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.
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
- 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.
- 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.
- 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.
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