by Michael Grebb
REPORTS OF THE recent tech revolution have been slightly exaggerated. Many new innovations still haven’t affected most businesses, simply because they haven’t adopted them yet. Some may be concerned about the cost of change, others about making the wrong choices. Play with fire, they think, and you might get burned. But when you see all the hype surrounding e-this and digital-that, and hear the same few companies loudly announcing their next generation-ness, it can start to feel like you’re the last caveman on the block still eating raw meat.
But the way to respond isn’t by making drastic ill-advised decisions, or taking the tech plunge half-heartedly — slapping up a Web site and calling the job done. Taking advantage of technology means doing more than just taking a test-drive on the Internet; it means being brave enough to reevaluate what your business does, how it works, and what it would take to change it.
The real tech revolution is still coming, and small businesses are the ones that will make it happen. Its heroes will be precisely those businesses that were in the technological Dark Ages only months ago but have been bold enough to make tough decisions, to retrofit their businesses, and to capitalize on new technologies. Below, we profile a few.
Until March, Cy Sidun was vice president and general manager of West Coast Office Interiors, a small office furniture company in the Bay area. He did such a nice job bringing that company out of the Dark Ages that its owner has since reassigned him to another one of his businesses to work the same magic. At West Coast, Sidun says, the situation was grim. He faced a “hodgepodge” of “clunky” computers, none of which were networked together properly or ran the same software. The servers were outdated, and a memory-hogging piece of software designed to draw layouts constantly overloaded the system.
The accounting software package was equally troublesome; it required people to manually key in new inventory entries, which could number in the thousands in just one day. “We could have four or five thousand pieces of furniture coming in,” he recalls. “It was just an inventory nightmare to keep that going with obsolete equipment.” To make matters worse, the firm’s accountant, whose husband just happened to be a “techie,” had become the designated IT person. She did her best, but could only do so much. “And her accounting duties were suffering,” Sidun says.
All the while, West Coast was trying to compete with “megadealers” who each had sales staffs of more than 20 people, compared to Sidun’s paltry four. “It was a five-to-one ratio,” he says. “That’s a heck of a difference. Their resources were tremendous compared to ours.” In addition, West Coast’s small staff had no connectivity in the field. A typical sales call involved visiting a customer, drawing out an office layout by hand, scribbling boxes where furniture would be, and then going back to the office to determine whether the requested furniture was in inventory. “You would have to do a physical inventory, actually counting desks in the back,” he says. Then the salesperson would enter the data into the layout software, print out the result, and take it back to the customer. Changes could sometimes require another visit. And another.
Sidun knew he had to do something — anything — to repair the situation. He decided to give everyone laptops with the ability to connect back to a new computer system at the main office. “That way, you can close a deal right in front of the customer,” he says. “They’re looking for instant gratification.” As is often the case, the major stumbling block was the price tag: some $300,000 to deploy the system Sidun wanted. With only $8 million in annual sales, it was too much to swallow. “That much money can be your whole pre-tax profit for the year,” he says. “It was out of the question.”
As Sidun stewed, wondering how he could implement his plan without breaking the bank, he got a cold call from a representative of CenterBeam, one of a new class of companies which offer hardware, software, and IT consulting to small and “emerging” businesses by allowing them to lease rather than buy. CenterBeam leased all new desktop computers, as well as about a half-dozen laptops that the sales staff could use to program diagrams during sales calls. It also helped set up a virtual private network that the staff could use to check on inventory back in the office on inventory database software that, of course, had been upgraded as well. Support and maintenance of the system costs West Coast Office Interiors about $200 per user per month, which CenterBeam says is a pretty average cost. Says Sidun: “It was like a miracle.”
Reinauer Transportation Companies certainly needed divine intervention three and a half years ago. Back then, the 80-year-old, family-owned tugboat and barge company maintained a small office on Staten Island, N.Y., and mostly monitored runs between New York and Boston. About 25 employees in its main offices worked frantically to keep track of numerous shipments, endless regulations and paperwork, and equally endless customer handholding. They also had a decidedly low-tech way of tracking ships.
“They had just an enormous amount of information that they kept on a 15-foot-long whiteboard,” recalls Ray Stoddard, senior business technology consultant at Hackensack, N.J.-based Flash Creative Management, which eventually designed a new system for Reinauer. “They would just put orders on it. When it was full and a new order came in, they moved the paper around until they could create an opening on the schedule.”
In addition, the complex web of maritime regulations required Reinauer to keep detailed logs of each shipment, what was being shipped, and other factors. It was all on paper, often scribbled into logbooks by barge crews. The office staff would later have to make sense of the books as they came in from the field. “There was so much logging going on that they weren’t able to take calls sometimes,” Stoddard says. A constant flood of bills and invoices (all on paper) only added to the task. On top of that, third parties, such as people hired by oil companies to measure the amount of petroleum on a given barge, often didn’t know the location of shipments until someone told them. These inspectors would constantly call Reinauer’s dispatchers to determine where the barges were going to be and when they would get there.
