RM Online - Computer Q & A

1

How can computer systems be used to level the playing field to help smaller, independent rental stores compete with large rental chains, mass merchandisers and hardware stores?

Joisher: By having the automated computer systems that their larger competitors have to control inventory, rental reservations, equipment maintenance records, keeping track of billings and revenue, doing publicity mailings and literature and by continuing to give the personal attention and customer service that owner-operators of smaller rental operations already provide.

Kohn: This is the age of information. One of the keys to success is being able to gather as much information for your customer base as you can. The more you know about your clients, the better you can serve them - what products they rent the most, what services they expect and what your past experiences have been.

A computer system can help process information quickly. One of my recurring nightmares is the never-ending line at the bank [because of] outdated or nonexistent computer systems. To a rental customer, time is money.

A small rental operator has the advantage of being able to keep his system small yet flexible enough to adapt to technology. When something new and innovative becomes available, it can be added or upgraded to the present system at a reasonable cost. The big guys aren't always that fortunate - a small upgrade or a new technology can mean big costs and so many large corporations are two or three years behind in their technologies. A small independent has to be able to keep up with technology.

Shea: One of the advantages enjoyed by large chains is their access to fast, accurate information about what is happening in their stores. From this they make informed deductions about market demand. Every day, they know what is renting/selling and what is not. They can also perform sophisticated analysis of customer information to help them compete more effectively. Computer systems available to the independent rental operator provide the same type of information and marketing tools as the chains enjoy. Automation can be a powerful equalizer.

Veneris: If you purchase software from a vendor that serves hundreds of customers, software development costs are shared by a large user base, allowing the software vendor to build better and better systems. This economy of scale in turn provides small, independent rental operations with the opportunity to benefit from advances in software technology just as easily as larger operations. Key competitive elements of your business - such as access to critical management information and the ability to provide intelligent, timely customer service - are a function of the rental software you're using to run your business. Small operators have equal access to these powerful tools.

Many rental operators admit they use only a fraction of what their current computer system can do. What are the barriers to getting the most out of your system and how can rental software vendors help customers use their computer's more advanced capabilities?

Joisher: The barriers are untrained and inexperienced employees who show disregard for proper methods and procedures to follow for the efficient operation of the computer system, and rental store owners' reluctance to change old work habits and fear of major changes. Software vendors can help with proper training of owner-operators at the outset, as well as training other employees on a continuing basis, and with attitude adjustments of owner-operators by impressing them with the simplicity, the effectiveness and productive use of the system. Vendors can also show the features that affect the competitiveness of the operation before and after installation.

Kohn: Many of the computer programs written for the rental industry contain bells and whistles that are great for selling the product, but when it comes down to actual day-to-day operations, bells and whistles aren't the critical issues. I believe most rental people are happy with the basic "meat and potatoes" of a rental inventory program. Being able to generate, modify and invoice an order expediently, with no hangups, and knowing what products are available today and in the future are the keys. Basic reports such as an end-of-the-day closing and monthly sales figures are also necessary. All the other features of a particular program are there for the discretion of the individual user. Is it important how many widgets were rented on the third Tuesday of each month when it rained on the Monday before? To some it may be. To others it is of no significance. Remember, our job is to maximize profits. It's great to have data that is relevant to our business, but the bottom-line truth is we don't have the time to learn all the things our software packages are capable of doing. If we did have the time, we would worry that we weren't busy enough. It's nice knowing all those features are there, but the average rental person is happy when that contract pops out of the printer and the system is up and running.

The best thing for vendors to do to educate us on the features of their systems is to offer training sessions where we can get together with other users and discuss needs and how the program can accommodate them. A good computer software program should be continually growing and evolving to meet the needs of the users. Quarterly newsletters are also a great idea to keep all users up on the latest bugs, patches and fixes plus any other relevant information.

Another great idea would be for vendors to host Web sites where information can be downloaded and questions can be posted. As users, we realize that vendors are on the road quite a lot and this could be a way for them to answer our questions and solve our problems when they are not physically available.

Vendors should find new and more efficient ways to do the most common tasks such as contract writing, inventory control and invoice posting - technologies such as scanning, bar coding and document management.

Shea: Training is at the heart of this issue. Initial training usually happens at or near the same time as data preparation, hardware and software installation and other considerations that require the attention of management and staff. The person being trained often retains just the basics of system operation and contract writing. This is the plateau that many system users start at and stay at, even if it means not reaping the full benefits of the system. We've found that regional advanced training, videotape training, free refresher training, newsletters and user meetings all encourage a fuller understanding and use of the system's capabilities.

