COMPUTER APPLICATIONS

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Finding computer applications for various aspects of a company's operations has, in recent years, become an increasingly vital task of many small business owners. Indeed, computers are an integral part of the business landscape today, in part because they can be an effective tool in so many different aspects of a business's daily operations. Computer systems are now relied on for a broad spectrum of duties, including bookkeeping, business communications, product design, manufacturing, inventory control, and marketing. Indeed, a 1997 survey conducted by Sales & Management magazine indicated that 85 percent of respondents felt that technology was increasing the efficiency of their sales force, while another 62 percent concluded that it was helping them increase their sales.

SMALL BUSINESS AND COMPUTER USE

Entrepreneurs and other small business owners utilize today's rapidly changing computer technology in many different realms of operation:

BOOKKEEPING Computer systems are heavily utilized for a variety of accounting functions, including employee payroll; cash flow analysis; job costing; tracking of vendor and customer payments and debts; federal, state, and local taxes; and other expenses and revenues that impact on the business's fiscal health. Small business owners use computers for bookkeeping more than for any other purpose, and software programs designed to help even inexperienced business owners with their bookkeeping have proliferated on the marketplace in recent years as a result.

BUSINESS COMMUNICATIONS The introduction of computer faxes and especially electronic mail systems has revolutionized the way that businesses communicate with one another. Moreover, e-mail has significantly altered how employees within the same company interact with one another. The savings, both in time and money, that have been realized through the use of this computer technology have been considerable. E-mail, for instance, not only enables users to save significant sums of money that would otherwise go to long-distance telephone and delivery charges, but also speeds up the process of information delivery. Computer faxes, meanwhile, also enable businesses to "save, labor, office supplies, and long-distance phone charges" that are associated with regular fax machines, noted Sandi Smith in the Journal of Accountancy. "The savings: You don't have to make a paper copy, go to the fax machine, wait to be sure the pages don't jam—and if they do, resend. The cost of sending a fax via computer is a fraction of the cost of sending a machine fax."

PRODUCT DESIGN Product design is one of the most popular computer applications in the business world today. Computer-aided design (CAD) involves creating computer models of products that are ultimately transformed into reality. CAD systems enable designers to view objects under a wide variety of representations and to test these objects by simulating real-world conditions.

MANUFACTURING Computer-aided manufacturing (CAM), meanwhile, uses geometrical design data to control automated machinery and other production processes. Since both CAD and CAM use computer based methods for encoding geometrical data, it is possible for the processes of design and manufacture to be highly integrated. Computer-aided design and manufacturing systems are commonly referred to as CAD/CAM.

In recent years, technological advances have triggered fundamental changes in many CAD/CAM systems. Whereas CAD/CAM applications used to be limited to older mainframe and workstation-based systems, advances in personal computers and software programs have spurred a dramatic upsurge in their use among small business owners, who are now better able to afford the technology. The greater viability of personal computers for CAD/CAM applications results from their ever-increasing processing power. An important trend is toward the standardization of software, so that different packages can readily share data. Standards have been in place for some time regarding data exchange and graphics; user interfaces are rapidly going the same route. In the realm of electronic design automation software, a similar trend toward standardization has also been underway. Other improvements in software include greater sophistication of visual representation and greater integration of modeling and testing applications.

INVENTORY CONTROL Small businesses are increasingly using computers to track all aspects of their inventory, including warehousing, ordering, receiving, and distribution. In addition, many computer systems maintain programs that integrate inventory control needs with other aspects of the business's operations, which helps the company perform in a cohesive and intelligent manner as it negotiates the various obstacles of the business world.

MARKETING Computer applications for marketing have surged in recent years. Whereas computer applications for other business needs have been a part of the picture for a decade or two now, the widespread use of computers to shape a company's marketing strategies and campaigns is a relatively new development. "Firms …are gathering tremendous amounts of information about customers, markets, and industries by using an array of relatively inexpensive software and computerized databases," wrote Tim Mc-Collum in Nation's Business. "These resources can help entrepreneurs increase their effectiveness in targeting markets, cultivating leads, and closing sales.…Whether it's called database marketing, smart marketing, or target selling, it boils down to using technology to delivery information that can boost sales."

Many consultants and business experts contend that it is particularly important for small business enterprises to make maximum use of this still-developing computer technology. Small business entities typically have fewer clients than do larger firms, which makes the search for new customers an essential component of future success. As analyst Martha Rogers noted in Nation's Business, information technologies like business and customer databases and sales force automation systems can be effective tools for small business owners looking to develop profitable and lasting relationships with customers. Indeed, smaller firms often need good customer information simply to keep pace with larger competitors.

