Time to upgrade: focus on computers, software, phone systems and staff training.

The hot pace of office technology has cooled a bit. You may not have noticed the slowdown because you're probably still breathless from trying to keep up--or at least catch up--with the hectic rate of updates in the past several years.

Although every new computer model runs faster than its immediate predecessor, we've reached a momentary technology plateau of sorts: Now, even 2-year-old hardware is powerful and stable enough for most office applications. And the majority of professional software packages--from tax preparation and accounting to time-and-billing and write-ups--have undergone enough upgrades and bug fixes that they now generally work flawlessly, providing a major boost in CPAs' productivity."

So, if you bought your computers and upgraded your software no more than two or three years ago, does that mean you can sit back, confident that your office technology is completely up-to-date and running at top effectiveness?

Hardly!

Now that you have this rare gift of a technology breather, you have the time to focus on two things so you don't fall behind when the advances pick up speed again--as they surely will. First, take the time to fine-tune your current system setup to be sure it's giving you the maximum efficiency for your current needs. Then look ahead to see where your business is going--or where you want it to go--and determine whether your current tools will take you there. And, if they won't, decide what you'll need to do to get on the right path.

This article will help you figure out how to accomplish those goals. It will cover technology planning, hardware, software, staff training and purchasing strategies.

STEP TO IT

Even before you look at your current technology setup, you must have a plan--a road map for where you want to take your business in the next few years. Recognize that if you fail to plan a future course, you'll eventually pay a high price in dollars spent and time and opportunities lost. As the wise adage says, "If you don't know where you're going, any road will take you there."

If you haven't done so already, create an in-house information technology (IT) committee that continually reviews business needs in light of new advances. Of course, it would be best if the committee included members knowledgeable about technology or at least had a strong interest in the subject. However, if your enterprise lacks such people, bring in a consultant who can tell the IT committee whether your current setup--computers, printers, scanners, network, Internet connections, telephone system--is adequate for the future task and, if not, what you'll need to do.

Even if you engage a consultant, there is much the IT committee can do on its own to fine-tune your operation and guarantee it does not fall behind technologically.

* Software: Maintain a list of alternative applications that can perform every one of your key business functions. At least once a year, review the two leading competing products and occasionally obtain evaluation copies to compare them with what you currently use.

If your IT committee sees something in one of those products it likes and it's missing from the software you're using, point that out to your current vendor--putting the vendor on notice that you are looking at the competition. As a result, you will be in a stronger position to negotiate better terms for renewals, future orders and service, and that may inspire the vendor--for fear of losing a good customer--to consider voluntarily adding new functions.

Or you may discover that your product already has a function you thought was missing but somehow overlooked; considering how complex some applications are, that's not so unusual.

Another advantage of keeping abreast of the competition: In the event you can't solve a problem with your current software application or the product is discontinued, you can quickly switch to one of the alternatives you've become familiar with.

One more reason to monitor other applications: Occasionally vendors augment their software with a whole new capability or they integrate it with third-party vendors' software. As a result a product that was not competitive in the past may suddenly become a serious candidate.

Aim to reduce the number of software vendors. Surely, the policy has drawbacks: You are more vulnerable if a vendor goes out of business. Also, on occasion, if you decide to limit your relationships to, say, two vendors, you may find that a third vendor has one product that is superior to the one you're using. But, as difficult as it may be, dealing with one or two vendors gives you more leverage on price and support and minimizes training costs.

Excel and Lotus 123 are a case in point. Excel is packaged with Microsoft Office, and Lotus 123 is in SmartSuite. Both are excellent products. However, the vast majority of business offices uses the Microsoft suite. A significant number of CPAs have long been devoted to Lotus, and even though they use the rest of the Microsoft suite, they stay with Lotus because they're so familiar with it. And that's despite the fact that Lotus doesn't interface as effectively with the other Microsoft products as Excel does.

Advisory: Maintain a list of all your software applications, both on- and off-site. Include all unlock or licensing codes or files, the number of licenses owned and their renewal dates. This seems like an obvious tip, but many organizations fail to maintain this information--and that can be an expensive omission. For example, if they miss a license renewal date, they may fail to get a regular discount.

In the event of software corruption, you likely will have to reinstall the programs, and for that you need the unlocking codes or files. In addition, when a disaster hits your facility and the software is lost or damaged, if the license documentation is missing, you may have to repurchase replacement software at full price.

