Is Your Software an Asset or a Liability?

Many people have the misconception that their house is an asset. The reality is that your house is a liability, assuming you don’t own it outright. If you have a mortgage, your house is an asset to your lender.

I believe this analogy applies to software that companies invest in. Under traditional software models a company makes a large up-front investment to purchase a software package. At that point the company views the software as an asset. The reality may be that the software is a liability. Time must be spent learning the software and integrating it into your company’s operation. Then you can start looking forward to steady outlays of cash to keep up with upgrades, patches, and support if required. Eventually companies reach a point that they cannot afford to switch to a new package even if they are not happy. The cost in time and money invested simply becomes too great to warrant any change.

These problems can be magnified if you are not getting the exact results you require from a specific application. Additional time needs to be spent to try to tweak the software to your needs, or additional manpower is required to massage the output into the format you need. Perhaps you even end up needing a second package altogether.

A specific example of this scenario I am familiar with involves an accounting software package. After paying the shocking sticker price and absorbing months and months of technical support and training time the software would not give us all of the reports we needed. We could not absorb the same type of hit to 'try' a new package so we had to set up a parallel manual system that would glean the information we required. At the end of the day, this software package did not save any money and indeed increased operating costs.

A company's real asset is it's information. A more practical model is to be able to control your information and have the ability to transfer it between software packages that fit your needs. Or, equally important, be able to try different solutions inexpensively to see what fits best. The emergence of Software As A Service shows promise in both regards. Although there is still a long way to go to standardize the data used for these packages, the idea of being able to pay a small periodic fee to manipulate your data in a manner that best suits your needs is definitely the wave of the future. Faster feature upgrade and bug fix cycles also make Saas ideal for providing a connection between the features you need and the software developer.

USA Today, in the article Software-as-a-service gives small business powerful tools calls attention to the fact that SaaS applications are growing into a legitimate solution for any size business. The fact that this growing field of applications can allow small business to "go toe-to-toe with big business" should not be overlooked.