Of course, reliable customer information is a major key to any effective marketing campaign. Consequently, database service providers such as Dun & Bradstreet Information Services (DBIS) and American Business Information Inc. (ABI) have become enormously popular with businesses of varying shapes and sizes. "These businesses," wrote McCollum, "have accumulated vast amounts of data on companies throughout the United States and Canada. Customers can buy the records on firms in specific locations or industries or of certain sizes or sales volumes. The databases make it easy to generate lists of potential customers for direct mail or telemarketing campaigns." In addition, DBIS, ABI, and other companies that provide similar services have made their information available via CD-ROMs (with regular updates). Another favorite site for finding business leads is the expanding group of CD-ROM products that provide business and residential telephone listings for various geographic regions of the United States.

Ultimately, however, Nation's Business magazine noted that although computers can be a valuable marketing resource for small firms, "technology itself won't boost sales…. For sales to climb, information must be carefully integrated into a total marketing strategy." The magazine thus made the following recommendations to companies looking to apply computer resources to marketing efforts:

Build a database of customers and prospective customers, and update it regularly.
Decide what marketing information is needed, and establish a plan to obtain it.
Use demographic and geographic data to put together a profile of current customer base, which can then be used to identify potential new markets.
Use data to identify long-term interests and buying habits of clients.
Involve sales force (if any) in introduction of new technologies; "If salespeople don't think the automated system will benefit them, they won't use it."
Share information throughout the company.
Use computer resources to personalize and coordinate direct mailings and other campaigns.
Arrange so that pertinent customer information is available to those who need it.

FACTORS TO WEIGH WHEN CONSIDERING NEW COMPUTER APPLICATIONS

Many small business owners have embraced computers as a potent new weapon in their arsenal. But despite their usefulness in dealing with a wide variety of business tasks, the pros and cons of various computer systems need to be carefully weighed before making the investment. Missteps in this area, after all, can cripple a company's finances and productivity.

Personal computers currently comprise the bulk of most small companies' information technology costs, and most small companies are perfectly capable of determining whether they can afford the initial expense of purchasing PCs for bookkeeping, marketing, or other purposes. But consultants and experienced small business owners contend that small firms need to recognize that the initial price tag of a new computer(s) is only a part—and sometimes only a small part—of the total cost of ownership (sometimes known as the TCO). Technical support costs and various administrative and labor costs associated with managing and developing policies for computer resources all need to be considered when pondering computer applications for different business areas.

But as Heather Page observed in Entrepreneur, perhaps the single biggest hidden cost associated with adding computers to the workplace is euphemistically known as "user operations." Page defines user operations as "those things that all employees do while sitting in front of a PC that sap their time, indirectly costing you money in lost productivity. These activities include time spent on PC management tasks, such as installing software, creating and moving files, and learning new technology," as well as time that may be wasted on soliciting PC advice from other employees or attending to personal business. Moreover, Page noted that there are myriad supplementary costs associated with PCs, such as printer ink, paper, and software upgrades.

Page subsequently suggested that small business owners take the time to fully consider the advantages and drawbacks of various computer applications before making a big investment in PCs and other computer equipment: "Buy new technology because it enables you to do something you couldn't do before or because it gives your business added flexibility or a competitive edge. In fact, the best solutions may not be the cheapest. Consider the case of the notebook computer. True, they're much more expensive to implement than desktop computers. But the high initial costs often pale in comparison to the benefits companies receive: added flexibility and increased productivity."

In an article for Fortune, Joel Dreyfuss wrote that peer pressure often provides the impetus for small business owners to purchase new computers or software upgrades: "If you don't have the latest and (always) greatest software and hardware on your business computers, your vendors and employees can make you feel that you're just one step away from quill pens and parchment. The truth is that most small businesses, and consumers for that matter, get cajoled into upgrades that give them more headaches than benefits."

Dreyfuss suggested that small business owners have employees figure out the cost of installation, debugging, and training associated with new computer equipment before consenting to a purchase. He also mentioned that Usenet discussion groups and technical bulletin boards on the Internet can provide valuable analysis of new products. "Seeing the comments about installation problems, upgrade issues, and reported incompatibilities with other products can cool the ardor of any technology fanatic," he noted.

Another factor for small business owners to keep in mind is that a variety of computer applications are available online over the Internet. A number of companies have established small business portals on the World Wide Web to give companies access to software and services—such as payroll processing, legal services, online banking, or assistance in building a Web site for E-commerce. In addition, application service providers (ASPs) offer companies the opportunity to test and use software over the Internet without having to purchase it. These options may eventually reduce the cost and improve the accessibility of computer applications for small businesses.

COMPUTER APPLICATIONS

SMALL BUSINESS AND COMPUTER USE

FACTORS TO WEIGH WHEN CONSIDERING NEW COMPUTER APPLICATIONS

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