ERP sales to small firms

Paul Elswood reckons ERP solutions do indeed offer something of value to smaller organisations

Elswood: Reduce the learning curve to make ERP attractive

I believe the recession has changed SMB spending behaviour. We have seen strong demand for enterprise resource planning (ERP) offerings in the first half of this year.

Before 2008, smaller companies were buying ERP systems to position themselves to compete globally and respond to new customer requirements. As the financial crisis accelerated, these businesses had limited access to capital and credit. Almost all SMB projects were delayed or shelved, and the market ground to a halt. It is still waiting for the macro-economy to stabilise.

I believe that SMBs investing in new applications are now looking for subscription-based offerings. The ERP market has been slow to deliver this option and therefore many companies are taking a hybrid approach – integrating their on-premise ERP system with cloud-based CRM, HRM, supply chain and e-commerce offerings.

This helps them view their business value chains and provides multi-channel routes to new markets, in a cost-effective and integrated manner.

Competition for sales into the SMB market is intense. SAP and Oracle view this segment as a long-term growth opportunity and are increasingly active in the segment. They are competing directly with longstanding ERP providers to the SMB market.

Vendors with a strong foothold in Europe experienced their highest growth rates in 2008. Their results were also helped by continued strength of the euro against the US dollar.

Many ERP providers have developed products for specific industries and company sizes, and in many cases they are also packaging applications for individual departmental buyers.

In addition, many ERP vendors have shifted their efforts to more preconfigured applications, with lower total cost of ownership, to help businesses get through challenging times.

From a go-to-market perspective, in addition to simplified products and deployment approaches, a shift towards indirect sales by the ERP providers to system integrators, VARs and strategic partnerships helps address vertical needs and lowers the selling price.

A number of vendors offer preconfigured ERP applications, with a reasonable amount of functionality, rapid deployment capability and predictable implementation costs.

Vendors are working with the channel to make these applications easier to buy and consume, furthering efforts to promote high-volume licence sales.

When businesses begin to get frustrated with their legacy systems, it may be time for them to invest in a new system. They may be unable to incorporate newer desktop capabilities to help them streamline their business processes. They may miss consistent and easy-to-use business analytics or have concerns over the integrity of the information provided and the time it takes to collect this information.

Other factors include the availability of accurate inventory and supplier information, and visibility into production and supply chain processes.

Increase the adoptability of the offering by integrating applications the end users are already familiar with into the baseline business process of the ERP application. These applications could be portals, spreadsheets, email or social networking in the baseline business process of the ERP application.

This reduces the learning curve and hopefully increases the user’s willingness to make use of the new system. It also opens up cross-selling and up-selling opportunities for the channel.

So does it make business sense to invest in ERP solution sales to the SMB market? In my opinion, yes, it does.

Paul Elswood is managing director for UK and Ireland at CDC Software