ERP Systems for Small & Mid-Sized Companies
If we look at the world's 2 leading large ERP packaged suites, they are huge applications that offer tremendous flexibility to handle just about all possible kinds of manufacturing systems and business processes spread across all kinds of industries. Can these ERP systems be readily adapted by small & medium-sized companies and how do large ERPs really differ from those that are used by the SMB segment?
Organizations that operate in the SMB revenue segment usually don’t have the scale (volume of transactions) and breadth (variety of business functions) that large global conglomerates have. They typically deal with a limited number of (and often niche) products. Though large ERP systems are very flexible and can be used to adapt to nearly any business process, mid-sized customers prefer to use specialized ERP applications available for their segment, instead. Typical reasons are not that difficult to find. One, because large ERP systems are so generic, use the latest in technology and have taken years to build, they are very expensive. Two, since they are highly modularized and setup driven, setting up the application and making it ready for use is time consuming. Three, adding custom features (reports/forms etc) needs a significant degree of skill/training. In most cases, it also requires additional expenditure on an IT vendor for implementation expertise apart from the initial investment of purchasing the ERP.
In addition to being relatively inexpensive, easy to use & set-up, mid-sized systems need to be agile and preferably should have the ability to hook-up with large customer/supplier systems. To give an example of the agility that a mid-sized manufacturer needs, consider a supplier who sells components to one of the world's leading automobile giants. Due to technological advancement, the manufacturer changes the specifications of the components that he procured from the supplier. The supplier doesn’t have the necessary expertise at that point in time to manufacture the component by himself - so he sub-contracts part of the work to another supplier. This signifies a change in business process that will require the ERP system to adapt quickly. Sometime business process changes might be such that an upgrade might be required to a higher version of the software. Though upgrades and change to business processes can also be easily handled by large ERP systems, it normally would take relatively longer for the organization implementing the ERP, to develop customizations or to test their entire business cycle “on the system” because of the complexity and linkages between modules in such systems.
The current market scenario is witnessing intense competition between midsized ERP vendors (like Intuit,Infor,The Sage Group) and Tier1 vendors like SAP, Oracle and Microsoft in the battle for clients in the SMB sector. Both Oracle & SAP who are also leaders in the large ERP segment, have ERP solutions for mid-sized companies and are gradually capturing significant market-share. SAP Business ByDesign is a low-cost adaptable ERP solution that allows customer to quickly adapt to market changes. Similarly, Oracle Accelerate Industry Applications offers an industry-focused, easy-to-use and affordable solution that can be used by SMB enterprises. The fact that big ERP players have specialized offerings for the SMB community outlines the fact that this segment represents an attractive business opportunity to them. What do you think the future holds - will Tier1 ERP vendors dominate the SMB segment or will midsized vendors be able to hold on to their market share?