Now, almost $700,000 later, things are different. The billing, invoicing, and reporting systems are all integrated on a computer system, so the company gets paid faster. Billing that used to take three days now takes thirty minutes. Its new Web site allows customers to track shipments in real time. And Flash integrated the computers so the company can more easily compile required government shipping reports, which used to take a week to compile. “The whole thing on the computer took five minutes,” says Reinauer’s controller Joe Jones. “The power is there; there’s no doubt about it.” Because all of the data is integrated, Jones says, Reinauer also can now run numerous cost analyses to figure out “where our revenue and expenses are, and where we’re leaking.”
Of course, most small businesses aren’t directing barges around harbors or even managing thousands of sofas per day. But even on a very small scale, adopting the latest technology can pay dividends. The Chicago law firm of O’Hagan, Smith, and Amundsen, for example, was skidding on the edge of the Dark Ages only a few months ago. Its research library held stacks of musty, law books. The computers were DOS dinosaurs, there was no local area network in the main office, and there was no way to connect with branch offices. “The attorneys had to physically drive in to the main office to enter their billing info,” says Chuck Linebaugh, the firm’s director of information systems. “It was very inefficient.”
In addition, the firm spent about $80,000 per month on legal research because its attorneys were using pay-per-use Internet services rather than the bank of CD-ROMs the firm had in the library. The problem was that two or more lawyers couldn’t access a CD-ROM at the same time, and trying to find information in old law books was too time-consuming. “We just started getting pounded by the cost of legal research,” says Linebaugh. It got so bad that the firm’s partners were worried that passing on the added costs to clients would mean risking the loss of business to larger, more efficient firms.
The firm gave Linebaugh the task of saving its skin. He turned to direct solutions provider Computer Centers of Vernon Hills, Ill, and his longtime account manager Simon Whitford to helped him figure out how to improve research and billing functions using computers. Linebaugh and Whitforddecided to convert its CD-ROM-based system into a hard-drive-based system that allowed up to 50 attorneys to access the same database all at once. For this solution, Whitford recommended high-speed Cisco networking equipment to link all of the branch offices and the main Chicago office through a WAN, enabling attorneys to file billing statements and perform research without leaving their desks. The changes cut research costs alone by $60,000 per month — a 75 percent reduction.
“Clients are expecting our business to deliver services at a reduced cost,” notes partner Glen Amundsen. “We’re using technology that’s quicker and less labor intensive. We can make the same amount of profit and still reduce costs for the client.” Amundsen says his clients are “highly sophisticated” and now raise technology issues before they hire the firm. Already, he’s looking into voice recognition technology that can reduce dictation expenses and outfitting attorneys with wireless devices to keep in constant touch on the road. The firm’s efforts have even had unintended benefits. “Space devoted to our library of books and CD-ROMs has been shrinking,” Amundsen says. “We’re actually taking our library and turning it into a storage room.”
Companies that undertake a technology renaissance are usually looking to change more than just the layout of the office, but some may get even more change than they bargained for. Once the big step is taken, it’s hard to tell where it will lead — especially when it’s a step toward doing business on the Web. Steven Bernard, the owner of Skokie, Ill.-based Bernard Foods, has discovered that his company can succeed on line in ways it never could off, and that changing its technology strategy has actually changed the business itself.
But taking that first step wasn’t easy. The company was doing respectable business selling sugar-free food products to restaurants, casinos, and other vendors when Bernard decided in 1997 to try out electronic commerce. He wanted to sell his products over the Internet to tap demand from the diabetic community, and figured it would be a fairly simple process. He was wrong.
“We started in 1997, but the site wasn’t up until January of 1999,” he says, and sighs. He declines to name the first Web-hosting firm he hired, but says it was a disaster. “They came in with a good presentation and then put us off on a sub-contractor,” he laments. “The subcontractor was so bad, he couldn’t even figure out how to get on the hosting company’s system.” After six months of hell, Bernard fired the firm. “We went with a smaller company,” he says, explaining that he expected to get more personal attention that way. Unfortunately, the company went out of business before it could complete Bernard’s Web site. “They had a proprietary ordering system, and we couldn’t even get the disks because the federal marshals came in and took everything,” he says. “That was another nine months of downtime.”
Bernard has since hired yet another firm, which he says does a “good job.” But even once the site was up at www.eDietShop.com, success did not immediately follow.
“When we first put the site up, nothing really happened, but after a while it just took on a life of its own,” he says, noting that he still hasn’t done any major advertising to boost traffic to his site. “It was just word of mouth and some basic promotion such as linking to diabetic sites. There was just a tremendous buzz.”
The 100-employee company right now pulls in around $20 million per year through its traditional avenues. But the diabetic consumer part of his business previously had been only a tiny piece. “In January, we were doing less than $100,000 a year,” he says. “Now we’re at about $1 million.” Bernard believes this could reach $40 million to $50 million within three to five years — which would easily eclipse Bernard Food’s current total revenues — and he now talks about doubling his company’s head count within a few years.
By any measure, that’s a future to look forward to.