The purpose of this discussion is to help you forecast computer needs, evaluate the alternatives, and select the right computer system for your business. Micro- or personal computers (PCs) make it economically possible for small businesses to get data-processing equipment. A microcomputer system provides professional management planning and control capabilities that can help you reach your goals for growth and profit. To take advantage of this opportunity, you must use your best analysis and judgment when choosing a computer for your small business.

To answer this question, you must have a clear understanding of your firm's long- and short-range goals, the advantages and disadvantages of all of the alternatives to a computer, and, specifically, what you want to accomplish with a computer. Compare the noncomputerized system you can develop with the computer system you hope to get. It may be possible to improve your existing manual system enough to accomplish your goals. In any event, one cannot automate a business without first creating and improving manual systems.

A computer's multiple capabilities can solve many business problems. Some of the most common applications are keeping transaction records (such as a cash receipts journal, receivables ledger, and general journal) and preparing statements and reports (like a balance sheet, income statement, or inventory status report). Other equally important tasks include maintaining customer and lead lists, creating brochures, and paying your staff.

A business that handles large volumes of detailed or repetitious information in short periods of time will benefit from computerization. A complete computer system can

1. Organize and store many similarly structured pieces of data (i.e., addresses including name, street, city, state, and zip code).
2. Retrieve a single piece of information from many stored records (i.e., the address of John Smith).
3. Perform complicated mathematical computations quickly and accurately (i.e., the terms of a loan amortized over many years).
4. Print information quickly and accurately (i.e., a sales report).
5. Perform the same activity almost indefinitely, in precisely the same way each time (i.e., print a hundred copies of the same form letter).
6. Facilitate communications among individuals, departments, and branches (i.e., quickly transmit messages and/or documents that require review or editing).

Link the office to many sources of data available through larger networks.

Consider the following manual operations that can be streamlined by computerization:

• Accounts Receivable -- Even if properly organized and maintained, a large volume of active accounts can require many hours of posting sales and receipts and, especially, of preparing statements. Unfortunately, as the volume of information to be handled increases, the number of errors often also increases. Don't forget, too, that if your customer isn't billed on time, you'll wait longer to be paid.
• Advertising -- Using only manual systems, it is costly and complicated to have special sales programs directed toward particular customers. Manually prepared mass mailings are time consuming and expensive.
• Inventory -- A large number of items or high-volume turnover can cause major errors in tracking inventory. Errors in inventory control can lead to lost sales and the maintenance of unnecessarily high quantities of slow-moving products.
• Payroll -- Calculating and writing checks are tedious operations in payroll administration. It can also be difficult to effectively implement an employee incentive plan using manual procedures.
• Planning -- Manual systems or procedures make planning for the future time consuming and difficult. What if situations such as "If sales increase, to what extent will expenses increase?" are not easy to simulate with a manual system.
  
  
  
  

Computers also can perform more complicated operations, such as the following:

• Financial modeling programs prepare and analyze financial statements.
• Spreadsheet and accounting programs compile statistics, plot trends and markets, and do market analysis, modeling, graphs, and forms. They can combine all these functions and can interchange and evaluate data from four programs simultaneously.
• Word processing produces typewritten documents and provides text editing functions. Many offer options such as a thesaurus, a speller, and punctuation and style checkers.
• Desktop publishing programs let you create quality print materials on your computer.
• Critical path analysis programs divide large projects into smaller, more easily managed segments or steps. This helps to target goals and set dates for completion.
• Legal programs track cases and tap information from data bases.
• Payroll system programs keep all payroll records; calculate pay, benefits, and taxes; and prepare paychecks.
• File management programs enable you to create and design forms, then store and retrieve the forms and the information on them.

The business applications for PCs are available in packaged software programs that enable you to interact with the computer through entering, manipulating and processing complex evaluations and computations of voluminous quantities of data.

