Rapid uptake expected as prices drop, implementation time decreases.

[Johannesburg, 12 September 2007]

Small and medium enterprises (SMEs) can now obtain the enterprise resource planning (ERP) functionality previously only available to large organisations - at a price that suits their pockets.

This opportunity has become available over the last 12 months as mainstream ERP vendors, who have saturated the larger corporate market, begin to realise the potential in the SME market for their products.

Says Carlo Gunter, COO at e.com institute: "Three years ago, implementing an ERP suite was a costly, time-intensive exercise that was out of reach of 99% of SMEs.

“Smaller companies that wanted greater control over all aspects of their business had to make do with point solutions or the limited ERP functionality built into accounting solutions. Now, however, ERP suites from vendors such as Oracle and SAP are available at a fraction of the cost for SMEs."

The Oracle suite is particularly appealing, offering all the standard functionality at a fraction of the cost. The various modules - HR, payroll, supply chain management, etc - can be implemented modularly as required and will scale to meet the needs of the organisation as it grows. SAP has also released an ERP solution suited to SMEs.

Some have questioned whether smaller companies really need ERP solutions. Says Gunter: "ERP solutions act as a backbone for larger organisations, providing a single solution that tracks transactions and meets HR, payroll, supply chain and asset management needs, among others.

“It also allows them to track expenses and asset utilisation and optimise them, as well as assisting them to meet compliance and governance requirements. Smaller companies are usually self or privately funded and, with smaller financial resources, need to have a much tighter rein on operations and the utilisation of resources. ERP suites will help them achieve this."

Rapid ERP implementations

ERP implementations in SME environments have been carefully tested. "In an Oracle lab environment, implementation of full ERP functionality for a company with a turnover of R5.5 million takes approximately three weeks," Gunter notes. "In another case, a live Cognos implementation in India for a company with 3 000 users took five months. This is a vast improvement on the 12 to 36 months' average for larger organisations."

These speedy implementations are due to the greater flexibility that has been built into the ERP suites as they have evolved. Larger organisations previously spent a large portion of the implementation time tailoring the solutions to suit their businesses. This has resulted in ERP vendors ensuring their solutions are flexible. Implementation templates and best practices have also been built for different industry verticals, such as FMCG, manufacturing and local government.

ERP benefits for SMEs

"SMEs are very aware of the benefits of these solutions and know the value of getting their systems to work for them," notes Gunter. "There is considerable merit in not having to input a single transaction into three or four different systems. Besides the labour saving, it assists SMEs to eliminate human error and opportunities for fraud.

"In different environments, ERP suites are designed to optimise and enhance operational and business performance. For example, in a manufacturing environment, it will assist to enhance productivity; in a services business ERP will help optimise resource allocation and enable managers to cost their services; and in a sales environment, floor space can be optimised and product sets assessed for profitability.

“Horizontal functions, such as customer relationship management and HR, can also be improved with management applications that incorporate best practices."

Preparing for ERP

SMEs who want to implement an ERP solution must have their business and process ducks in a row, however. "It is key that organisations have a clear understanding of their business hierarchy and processes, as well understand the importance of using 'clean', valid data," he says, adding that training is the other half of ensuring ERP success as transfer to, and usage of, a new system takes time.

A proven approach is to identify the primary needs of the business, be they financial or - the end goal of any company - better management of information in order to improve decision-making. The growth vision of the company is also very important as it will impact at a later stage and must be catered for in the early stages of ERP implementation.

"We expect to see a bulk update to ERP systems in the SME sector as accessibility and affordability of these solutions increase," concludes Gunter. "However, SMEs, much as their larger counterparts, must map their processes, build hierarchies carefully and ensure data quality early on to create a solid foundation for growth and ongoing improvements in productivity and cost efficiencies."

by Carlo Gunter - COO e.com institute (Pty) Limited
(011) 262 4262
carlo@ecominstitute.com