Never make a decision about upgrading either software or hardware before you consider what business problem the move will solve. Too often managers get caught up in the chicken-or-egg riddle: Which should we upgrade first--the software or the hardware? The answer is neither. Consider this business-solution question first: What technology is needed to solve this business problem? If the answer is software, the next step is to determine whether the current hardware setup is sufficiently robust or compatible with it. Don't just assume the hardware is up to it; check with the software vendor.

For example, if your organization wants to upgrade to paperless technology--that is, document imaging--don't run right out and buy a scanner and the associated optical-character-recognition software. First, determine which of your business processes can benefit from using less paper. Next, decide whether you should buy a complete document imaging system or whether you can upgrade your current software to do the job. If you lack a staff expert who can make that determination, consider engaging a consultant--but, for obvious reasons, not someone who sells document imaging equipment.

* Operating systems: Contrary to what Microsoft would have you do, my consulting organization encourages clients to leave their operating system (OS) alone unless new software applications or new hardware requires them to upgrade. Changing a system for the sake of change is expensive and often difficult. That said, it's also important to understand that failing to change an OS which needs an upgrade can cost you even more.

So how do you recognize when you need an upgrade?

If your system locks up or applications run slowly, you most likely have an OS problem. Don't consider a system upgrade as the best first step for solving it; it's better to upgrade the hardware, which will come with the latest OS version already installed. In general, software upgrades cost more than hardware upgrades because replacing both the OS and the associated applications usually requires a major time investment, and time, as you know, is money. For more on this, see "The Microsoft Dilemma," page 31, and "The Linux Option--Almost Ready for Prime Time," below.

We believe that, when possible, the OS that was initially installed in your computers should be left alone. However, that often results in an office with multiple operating systems--Windows 98, 2000 and XP, for example. In general, running multiple OS versions costs more to support, and that's frequently unavoidable. But if the system works, it's worth living with. On the other hand, if the OS or your whole system functions poorly, replacing all the computers may be the most practical option.

We recommend a similar policy for network operating systems: Upgrade only when significant fixes are necessary to meet changing software needs, network OS support is being discontinued or you want more security, performance, space--or for other specific, identifiable reasons. Further, don't hold on to your server until it fails. Plan to replace it as it ages to maintain reliability and speed. Consider server hardware reliable for about five years.

* Hardware: Once you've established your business needs and reviewed the software applications, you'll have a better idea whether you should replace the hardware. For years we've recommended replacing hardware every three years; we've since extended that cycle to four years or more since today's computers can effectively operate most office applications.

Sometimes a buy decision is not clear-cut. For example, when there are no total hardware failures and the software runs OK or just adequately but it could run somewhat faster, you should ask these questions:

* How much would it cost if one particular piece of hardware failed?

* How much productivity would be lost by slow equipment or frequent lockups?

* How much would it cost if the server or a specific desktop machine failed?

When you get to the point that continuing to run the equipment can lead to a major business interruption, then the decision is clear. Or if a vendor no longer supports your old hardware, it's time to replace it. A hardware failure generally costs at least 2 hours of productivity, but it's not uncommon to lose 16 or more hours.

Different classes of hardware pose different levels of risk to the organization when they fail. For example, a server failure affects all users, keeping everyone from working. If it occurred at deadline time, it could be a catastrophe.

* Desktop computers: Compared with servers, desktop machines are often less critical and can be replaced for a lot less money. We recommend a four-year cycle as long as a desktop computer is fast enough to effectively run the current generation of applications. However, don't be tempted to keep them much longer.

Running a slow machine on an old operating system costs you soft money--that is, time lost. We see businesses with 8-to 10-year-old computers; their employees often spend some portion of their workday waiting for a process to finish. Not only does that waste money, it leads to job frustration and poor morale--contributing to higher-than-usual staff turnover.

When buying new computers, a question that frequently comes up is: Who gets the fastest, newest computers? Often they go to lead partners or top management, while staff members, who usually do the "heavy" computer work, must stay with the slower, less reliable models. Give new equipment to those who really need it.

* Laptops: Portable computers take lots of abuse. So a reasonable strategy is to buy less expensive portables and replace them every two years. If a portable fails while on the road, the user is often totally disabled. At a typical hourly rate, this type of loss justifies frequent replacements.

* Printers: Just because an old printer hasn't failed is no reason to leave it in service. Older printers cost more per page to operate and have inferior paper-handling capabilities to the current generation, causing users to spend time clearing jams. Poor quality black-and-white or color printing reflects badly on a business's image. Today's laser printers produce an original color page far more cheaply than many older black-and-white machines.

