Enterprise resource planning (ERP) systems were once considered the domain of mega corporations – think Coca-Cola and McDonald’s. In recent years, however, this software has become more accessible, both in terms of cost and the time it takes to implement it. So now small and midsize companies can compete more effectively against larger competitors…and even use their size as an advantage.
Eye on ROI
According to Aberdeen Group, cost reduction tops the list of business pressures that are driving ERP strategies. Ron Mondor, President at Zantek Information Technology concurs and notes that cost savings are the easiest metric to measure when calculating return on investment for ERP software. “Reducing costs by even a small amount can have a big impact on a company’s bottom line. In many cases, it can justify the entire investment.”
Managing growth expectations also figured prominently in Aberdeen Group’s survey about top business pressures. In its report, called ERP in SME (September 2012), it says: Strong SMEs are always looking to expand their business, but pie-in-the-sky growth goals can put impossible demands on employees and lead to unsustainable expansion initiatives. These organizations must find a way to effectively ramp up their business without incurring crippling costs or losing sight of operational objectives.
Shifting focus from the bottom to top line
The remaining three of the top five pressures facing small and midsize businesses, as identified by Aberdeen Group, have more to do with top-line performance than the bottom line. Approximately 30 per cent of respondents cited decision making and customer service as important factors in their success. These are easily improved with ERP through up-to-the minute information about the company’s sales, quality, inventory, shipments, and customers. An almost equal number of survey participants said that ‘being easier to do business with’ is important to them.
“Being easier to do business with means removing barriers and facilitating effortless interactions,” explains Mondor. “Small and midsize businesses can gain a competitive advantage against larger competitors by having a more personal relationship with customers, suppliers, and partners.” Mondor goes on to note that mobility and e-commerce strategies are often included in new ERP implementations.
Takeaway – ERP can level the playing field
Cost savings may be the easiest metric to apply when calculating the return on investment for an ERP system but there’s no denying that improved performance can have an equal or greater impact. For small and mid-size companies, ERP can be the key to more strategic decision making, stronger customer relationships, and better overall management.
Useful links related to this article
> Whitepaper: ERP in SME 2012 (Aberdeen Group, September 2012)
> Ask an expert: Is ERP right for your business?