Managing Documents in the Small-to-Medium Business: Dangers of DMS in the SMB… (Part 2)

Many companies have often wrestled with the idea of “owning” software. While most people now understand the concept of intellectual property, business owners are feeling the pain behind keeping up with the barrage of updates, patches, and major releases of the army of software products now required to run their daily business. To mitigate risk, many companies see a value in outsourcing areas of their business that are not their core competency. This has led to the SaaS (Software as a Service – see SalesForce.com) model gaining ground. The thought is that it is typically cheaper to rent the software than to own it. In my experience stand up time is very quick, but integration costs and subscription fees can get to be a little expensive over the life of the solution.

While SaaS in the DMS space has a bit to go before it reaches any true level of maturity, a fast growing example of seed-change can be seen where political campaigns are turning to Salesforce.com’s Campaignforce to help control costs, increase the speed of deployment, and leverage the social-network phenomena to gain votes. Most channel or direct software vendors see this type offering as a loss leader to create a funnel in order to bring more customers to their core offerings. To some extent, this is a bit concerning in that an offering such as this would not necessarily be the best solution for a customer, if a channel or direct vendor is only angling to bring a customer to their core offering.

There also seems to be a division within the SMB segment itself that is causing some introspection among the software vendors and service providers alike. Much like the “copier-industry”, this segment 1 customer base does not have the expertise or budget to manage intensive software projects, nor do they feel they need a “big software package” to manage their business. Generally, this segment 1 ranges from 1-10 seats (possibly ranging to 25), whereas the medium sized, or segments 2-4 customers might have 25-250 seats (ranging as low as 10 or as high as 500). The truly ’small company’ (less than $1 million in annual revenue) simply does not have the cash flow to invest in an offering unless subscribing to a SaaS model, nor does it want a big, complex software package to manage – as being nimble in the market place is a key advantage to scrapping with the big guys. However, some savvy business owners quickly realize the opportunity to apply this type of technology to their businesses, and the ability to offset future costs. As this type of business gains acceptance among the general SMB business community, expect DMS in the segment 1 and 2 markets to grow dramatically. Much like the HP inkjet printer business, the goal is to make money on the residuals across a large base of customers; this helps keep the costs low for the software vendor and partner and keeps prices competitive for end-customers.

With all of this said, there are many dangers that are lurking around the corner for every SMB, some of which have been mentioned above. The greatest obstacle I have seen is still project success and cultural acceptance, by far. While IT project failure has decreased over the decades, it is still dangerous to embark on IT projects in general. The Standish Group, widely regarded as the leader in IT Project risk assessment, publishes the Chaos Report. In a 2006 study, only 35% of IT development projects were considered successful, whereas a project that encountered cost or time overruns or did not meet user needs requirements was a staggering 46%. Even though this study references software development projects, I can tell you from experience many projects are doomed to failure before they even start.

The responsibility of conducting due diligence still rests squarely with the prospective customer – caveat emptor; it has become obvious to me the CMS/DMS companies have inventory to sell and that’s what they aim to do – even if the solution is not everything the customer needs. Only a provider that is willing to truely form a partnership is worth evaluating in the long run, since their business is dependant upon your success.

Integrating emerging technologies into a business can bring important benefits to the company. Look at how revolutionary facsimile technology was at the time, and what a game-changer e-mail has become. An owner must be extremely cautious not to bet the farm on an emerging technology unless they fully understand the value-benefit proposition as well as the cardinal rule, the culture must adopt the solution or it will fail. DMS technology will be important to decrease file-room sizes, allow for quicker access to documents, and aid in the processing of “hard-copy” documents. For all those reasons, I think it is a growing priority from which SMB owners cannot afford to turn away; however, they do have to ensure they understand their business and choose a good technology partner that understands theirs.