Infosys’ blog on industry solutions, trends, business process transformation and global implementation in Oracle.

« Oracle Financial Accounting Hub (FAH): Multi Level Drilldown | Main | Upgrade to Fusion: An approach to a successful PoC »

Cost Effective And Flexible Shared ERP solution for SME Segment (Part 1)

Guest post by
Ajay Ashok Verekar, Senior Consultant, Infosys

 

This blog is about ERP system for SME (Small and Medium Enterprise) and business opportunity for IT companies. Small and Medium Enterprises still feel ERP as jargon and not useful to their routine business. SMEs are not showing interest in the ERP products like SAP, Oracle due to limitation of IT spending and not much good option available in the market for low cost.

Why SME

Small scale industries are most important for growth of any economy. They play a vital role in changing and support of industrial sector development. The role of small scale industry is recognized throughout the world irrespective of level of economy developed.  They help the employment of assets for productive purposes with minimal initial resources. SMEs have contributed like catalyst in development private enterprise and in accelerating the economic development by generating employment, exports, and reducing local discrepancy.

Based on trends available on SMECHAMBER portal and some of SME SUMMIT reference documents, SME contribution in developing nations like South Africa and India is enormous. SMEs contribute by producing thousands of quality products, employing millions of people. In India, SME role in industrial output and exports is also remarkable as well as It is expected that millions of job will be created by SME. In addition if you have noticed, all governments across different countries are developing reform policies considering SME.

SMEs are the foundation of several inventions in manufacturing and different sectors. SMEs are major linkage in the supply chain of corporate and government organisations. SME business is still unexploited by major ERP vendors. ERP majors still not able to gain much SME market.

Challenges for ERP implementation for SME

  1. Cost - Cost of ERP implementation is substantially high from SME point of view. Considering ERP as expensive, SME suffer with financial constraints, the operational and financial risk become more apparent than the advantage. Cost of Elements in ERP implementation.
    • Hardware -Server, Storage, Networking etc.
    • Software - ERP licence , Upgrading cost , AMC , Database management
    • Project - Implementation cost from Implementation partner, Resource training and project management
    • Service - Support service cost, Maintenance activity cost etc.
    Considering these direct/ indirect cost, every implementation seems to be very expensive.
  2. Organisational Fitment - In most common practice, SMEs are opting for small or customised ERP software which are less costly. By this SMEs try to overcome cost constraint issue but organization losses flexibility. SME need to react faster to new changes or process to match client requirement or sudden changes in demand. But small or customise ERP package fails to meet such changes.
  3. Resource (Manpower) requirement -Good ERP system need support team which also need extra cost and more manpower requirement. Both these requirements are major constraints to SME. Climbing cost of IT manpower which causes salary difference between Cores business workforces compare to IT team.  This develops conflicts of interest in employee and cause failure of ERP system.

In Part 2 of this blog, we will talk about ERP Solution for SME.

___________________________________________________________________________________________

Meet Infosys experts at Oracle OpenWorld 2013, Booth No. 1411, Moscone South

Explore more at http://www.infosys.com/oracle-openworld

Follow us on Twitter -  http://twitter.com/infosysoracle  

____________________________________________________________________________________________  

 

Comments

I feel its the Business Analyst of the SMB's (SME's) who are the best to do a bottom up drive to get the right applications mimicking the high costly ERP in market with a correct balance between in-house apps and cloud apps to answer all these three impediments mentioned above. There are few more problems for SMB's which should be listed in detail for this blog too.

thanks for your valuable posting,it was very informative.

This is a very simplistic post. There are many more challenges that SMEs face when it comes to ERP. Some of it include process knowledge risk (they may not know their end to end processes), IT awareness risk, Employee Retention risk, Scalability risk, cost escalation risk, product risk, product version risk etc are some of the additional challenges that SMEs face. I have a complete post in my blog, I don't know if you do accept links to other blogs.

Great article.Thanks for your valuable posting..Its was very informative.

Post a comment

(If you haven't left a comment here before, you may need to be approved by the site owner before your comment will appear. Until then, it won't appear on the entry. Thanks for waiting.)

Please key in the two words you see in the box to validate your identity as an authentic user and reduce spam.

Subscribe to this blog's feed

Follow us on

Blogger Profiles