Infrastructure: The components that interconnect your computer systems collectively are called infrastructure. These include network interface cards (NICs), cabling, hubs, switches, wireless access points (WAPs), routers, firewalls, printers and servers. Infrastructure needs routine care and, when installed correctly, does not need to be upgraded nearly as often as other computer system components. For example, correctly installed cabling systems last 10 years or more. IBM and AT&T claim their cabling systems should last at least 20 years, and this is proving true.

Although I'm biased because my company provides technology consulting services, I do believe that building a proper infrastructure is where you can most likely benefit from outside help. In-house network administrators, unless they work hard to stay very current, often are unaware of the latest developments in infrastructure and tend to do things the same way they have always done them. The result: They tend to spend more for inferior strategies and hardware that is less productive and more complex to maintain.

* Telephones: This is the one area where technology is making giant leaps and where organizations can experience enormous productivity gains. One of the biggest improvements is the development of the all-in-one personal digital assistant (PDA) that can do multiple chores: It's a cell phone with full wireless Palm or Pocket PC functionality, which means it can maintain a calendar and a to-do list, receive and send e-mails, browse the Web and handle word-processing and spreadsheet calculations.

One such instrument, the Samsung SPH-I330 PDA/ phone, weighs about the same as a standard cell phone and costs about $300. Another example is the Kyocera 7135, which sells for $499. The new generation of PDA/phone technology introduced last August also sports higher-speed data communication along with features such as color digital cameras or global positioning systems.

Now, what if we added even more telephone features? What if our system sustained no additional charges for long distance? What if this all-in-one PDA integrated with a conventional wired telephone system that supported voice mail and handled voice-mail-to-e-mail and e-mail-to-voice-mail translations so we could select our preferred method of receiving messages? What if the phone system transparently (that is, automatically) could connect to our home or home-office systems? We then would have a single number, and the phone could filter callers such as colleagues, customers and family.

And finally, what if the phone system was connected with our application software so it could instantly retrieve business records related to that caller on our computer or PDA before we even picked up the call? We are likely to see these features in a competitor of the PDA/phone, the smart phone.

This level of integration is not available to most of us today, but some vendors have been delivering individual components that, when coupled with conventional phone systems, can deliver such functionality, which is called computer telephony integration (CTI) systems. The main elements that don't yet work satisfactorily are cell phone integration and a single phone number with screening. But that advance is less than 10 years away, so these features are likely to be delivered during the time you own your next phone system.

It's possible to install some CTI integration between office and home, including voice-mail-translation features. A small system such as the 3Com NBX (www.3com.com) starts at $3,400 for a complete system with four handsets capable of handling up to 25 users. Larger systems can handle 250 users or more in multiple offices. Systems located in entirely different cities can be integrated and treated as a single system.

* Training: While it's true that many software applications now have similar interfaces, it does not follow that less training is necessary to run them effectively. Training is as important today as it was in years past. If anything, because today's software is more sophisticated, even more training is needed to make its use fully productive.

Conventional wisdom has it that the least expensive way to conduct training is in a classroom where one syllabus fits all. Put bluntly, this conventional wisdom is wrong. The most effective and most economical kind of training is one-on-one and customized to the specific needs and abilities of the learner.

So instead of scheduling one-shot classes, consider having your in-house trainer or a contracted instructor circulate among your users, helping them discover more effective ways to use the available technology. Users can simply keep a record of areas where they need help, and the trainer can stop by every so often for a short instructional session. This type of training is extremely practical and productive. It beats the big classroom where most users waste time by sitting through lessons they don't need and will never use.

One of your most valuable business investments is your office technology. After all, it's taken you from the days of columnar pads and pencils to professional levels far beyond anything imagined in the precomputer days. Therefore, give your technology systems the attention they deserve. Buy quality. It's worth it. It reduces the ongoing maintenance and the likelihood of catastrophic failure. Hardware and software constitutes less than 25% of the cost of running your system--so searching for the lowest prices is not the most effective way to save money.

If you follow the recommendations we suggested, you will have better technology than most of your competitors, and most likely, you'll spend less to get the job done well.

RELATED ARTICLE: The Microsoft Dilemma.

The decision to upgrade the Windows operating system and Microsoft Office Suite used to be pretty easy, primarily because new versions were relatively inexpensive.

That's no longer true.

The current full cost of the latest operating system, XP Professional, is $299, while Office XP Professional (the full suite of applications) runs $540. That's a total of $839--and that's for each computer.

