12 Small Business Cloud ERP & Accounting Software Buying Traps & How To Avoid Them VersAccounts Best Practices Series White Paper Contact Us: North America: +1 855 445 2281 Europe: +353 1 6855088 By: Sunil Pande, CEO VersAccounts Limited sunil.pande@versaccounts.com October 2014 Discuss This White Paper at VersAccounts This White Paper is for informational purposes only. VERSACCOUNTS MAKES NO WARRANTIES, EXPRESS OR IMPLIED, IN THIS WHITE PAPER. VersAccounts cannot be responsible for errors in typography or photography. Copyright 2014 VersAccounts Limited. All rights reserved. Reproduction in any manner whatsoever without the express written permission of VersAccounts Limited is strictly forbidden. For more information, contact VersAccounts. Information in this document is subject to change without notice. October 2014 Page 1 Copyright VersAccounts 2014
Contents A Personal Message... 3 Overview... 5 Price & Terms First... 9 Focus It Is Always About The Vendor - Not the Software... 10 Users and Modules... 14 Usage... 15 SaaS vs On-premise Subscription Tomato/Tomato... 16 Growth, The Last Straw... 19 Nickle & Dime Death by a Thousand Cuts... 22 Support... 23 Implementation... 24 Training... 25 Price Guarantee... 26 The Future... 27 October 2014 Page 2 Copyright VersAccounts 2014
Section 1 A Personal Message Dear Reader: Thanks for downloading and reading this VersAccounts Best Practices White Paper. My name is Sunil Pande and I am the CEO of VersAccounts, a new born in the cloud business software company that offers a 100% Mobile Cloud ERP system to Small and Medium Sized (SMBs) Businesses globally. With over 20 years each invested in developing and delivering business software to a broad spectrum of customers from global Fortune 500 companies to small micro businesses, my team and I at VersAccounts have developed definite ideas around what works and what does not. How things should be and how they should not. This White Paper like VersAccounts is a result of these learnings. In our minds it is out with the old ways of doing business and in with the new. Buying business software today is a confusing, difficult, adversarial, unpleasant, and an exhausting experience. VersAccounts wants to change that. But it won t happen overnight. Old habits die hard in an industry for which the old ways of doing business have worked well for decades. So, in the meantime, this White Paper and others like it in the VersAccounts Best Practices series have been written to give business software buyers like you, some of the tools you need to educate and even protect yourself as you set out to purchase your next Accounting or ERP package. Our goal with this White Paper, October 2014 Page 3 Copyright VersAccounts 2014
which is part of the VersAccounts Best Practices Series, is to make that process of selecting, buying, implementing, and using the software you need shorter, simpler, more enjoyable, less stressful and ultimately less expensive than it might be otherwise. Of course, this not an entirely selfless exercise. While I promise that the White Paper will not be a shameless advertisement for VersAccounts, that the contents will actually be useful to you, I do want to hear from you if you are in the market for an ERP system for your small or medium size business. We know that VersAccounts is a great solution for many SMBs across the globe, and we hope you will consider evaluating it for your business as well. I would also like to hear from you on what you thought of this White Paper and how it could be improved in the next revision. Please join the discussion at VersAccounts Finally if you are already considering an Accounting or ERP solution other than VersAccounts and would like to discuss a particular issue related to that purchase feel free to give me a call. I will be happy to spend 15 minutes on the phone and give you my point of view and make a friend. I promise not to try and change your mind or derail your plans. Regards Sunil Email: sunil.pande@versaccounts.com Twitter: @sunilpande Phone: +1 855 445 2281 Ext 701 October 2014 Page 4 Copyright VersAccounts 2014
Section 2 Overview Buying an Enterprise Resource Planning (ERP) or Accounting system can be complicated. It should not be, but unfortunately the industry has chosen to make it so. So it is. This is even truer for many small business buyers who are looking to upgrade from the basic Accounting system that they currently have to something more substantial like an ERP. Consider the story of Julie (name changed to protect the exhausted). It was 2001. She had been running her light manufacturing job-shop cum distribution business for a few years using spreadsheets and email. It was hard to continue this way. She needed an Accounting system. She asked her accountant to recommend one. Talked to friends. Everyone suggested the leading small business Accounting package. So she drove down to the mall and purchased a copy. Bought a computer as well. Her accountant came over and set it up for her. A few days of training and away she went. Selecting, implementing and learning how to use the new Accounting package took some effort. But in the end it was easy enough. Especially compared to what she faces today. Over the years the business has grown. Julie and her staff have learnt more about the different features available in their Accounting software and applied them to the business. They have found workarounds when the features did not work as they would have liked or when the feature did not exist at all. October 2014 Page 5 Copyright VersAccounts 2014
