for entrepreneurs. “They don’t have time to really look under the hood when they’re mulling a software-buying decision.”

As a result, many small-business software packages have struggled to gain traction with customers. Established enterprise software providers—such as IBM, Microsoft, Novell Inc., Oracle and Red Hat—have spent years developing, refining and marketing software for small businesses. But for every Intuit Corp.—the No. 1 provider of financial applications for small businesses—there are dozens of rivals that never escaped niche status. “Small businesses require ease of use, low cost and credible consultants who can install and configure the system,” says Clayton Banks, president of Ember Media Inc., a multimedia software company in Manhattan that serves large enterprises and small businesses. “But that formula for success is easier said than done.”

 

Ron Pasquini, founder of Pasquini Landscapes in Smithtown, N.Y.

Lessons Learned

Just ask Microsoft. SBS, now in its third generation, initially struggled to gain credibility with small-business owners. Upon its debut in 1999, many customers didn’t understand the difference between SBS and Microsoft’s software packages for large enterprises. Further complicating matters, SBS’s initial release was limited to 25 users—far too low a figure for many small businesses (such as residential real estate companies, insurance firms and retailers) that typically have dozens of part-time workers.

Microsoft took customers’ constructive criticism to heart. In recent years, the company has revamped SBS to support up to 75 users, and has trained more than 47,000 technology partners to install, configure and troubleshoot SBS for small businesses that lack dedicated technology managers. “It was a real learning process for Microsoft,” recalls Ron Pasquini, founder of Pasquini Landscapes in Smithtown, N.Y. “They went back to the drawing board multiple times to make SBS a better fit for small businesses.”

Microsoft’s small-business rivals have suffered from similar growing pains. IBM spent the mid-1990s promoting a niche operating system, dubbed OS/2 Warp, to consumers and small-business owners who wanted Internet access. But when Warp sales stalled, IBM retrenched and regrouped. The company now promotes “Express” versions of its enterprise applications to small businesses. These include Express versions of Lotus Notes e-mail, DB2 database and WebSphere Internet software packages. Separately, IBM has partnered with PeopleSoft to recruit and train partners who can install Linux-based software for small businesses. The effort, announced in May, includes software for small manufacturing companies.

IBM is also helping small businesses to safeguard their software. The company’s Desktop Management Services, for instance, continually update small-business PCs with the latest security settings. At $40 per user per month, the service may be too expensive for tiny businesses. But some small businesses claim the service actually saves them money. Such is the case at Randstad Employment Bureau in the United Kingdom.

“IBM’s capacity to reach all of our 100 UK locations and 400 staff with its on-demand Desktop Management Service means that we can expect to reduce our yearly IT … management costs by approximately 40 percent,” says Patrick Green, director of business services at Randstad. “We also hope to be able to open new offices much more quickly, since we can now leave all the associated IT installation issues to IBM.”

 

Software Pacages for Small Businesses

Company: Microsoft Corp.
Product: Small Business Server
Strengths: Includes e-mail, database and Internet software for Windows Server 2003
Challenges: Doesn’t scale beyond 75 users; often requires a third-party expert (such as a reseller or technology integrator) to deploy and configure
Price: Starts at $599 for 5 users
Info: www.microsoft.com/sbs
Company: Novell Inc.
Product: Small Business Suite 6.5
Strengths: Very reliable package that includes e-mail, scheduling and networking software
Challenges: Based on NetWare, an operating system that’s difficult for novices to configure
Price: Starts at $475 for 5 users
Info: www.novell.comCompany: IBM Corp.
Product: “Express” software packages
Strengths: Redesigned versions of IBM’s e-mail, database and Web software for small businesses
Challenges: IBM’s history as a small-business software provider is mixed at best
Price: Varies; typically starts at $500
Info: www.ibm.comCompany: NetSuite Inc.
Product: Online Internet applications
Strengths: Instead of licensing and deploying software, small businesses merely use a Web browser to access secure online applications
Challenges: At $49 per user per month, cost could be prohibitive for very small companies.
Info: www.netsuite.com

Remember Novell?

Local area network pioneer Novell Inc. has also revamped its small business software lineup. During the 1990s, the company aggressively promoted NetWare, a server operating system, as an ideal tool for sharing printers and files across a small network. Unfortunately, NetWare was difficult to install and it couldn’t run many e-mail and Internet applications. By the late 1990s, then Novell CEO Eric Schmidt (now chairman of Google) conceded that Novell didn’t have a viable alternative to Microsoft in the small-business
market.

Today, Novell’s small-business strategy is markedly improved. Novell, through alliances with HP and IBM, now sells a variant of Linux, the open-source operating system, to small businesses. Novell has also launched an integrated package, known as Small Business Suite 6.5, that provides e-mail, scheduling, security, Web server and network management software for up to 100 small business users. The package costs $475 for up to five users and $252 for each additional five users.

Eager adopters include Joe Cook, owner of Cook’s Computer & Software Service in Broken Bow, Okla. “The need for network reliability, security and return on investment is not limited to big corporations,” says Cook. “Novell is giving my customers the tools they need to stay ahead.”

The Internet Way

Still, not all businesses want to purchase, install and configure small- business software. Instead, many entrepreneurs are turning to so-called application service providers (ASPs) for help. ASPs such as Salesforce.com and NetSuite Inc. host software on the Internet. Rather than buying servers and software outright, interested customers can pay a monthly fee to access and use the online applications, with the aid of a standard Web browser and high-speed Internet connection.