Veneris: To unlock the full potential of your computer system, you need opportunities to interact with other users to find out how the system is being used in real-world situations. An established, independent users' group can provide the networking and training that will take you to a more sophisticated level of using your computer system. A vendor [should provide] this opportunity.

Not everyone chooses the most appropriate computer system for the business the first time around. If someone has made a substantial investment but is disappointed with the results, is it worth the cost and effort to change?

Joisher: The obvious thing to do would be to work out the kinks of the ineffective computer system, if possible, [with] the original vendor. If not, check with other vendors to find out if any portion of the investment can be salvaged, to be used with a new system. It does not make any sense whatsoever to continue using a system that simply does not work. The computerized world is moving too fast for somebody to continue using an inappropriate system.

Kohn: "Let the buyer beware." Before purchasing any system, check the software thoroughly. Talk to other users of the program, feel them out, ask direct questions. Every program has both good and bad features. What I see is that users of particular software seem to [be] close to one another. It seems if your friendly competitor uses the software, then it is OK for you. I think this says something for our industry, namely that we respect one another and we value what our competitor has to say.

Spend time with the vendor's sales staff, have them show as much as possible about the program. Make sure it will fit the way you do business. You shouldn't have to drastically change your procedures to fit someone else's methods.

Yes, many make mistakes the first time out and purchase software that doesn't work for them. At that point it may be necessary to "bite the bullet." Sometimes it doesn't pay to throw good money after bad. The good news is today's programs are written to run on most standard PCs, so the hardware won't have to be discarded. This could save thousands of dollars. You might find that a change of your current program is necessary - although it's working fine, there has not been a major upgrade in awhile or you have found features you like better in another program. Sometimes you can approach your particular vendor, let him know how you feel and suggest changes. They should want to make their product competitive - most improvements come this way.

Shea: There are two separate costs to consider here. First, if you've bought one of the systems running on an Intel-compatible (IBM-compatible) PC, the cost of changing can be minimized by using the existing hardware. It's unlikely that non-IBM PC-compatible hardware will be usable by the next software package you're interested in.

Second, a good point-of-service rental system can make a tremendous difference to your bottom line. It can proactively address all the areas of your business that potentially produce profits, managing your rental inventory to maximize ROI, making your business more efficient and handling customers better and more professionally. A poorly performing system costs you all this and more. If your system isn't providing these benefits, you can't afford not to change.

Veneris: Rather than asking whether it would be too costly to change computer systems, you should ask yourself what you are missing by not changing. Recently I was in a rental store that was doing more than $500,000 in annual rental volume. By studying the ROI reports, the owner of the store was able to identify more than $20,000 in excess inventory that should be sold. If your software is not providing you with this kind of management information that can dramatically alter your bottom line, you should consider switching. The temporary disruption to your business will be far outweighed by the more intelligent, and more profitable, way of doing business a newer system can provide.

Do you consider computer hardware to be a long-term investment or a short-term investment? Why?

Joisher: Computer hardware is the most evolving part of the modern world and changes to hardware products happen quite frequently. How-ever, appropriately chosen computer hardware should be good for about three to five years, unless the rental store needs change dramatically.

Kohn: Technology is evolving so rapidly, what we purchase today can be obsolete quickly. The best suggestion I can give is to buy systems that can be upgraded. Because technology is moving quickly the prices of hardware are dropping, so when you decide to change that long-term investment into a short-term purchase, it won't hurt as much. Make sure the software you purchase today will run on generic hardware, not hardware specific for that product.

Shea: We have customers running on computer hardware they bought more than 15 years ago. It still does the job it was purchased to do then, but there is more modern hardware that will do the job faster, easier and more reliably. In general, you should expect your hardware investment to last about five years, although it's common to upgrade a system every three years or so to take advantage of improving technology.

Veneris: We believe computer hardware should be considered a short-term investment. I outlined why this is so in my column in Rental Management in February 1997.

Say a rental operator finds that the system is out of date or can't handle current and anticipated needs, but has already made a substantial investment in hardware and has a lot of data stored on it. Are there any special criteria to consider in selecting a new vendor?

Joisher: Any competent computer vendor will design a system to handle current and anticipated needs. The rental operator should find out how expandable, flexible and economical are the systems offered by the new vendor, and should get comments from customers of the vendor at various rental operations. A competent vendor should be able to incorporate the existing management data on to the new system, and demonstrate to the purchaser that every detail has been taken care of.

