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The ROI Series – Calculating the ROI of a Technology Investment – Part 1

When an economic downturn starts to hurt, small businesses often hunker down and cut costs. But new technology solutions may be necessary for survival and growth—and they may not be as expensive as you think when you consider their return on investment (ROI). In this three-part series, we’ll review what ROI is, explain how an ROI analysis can help you save or make money, and provide guidelines for analyzing the ROI of a technology investment. Part 1: Understanding ROI There are two ways to look at the value of technology: total cost of ownership (TCO), which quantifies only the cost of a project, and ROI, which quantifies both the cost and expected benefit of the project over a specific timeframe. Traditionally, businesses have used TCO when analyzing the cost of internal infrastructure projects such as upgrading an e-mail system. But even with internal systems, ROI can be a better method: If your old e-mail system goes down, for example, your sales team can’t contact customers electronically and must spend more time making phone calls. If your employees spend two more hours on calls than they would on e-mails, you’ve actually lost money by not upgrading your e-mail system. When it comes to any non-internal technology, however, ROI has long been the gold standard. That’s because technology can drive profit growth by increasing revenue. Looking at ROI is particularly important when an economic downturn limits your budget. Indeed, an economic downturn may be the best time to assess your technology spending—because by investing wisely during a downturn, you can strengthen your future. As an example of how ROI works, consider the case of a small, high-end electronics boutique. The current point-of-sale (POS) software program is beginning to show strains from the company’s expansion and increasing inventory, and customer service issues are arising—a problem since the company’s mission is to provide exceptional customer service. The company’s owner believes implementing a new POS software program will help address these issues, but deploying it will be costly. The key question is which will cost more in the long-term: spending the money to provide a solution—or the losses the boutique will incur by not doing so? That question may be easier to ask than to answer. As important as determining ROI is, there is still little consensus about how to measure it accurately. ROI, it seems, is in the eye of the beholder. That’s because ROI has many intangibles—things that don’t show up in traditional cost-accounting methods but still maximize the economic potential of the organization, such as brand value, customer satisfaction, and patents. For example, a knowledge management system may not reduce your costs in obvious ways, so how can you justify it in a tight economy? You probably can’t if you measure ROI by asking what a project will do for your bottom line in a year. But if the new system leads different parts of your company to collaborate, which in turn produces better goods and services that lead to top-line growth, then your ROI is strong. In Part 2 of this three-part series, we’ll go into more detail about how a technology investment can provide a high ROI.Later, in Part 3, we’ll offer some guidance for conducting your own ROI analysis.

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The ROI Series – Calculating the ROI of a Technology Investment – Part 2

When an economic downturn starts to hurt, small businesses often hunker down and cut costs. But new technology solutions may be necessary for survival and growth—and they may not be as expensive as you think when you consider their return on investment (ROI). In this three-part series, we’ll review what ROI is, explain how an ROI analysis can help you save or make money, and provide guidelines for analyzing the ROI of a technology investment. Part 2: How ROI can Justify a Technology Purchase In Part 1 of this series, we examined the basics of ROI—and also noted that ROI is in the eye of the beholder because it has many intangibles. This month, we’ll go into more detail about the different ways a small business can realize a ROI on technology investments—even in an economic downturn, when the conventional wisdom is to cut expenditures. There are three ways that a technology investment can pay off: Reduced downtime. Some downtime is clearly associated with lost revenues: When your website is down, for example, revenue will be lost as a result of customers not being able to place orders. But when internal computers and networks fail, employees are idle—and this, too, could ultimately cost you money. Businesses that have upgraded and efficient IT systems, and those that have managed services vs. a break/fix model (also known as service on demand), simply have busier employees—and busier employees bring in more revenue. Increased productivity. Technology allows employees to do more work in less time. For example, a new database management application might improve timely access to accurate information (which would result in less time spent searching for data) or reduce errors (which would result in less time spent revising work or handling customer complaints). Or, a network with remote connectivity might result in less lost time when employees are traveling, Lower costs. Technology allows small businesses to spend less. For example, a new inventory management application might reduce inventory costs. A new teleconferencing system might reduce travel costs. And a new process management system might reduce headcount, which can lead to lower labor costs. Just how much could you benefit financially from a technology solution? As just one example, Microsoft surveyed 25 small businesses that used Microsoft Windows Small Business Server 2003, a network operating system that provides small businesses with secure Internet connectivity, an intranet, file and printer sharing, backup and restoration capabilities, a collaboration platform, and more.The average cost of the package was $11,650—which included $3,341 in hardware, $2,003 in software, $4,561 in installation, and $1,477 in downtime, plus incremental support. The 25 users surveyed saw a payback of total costs in just 4.9 months. The total average annual benefits were $40,409 and total three-year benefits were $121,227. The software resulted in an average ROI of 947 percent, with some companies realizing a ROI of as much as 2,000 percent. Getting at those numbers, however, may be the greatest challenge of ROI analysis. Because ROI is not one simple thing, there isn’t one simple way to measure the costs, returns, and benefits of a technology solution. In Part 3 of this series, we’ll look at the many different questions one must ask during a ROI analysis.