NetSuite, for instance, offers Internet- based applications that manage sales, contacts, financials and e-commerce systems for small businesses. The system, priced at $99 per month for the first user and $49 for each additional user per month, is based on Oracle Corp.’s Small Business Suite. In fact, San Mateo-based NetSuite and database giant Oracle are close business partners.

NetSuite promotes its online software to small businesses that are currently running Intuit’s QuickBooks software package. QuickBooks supports up to 10 users and tracks up to 29,000 customers. But many small businesses need to push well beyond those limits.

Such is the case at Home America Lending, a Santa Ana, Calif.-based mortgage lending company. “We switched from QuickBooks to NetSuite for … extensive accounting functionality we needed today [plus] expanded features like customer relationship management that we could tap in the future,” says Hossein Pourmand, CFO of Home America Lending America.

The ASP model offers several advantages for small businesses. SMB owners don’t have to pay for hardware or software upgrades. Instead, they pay a monthly subscription fee, similar to fees that cable and telephone companies charge for broadband service. Also important, SMBs don’t have to hire technicians to manage the online applications.

Of course, turning to an ASP for small-business software also involves some risks. Many ASPs imploded during the dot-com downturn, running out of cash and closing for business, leaving distressed customers stranded. In order to avoid such setbacks, small-business owners should have their attorneys carefully review proposed contracts with ASPs. The contract should describe what happens to customer data if the ASP shuts down, among other factors.

The True Price of Software

Of course, price is one of the top considerations whenever a small business evaluates software. In addition to software licensing costs, small businesses should expect to pay at least $50 to $100 per hour for a technology partner (known as an integrator or IT reseller) to install and configure applications. In many cases, an application (such as an e-mail system) can require a day or less to configure. Other software packages, such as CRM (customer relationship management), can require as much as a week to get just right.

With that in mind, many small businesses are adopting Linux, the low-cost operating system that’s also freely available on the Internet. Despite Linux’s reputation for reliability, the operating system often doesn’t run key small business applications—particularly accounting software—that were first designed for Windows. As a result, some companies that kicked Linux’s tires are returning to Windows.

“Cost was certainly a consideration when we started to evaluate systems, and a no-cost operating system certainly seemed attractive,” says Frank Assali, founder and president of the California Grown Nut Company. “However, when we started looking at the real cost of the applications and services we required, and looked at our five-year plan for expanding our network, then Linux suddenly didn’t look like such a good deal.” In particular, many of the programs that California Grown Nut Company required didn’t work with Linux, meaning that the company would have had to pay a consultant to migrate Windows-related software to Linux.

Either way, small businesses finally have no shortage of software options.

 

The Choice Is Yours 
More software vendors are targeting their products specifically to small businesses than ever before. Following is a sampling of some of these providers plus a summary of what they offer.
AdvanceWare Solutions: Inventory Management Software
www.advanceware.net
Supplies inventory and order management software to small and mid-sized companies. Synchronizes with QuickBooks accounting and offers a money-back guarantee.
BrainStorm Concepts: Mail Order Software
www.stormplus.com
Provides StormPlus software for accounting, sales order and POS management for small to mid-sized retail, wholesale and distribution firms.CORESense: Small Business Retail Software
www.coresense.com
Delivers integrated retail software to manage POS, eCommerce, eBay, call enter, CRM, product catalog, inventory, order fulfillment and suppliers.Envision SBS: Small Business Document Software
www.envision-sbs.com
Offers Business-in-a-Box business document template software. Includes legal forms, letters, contracts, policies, spreadsheets and more.iCode: Small Business Software
www.icode.com
Management software for small businesses with accounting, inventory, ecommerce, POS, sales, shipping, customer service functions and more.NetLedger: Small Business Application
https://system.netledger.com
Offers the Oracle Small Business Suite, a Web-based application featuring accounting, CRM, employee management and Web development functions.NetSuite: Small Business Solution
www.netsuite.com
NetSuite offers an integrated online small business application with accounting, ecommerce, sales, inventory, shipping and support.PC Innovations: Mail Order Software
www.pcinn.com
Provides software to run a mail order or Internet-based business. Software includes order entry, credit card processing and UPS shipping support.Qualte: Small Business Software
www.qualte.com
Provides scalable, hosted e-customer service applications designed for rapid implementation, quick response times and maximized customer retention.

Salesforce.com: CRM for Small Business
www.salesforce.com
Offers an integrated suite of software to manage all sales, marketing, forecasting, analysis, contacts, reporting and lead tracking functions.

Topica Email Publisher: Small Business Software
www.email-publisher.com
Provides small business marketing solutions. Includes Web-based subscription guidance for marketing leads, audience segmentation, and email newsletter design.

Turtle Creek Software: Goldenseal Small Business Software
www.turtlesoft.com
Integrated software for small business accounting, cost estimates and project management. Available for Mac and Windows-based users.

Wells Fargo: Small Business Software
http://adfarm.mediaplex.com
Provides small business software and services, including bill payment, checking, savings, credit cards, loans and merchant card processing.

Xencoders: Small Business Solution
www.xencoders.com
Increase sales and provide instant customer service with ChatAnywhere, a Web-based online sales, marketing and customer service solution.

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