After analyzing your application needs, consider (1) the investment decision (payback period, depreciation, tax impact, etc.) and (2) the potential increase in your management capability.

There are, however, some things you should not expect your computer to do.

• Don't expect a computer to clean up a mess in the office. The mess must be organized before you can attempt to computerize, or you will wind up with a computerized mess.
• Don't install a computer because you don't have the right people to do the jobs in your firm. Initially, at least, a computer will make more, not less, demands on the organization.
• Don't install a computer with the idea that any information you want will be instantly available. Computers require structured, formal processing that may not produce some information as fast as an informal system could.
• Don't expect the installation of a computer to help define the jobs that must be done. The computer is a tool to get those jobs done, but the jobs must first be well-defined.
• Don't expect computer installation to be like magic. Computer selection and installation will be successful only through methodical work.
• Don't expect any computer system to exactly fit your present methods of completing jobs. If you are not willing to listen to new ideas for solving problems, you will not be able to install a computer successfully or at a reasonable cost.
• Don't acquire a computer to generate information you will not use. Growing companies may benefit from structured management information systems, but many owner-managers of small companies already have their fingers on the pulse of their businesses and do not need a formal, electronic system.
  
  
  
  

Two options for your own in-house computer system are the minicomputer and microcomputer.

A minicomputer is a general purpose computer linking a number of dumb terminals, i.e., display units that can only function if connected to the minicomputer. It can be programmed to do a variety of tasks and is generally designed so data can be inputted directly into the system. For example, data on a sales order are put into the computer at the same time the order is written. A minicomputer can be operated by those without special computer knowledge. Minicomputers cost ten or more times as much as micro (or personal) computers; sophisticated systems may cost well over a hundred times more. The computer power/cost ratio is relative, however, and may be readily justified by the application required. Don't forget monthly costs for system administration and maintenance of both hardware and software. Minicomputer costs are decreasing rapidly, so inquire for the latest estimates.

The microcomputer or personal computer (PC) is a household word, if not quite yet a universal household item. It can operate independently of a network, is rather inexpensive, and is compact enough to sit on a desk. PCs run programs that do an astonishing variety of tasks and can be operated without special computer knowledge. Microcomputers can satisfy the needs of many small business owners. They usually handle one task at a time, although some may have modest capabilities for multitasking and multiuser applications (more than one program and terminal at one time). Personal computers are easily affordable by virtually any business, although prices may vary widely depending upon the manufacturer. There are supermicros equipped with multitasking operating systems and networking capabilities. These may cost five times as much as a personal computer, or more, but they can be used by multidepartmented companies, sharing and using the same data on a daily basis.

To computerize your business you will have to choose the right programs and equipment, and enact the various applications. This means training people, establishing security procedures, and maintaining equipment, supplies, and daily operations. If you follow a well-laid plan and make well-informed choices, a computer system should provide the information and control intended.

Computer Components

These are the main computer components:

• Hardware central processing unit (CPU) -- A CPU performs logic calculations, manages the flow of data within the computer, and executes the program instructions.
• Main memory - This is a storage area readily accessible to the CPU.
• Mass storage -- It is permanent. There are a number of mass storage devices available, such as disks and tape.
• Input device(s) -- These units are used to enter data into the system for processing. One type of input device is a keyboard. Scanners are a new way to input data.
• Output device(s) -- These display the data. The most common output device is a printer.
• Software operating system -- This software tells the hardware how to run the software.
• Applications programs -- These are programs written to perform a particular function such as word processing, accounts receivable, payroll, or inventory control applications.
• Compilers and interpreters -- This software converts programs to machine language that a CPU can execute. As a user of PCs, you won't work much with this software.
  
  
  
  

A program, usually referred to as software, is a set of instructions that tells the computer to do a particular task. The software determines what information is to be entered into the computer and what output or report is to be returned by the computer after it has performed as instructed by the program. The act of entering information into a computer is called inputting the data.