Kohn: We all want the best software for our needs. As we expand, needs change. If our software package doesn't change as we do, it's time to look for one that does. For example as Windows 95 has become more popular, our company wanted a package that ran under Windows 95 (not as a DOS application!). We went to our current vendor, discussed our needs and after a lot of investment and hard work from the vendor, we now run under a Windows 95 environment. The vendor knew that if he wanted my business, this would have to be accomplished or I would have gone elsewhere.

I am constantly looking at other vendors' packages, comparing them to mine. If there's something I like, I discuss it with other users. Then as a group we can approach our vendor. Sometimes the voice of many works better than the voice of one.

I'm not afraid to make an investment in our future. Just like purchasing a new piece of machinery or a new party tent, you are purchasing an item that can make you money. Sure, the old stuff works OK, but how productive can you be with new equipment? How much can your efficiency be improved? How much time and money will you save in training new employees? If you can process a customer's order two minutes faster, is that important to your customer? The answers to these questions should determine your decision whether to switch or not.

Shea: I would urge anyone facing this situation not to limit your research to those aspects of your current system/vendor with which you are dissatisfied. There's a tendency to think that if your current vendor handles a particular thing well, everyone else does also. But something that's handled satisfactorily now may be a major weakness with the new vendor. You would only be swapping problems, not getting a better package overall. Changing systems should be handled just like your search for your first system, except that you're more knowledgeable now.

Veneris: One of your primary criteria should be whether the vendor can keep up with the pace of change in the computer industry. You will want to take advantage of new hardware and operating system technologies as soon as they become available. Vendors with "open" systems that are designed to work on many platforms (both existing and new platforms being developed) will be able to deliver these emerging technologies.

How do you know which systems are more "open" than others? By asking what platforms the system runs on and what systems it will be able to run on in the future.

What about the "Year 2000" problem? Should rental people be concerned about having their systems increment the date correctly, or fail?

Joisher: Every business should be concerned about the "2000 problem." Every rental operator should check, whether he or she already has a computerized operation or is about to buy a new computer rental system, to see if a contract can be drawn up now for a date in the year 2000.

Competent systems should and will be able to write the contract for the next millennium.

Kohn: I would certainly ask your vendor how he plans to deal with it. Older programs might be forced to upgrade to new versions if available. Programs written today are aware of this and are correcting the situation. There might be older hardware out there that will not work, but my guess is someone will come out with a conversion device that can be added on or plugged in.

Shea: You should test any system for Year 2000 compliance by creating a one-week reservation beginning Dec. 30, 1999, and verifying that the software performs all the calculations correctly. Any vendor selling a computer system that cannot handle the year 2000 should be discarded. Period.

Veneris: The Year 2000 problem is emblematic of aging software that was designed and programmed in the 1980s and is now woefully out-of-date.

Most vendors have plans to patch their software so that it can handle dates beyond 1999, and you should test your software by writing a reservation for 2001 to see if you will need a Year 2000 patch.

This problem really points to a larger issue - that rental stores shouldn't be hampered by the limitations imposed by out-of-date software, but should be converting to the latest in software technology so they can take advantage of current computer capabilities.

What is the payback for an economical, efficient, user-friendly system?

Joisher: Anywhere from nine months to one year, depending on the number of contracts written per day and the number of days that the rental store is open during a year.

Kohn: Friday at 5 p.m., going home and knowing all is well, all orders have been filled, invoicing is done, the bills are organized, the customers and your employees are happy, you have money in the bank (according to your computer) and your racquetball game is on for 7 a.m. tomorrow. That's payback time.

Shea: Less than one year.

Veneris: The economic payback is anywhere between six months and three years. It depends on how well the rental store is operated before the system is put in and how much of the system is used immediately.

What are the pros and cons of using demo diskettes to evaluate software?

Joisher: In-person demos will give the rental store operator the proper features and benefits of a particular vendor's system and the rental store operator will get a decent comparison of the systems on the market. But demo disks do not provide a clear understanding of the software and features. Also, improper installation of a demo disk may discourage the rental operator from buying a system.

Kohn: As a user, I enjoy them, I learn from them. I even offer them to my current vendor. I let him review them. Then I discuss with him what I like and what I don't like and this leads up to what we are going to add to ours. Keep those demos coming!

Shea: I don't believe a demo diskette is an appropriate method to demonstrate software that is going to control the productivity of your major asset, your rental inventory. A diskette goes through pre-programmed paces that usually fail to show transactions handled in non-standard ways - even though this happens all the time in the rental business. The purchaser is left guessing how this might fit his or her special needs. Demo diskettes are a cost-saving way for a software manufacturer to sell software priced at a few hundred dollars, but software that costs thousands of dollars and will be the lifeblood of your business needs a more thorough investigation.