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How Much Ink Is Left in That Dead Cartridge?

You’ve probably had this experience: Your printer tells you it’s time to change the cartridge, but you dismiss the message and keep printing. Days or weeks later, you’re still using the same cartridge and thinking to yourself that rumors of its death were greatly exaggerated. Read the story on Entrepreneur.com…

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R-and-D Tax Credit Makes Technology Upgrades More Affordable

A one-dollar reduction in the after-tax cost of research and development creates an additional dollar of new spending in the short term and two dollars of additional spending in the long term, according to the Council of Regional Information Technology Associations (CRITA)—but what small business can afford R&D in times like these? Those who use the federal research and development (R&D) tax credit, perhaps. The R&D tax credit, first enacted under the Economic Recovery Tax Act of 1981, provides certain companies with a tax credit for R&D expenditures used to introduce new products and services, improve current products and services, or simply enhance processes. The tax credit reduces the cost of capital, thereby mitigating the risks of R&D investment and allowing companies to “push the envelope” in the development of new products and services. In other words, your company might get a tax break simply by making its products or processes better. The R&D tax credit likely applies to more companies than you think it does. Contrary to popular opinion, the tax credit is not just for scientific research done in a large laboratory setting. Thanks to recently relaxed regulations, it applies to companies of all sizes in many industries, such as manufacturing, technology, software, and engineering. Examples of small companies that could potentially use the R&D tax credit are a 10-person company that designs and manufactures disk drives for personal computers, or a five-person company that develops software for streamlining real estate companies’ billing operations. And the list goes on. Companies involved in any of the following activities may also be eligible for the R&D tax credit: Manufacturing new products, processes, or formulas Developing new, improved, or more reliable products, processes, or formulas Developing prototypes or models (including computer-generated models Designing tools, jigs, molds, or dies Applying for patents Conducting certification testing Testing new concepts and technology Trying to use new materials Acquiring new equipment Conducting environmental testingDeveloping or improving manufacturing processes Developing, implementing, or upgrading systems or software Building or improving manufacturing facilities Using outside consultants or contractors to do any of the above activities If your company is eligible, you can generally claim a 20 percent credit against your taxes for qualified expenses above a base amount. Qualified expenses include in-house costs for wages, supplies, and a percentage of any contract costs. However, you must provide certain documentation showing that your projects are not just part of the ongoing cost of doing business. That’s where the tax credit gets tricky. For example, unqualified expenses include (but are not limited to) internal-use items, such as the installation and customization of software used by your company internally. In one case, a company increased efficiency and reduced costs with an administrative software package. It claimed the R&D tax credit for the wages of its computer programmers and analysts working on the system during its installation and customization. The IRS denied the claim. If you think you may be eligible for the R&D tax credit, you may want to contact your accountant now. The credit has expired and been extended many times—most recently in October 2008, when President Bush signed into law a retroactive two-year extension of the tax credit, from January 1, 2008 through December 31, 2009. In some ways this is good news. Because it is retroactive to January 1, 2008, eligible companies can take advantage of a full year’s credit in a single quarter. However, if it’s not renewed again, you only have a year left to take advantage of the credit. Finally, note that you may also be eligible for an R&D tax credit offered by your state. Your accountant can provide you with more information.