Generally, there are three types of software:

1. Compilers and interpreters -- This is special software that translates programs written in programming language that people can use (such as FORTRAN, COBOL, BASIC) into machine language that the CPU can execute.
2. Operating system software -- These are the programs that control all separate components of the computer, such as the printer and disk drives, and how they work together. System software generally comes with the computer and must be present (or loaded into memory) before the application software can work.
3. Application software -- This is software to make a computer perform particular functions, such as payroll check writing, accounts receivable, posting, or inventory reporting. Such programs, particularly the more specialized ones, are normally purchased separately from the computer hardware. Before beginning your search for the application software that is right for you, identify what the software must accomplish. Time will be well spent if you research and write up your requirements before visiting your software vendor.
   
   
   
   

Determine Your Requirements

To determine your requirements, prepare a list of all functions in your business in which speed and accuracy are needed for handling volumes of information. These are called applications. For each of these applications, make a list of all reports that are currently (or will need to be) produced. You should also include any pre-printed forms such as checks, billing statements, or vouchers. If such forms don't exist, develop a good idea of what you want -- a hand-drawn version will help. For each report, list the frequency with which it is to be generated, who will generate it, and the number of copies needed.

In addition to printed matter, make a list of information you want displayed on the computer video screen (CRT). Again, design a hand-drawn version. List the circumstances under which you want this information displayed.

For each application, make a list of all materials used as input into your manual system. These may include items such as time cards, work orders, receipts, etc. Describe the time period in which these items are created, who creates them, and how they get into the system. Also, describe the maximum and average expected number of these items generated in the appropriate time period. As with the reports, include copies of the input items or drawn drafts.

For all files you are keeping manually or expect to computerize (such as customer files or employee files), list the maximum and average expected number of entries in a specific time period, such as 10 employees per year, 680 customers per year. Normally, a file, manual or otherwise, is cleaned out after a specified time and the inactive entries are removed.

Identify how you retrieve a particular entry. Do you use account numbers or are they organized alphabetically by name? What other methods would you like to use to retrieve a particular entry? Zip code? Product purchased?

Note which of your requirements are a must and those on which you can compromise. The more detailed you are, the better your chance of finding programs compatible with your business. It is also true that the more detailed you are, the more time it will take to research and evaluate each alternative application software package.

Evaluate Your Choices

If, after compiling all your information, you find your needs are fairly complex, you may wish to engage the services of a small business consultant to help evaluate your software requirements. Or you can submit your requirements to software retailers, custom software vendors, or mail-order software firms. They will propose packages to meet as many of your requirements as possible.

At this point, you should review and compare the software packages and verify the extent to which each meets your needs. Ask yourself these questions: Does it cover all of my musts? How many of my other requirements does it fulfill? Does it provide added features I had not thought of earlier but now believe to be important?

After you have identified one or more software packages fitting your needs, examine other general features of the software:

• Does it come with effective documentation? Do you understand it?
• Is the operating manual written for the novice? Is the information organized so you can use it effectively after you gain experience?
• How easy is the software to use? Does the information displayed on the computer screen make sense? Is there a help facility?
• How flexible is the software? Can you change data that have already been processed? Can you change the program instructions, such as payroll withholding rates, or will you have to pay the vendor to change these for you? If you must pay a vendor, what will it cost?
• Will you be required to change any business practices? If so, are these changes you should make anyway? Will the software provide the accounting and management data you need?
• How well is the software documented? You should be able to understand the general flow of information, i.e., which program does what and when.
• Does the software have security features, such as passwords or user identification codes? Can it prevent unauthorized access to private information?
• Is it easy to increase the size of files?
• Will the software vendor support the software? Does the vendor have a good track record? Will the vendor make changes and, if so, how much will the changes cost?
• How long has a vendor been in business? What are its prospects for staying in business?
  
  
  
  

Ready-Made Software

If you find a ready-made software package that fits your business's needs and price range, take it. You may still have to do a lot of work adapting your procedure, but generally you will be better off than if you design your own software system.

