Tech Trap No. 6: Selecting Products Based Solely on Price

Editor’s Note: Following is the sixth of our ten part series called “Technology Traps and Mishaps,” by Fred Ode, CEO, chairman and founder of Foundation Software. To read part five, click here. To read part seven, click here.

State-of-the art Techno Pro XP:  $5,000

EIght hours of Techno Pro XP training: $1200

The benefits that you gain from owning Techno Pro XP?  Priceless!

Okay, so I borrowed a little from the credit card ads we all know so well. But you get the idea. When it comes to purchasing new technology-or anything else that meets our needs-price is completely relative. What matters most is that a painful (or costly or inefficient) problem will be solved. If such a technology solution can be found, the investment can become, well, priceless.

Unfortunately, many construction owners approach new technology purchases with an overemphasis on price. What’s more, their concept of price is often a simplistic definition that looks only at the technology product price tag and ignores the necessary costs associated with it. These related costs may include:

• Time and effort to research products
• Time and effort to implement a product
• Additional hardware or software needed to support the product
• Training and education of users
• Ongoing technical support.

I have found that price-focused technology shoppers usually fall into one of two categories. The majority are those who first define what they think they can afford instead of what they need. Price becomes the No. 1 criteria for the selection process. On the other end of the spectrum are those who believe that acquiring magic-bullet technology is most important, no matter what the price.

Be penny-wise, but not foolish!

It really doesn’t matter whether you spend $100 or $20,000 on your next technology solution. What matters is that it fits your company’s needs and produces a competitive advantage. Buying too little or too much technology to meet the needs of the business can both be costly mistakes.

Contractors who buy too little (usually because of an unrealistic technology budget) end up with products that fail to meet their immediate and future needs. A contractor looking to replace his company’s outdated spreadsheet accounting system, for example, decides that an off-the-shelf small business accounting package is the best option within the  budget. Six months later, after countless hours were spent importing data and training users to learn a new program, the product is proving to be inadequate. It’s unable to track billing, handle payroll or produce needed job costing reports (without duplicating the painfully slow spreadsheets). Having spent far more time and money than originally planned, this contractor is looking, again, for a new accounting software solution. So how does a contractor come up with a realistic budget for his/her investment? One way is to consider the hidden costs of not investing in technology. Holding on to an antiquated construction accounting system, for example, might incur the following costs:

• Indirect costs of not having real-time job cost data
• Indirect costs of having to create off-line reports on spreadsheets
• Indirect costs of duplicate data entry
• Frustration and time spent with inadequate customer support

In short, if more contractors took the time to assign dollar amounts to lost productivity and inefficiencies of operation, it might lead to a more realistic new technology budget.

Buy for Fit Not for Fashion

Lots of people who buy technology are actually looking for a magic bullet. They think technology-and usually a higher-priced technology solution-has the power to miraculously bring about organizational and procedural changes on its own. Instead of selecting a product that will help to increase efficiencies and build on their unique strengths, they end up with an ill-fitting product that is likely to create its own set of problems.

What most of these tech-buyers don’t get, obviously, is that not every technology is right for every company. Just because a product comes with lots of high-tech features and state-of-the-art gadgets, or is priced higher than any of the competition, doesn’t mean that it will have any value for your particular company. What matters most is that the technology fits into the company’s overall business strategy and that the company is committed to using it effectively.

Ideally, contractors would love to find the invaluable technology products that solve all their problems and help boost profits. But all that comes with a price. The price includes understanding all the costs, all the time and all the resources needed to find the perfect-fit product and make it work to your company’s advantage. Now that’s priceless.

Construction Business Owner, December 2006