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Types of software

There are various types of software and you need to know the differences between them.

Build or buy
It is possible to write software specifically for your business. In a small business this is not likely to be cost-effective as you need to have good internal IT expertise, lots of time and a large budget.

System or application software
System software is not directly useful for business purposes but makes the computer hardware useful. An example is the Windows Operating System. Application software is designed for a specific use such as word processing or accounts. You will need both types of software.

Bespoke or off-the-shelf software
You can have software written specifically for your business. This will give you exactly the functionality you need, but the price is likely to be very high, and you will be tied to that supplier for future support. Producing bespoke software can take a long time and your staff will need to provide a lot of input into the development process. This means that it is not a sensible choice for most small businesses.
Off-the-shelf or shrink-wrap software is standardised and generally low priced. The functionality may not be exactly what you require, but it may be better to change your business practices to suit the software rather than having software specially written. The high volume of sales of such software usually means that support, such as training, can be obtained from a number of different sources.
Standard off-the-shelf software packages are usually the best choice for small businesses. In some cases software can be tailored to meet your requirements if it does not include all of the functions that your business needs.
See our guide on make the right IT choices.

Open source and proprietary software
Proprietary software is software developed by a supplier and made available for you to use under a licence. This defines how the software can be used and usually forbids you from doing certain things such as:

• making copies of the software and passing them on
• selling your licence to someone else

• lower software licence costs
• no supplier lock in
• freedom to do what you want with the software
• compliance with accepted industry standards
• freedom to upgrade software as it suits your business

• it may be difficult to obtain support
• some proprietary formats such as Microsoft Word's .doc format are so widely used that other formats are not acceptable for business

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Software licences

Proprietary software is made available under a number of different types of licences.

Shrink-wrap licences (OEM) are usually for one installation of the software. This is the most common type of licence for software that you will find in retail stores including online outlets. Some versions of this type of licence may require you to activate the software. This allows the supplier to check that the software is installed on just one PC. Such software may require re-activation if you change the hardware in the PC.

Per-user licences are common where software may be used by more than one person simultaneously. The licence is usually for a maximum number of users.

Site licences are much less restrictive. They typically allow as many users as you wish at one location.
Software licences are often expensive, and it may be tempting to buy just one licence for a product and copy it for several users. The software industry is protective of its licensing revenue and, if you are discovered, you and the reputation of your business could be in serious trouble.

Be wary of buying very cheap software, as there are criminals engaged in pirating software. There have been cases of firms who supply complete licensed systems using pirated versions of networking software or operating systems.
The Business Software Alliance (BSA) provides guidelines to how to manage your business software. You can download a guide to software management from the BSA website (PDF), or find free software audit tools at the BSA website.
Software is available which queries your computers and builds up an inventory of the hardware you have and the software running on it. This is a good investment, partly for your own resource management and partly because it helps you counter allegations of running unlicenced software.

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Selecting and acquiring software

There are many ways to get advice and support when choosing software, including:

• your own needs analysis of the business - see the page in this guide on identifying the business benefits of new software
• software or business consultants - although they may be biased towards software they are familiar with
• software vendors - again remember their possible bias
• professional and trade associations such as the Institute of Directors - find advice on IT for your business at the Institute of Directors website
• the computer press, which can be a good way to get information on the basic issues so you know the right questions to ask - for example, Computer Weekly or Computing magazines
• your local Business Link

Document your business
Diagrams may make documenting your business easier - use boxes for processes and arrows to show documents, invoices etc, entering or leaving processes.
Documenting your business in this way will help you identify areas where new software could improve your business processes. It will also help you explain your business and its requirements to potential suppliers when purchasing software.

Purchasing
As well as the price of software, you should also consider support costs, future upgrade costs and the need for hardware upgrades to use your software to full effect. You also need to consider if software will still be suitable as your business evolves - your software system must be able to accommodate an increased load should your customer base grow.
Make sure that you are purchasing properly licensed software and keep safe your proof of ownership, such as the original distribution CDs or hologrammed Certificate of Authenticity.

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Software installation and activation

Most off-the-shelf software is delivered on CD-Rom. The installation of such software is usually simple - insert the CD-Rom and answer a number of questions about how and where the software is to be installed.
Software that will be shared between several employees and applications will typically be installed on a server - a larger computer that is often located in a secure office space. This may be a more complicated process and will require the correct password and access rights.

For businesses with more than ten desktop PCs, it can be better to set up desktop PCs so that they all have a common set of software. This will make it easier to keep them all up-to-date and to check that software is properly licensed.
Some software will need to be activated once it has been installed. You may be able to use the software for a short time without activation but it will eventually stop working. Activation can be carried out through the Internet or by telephone. The software supplier will obtain some details about the hardware of the computer you are using and will then issue an authentication code. This will allow the software to be used. If the hardware details of the PC are changed it may be necessary to re-activate the software.

Software upgrades are offered by the supplier because:

• "Bugs" are discovered in the software and must be corrected, perhaps for security reasons for example, bugs in web browsers have allowed hackers to gain access to company systems. The software suppliers provide corrections to their software to prevent this.
• The software is improved or new functions are added.

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Software maintenance and support

Software requires maintenance and will eventually become obsolete and need replacement. Most software costs come after you've bought the licence. Paying for staff training, support, upgrades, managing licences and deployment can be expensive.