Although different brands of software and hardware can be adapted to work together compatibly, such standardization is not yet prevalent. For this reason, it is important that you first find the right software and then select the hardware that can handle it.

Preparing a Request for Proposal

If you are unable to find a software package that fits your needs, send a request for proposal (RFP) to selected hardware vendors and turnkey systems houses. (The latter are firms that put together complete, ready-to-use hardware and software systems.) The form of your RFP depends on the kind of proposals you are soliciting - a turnkey system with customized software, a turnkey system with packaged software, or hardware and/or software in separate packages.

Because most first time users get turnkey systems, the following guidelines apply to RFPs for this method:

1. Give a brief description of your company.
2. Describe the business operation to be computerized.
3. Submit the materials you designed and accumulated earlier.
4. Describe the criteria that will be used to evaluate proposals and request a response to each criterion (i.e., maintenance, technical support, training, etc.).
5. Specify which requirements must be met exactly and which must be met only in substance. This is important when dealing with software packages.
6. Request a detailed price quotation that includes all charges to meet your needs, including one-time charges, such as for equipment, training, applications and systems software, and ongoing charges, such as maintenance and technical support.

Request financing alternatives such as lease-purchase and direct or third-party lease.

The most important sources of feedback in judging a computer system are companies using the computer system you think you will buy. Try to find firms with configurations and applications as close to yours as possible and visit them, without the computer sales representative.

Use the following criteria, listed in order of importance, to evaluate a computer system:

1. Software developer's past performance record -- software developer should have prior experience with similar applications for the same equipment configuration as the one you are considering.
2. Commitment of hardware vendor -- Where will your commission sales representative be after the contract is signed? How many systems engineers does a vendor have in the area?
3. Hardware capacity -- Does the hardware have adequate processing capability to meet your requirements within acceptable time frames?
4. Quality of systems software -- The quality of the system software (operating systems and utilities) dramatically affects how difficult the system is to program and use.
5. Systems documentation -- What kind of systems documentation does the vendor provide and how is it updated? Can it be understood at some basic level by the user? Is it designed so other experts can understand how things were done and change them when necessary?
6. Service and maintenance support -- If a system breaks down, how long will it be to fix? Who will do it? Will it be subcontracted? Are there provisions for backup in downtime?
7. Expandability and compatibility - What are the technical limits of your system and how close to them are you now? Is there software compatibility with a vendor's product lines?
8. Security -- What security features will your system have to prevent unauthorized use of the system or unauthorized program modifications?
9. Financial stability of vendors -- Satisfy yourself about the financial stability of a vendor.
10. Environmental requirements -- Mini and microcomputers do not usually require special environments such as raised floors, special wiring, or special air-conditioning. Some may, however, and it pays to find out in advance. Local area networks (LANs) require cabling.
11. Price -- With computers, as with anything else, you generally get what you pay for. Low price alone should not be a prime evaluation criterion.
    
    
    
    

If you purchase a full hardware and software system (turnkey system) rather than buy software and hardware separately, you should have a contract or agreement. Examine the standard contract supplied by the vendor. Be aware it may not protect your interests. If you have any questions, have your lawyer review the contract and suggest changes to help you implement the system.

An important factor is the payment schedule. Do you pay before or after installation? Will you pay for the installation over a schedule? The more money held back until installation is complete, the more power you have to ensure a vendor properly completes all that is promised and contracted.

The contract should include detailed references to the following:

• Description of equipment and software.
• Installation responsibilities.
• Provisions for additional equipment.
• Performance guarantees.
• Responsibility for training.
• Software rights.
• Provisions for default, bankruptcy of vendor or termination of contract.
• Software documentation.
• Systems documentation.
• Responsibility for hardware freight charges and sales tax.
• Acceptance testing.
• Conversion responsibilities (from manual system to computer).
• Upgrading privileges and trade-in rights.
• Restart (what is required to restart system from failure).