Compare that with the previous versions. Windows 2000 and Office 2000 upgrades routinely were sold for about $129 and $219, respectively, for a total of $348 per workstation.

Not only did prices rise, but the pricing schedule got much more complicated: You need a purchasing agent with a very sharp pencil to figure out the best deal. For example, if you had purchased any of Microsoft's operating systems or the Office Suite before July 31, 2002, you also could have purchased a Microsoft Software Assurance license agreement that would have let you upgrade to future releases during the next two years for a token charge of $26 for shipping the upgrade disks. The cost of Software Assurance for the operating system was $109 and $263 for the Office Suite--a total of $372 per workstation.

Microsoft announced that it was discontinuing all upgrades as of last July. However, as of this writing, a Windows XP OS upgrade still was available for $199 and Office XP Pro for $329--for a total of $528.

If you want to get Software Assurance on your new purchases of Windows and Office XP, it is available only on Microsoft's Open Business licensed product--not on the preinstalled software from hardware vendors. However, depending on the person you talk to at Microsoft, you may or may not be able to upgrade any retail box product license, old or new, either.

However, if you buy a new computer, nontransferable licenses of Windows XP Professional operating system can be preloaded as a premium option for about $100, and Microsoft Office XP Pro can be included for an extra $269--for a total of $369 per workstation.

So, a Microsoft operating system and office suite that used to cost a combined $300 to $500, now costs between $700 and $1,000--per machine.

It is almost always wiser--because the software is less expensive and the hardware is better--to buy new hardware that already comes with the license for the new software even though the licenses aren't transferable.

If you think you will need to upgrade your OS and applications in about five years--the usual life cycle for hardware--you should buy Software Assurance so you can update whenever you want. Don't waste your money on preloaded software since it can't be upgraded, and in any case, you already own the software licenses as part of your Software Assurance. Also, if you want to keep all your desktop software versions the same, then be sure to acquire Software Assurance.

RELATED ARTICLE: The Linux Option--Almost Ready for Prime Time.

It's time to start thinking about Linux--the operating system developed by a young Finnish student, Linus Torvalds. Desktop Linux is almost ready for prime time and should definitely be considered in your technology planning. Server Linux and its applications are ready now. Many companies are using server versions of Linux today--mainly for security, firewall, spam filtering and file and print servers.

Compared with Windows, what Desktop Linux lacks in a few bells and whistles is more than made up with its speed, reliability and economy. For less than $100, you can buy one copy of a commercial Linux version--Red Hat (www.redhat.com) or UnitedLinux, SuSE, TurboLinux, Caldera International, Conectiva (www.unitedlinux.com)--and install it on all your computers. Compare that with spending about $369 to $839 to separately license just one computer to run Windows and the Microsoft Office Suite.

Currently, there are two Linux office suite packages similar to MS Office: Sun's StarOffice (www. sun.uom/software/star/staroffice/6.0), which costs $75, and OpenOffice (www.openoffice.org), which can be downloaded free. Both not only are compatible with MS Office, but they mimic many of the MS Office features; future upgrades promise even more MS Office-like features that are now in Office XP and will be in the next generation of Office.

The user interfaces of both StarOffice and OpenOffice are similar to Microsoft Office, so the learning curve is very short. They have almost all the same modules with two exceptions: Outlook (for e-mail, calendaring and to-do lists) and the Access database. I have been using StarOffice for more than a year and have found its word-processing, spreadsheet and presentation components comparable to MS Office. Further, both of these products read and write MS Office files. Other vendors such as Corel (http://linux.corel.com) have a Linux version of the WordPerfect Office Suite.

If you want a Linux-compatible product with a similar look and feel to MS Outlook, consider Ximian Evolution. For $24 you can connect to your corporate MS Exchange mail server.

If you want to run a Linux operating system but still use MS Office and some other Windows applications, you can install CrossOver Office (www.codeweavers.com/products/office), which makes them compatible with Linux. It costs $55 and allows you to run your licensed MS Office application as well as a supported list of other Window applications. We find that many products that are not officially "supported" for Linux still run well on it.

If you want to use both Linux and Windows applications on your desktop computers but you don't want to actually load the applications there, you have the option to install Citrix Metaframe (www.citrix.com) on your servers. This approach reduces desktop administration expense and lets you convert a Windows desktop to a Linux desktop as you replace your computers.

RANDOLPH P. JOHNSTON, executive vice-president of K2 Enterprises, Hutchinson, Kansas, is a technology consultant. His e-mail address is [e-mail].