Can Technology Survive This Industry?

Posted on October 1, 1998 by Sara Eastwood-McLean - Also by this author

This week I received a call from the owners of Livery Coach Software. They informed me the company was closing its LiveryLink doors forever.

In the past five years, I’ve seen more software obituaries than I care to think about: Limo Magic, Limo Pro, Vertical Solutions, Apsley Bolton Computers, GTN Technologies, Alternative Management Technologies, and a slew of others. Why couldn’t these companies survive our marketplace?

I knew the principals of the above companies. None of them entered this industry with any intent to de-fraud it or go out of business. In fact, quite the contrary. They all invested huge dollars to help fill a need for what they considered to be a fresh, growing marketplace.

Each company spent a minimum of two years in R&D, where no revenues come in and only big expenses are paid out. They sought out the appropriate affiliations and joined both national and local chauffeured transportation associations. Finally, they launched aggressive marketing campaigns to introduce their products to us.

I’m confident these companies had no hidden agendas, despite all the accusations I’ve heard. What do I believe is the real truth why software companies struggle to stay afloat? Money.

From what I’ve seen, most companies are small and entrepreneurial by nature. They are not backed by big firms. Software development is a capital intensive business. Most of these companies are under capitalized from the get-go. They’re not big like Microsoft, which can withstand the test of time. Once it’s time to bring a product to the market and start making money back, software companies find they’ve underestimated the purchasing power within our industry.

We are still very much a cottage industry. A $5,000 software package is a HUGE investment for the vast majority of us. However, that is deemed small potatoes to the software industry. The investment in software R&D can cost as much as $1 million. Think about the volume of sales a developer must make to recoup his start-up costs!

There’s another challenge most software companies fail to realize until it’s too late. We are not “techies.” Automation is still very new to us. We need a great deal of technical support after a software system is installed. Support costs money. There is zero return when support is provided, hence this also adds pressure to the developer’s bottom line.

The problem I see with operators who purchase these packages is that many believe software is magic. They think it will solve all their front office problems. Not so. Software can build efficiencies and streamline an operation, but can only help the operator if he or she fully understands what they’re asking it to do. I was once told that “You can have the easiest accounting program in the world, but if you don’t understand the fundamentals of bookkeeping, the software is going to be difficult to use.”

When a software company disappears, it leaves a negative impact on the industry. The biggest losers are the company’s customers. The software vendors that remain in the marketplace are left to mop up the mess. They have to work extra hard to overcome negative PR and pessimism. LCT forfeits a valuable advertiser and show exhibitor, the NLA surrenders a member, and so on.

We owe it to ourselves to be more astute businessmen and women, or technology will continue to be crippling instead of beneficial to our industry. If you’re looking to automate or upgrade your current computer system, be sure your vendors are well established and financially secure.

Also, I recommend that you learn computer fundamentals and popular applications, such as EXCEL, ACT!, ACCESS, and WORD, before you buy a custom software program. Think of it in terms of buying a vehicle. You can get it loaded with all the amenities, but if you don’t know how to drive, you’re stuck with an expensive piece of equipment that doesn’t work.

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