Enterprise Resource Management for Small and Medium Enterprises

chillibreeze writer — Sunita Srinivasan

Small and Medium Enterprises (SMEs) is the latest honey pot that is generating a lot of buzz for the ERP vendors. SMEs are the organizations that have annual revenues under $50 million. The ongoing recession and the super-saturated market of Large Enterprises has spelt doom for the profitability of the ERP vendors. However, the SMEs have come to their rescue and the ERP vendors have been able to show a positive trend in their bottom lines. The economic crisis has not impacted the SMEs in India very badly. Therefore they are willing to make investments in the IT infrastructure by purchasing and implementing ERP solutions.

Market Reality

SMEs do not have the financial muscle and skilled resources to invest in the traditional ERP offerings. They are traditionally into manufacturing business. The SMEs look for solutions that require minimal capital and infrastructure investments, low total cost of ownership (TCO) including the costs of upgrades in future. As the SME segment is showing a compounded annual growth rate (CAGR) of 15 to 20 per cent. ERP vendors are tailoring products specific to their requirements.

Benefits of implementing ERP solutions

SMEs are seriously looking at ERP solutions to provide that extra edge in the competitive business environment. They can increase their profitability using the power of modern technologies and best business practices that the ERP software provide. The other benefits that accrue are that of a wired organization with easy access to latest information, ability to integrate with existing legacy systems, cost control, better profitability and customer service. For the manufacturing organizations, where implementing an ERP really scores, is by improving operational control and increasing productivity through inventory optimization and management reporting.

ERP market in India

It is estimated that ERP solutions for SMEs are available from Rs. 3 Lakhs to Rs. 25 Lakhs. Marquee brands like SAP, Microsoft and Oracle have got bespoke solutions for the SMEs at significantly lower price points with similar functionalities. There is a category of ERP vendors who have built their solutions scratch-up specifically for the mid-size organizations. Some of these are Great Plains Software, Eastern Software Systems (ESS), Ramco Systems and SSA Global.

Apart from tailoring the software to match the requirement of the SME segments, ERP vendors are also focusing on the time to implement for this segment. ERP implementation takes time and effort especially on the front-end. The key personnel will have to be trained on the new system. Not only will they have to get used to new interface but also some new ways of doing the old tasks. Moreover, there must be total commitment from the owner or the top executive to ensure that the decisions are in the best interest of the organization and no department gets undue advantage. Once implemented, there are a lot of success stories in the SME segment about the wonders that they have derived from the ERP solution.

Apart from the usual start-to-end implementation, now ERP can also be implemented in stages, allowing the SMEs to spread internal and external costs over a longer period of time. Initially the core modules like Manufacturing and Finance get implemented, then the Production and Sales modules to complete the cycle. Later they look at integrating the Human Resource (HR) modules and Reporting systems. Some tech-savvy SMEs are also looking at Open source ERP. Open Source applications are software programs that can be copied and reproduced without even paying the license fees.

To ensure a successful implementation there are certain pre-requisites needed from the organization too. They will have to ensure that the core management team and key decision makers undergo proper training. If the handover strategy will have to be finalized during the implementation, then the employees will adopt the new system easily.

Conclusion

The SMEs are facing the same challenges as the large businesses – that of staying ahead in the competitive industry, cutting costs, shrinking the Time-to-Market period. In order to leverage the operational efficiencies like their large counterparts, SMEs must consider the ERP solution as a technological aid.

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—About our writer:

Sunita is a marketing communications specialist who specializes in IT products. She has about 10 years of experience and a degree in business management. Apart from working on collaterals, she also likes to help independant professionals build their brand. She is based out of Bangalore.

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