8. How to save money on business software when starting out

When starting out in business, one of the first things any entrepreneur needs to do is set up their internal IT systems. But the cost of setting up a business – even with basic software tools – can be pretty steep.

Traditionally, a typical five user business would need: Microsoft Office (Word, Excel, PowerPoint – £180 per person), Microsoft Outlook (email, contact manager, calendar – £90 per person), accounting software (eg Sage or Quickbooks – £100) and a customer relationship management (CRM) system to keep track of your customers, prospects and sales pipeline, (eg ACT! from Sage – £750 for five users).

That’s £2,200 before you’ve done anything else, and doesn’t even include the hardware to run these systems, maintenance and upgrade costs.

But there are alternatives to buying conventional software – and some of them are completely free.
Web apps
Instead of buying the software on a CD and running it on your PCs, Macs or server, you use applications that are delivered over the web. The vendor hosts all the applications and data on their servers so there is no software to install or maintain, you just use your browser to access the system, and the vendor handles all the IT chores such as updating the system and backing up. Best of all, instead of buying all the software upfront, you pay a monthly subscription and can usually cancel at any time.

Examples are Google Docs as a replacement for Microsoft Office (email, word processing, and spreadsheets) and KashFlow Accounting for bookkeeping.
Open source software
Open source products are those developed by a community of programmers and then offered free to the world. Many of these products are technical applications that need a high level of competence to use, such as Linux, an alternative operating system to Windows, and MySQL, a database application that’s an alternative to Oracle or Microsoft SQLServer.

But there is also a lot of end-user software, such as Open Office, an alternative to Microsoft Office, which can be downloaded and installed by the average semi-technical user. Other famous examples are the FireFox web browser and Thunderbird email client from the Mozilla foundation.
Freemium products
Freemium products are systems that are offered for free by software vendors in the hope that you’ll upgrade to a premium product if you like their basic version. Unlike free time-limited trials, they are free to use forever and many people will find that they never need to upgrade to a chargeable version if their requirements remain the same.

Freemium is a whole new way of marketing and buying business software. The benefit to the software vendor is that instead of spending millions on advertising and marketing, they offer a basic level product for free and then if the product is useful, customers will flock to it and word of mouth will do the marketing for them. Then maybe as few as 10% of the ‘free’ customers will upgrade to a paid-for ‘premium’ version for more features.

The benefit to users is that they can start for free without any commitment (effectively an unlimited free trial) and many will never have to upgrade to a paid-for version at all. If and when their requirements grow, then they can spend (normally very little) money with a vendor that they now trust because they’ve been using the system for a while.

Examples of freemium products include DropBox for file back-up, access and sharing, Really Simple Systems for CRM and Skype for telephony and instant messaging.

Freemium products to help start your business:

John Paterson is the CEO of Really Simple Systems