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Why Do You Need an IT Consultant

Reading this article will help you understand the pros and cons of internal IT Staff or external IT Consultants. In today’s world you’d be hard pressed to find a company that does not use computers, the Internet, and other information technology on a daily basis. In fact, there is hardly a company that does not rely on computers and networks for its mere existence. Whether we like it or not, IT plays a significant role in every business, and if you don’t ensure that your information system is working properly, your business is at risk. Do You Really Need an IT Consultant? Since your information system is so crucial to your business, you can’t afford to compromise with its quality. Technology is a pretty complex field, and unless you are a tech guru you might not be able to handle it on your own. But even if you can, you most likely have better things to do. As a small business owner your time is spent more productively focusing on your core business activities than on desperately trying to keep your network up and running. Additionally, downtime is not cheap, and it costs far less to hire a good IT consultant to maintain your network for you than to experience the losses of downtime. You are lucky if you have not already learned the hard way that relying on amateurs in IT, medicine, law, and many other fields is very dangerous, so you will hardly want to experiment in your own company with trying to become a first-class IT expert. While there are small business owners who do have the skills (and time) to manage their network, the majority prefer to have somebody else do it for them. Keeping in mind the speed at which information technology develops, it is quite understandable that many small business owners, even if they are IT-proficient, aren’t able to keep up with this constantly changing field. Therefore, many small business owners agree that the best solution is to hire a specialist. Employ an IT Specialist Full Time — or Hire an External Consultant? After you have decided that you need to hire somebody to maintain your information system for you, the next step is to decide whether you need an in-house expert or an external consultant. Depending on your specific situation, both alternatives have their pros and cons. Hiring an in-house IT specialist — This is a good choice if you have 30-40 or more computers or use complex applications that require ongoing maintenance. However, generally speaking, hiring an in-house IT specialist is rarely the best option for small companies who don’t need the level of IT attention to justify a full-time IT expert on payroll. Having a part-time IT expert is also an option, but very often it’s difficult to find a good IT expert who is willing to work part time. Also, for many people, a part-time job is only a temporary solution until something more permanent comes along. Because of this, part-time employees often leave when you need them most. And even worse, they leave taking important information about your systems with them, so when you finally replace them, it takes the new person valuable time to become familiar with the configuration of your network and applications. Hiring an external IT consultant — This could be the better choice, and not only in terms of money. The advantage of hiring an external IT consultant is that you call them only when you need them, avoiding costly full-time salaries. Hiring an experienced and knowledgeable IT Consultant gives you the best of both worlds: part-time, highly specialized help, and the consistency and reliability of a full-time employee. However, In most cases, it’s best to have an IT Consultant on a monthly fee – and that’s certainly what our clients prefer. Companies that get out of the ”fix-it-when-it-breaks” mode of thinking benefit from relying on an experienced IT Consultant as a trusted advisor, performing preventative work and helping them plan for the future. This is known as Managed Services. What to Look for When Hiring an IT Consultant Hiring an IT consultant is not that different from hiring in-house employees, but it certainly has its advantages. To get an idea of what to look for when hiring an IT consultant, you may want to read this article . You don’t handle complex legal issues without your attorney – do you want to entrust the smooth functioning of your business to chance or unqualified hobbyists? What Next? Review your business plans, and determine if you are happy with your current IT capabilities and performance. Talk to other businesses and associates and learn how they are using IT to better manage their business. Get their recommendations for IT Consultants and interview a few until you find one that meets your needs and standards.

