SME IT awareness rises with growth

In emerging economies such as India, small and medium enterprises (SMEs) are experiencing unprecedented growth. As they can sustain such growth and further accelerate their business, they have become more IT-aware. According to recent research by AMI Partners, SMEs in India are on track to spend about $640 million (Dh2.3 billion) on packaged software purchases this year, up by 26 per cent from last year. Enterprise resource planning (ERP) will form a significant part of the packaged software investments of these companies.

SMEs have their own expectations from an ERP system. Inevitably, it's about growth. When firms expand they realise that they can't manage the resources of the organisation on spreadsheets. They need to standardise business processes regardless of where they are located. Having a single backbone for the company for analysing information helps a business make sound business decisions.

Senior managers at SMEs need to look out for signs that indicate to them that it's probably time to move from their current manual practice or simple accounting system to an ERP.

Simple ledgers and order processing systems should be swapped out for more comprehensive systems. In the current market, many ERP vendors are shipping most of the functionality a retailer, a manufacturer or a wholesaler will ever need in one bundle, and you need to only add users when required. This can work out far cheaper and effective in the long term than adding to a suboptimal system to paperwork and in-house databases.

It is important that the SME synchronises the adoption of enterprise-wide IT solutions smoothly with the growth of the company. This has great relevance in the case of enterprise-wide business applications such as ERP. Most small businesses install an accounting package to manage their day-to-day operations. The rest of the operations are handled with basic office tools such as the ubiquitous spreadsheet.

What historically prevented SMEs from investing in ERP was the cost, paired with the risks involved because the decision will affect their entire business, unlike enterprise firms that can try it out in a particular division or region. Now, some ERP vendors who focus on selling to SME enterprises, are rolling out multiple strategies to address this segment – identifying and aligning their offerings, channels, delivery options, and price points, and really driving home the value their offerings can deliver to these firms.

SME customers expect the same from their ERP implementations as their bigger counterparts. However, they do not have the IT staff to support a wide-ranging implementation. Thus they require a little bit more simplicity in terms of execution, but expect the same amount of complexity and richness of functionality as the bigger enterprises. Managing this balance of relatively simple implementation coupled with rich functionality is the challenge for ERP solution providers. In addition to functionality, they also require additional tools that will enable a business user to pry control, rather than the IT staff.

Return on investment is more critical for SMEs as they often have little financial buffer to fall back upon. IT spending as a percentage of revenues is, expectedly, larger for an SME than for a large enterprise, and given the low cash flows of the SME, this puts serious pressure on the IT investment to show results.

Often the IT investment has to show an immediate tangible result to enroll the support of the management for further investments in IT.

Conversely, SMEs tend to invest in IT solutions that promise some form of tangible result upfront in the short-term.

The large enterprise market has been extensively tapped by ERP vendors and the SME segment is showing the greatest potential for ERP implementations at this point. The SME segment actually spends more on IT infrastructure than the large enterprises today. This is reflected in the ERP implementation rates amongst SME segment, which are now up and rising. 



- The author is Regional Sales Director for Middle East, North Africa and India with ERP software and solutions provider Epicor Software. The views expressed are his own

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