They have purchased additional software packages and learnt how to transfer information between packages so that they could use them together including an Inventory Management package and a Point of Sale (POS) system. They have built spreadsheets. They use email to transfer files. There are manual processes in place to take care of what the software won t. Now several years later the Accounting system that has served them well all this time has to be replaced. Their needs have outgrown the capabilities of the basic Accounting system that they have and the other systems they have connected to it. It is time to look for something more capable. More integrated. Like an ERP system. An ERP so they can get rid of those spreadsheets and manual processes that take up large amounts of time and introduce errors that are hurting the business. That are getting in the way of the company s growth. Time to implement a comprehensive system that automates all aspects of the business in a single package. So all the information is available to everyone, from any module at any time. So mistakes are minimized. So that no one forgets what has to be done. So Julie talked to her friends, did Google searches and educated herself on what was available. She listed product features that she needed in a spreadsheet, and marked what was available from each vendor based on the documentation she could find on their website. She shortlisted a set of vendors based on her research. Then asked them to come in and present their solutions. They discussed requirements, gave presentations and product demonstrations. Finally she settled on a vendor and their solution. Then she asked for a quote. Sticker shock!! October 2014 Page 6 Copyright VersAccounts 2014
It was way beyond her budget! The price on the vendor s website said that the product was offered for $79/user/month. Turns out it was not the whole story. So she went back to the vendor and confronted them. There was an explanation of course. So much mumbo jumbo. Julie s head wanted to explode! What should she do now? Maybe she should bite the bullet and make the purchase because she has already spent 6 months and untold hours on the search? Reduce the number of users she purchased now, suggested the vendor. Buy only the modules she needs now, and leave the rest for later? Skip the 24x7x365 support, and just buy the basic 9-5 weekdays with a limit of 5 calls per year. Basically, give up everything that made the solution stand out from the rest and look attractive in the first place. Julie is exhausted and just wants the system in place so she can return to what is important. Running her business. Go back to another vendor? What s the point she thinks? They are all the same. Mostly true, but not entirely. But that is a whole different conversation. Maybe another White Paper in the future The purpose of this White Paper is to make sure you as a small business owner are never in the position that Julie finds herself in. The unfortunate fact is that buying anything more sophisticated than an entry-level Accounting system is a long and tedious process. It hasn t changed since business software was invented. VersAccounts mission is to change this. To make the process easy, transparent and predictable. To make the outcome fair. A win-win for everyone. October 2014 Page 7 Copyright VersAccounts 2014
However till that happens it is our hope that this White Paper will help make the process of selecting an Accounting or ERP package for your business a little easier. Regardless of whether the solution you choose is from VersAccounts or someone else. October 2014 Page 8 Copyright VersAccounts 2014
Section 3 Price & Terms First Get to the price as soon as possible. Do not let the vendor pass GO. Do not let the vendor collect $200. Unless you have a firm price in your hand. No presentations. No demonstrations. Nothing. Until you have a PRICE. And TERMS. It is not hard. Tell the vendor what you do in your business. How you work. The challenges you face. What you like about your system today. What you don t like. What you want to be able to do in the future. Let them engage with you to collect requirements. In fact welcome that. You want to do business with a vendor who takes the time to understand your business requirements and will tailor their solution to your needs. The vendor can get to a price pretty quickly. They do this all the time. Everyday. They have to. Ask them for the number they are reporting up the chain to the sales manager as the potential opportunity. And ask how they break it out. Ask the vendor to explain their pricing up front. To give you a copy of their price list. Ask them for a copy of the contract that you will eventually sign if you select them. Examine it for any potential gotchas. Ask the vendor if they will remove or modify them. October 2014 Page 9 Copyright VersAccounts 2014
