What do you think stops an SME (Small-to-Midsized Enterprise) to decide whether to go for an ERP (Enterprise Resource Planning software) or stay with mutilple solutions for their daily business operations?
Here are a few that I already know:
1. Resist for change
2. Inability to trust a new service provider
3. Not willing to spend
4. Don't feel the latent or upcoming business need
What am I missing?
Usually cost is the key decision driver in most cases.
When the time is ripe to covert to an ERP, a SME must change to grow better. However, if the time is not ripe, there isn't much to investigate at that moment.
If the SME is making a correct decision, than the reason is it is not in the right time to change over.
If the SME is making a wrong decision, than the reasons are a lot and many people already given the answers, therefore I only one to add one more:
Maybe the fact that ERP's are not cost effective. They create more problems than they solve.
Its like having a train for transportation and delivery in a small town.
As Robert Sollow said (New York Times, 12/7/1987):
"We can see the computer age everywhere but in the productivity statistics"
Your organisational ability to change - all of your words are about people resistance. This is not good news if you want to drive the business forwards.
If you don't feel as though you have capability to lead such change, get a professional in the field. Oh yes, and they MAY need to have some technical knowledge too, though this is typically easy to buy in. A good book with an 8-stage process is Leading Change by Kotter.
Most small companies will grow organically, adding new software as they go. After a while they will have a collection that covers most aspects of the business. You'll probably also find that the owners of the business are comfortable with the accounting software despite its limitations.
The secret to selling ERP to SMEs is convincing the owners that they will still have control of the business once the new ERP system is in place. Recreate their favorite reports or show them how to access those elements of the business that are the most important. Once the owners are comfortable you should be able to move forward.
5. Not enough knowledge about ERP and its benefits.
6. Lack of trained people to use the software to it s maximum advantage
7. Am I putting all my eggs in one basket? -fear syndrome
8. CRM, ERP, are jargons meant for big businesses not me!
9. Business model is still not IT friendly
Good question Ravi...
Having to train their employees on the ERP and then having to change the processes to arrive at the financial statements they want.
The management does not believe in the team is capable of success.
The system does not provide the improvements needed.
Comittment, committment, committment at all levels.
Implementing an ERP creates a huge culture change (at least in a manufacturing business) that goes way beyond simply changing how you do things that are already being done. To take advantage of an ERP system, you have to do a significant number of additional tasks that may not have ever been done before. For example, an engineer must create "engineering masters" for each item he designs so that it can be tracked through the manufacturing process; in the past he may have simply created the design, the bill of materials and manufacturing instructions and sent it onto the manufacturing floor. To create an engineering master, manufacturing processes need to be documented - this may not have been done to the necessary level in small or mid-size businesses. Now imagine creating engineering masters for every item the company makes - the resources needed to catch up are tremendous, and may well not be available in SMEs. Even if they are, most engineers would much rather be working on actually designing and building something rather than documenting it. They will not like the transition period at all, even though they might appreciate the end result.
I think your list is comprehensive, but an ERP solution is not going to fix a business that has poor processes. Most SME's do not spend enough time time to implement robust, quality processes which can then be enhanced by ERP software so they see the software itself as the "fix" which it never is..
The most typical question that I have been asked is "What is the price for your ERP?". They may not even ask what are the features, how do you think it helps me, etc. After checking for price, they don't think about this unless there is a dire need - such as some mess in stock handling. Definitely SMEs need a lot more effort from an ERP solution company and the solution has to be affordable for them!
Hi Ravi - I believe there are 3 most important reasons:
1. complexity of implementation
2. high cost of implementation and ownership
3. high rate of implementation failures
Hi. My company is currently implementing an ERP and money has been ruled out thanks to financing via an EU project programme. However, it is a sad statistic on how many ERP projects fail completely or fail to reach the planned efiiciency. One of the critical factors I think would be professional representation. An ERP system must be presented by a professional who is familiar with the typical issues of the target company and be an excellent versetile speaker who can accurately and tightly educate the company about those four issues you mention.
It is the cost and need for an ERP, glitches in new software, and being able to get assistance when there is questions or problems with the software.
Yes ,no matter with the sizes of enterprises atall. If any one really interested to grow then they must adopt ERP. Now a days many economic packages are available for ERP implementation for small and midium enterprises.
ERP solutions can be a massive burden if not planned well. It can very quickly lead to cost escalations and data mismanagement. To implement ERP it is a must that all stakeholders are embedded into the solution and they are trained to optimally utilize it. An ERP system should not be introduced without the concurrence of the employees, management and any other stakeholder.
Cost is a big factor, not just the purchase price, but the on-going paroll and training costs for the lifetime of the ERP use.
Most small businesses do not have the technical expertise required to setup and use a full ERP, nor do they know the true cost of not using their business data.
They make the mistake of looking for income-producing ideas rther than profit-maximizing ones
I think security is another concern. Just connecting payroll module to the operations like sale purcahse etc will increase the security risk. What I faced is that they request to separate HR modules (so no longer single solution ! ) then they may ask why not use our current CRM with this ERP, because ERP is not so flexible in CRM. Then they might ask why are we spending so much on this new integrated system if we go for such islands of applications like the past.
This is part of my experience as ERP Project Management for SMEs.
The normal ERPs are both heavy loads on IT systems as well as have heavy capital outlay. It would be great to explore cloud based ERPs which tackle both the challenges e.g. the type offered by companies like RAMCO. The payments are based on usage & hence provide the desired flexibility.
Limited resources for business and inability to visualize benefits of implementing ERP over money spend makes them to stop thinking for changeover.
There are two reasons, in my experience:
1. There aren't really any ERP systems out there designed specifically for SMEs, and
2. Those that could be used, e.g. SAP All-in-One, are just way too expensive for most SMEs to consider.
So they make do until such time that they can either develop their own solution, or they can afford one of the bigger off the shelf solutions available.