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?
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!
In my experience, this comes down to cost for most small business owners. They fail to see the customization benefits in terms of efficiency of ERPs over the cost benefits of cheaper out-of-the-box solutions. Many times I make this analogy, "It's like a tailored suit. Definitely more expensive than off the rack, but fits perfectly and makes you feel like a million bucks."
I worked for a start-up that was extremely cost conscience. We must have tried half a dozen OTC CRMs, switching constantly to try to find one that would do what we wanted without us having to become experts on their software. In some cases we were just asking too much of the software in our quest to find a cheap Swiss army knife solution. Looking back, we wasted more time and effort trying to make a round peg fit into a square hole, that we could have probably gone with an ERP for the same cost in sweat any money.
Many small businesses are concerned with the cost and value that the new system may bring. If they can't easily find the value in it then they won't want to risk the little money they have. They are willing to spend when they see and can easily calculate the amount it will save them. Not wanting to change also plays a big role if they don;t have a need for things to change. I would say all your points are correct to some extent.
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.
As a business strategist, who places great emphasis on mindset and model, I would have to add to your list of answers: the absence of a growth plan, a model to follow. The most important reason a business misses or overlooks opp's for advancement is because they are not focusing on the plan to do so, the short-term vision and are most likely not measuring ROI and benchmarks.
The bottom line to your question is, because it is not at the forefront of their present stage of growth.
I think many companies resist the risk of change; both the spending part and the risk of messing up something that "works". The challenge of IT projects is that the customer wants benefits in business whereas the providers interest usually stops when the project is up an running. Consequently the customer is left alone achieving their goal with the new tools.
Suggest a project that does not end with the installation and go live of the technical stuff but ends with the process having been updated and that the customer has achieved its operational targets (not only the technical ones)
It is not the willingness to spend, but looking at the saving vs the cost. Many small businesses are using labor that doesn't have that high of a cost; An ERP isn't going to save a lot in labor dollars. Also, the high price of an ERP system is a large investment for a small business and it doesn't directly touch the customer. Some may argue that point, but I have never seen an ERP system deliver goods to a customer’s loading dock. Tell me to, but so does a phone call.
The Sm. Business owner is juggling cash and requirements. Hiring staff to help move information around the enterprise gives him the ability to meet those changing requirements faster, more dynamically and with a personal touch that any ERP will not. And when the staff isn’t doing ERP like functions they can do something else. The ERP system doesn't do anything when it is not ERP'ing.
Just my 2 cents.
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.
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..
Here's another resist point:
As an IT guy I'd strongly recommend businesses (of all sizes) stay away from software that locks their data away in proprietary binary formats or worse, stores their data online. Providing an API is a start, but designing a good one should be left to an experienced systems architect - definately not a job for your average programmer!
the first and the main cause (to stop SME) is in the following = not having knowledge of what is the stage (or step) of SME's development...
because if you understand that there is your SME at the stage from growth till maturity (but not start-up), so it is obviously ...
as if you are a child or ans younfg man and you choose what you shoud have to good and quickly development at your 5-6 years or 20-23 years old
hope, I could help you...you are welcome! ;)
best regards for you and your business,
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.
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
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.
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.
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
Thank you everyone for your very well thought out and informative answers.. !
a) Short of Resource.
b) Limited Budget so wont be able to Hire Technical Staff for ERP.
There is also quite a learning curve for associates with this kind of implementation and many managers fear it will disrupt their daily operations.
MBA, CQE, CSSBB
Limited resources for business and inability to visualize benefits of implementing ERP over money spend makes them to stop thinking for changeover.