Section 4 Focus It Is Always About The Vendor - Not the Software Getting the Price & Terms discussion out of the way early is key to making sure you don t waste your time. It is key to eliminating solutions that you cannot afford and hence should not consider. And it is key to finding the right solution for your situation quickly. Another important consideration in choosing the right solution is to make sure that you understand that the solution is not just the software. Software is part of it. But there is a lot more. The services that are required to put the software in. To train you and your staff on how to use it. To support you when that is required. The willingness of the vendor to make changes to the software when you need those. Or add new functionality. How easy it is to deal with the vendor. How reasonable are the vendor s responses? How quick? How about charges for services? These are all part of the solution. In short the solution is everything that is needed to make sure that the software works well for you in every situation that you may find yourself. So in the end the solution is the vendor. Your focus has to be on the vendor you are signing up with? How flexible are they to work with? How interested are they in in making sure you have the right solution? Will they work with you to meet your needs? Software is becoming a commodity. Most packages have more or less the same capabilities. Don t fall into the trap of buying capabilities. Your needs will evolve over time. Make sure you have signed up with a vendor who will be October 2014 Page 10 Copyright VersAccounts 2014
respond to changes in your needs and deliver the solutions you need. The selection process should give you a good feel for the kind of vendor you are dealing with. If you have doubts about working with the vendor then eliminate them. It really does not matter that their package has the features you need today. Today should not be your frame of reference. Today is not your tomorrow. You have plans for your business. You plan to be in business for a long time. Make sure you select a worthy partner. Make sure your partner is easy to do business with. Is responsive. Today and in the future. October 2014 Page 11 Copyright VersAccounts 2014
Section 5 The ROI Trap It s Affordability before ROI So you have a price and terms from the vendor. You are stunned. The vendor can see this. But he is not worried. He has been through this before. You have invested a substantial amount of your time and resources getting here. You just want to get the process over with. He just needs to give you the reason. And He can. This is when the vendor pulls out the old ROI card. It is usually in the form of a spreadsheet. You plug in what you spend today on various aspects of your business and it shows you what you will save if you put the software in. The savings are always substantially larger than what the software costs. What a deal. Doesn t everyone want to save money? I am reminded of a comment my wife made a few years ago while we watched an ad for a Mercedes. She said I get it, let us buy 2 of those and with the savings we can buy a Honda Accord as well. So don t be fooled. Of course you understand the need for a new ERP solution. You have worked out the benefits. You know the impact it will have on your business. You don t need some vendor with a generic ROI calculator to tell you about ROI. The point is that it is about AFFORDABILITY first and foremost. First and foremost you have to be able to afford it. Then you can determine if it is worth it. October 2014 Page 12 Copyright VersAccounts 2014
Nail down the price. Make sure the solution is within your budget. Then you can have the vendor help you with determining ROI and if the solution is right for you. October 2014 Page 13 Copyright VersAccounts 2014
Section 6 Users and Modules It seems like software vendors like car dealers can make anything complicated. So you thought it was $79 per user to buy the product. Oh wait a minute. It is and it is not. You have to buy a minimum of 25 users? And by the way you also have to pay by the module? Make sure you understand how the software is priced based on how many users you will have on the system, what they will do. Never answer the question How many Users will you need? or What Modules do you want?. Rather invite the vendor to tell you what you will need based on their understanding of your business. Invite them to learn about your business. Describe you workflows. Speak in your language. Then let them translate into their language and give you a price.. October 2014 Page 14 Copyright VersAccounts 2014