If the contract is for software developed especially for you, the contract should specifically refer to your RFP and the vendor's responding proposal. A good contract will help you prepare for the system's installation and ensure a more satisfactory business transaction.

Points to consider when selecting your computer system include:

• Reliability -- How qualified are the manufacturer and vendor? What is their reputation? What is the incidence of repair on the system equipment?
• Resources -- How long have the manufacturer and vendor been in business? How strong are their financial positions and credit ratings?
• Services -- Are ongoing consulting, training, supply, and repair available?
• Rates -- Are charges competitive? What terms are offered?
• Backup -- What happens if your system fails?
  
  
  
  

As was suggested before, successful computer applications for your business depend heavily on the implementation process. Problems are inevitable but proper planning can help avoid some of them and mitigate the effects of others.

Employee involvement -- The success of a new computer system will depend on the cooperation of employees; therefore, it is important to involve them as early as possible in implementation. Explain to each affected employee how his or her position will change. To those unaffected, explain why their jobs will remain unchanged.

Schedule for implementation -- Set target dates for key phases of the implementation, especially the last date for format changes.

Installation site -- Prepare the installation site. Check the manual to be sure the location for your new computer meets the system's requirements for temperature, humidity, and electrical power.

Converting applications -- Prepare a prioritized list of applications to be converted from manual to computer systems. It is important to convert them one at a time, not all at once. Prepare a list of all business procedures that will be changed so the computer system will fit into the regular work flow. Develop new manual procedures to interface with the computer system.

Training -- Train, or have the vendors train, everyone who will be using the system.

When these steps are complete, the computer system can be installed. Each application on the conversion list should be entered (files set up, historical data entered, and the system prepared for new transactions) and run parallel with the pre-existing manual system for a number of processing periods. This means two complete systems will be running, placing a great deal of pressure on your employees and on you. However, until you have verified the new system works, it will be worth the effort. Be sure to insist on progress reports from everyone involved in the changeover.

At the same time you are converting each application, you must begin dealing with the long-term issues that will keep your computer operation successful.

System security -- If you will have confidential information, you will want safeguards to keep unauthorized users from stealing, modifying or destroying the data. You can simply lock up the equipment, or you can install user identification and password software. You can also

• Control access to your computer, disks and reports.
• Label all disks to identify their contents and verify correct labeling.
• Initiate original accounting transactions, adjustments or corrections yourself.
• Rotate computer employees or schedule vacations to expose unauthorized practices.
• Require dual signature authorizations to control software modifications.

Data Safety -- Data, confidential or otherwise, can be destroyed by unexpected disasters (fire, water, power fluctuations, magnetic fields, etc.) or through employee tampering, resulting in high replacement costs. The best and cheapest insurance against lost data is to back-up information on a regular basis. Copies should be kept in a safe place away from the business. Also, it is useful to

• Have and test a disaster recovery plan.
• Identify all data, programs, and documents needed during recovery from a disaster.

Employee cross-training -- It is vital to have more than one person who knows how to operate a system. Once a business relies on a computer system, the absence (sickness, termination, etc.) of a computer operator can be devastating unless another person can fill in.

Management controls -- Although computer systems allow small businesses to process more data more accurately than ever before, there is a chance the same system can cause greater problems if left unsupervised. All systems, manual or otherwise, must be continually monitored to ensure the quality of the input and output data.

If all this seems like a lot of work, it is. The computer, like any other tool, requires learned skills in order to fulfill its purpose. If you believe that you and your business need a computer, plan to spend the time and the money it takes to make installation and operation of the system successful.

With no prior knowledge of computers, you can buy a PC with applications for your business. After some guidance, study, and experience, you can develop computer-based management planning and control expertise. By taking advantage of the speed and complex capabilities of a computer, you can tap the potential for growth and profit in yourself and your business.

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