Veneris: The opportunity to evaluate rental software on your own PC using a demo disk provides a whole new way for you to learn about software systems and assess their pros and cons. The demo disk lets you review the software at your own pace and on your own terms. After working through a guided tour of the system with a salesperson over the phone, you can evaluate the software on your own. As questions arise, you can return to the demo and try out various functions and scenarios. This provides a deeper understanding of how the software will work for your business and results in a more consultative, educational sales process - and ultimately, a more satisfied customer when a purchase is made.

What can you say this year about the Internet? Is interest growing? Are rental people finding ways to use it? And what about security on the Web?

Joisher: Interest in the Internet has grown immensely. Perhaps four times as many rental stores are on their own Web sites compared to last year. Rental stores are using their Internet sites for advertising and e-mail. Some operators are also placing orders on the Internet.

[You shouldn't have to worry that customers will have easy access to your data because] security encryption codes have been developed that provide Internet security and privacy.

Kohn: All one has to do is look at all the A.R.A. members' stores listed on the A.R.A. Web page - www.ararental.org. This list grows every day. Many businesses are adding shopping cart services, where customers can rent right from the Web. Some A.R.A. members are using the Web as an excellent sales tool. The Internet is here and growing. Rental stores are catching on fast.

Rental stores are using their Web sites for advertising their products and services, company profiles and policies, featured employees, featured jobs and equipment, brochures with pricing, community services they provide, coupons customers can download, directions - along with a map - pinpointing their locations, after-hours emergency information, franchise information, e-mail, discussion groups, links to other related rental and industry topics, after-hours shopping, video demos of products and customer testimonials.

More and more rental businesses will go on the Web. The Internet will become a valuable sales tool. It is fast becoming an advertising medium of choice. The costs are minimal and the return can be tremendous.

The Internet is not a still medium like the Yellow Pages. Your advertisement comes alive on the Web. Now that the Web has come to TV, your message has the capacity to enter many more households and businesses. We are going to see a huge increase in businesses' use of the Web to advertise. Now that Microsoft has spent $425 million to purchase the rights to Web TV, you can expect great developments in this area.

Rental stores can expand their territories. The Internet can prove to be a testing ground to see if new areas of operation are feasible.

As the Internet grows, so does the security available to end users and customers. Privacy is of the utmost importance, and there are companies out there that just specialize in that aspect of Internet transactions.

Banking has become a big part of the Internet. You can be sure when these establishments enter the Web, security has to be top-notch.

Your customers can obtain as much information about your inventory as you deem necessary. If you choose to publish your prices, that's OK, but remember your competitors will be looking, too.

Shea: Yes, interest is growing, although not at the explosive pace that you see in some other industries. Rental operators seem to be using Internet and Web sites primarily to advertise. Right now, advertising on the Web is mostly limited to individual rental businesses with their own sites - some show rental rates, others concentrate on general statements about range of inventory and expertise. I think that eventually you'll also see rental businesses marketing themselves through community Web sites, where stores of all types in a given region or town can advertise electronically as a group.

For customers, both electronic reservations and direct ordering are possible now, although many stores prefer to avoid the security risks inherent in allowing direct access to their point-of-sale rental systems. The alternative is to create an e-mail reservation/order form from which a customer can submit rental requests.

Interactive access is certainly possible now, but in my opinion it's not advisable. Security is a significant risk when you use your mission-critical rental system as an Internet server - a situation that potentially opens the door to unwanted access to your database, even with password protection. Instead, a rental business can identify the data it wants to put on the Internet, extract it from the system, and post it on a Web site through an internet service provider (ISP). Updating this information frequently, even daily, is an easy process.

Veneris: Last year, we believed that interest in the Internet was strong enough to warrant developing a program caller ALERT RentalNet - Internet services developed specifically for rental operations. While the business use of the Internet is still in its infancy, we believe that companies that get onto the Internet early will have a head start in providing some of the more advanced capabilities the Internet will offer businesses in the near future. Today, we have customers who are advertising their businesses on the Internet and allowing customers to view information and place orders on the Internet.

How much training do you need to become proficient on a system? How "techno-savvy" does the average person really have to be?

Joisher: The systems on the market have different training requirements that vary from one day to one week. A good system (efficient, user-friendly) should be able to provide proficiency in less than two days.

Kohn: The more you know, the more dangerous you become. As they say, a little knowledge never hurt anybody. It can go a long way. This holds true for computers. Many of us know enough to "get by" but as you develop your skills, you will be amazed at what you can accomplish in a short time.

The good news is that software is becoming easier to learn - most manuals are on screen with "pull-down" help menus. There's no longer long hours of setup and manual reading. In most cases, you can jump right in and learn as you go.