Section 7 Usage Some vendors price by usage rather than users and modules. Buying against a usage based contract is a bad idea in my opinion. I like predictability if I am running a business. I also prefer fixed rate mortgages over variable. I also don t want the hassle of trying to figure out if the vendor s calculation of usage is correct. Or trying to dispute it if I don t agree. However, usage based pricing may be an option that works for some businesses, so if this is something you prefer, be sure to ask the vendor it they offer such an option. If they do ask them how they track it, what kind of visibility you will have into the tracking and how they might handle disputes. October 2014 Page 15 Copyright VersAccounts 2014
Section 8 SaaS vs On-premise Subscription Tomato/Tomato Subscription pricing was made popular by the so called born in the cloud Software as a Service (SaaS) software vendors who entered the market in the late 1990 s. Instead of paying up front for the software then paying for support and upgrades on a yearly basis, subscription pricing allowed customers to just pay a monthly fee for the software and support in one payment. No up-front lump sum payment was required. Over time subscription prices evolved to the point where vendors would quote a monthly fee but required payment annually. In response to subscription pricing from SaaS vendors the existing vendors of Heritage On-premise client/server software also made their offerings available for a monthly subscription fee. This confused matters. Because SaaS subscription and Heritage On-premise subscription are typically not the same. The subscription pricing offered by SaaS vendors includes hosting of the application by them as well as support. The subscription pricing offered for Heritage On-premise products usually does not. Hosting is additional and support may be as well. October 2014 Page 16 Copyright VersAccounts 2014
The graphic that follows shows a common mistake that customers make when comparing the subscription pricing for SaaS and Onpremise products. On the one hand the diagram plots the subscription pricing for a popular On-premise ERP system from Vendor M. This pricing does not reflect what it costs to host and run the ERP system, nor the price of a support contract. The subscription price in this case only includes the cost of the ERP software. On the other hand the diagram also plots the subscription pricing for a SaaS product like VersAccounts Cloud ERP for Small Business. This subscription price does include hosting by VersAccounts and 24x7x365 support. Understanding what the subscription pricing from different vendors includes is important. Subscription offerings are rarely the same from vendor to vendor. To further complicate the comparison between SaaS subscription pricing and On-premise subscription pricing is the fact that hosting of On-premise solution when available is usually from a vendor other than the supplier of the software package. Which makes it necessary to deal with 2 different parties when there is a problem and also have support contracts with the two different parties. October 2014 Page 17 Copyright VersAccounts 2014
The following two diagrams should make te difference between SaaS and On-premise subscriptions even clearer. They compare pricing between VersAccounts Cloud ERP for Small Business and a solution from Vendor IQE. The pricing seems comparable until you realize that Vendor IQEs subscription does not include hosting or support. Fortunately Vendor IQE has a separate subscription offering that does include hosting and support. Plotting that in the picture below may paint an entirely different picture with respect to the viability of the solution for a particular customer. October 2014 Page 18 Copyright VersAccounts 2014
Section 9 Growth, The Last Straw Most businesses plan to grow. So making sure you understand what will happen to your ERP system related costs as you grow is very important. You would not want the very Accounting or ERP you purchased to enable that growth, become the millstone around your neck that impedes it. How the system you are purchasing scales to support your growth is not necessarily something vendors like to discuss. So you will have to bring it up. In many case vendors have special pricing to win your initial business with a few users and a few key modules. Then as your usage expands, you suddenly realize that the expense to support that expansion will be enormous and maybe even infeasible to sustain. October 2014 Page 19 Copyright VersAccounts 2014
For example in the case of Vendor A below, a SaaS ERP vendor, it would be important to understand that even though they don t charge for the number of users you put on the system as you grow, using more of the system beyond core financials, say, could cost you 2 to 4 times what you what you were paying for just financials. In another example, consider Vendor I who offers an attractive getting started package for $499/month for 3 users to use the financial module. The goal is to make it easy for small businesses currently using an entry level Accounting package to transition to a more robust financial system that is cloud based. October 2014 Page 20 Copyright VersAccounts 2014
