The case for Web-based software applications for SMEs

My friend Janette Toral  sent me an invitation to the Digital Filipino One Internet Day, Digital Filipino's anniversary celebration. You can expect Janette to write about One Internet Day anytime soon if she hasn't yet so I won’t go into the details. Suffice it to say that I had a blast reuniting with people I hadn’t seen in years, like since the last century. I’m bound to forget all those I met, so I’ll not even try to list them all down.

What I would like to do is address the issue that Erville Magtubo of ePLDT raised in his presentation about IT outsourcing as an option for SMEs. I won't reproduce his points here, nor will I ask again the questions that gave him a cold sweat. Instead, I’ll zero in on the outsourcing possibilities, especially in regard to the managed — i.e., Web-based — applications he mentioned:

• Outsourced CRM [Customer Relations Management]
• Outsourced SFA [Sales Force Automation]
• Outsourced Financial Applications
• Outsourced ERP [Enterprise Resource Planning]
• Outsourced School System

The good news is that the potential outsourcing service provider can choose from a wide variety of software suites and stand-alone applications, depending on what the customer needs. Many of those suites and applications are Free Software too.

A service provider, of course, faces a few challenges, foremost of which is selling the concept to potential customers. For instance, history may be against them. I’d like to think that a significant number of SMEs have tried computerizing their operations, mainly through contract programmers, and these projects were, to put it bluntly, disasters. My presentation on OpenRules at the recent Philippine Open Source Conference (PhilOSC) began with a graphic from Forrester Research depicting the level of IT project satisfaction at 500 large enterprises. You can pick up a copy of that presentation as either an Open Document Presentation (.ODP) or a PDF. As an aside, Business Rules Management (BRM) is a modeling technique that hopes to result in higher IT satisfaction by, among other things, involving business users more closely during the specification phase using tools they already know (e.g., Excel spreadsheets).

Second, the SME may need to adjust their systems and procedures to conform to the service provider’s software. In fact, this may be true even of larger enterprises deploying any of the systems Erville mentioned. It may be a matter of choosing one’s poison: adjusting systems and procedures, or rewriting portions of the system, if it's even possible in the first place. I did a case study on an ERP system deployment several years back, and the customer called it “swallowing a bitter pill.” By and large, though, despite that “bitter pill”, the customer was satisfied with the outcome of the deployment.

The third and possibly most serious challenge involves trust: Would an SME owner be comfortable with the thought that their data and processes are in the hands of another company? I’m not referring to the technical issues — server security, bandwidth stability, and others, since ensuring server availability and reliability isn’t exactly rocket science. No, hosted application providers have to convince their customers that they won’t misuse the latter’s data. Moreover, customers also need the assurance that their data and their accessibility to it won't depend on their provider's survival.

Let's address these challenges and attempt some measure of resolution.

An off-the-shelf enterprise software suite should obviate the need for development. However, these suites are as a rule large multi-gigabyte monsters that were designed with all business possibilities in mind; the less charitable may call them “bloated”. And  that's a strong argument for a Web-based hosted application: let the application service provider absorb the “bloat”. They can also take care of the maintenance of both the hardware and the software — both of which they are qualified to handle. Furthermore, it makes sense especially for a small-or-medium enterprise to outsource their applications — after all, even large enterprises as a rule don't have in-house electrical or water facilities but rely on outside providers. In any event, accessing and enterprise suite through the Web from an application service provider will relieve the SME from the onus of software and database maintenance.

Of course, since the suite is off-the-shelf, an SME user may need to adjust their systems and procedures to conform with the suite. The alternative would be to rewrite portions of the software, if it's possible — and we’re back to the expensive, customized software model which has largely led to disaster. Adjusting systems and procedures is akin to transportation: the mass public transport system is much cheaper than personal transport (e.g., a car or even a taxi) but you do have to make several adjustments when you take a bus or the MRT. You have to endure the long lines for your ticket (even a “loaded” ticket, once you run out of credits). You have to squeeze in among a multitude of fellow commuters. You have to walk or take another ride to your destination. You're at the mercy of station stops. However, it is cheaper, both in the short and the long run.

Lastly, and possibly of prime importance: the issue of trust. I can write a fairly long post on this, but suffice it to say that it boils down to a matter of ownership. And I leave the rest as an exercise for the reader.

Further reading: InfoWorld special report on “How you will pay for software?”