Still, basic skills are important, such as typing and maneuvering the mouse. Master those two and you're halfway there.

I think the greatest concern is fear. If it was a new rental product, most of us would know it inside and out quickly. Why can't we feel the same about a new spreadsheet program or desktop scanner?

Shea: No rental employee handling customer transactions should have to understand computers or be a typist.

The true test of a system's ease-of-use is when a store employee who typically doesn't serve customers can step up to the counter and confidently write contracts.

True ease-of-use is impossible to retrofit - the system has to be developed from the start with this as a major design objective.

Veneris: No matter how many bells and whistles a computer system has, if it isn't easy to learn and use, it won't get used.

Today, because many rental software systems are hard to understand, rental operators are only using the most basic contract-writing functions on the system.

When you begin shopping around for a new computer system for your rental business, evaluate the "ease-of-use" factor first, checking to make sure the system has an intuitive format, non-cluttered screens and features such as online help, coach lines and easy selection codes via pop-up help boxes.

Where do you see rental technology going next, or over the next few years? What capabilities and applications will be most important in the next couple of years?

Joisher: The Internet will play a major role in the rental industry - placing orders, looking up rental rates, getting quotes online, making reservations, paying for purchases online (credit card/debit cards) and online video demonstration of usage and safety of rental equipment.

Kohn: Technology is increasing extremely fast. Hardware bought today, like a new car, devalues before you leave the store. Many rental companies are leery to make new investments in technology today, fearing tomorrow something better will arrive on the scene. This doesn't just stop with computers - even your TV at home will be obsolete in about eight years (or sooner) when digital video becomes the standard.

I expect to see improvements in contract writing, namely voice recognition, and more interactive developments in the way of customer service. Your customers will be able to obtain a wealth of information on the products you rent, including safety features, demonstrations, technical data and complete operating instructions. Soon information about your customer will be as easy as [having him or her put a thumb print] on a screen and everything including the customer's name, address, phone, fax, e-mail and credit and rental history will appear on the screen.

Database management is a key to success. Because this is the age of information, we will need effective ways of handling, storing and transferring vast amounts of data. Look for improvements in bulk storage such as hard drives with the capabilities of 50 gigabytes or better, data transfer systems that will exceed ISDN speeds of 112 bps, and read-and-write optical disks smaller than today's CDs but capable of holding 10 times as much data.

Shea: I see electronic commerce as the area most potentially beneficial to small businesses [vs. large businesses]. It will give the small business owner many of the same capabilities of a large business - particularly when it comes to purchasing and receipt of payment for services - and it will [offset] some of the advantages of being big.

Rental businesses could also benefit from the efficiencies of electronic signature capture, but only if the legal hurdles can be overcome.

Veneris: The pace of change occurring in the computer industry virtually guarantees that no single company will be able to provide all the computer-related goods and services that rental stores will want to use in their businesses. We believe that rental software vendors must increasingly become technology facilitators, helping to bring together the resources necessary to meet the needs of the industry. In our company, we have begun this process by instituting [a] partnering program that brings together specialized technology and software experts so that we can provide the best of what today's computer technology has to offer.

Do you have any additional comment about computerization in the rental industry in general?

Joisher: Any system that can incorporate productive, economic and user-friendly features and have the capability of working on the Internet will be the successful business of the future.

Kohn: We should see more hardware and software vendors at A.R.A. trade shows. Our members need to be brought into the fold on what's available out there and the options that come with it. Up until now, when we purchased inventory management software, we generally purchased the equipment the vendor suggested. We realize now there are other choices and decisions to be made. Additional products need to be displayed - everything from digital photographic equipment to software that can produce spreadsheets, newsletters and Web pages, and store information.

Shea: The rental marketplace can expect an increase in the quantity and quality of competition, making computerization an essential element of any rental operation that expects to compete successfully alongside other local, regional and national rental businesses. Computers level the playing field for the independent rental operator vs. the chain store that takes full advantage of automation. Quality information is the key to matching competitors' capabilities as well as customers' expectations.

Veneris: The rental industry is being radically altered by the consolidation of rental stores and the influx of large retailers into the market. In this changing and increasingly competitive climate, independent rental stores must take advantage of all that computers can provide to help level the playing field. This includes "riding the technology wave" - making use of new technology as soon as it becomes available and not getting stuck in a rut of older, less efficient software or older, slower and less dependable hardware. The current climate of the rental industry requires a quick response to competitive pressures, building customer loyalty through superior customer service and intelligent decision-making. All of these factors are impacted greatly by the information system you have invested in for your business.