Software for SMEs: Why Best-Fit is In and Best-of-Breed is Out

By Michael Haddon

These days, technology runs hand-in-hand with businesses, supporting every step of the customer journey from sourcing to production, back-office functions, customer service and order fulfillment. Most businesses simply cannot function successfully without technology.

However, over the past decade, the way in which technology – especially software – is selected has evolved. Initially, many organizations adopted a ‘best-of-breed’ solution – one which would address  just a few specific needs and would perform those functions well but with limited flexibility. In other words, a one-size-fits-all solution.

Businesses with ‘best-of-breed’ solutions soon became frustrated with the limitations imposed on them and as such, ‘best-in-class’ solutions proliferated. Organizations began to select these alternatives which could perform a wide range of functions. However, only a small percentage of those functions would be relevant to individual businesses and they found themselves paying for features they did not use.

The needs of organizations are once again changing. Instead of choosing solutions that are deemed to be ‘best-of-breed’ or ‘best-in-class’, a growing number of businesses are opting for a ‘best-fit’ solution which offers variety and customization – specifically suited to each unique organization.

‘Best-fit’ software

When it comes to software, businesses – particularly small and mid-sized enterprises (SMEs) – can no longer afford to be at the mercy of complex, expensive and inflexible solutions with high commissioning costs and long-term contracts which lock them into binding agreements. The market has simply become too competitive to tolerate these inadequacies.

An emerging alternative for businesses is a software solution that can be easily customized to fit the way they operate – not the other way around. This alternative is known as best-fit software and is growing in demand.

Breaking up with ‘best-of-breed vendors

Unfortunately, many SMEs find they have become locked into their existing ‘best-of-breed’ software and extracting themselves from complex contracts and significant investment has become yet another challenge they must face.

Recognizing and evaluating the magnitude and complexity of this challenge through a cost-benefit analysis is a critical first step toward positive change. It is common to sweep unwelcome problems under the carpet. However, it is those businesses that choose to delay tackling these challenges that will suffer the most in the long-term.

Here are some quick and easy tips for evaluating solutions:

• List all existing solutions within the business
• Rate their effectiveness and integration with other systems
• Match the critical business functions that are supported (or unsupported) within the business
• Research alternatives – new solutions can be more cost effective to adopt even after license termination costs are incurred
• Compare license and integration costs
• Understand contract termination clauses including risks and costs

Beware of hidden costs

Apart from undertaking a comprehensive evaluation, it is also crucial to understand potential hidden costs when choosing a software solution. Implementation costs can be five times more than the purchase cost of the software.

A full range of factors must be taken into consideration including the initial license cost as well as the impact of implementation. Ongoing maintenance charges, the platform on which the software runs, technical support and the roadmap for future development will directly impact the success of the project and the value-add to the client. It is also important to consider how easily the solution can be adapted to the future needs of the business.

The upfront license cost and terms of use need to be carefully analysed. Although we all tend to gloss over the terms of use, it is essential to understand the conditions attached to the data stored on the platform. Many clients have found out to their detriment that once data is stored on a platform, it is no longer theirs. Retrieval of data can therefore present an unexpected and unwelcomed cost to businesses.

The traditional approach of simply investing in expensive and established ‘best-of-breed’ software solutions no longer reflects success. Nor does it guarantee that the once trusted brand will exist forever or be relied upon. Mergers and acquisitions are becoming more frequent and company size is no longer a barrier. An example was in 2007 when three large software vendors were acquired within a few months (Hyperion’s purchase by Oracle, Business Objects by SAP and Cognos by IBM).

A better plan of action for a business seeking to adopt a ‘best-fit’ software solution is to ensure that full control can be retained. Rather than making significant investments in large, complex software solutions, opt for a platform where ongoing development and support is the core of the offering.

Combining a ‘best-fit’ strategy with the careful selection of a provider that can deliver customizable software without the need for large upfront investments is the best choice for SMEs wanting to take charge of their destiny.

Michael Haddon is the CEO of Kradle.