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How to Choose an IT Consultant

In business today the choice of a technology advisor can be a critical success factor in this article you’ll learn how to make the right choice. Maintaining your small company network in good shape is not an easy task, and you are probably perfectly aware that doing it on your own is not the best way to invest your time. When you want to hire somebody to maintain your company network for you, basically you have two choices – to employ somebody onsite (as a full-time or part-time employee) or to outsource the task to an external IT Consultant . After you have decided that your small company does not need onsite IT staff and you will need an IT Consultant, the next step is to choose one. Choosing an IT Consultant is not so different from choosing an onsite employee, but still there are specifics you need to be aware of. Sometimes this task is a very easy one when you can ask your business associates to recommend somebody. But if you want to choose the IT consultant on your own, here are some points to consider: 5 Key Steps in Choosing an IT Consultant Technical competencies . Needless to say, this is the most important factor because if you hire somebody whose technical competency is not satisfactory, this will certainly lead to a lot of trouble. If you are a non-technical person, you are hardly in a position to judge the technical skills of the candidates, but if you ask them about the certificates, degrees, diplomas, and other similar documents they possess, this will give you a clue if they are technically competent or not. For instance, IT Consultants with Microsoft Small Business Specialist certification have passed rigorous exams on small business technology. Ability to work with people . Sometimes technical people are not the best communicators. But IT Consultants are supposed to be half techies, half business consultants, so for them being technical is not an excuse for lacking basic business and communication skills. That is why it is key to choose someone who can communicate with you, explain things in a way you understand, answer all your questions, and not just talk in jargon — someone who can help you understand how technology matters to your business and can help it grow. Availability . Availability is a key factor for your decision because if you hire somebody who is not available when you need him or her most, what’s the point of having an IT Consultant if you can’t rely on him or her? Usually it’s best to hire locally, because when their office is near, they are more likely to be able to arrive quickly on your premises an emergency. Also, very often problems can quickly be solved remotely, so it is equally important that the IT Consultant you choose provides remote support as well. Recommendations from clients . It’s always good to know how the candidate has handled previous clients, so feel free to ask for recommendations from their clients. Can they handle all your IT needs? When you choose an IT Consultant, you would like him or her to be the single point of contact for all your IT needs. While it’s not always possible for your IT Consultant to necessarily complete all of your technical needs him or herself, he or she should be able to manage the process on your behalf. (For example, if you want a software application to be developed especially for you, you’d better contact a dedicated software development company, but your IT consultant could be the one to handle the process for you.) Therefore, it’s best if the consultant you choose can meet all (or at least most) of your IT needs – from purchasing new hardware, to maintaining the network, to providing support for the applications you use on a daily basis. Wrapping Up These are some of the points you need to have in mind when choosing an IT consultant. It is important to choose carefully. If you want to establish a long term “trusted advisor” relationship with your IT Consultant, just like with your attorney or accountant, you must choose the best — not necessarily the cheapest — IT Consultant. Remember, your IT Consultant is a key partner in the viability of your business and your success! What Next? Sit down with your team and become clear on your IT needs and goals. Ask associates or key advisors such as your accountant for recommendations Interview and select carefully. The best IT Consultant should be a trusted advisor just like your accountant or attorney. Take your time and find someone you can trust and work with for the long term

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Lessons about Tech I Wish I Knew Then

“There are some steps that small business owners should take today that will help them tomorrow when it comes to understanding and deploying technology. It seems so obvious now. You think, why didn’t I do that then?” Read the story on Inc Technology

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Microsoft Offers 0 Percent Financing to New Microsoft Dynamics ERP and Microsoft Dynamics CRM Customers

Microsoft Dynamics is committed to helping credit-approved customers gain access to capital and invest in their businesses even in uncertain times. REDMOND, Wash. — Nov. 13, 2008 — Microsoft Corp. today announced 0 percent financing for 36 months for new, qualifying customers of Microsoft Dynamics ERP and CRM solutions. The limited time offer is available to Microsoft Dynamics customers who receive Microsoft Financing credit approval on all purchases of $20,000 (U.S.) up to $1 million (U.S.). Read more

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