16 Feb The case for ERP in the Medium Business SME SMB
If you’re running a successful small-medium business (SMB), chances are that over a number of years, you would have developed some pretty robust processes along the way to manage the myriad of your business processes. You probably haven’t had the time or bandwidth to perfect them, but they work well enough to keep you up and running.
From what I have seen, these usually consist of multiple applications that have been procured along the way, with a bunch of manual processes filling in the gaps. If you track the history of a company, problems that have arisen are often tackled one by one, by implementing new processes or looking to the applications marketplace for an individual solution.
The result, for the most part, is a bunch of disparate applications that are not at all integrated with the best-case scenario, with some manual processes on top of them doing some data replication.
The problem with manual processing is that it’s usually done intermittently in batches. This means that systems are rarely real-time, and, even with the most careful consideration, errors accumulate through typos, naming conventions and duplicates.
Just take reporting. Manual reconciliation requires time-consuming data manipulation in excel just to get the data to a state in which it can be analysed. As a result, decision makers look at this crucial information less frequently. The business becomes less dynamic. It spends its time and resources keeping pace, instead of using the reporting data to make predictive decisions or build competitive advantage.
A vicious cycle is easily created – the quality and frequency of data going into all these systems becomes less important, as fewer decisions are being made because of the doubt about their accuracy and timeliness. Low adoption then ensues throughout the organization as it becomes apparent that management are not doing anything with the information they have.
One compelling alternative to this stagnant state of affairs is to select one of the handful of enterprise resource and planning (ERP) systems available for SMB. These highly configurable platforms integrate most functions of a business, including quoting, planning, managing customers, manufacturing, service, sales and marketing. It also covers activities like stock control, order tracking, customer service, finance and staff.
The objective of enterprise resource planning is to drive the flow of information between all internal business functions, while managing connections, or “touchpoints,” to outside stakeholders.
SMB business owners and decision-makers with a corporate past may have been exposed to ERP and understand the benefits of these platforms. What they may not know is that these benefits are now within reach of small to mid-size businesses. How many SMB owners would choose an ERP platform as their first or best choice to streamline their business?
The value proposition for ERP to the SMB business is huge. The big players in this space – such as SAP, Microsoft and Oracle – are well aware of this, looking to the SMB space to meet their future revenue numbers. Last year, Oracle acquired NetSuite for USD$9.3B, while rivals SAP have been developing the only true cloud ERP suite for SMB, Business ByDesign, since 2004. SAP are doubling investment in the ByDesign platform in 2017.
Without question, the main obstacle for any SMB assessing whether it should move to a ERP system is price. Even with a large multitude of licensing costs across many internal systems, an ERP platform will be at least five times the annual subscription cost of the business’s entire application landscape.
This initial cost may be difficult for an SMB to get their head around, but how much the platform costs is the wrong question to ask. For example, the trigger point for decision-makers to go to market for a new platform is usually the result of a series of either inefficiencies, stock losses, missed billing, lack of transparency, after-the-fact discoveries and integration failure. Any of these have an attached commercial impact to the business. Decision makers need to understand what the real cost of this is having on their business.
Like any business investment, investing in an ERP system should not be looked at as simply “buying software”. Implementing an ERP system is a business transformation project that engages all levels of the organisation.
The value is derived from both tangible and intangible results. Business owners should have a good idea as to where these will come from. They need to understand that ‘Systems’ within any business is one of the key areas of competitive advantage – therefore, a business that develops superior systems will nudge out those competitors with less efficient ones.
For sure, the cost question has to be asked – given the commercial constraints on an SMB – whether investment in an ERP system is the best allocation of capital. And needless to say, every SMB should take a moment to assess the value an ERP platform would offer to their business.
Selecting from the top vendors or from the relevant partner ecosystem, the right consultants should be able to create a business case for your unique value proposition.
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