However, growth would be expensive with this vendor as well and should be taken into consideration when comparing their offering to other solutions. In fact, getting started with a few users is usually very affordable with most Accounting and ERP systems in the market. And the price is almost the same. However growing with them can be a challenge if not impossible.. October 2014 Page 21 Copyright VersAccounts 2014
Section10 Nickle & Dime Death by a Thousand Cuts Getting a greater share of wallet is the game that all vendors are playing. So finding creative ways to get a little extra from the customer seems to be a full time job for many working for the software vendor. So expect to be charged extra for integrating with the ERP application via the Application Programming Interfaces (API). This charge could be by activity or by the number and type of applications the ERP system is integrated with. As you can imagine this could get expensive very fast. Another favorite is charging for import and export of data. You would likely find these charges and a whole lot more if you could get a look at the vendor s price list. It does not have to be that way. Make sure you know what these charges might be and negotiate them into your contract before you sign up for the vendor s product. That is when you have the most leverage. October 2014 Page 22 Copyright VersAccounts 2014
Section11 Support You run a business. Your system is down and you need support. Are you willing to wait till the next working day? Are your customers willing to wait? Are your suppliers? Does your support contract with the vendor limit the number of calls you can make in a year, a month, a week? Is the vendor s support so limited that you need to enter into a separate contract with a consultant (maybe your accountant or the solution partner who installed your system for you). Support is one area that is often neglected during the process of vendor selection. This could hurt you. There is usually a large price to pay to get the support you need in place after you have already selected the vendor. Nailing down the kind of support you need and what you will pay for it should be done up front. Get a copy of the support contract up front and make sure to scrutinize what is included and what is not. Do it as part of the price and terms discussion. Well before you spend a lot of time with the vendor. October 2014 Page 23 Copyright VersAccounts 2014
Section12 Implementation What should you pay for implementation? This is both a how much should you pay question? And also a how should you pay question? The answer to the second question usually determines the answer to the first The choices with respect to how to pay, are two. Either pay a Fixed Price for Implementation. Or pay on a Time & Materials (T&M) basis. My preference is for Fixed Price implementation contracts. Especially for smaller companies. My experience is that T&M contracts magically balloon to consume whatever budget the customer has. So they should be avoided like the plague. The objection to the T&M contract is that the customer always feels that they got less than the contracted for and the vendor always feels they delivered more than they paid for. This does not have to be the case. A simple way of making sure this does not happen is to document your requirements clearly. Or make the vendor document them for you by paying them to do a needs analysis on a Fixed Price basis. October 2014 Page 24 Copyright VersAccounts 2014
Section13 Training Training of your team at the time of software purchase is usually included in the price of implementation. But what about subsequent training? For the additional people who come on board as your company grows? Additional modules that you may implement? While not a large expense compared to others, make sure you understand what the costs for additional training will be so that you are not surprised when you need it. October 2014 Page 25 Copyright VersAccounts 2014
Section14 Price Guarantee We have left the best for last. You can afford the product you have selected this year. But will you be able to next? And the next? Before you buy make sure you are clear about how you will be protected in the future? Does the vendor offer a cap on the amount the price can be increased on you over time? Month to month? Year to year? Term to term? October 2014 Page 26 Copyright VersAccounts 2014
Appendix The Future At VersAccounts our feeling is that the pricing and packaging of ERP and accounting software sold to the small and medium sized business market has to change. It has to be made simple. It has to be made transparent. There should never be any surprises. So we have made VersAccounts pricing that way. Pricing can be found at http://www.versaccounts.com/pricing/oursimple-pricing.html It is all captured on one page October 2014 Page 27 Copyright VersAccounts 2014
Implementation is also fixed So is customization. 24x7x365 support is included and is standard. October 2014 Page 28 Copyright VersAccounts 2014