In this continuing series on ERP for the SMB, we are exploring the issues specific to SMBs. In other words, we will delve into the world of Marketing, Sales and Channels.

In Part Three, we discussed businesses’ increasingly complex relationships to markets and customers.

In this article we will tackle two issues:

1. Who are the ERP providers who focus on the SMB?
2. And, a more challenging question, who are the SMBs?

So who are the ERP providers who focus on the SMBs?

Today, there is quite a range of ERP providers, so we will dissect their positioning. Table 1 shows a list of the providers in this space. Some providers are differentiated by small vs. medium businesses; we will look at how they specialize by industry and other variables. This table covers on-premise and cloud solutions, as well as having a business complexity focus. As we discussed in earlier articles, it’s imperative that you are clear about the most complex and critical aspects to be automated within your business.

Drum rolls please.

As you can see in Table 1, we are immediately confronted with a daunting list of players. It’s critical to understand that the larger firms like Sage, SAP, and Infor (multi-product enterprise providers) have multiple products that are either industry or company-size oriented solutions. Some of these also are designed for growth orientation, so as you grow, you don’t have to buy a new package. NetSuite, Plex and SAP’s All-in-One are just some examples of these. So for example, a small, less complex business might adopt SAP BusinessOne; whereas a business destined for growth would purchase All-in-One and add functions as they grew. Plex and NetSuite provide this same concept without the purchasing confusion, we think.¹ Highly configurable, multi-tenant architectures allow users to adopt business processes as needed without guessing which software package might be the one they need.

But there are other considerations, so let’s work on narrowing down² our choices a bit.

Cloud vs. On-Premise

SaaS ERP has been around since the launch of NetSuite in 1998. But in the intervening decade a few things have occurred to lend importance to the cloud. First, although the internet was a ‘hot concept,’ it was considered more a vehicle for trading partner integration and commerce, not for core enterprise management. And that was probably OK then, since we did not have the internet connectivity and global performance that we have today. So, number one is ubiquitous connectivity to assure that critical enterprise functions can run over the internet.

Second are budgets for IT projects of this nature. We have seen a steady decline in IT budgets for certain classes of software. Previously, if mega enterprises with big IT budgets spent ten million or more on software, it did not seem critical. Today, we have continued downward pressure on the budget, and cloud economics are quite compelling. So economics is our second factor. (You can read about cloud economics here.)

Third is the market itself. Software players like to chase the big enterprise deals, especially in their early years. If you spend tens of millions developing your product, naturally, you think about recovering those costs through large deals with the largest companies. As time passes, saturation occurs in the Fortune 10000, so the mid-market is where everyone chases. And that has been the course of ERP’s history for Oracle and SAP, surely. But many of our ERPs for the SMB started out as solutions for this market. Now, they have more competition. However, this competition has challenged the players to think innovatively about how the get SMB up and running. And that brings us back to cloud.

So now we have about a dozen cloud-based solutions on the market.

It is important to understand that not all ‘cloud’ is the same. Many solution providers now host your propriety solution for you, which is a bit different than the multi-tenant/single instance of other providers. (You can read all about cloud benefits in this cloud series and about alternative cloud architectures and approaches in the series As-a-Service Framework). And managed service will take on further IT activities for their customers. In Table 2, we show several approaches for these platforms and who provides them.

Business process outsourcing will go further, assuming basic business functions and participating in team work, often at the client site. (You can read about managed and co-managed processes here.) As you can see, few technology companies have ventured into this business process realm, though these services are frequently available from consultant and data analytics companies.

No Enterprise is an Island

Besides handling basic critical business functions such as Manufacturing (see Part Two) and Sales and Marketing (see Part Three in this series on ERP), machine-to-machine/enterprise-to-enterprise communication must be fluid and seamless.

So communication such as device integration to mobile and RFID, or business-to-business communication in workflow management and EDI (Secure File Transfers) must be well integrated with the basic enterprise processes. Though, often, these features are developed by partners of the ERP companies, they should be seamless and easily deployable.

In addition, users are often forced to buy separate analytics and reporting packages and bolt these into the enterprise. There may be a good reason for a standalone reporting system in organizations that have multiple software packages, but many SMBs rely on one ERP provider. In this case, reporting and analytics should be included in the solution, rather than driving users to be Excel specialists along with their other job.

Industry Focus

As mentioned in the abstract, picking an ERP is as much about who you are, as who the providers are. The technology market is very much focused on serving particular industries, and companies build their market share by being experts with deeper functionality in these verticals.

You can see in Table 4, industry focus is clearly important. Take CDC software vs. Visibility as an example. CDC is strong in process areas such as chemical and pharmaceuticals; whereas Visibility’s strength is in Aerospace, Engineering and Construction — very different processes, products, and financial models. Therefore, the software has to look very different. One of the most important elements in selecting a solution is this industry focus. Before you proceed with a provider, you should be clear about their industry expertise.

Architecture Makes It All Scale

It is important to note that in spite of the marketing hype(which is designed to impress you with what these solution provideers understand about your business and use cases), these companies fundamentally define themselves as technology providers. The core principle by which they develop the code, databases, and connectivity makes a huge difference in their ability keep up with industry changes. If they make poor choices in the foundation, the price will be paid later with lack of flexibility in change management. Poor design limits the ability for cross-functional and inter-enterprise communication, as well as data management. Over time this affects the cost of development and, therefore, the service charges or other costs such as major, disruptive upgrades of the software package.

Conclusion: Who Are You?

To answer that question, several fundamental questions need to be answered. Before thinking about that ERP purchase, think about how you would characterize your business. For instance:

1. Industry — What industry are you in?
2. Regulation and Compliance — Is your business part of a regulated industry such as Aerospace, Life Sciences, etc?
3. Business Maturity — Where are you in your business maturity? Start-up, growth, going global?
4. Globalization — If you are going global, what is your need for multi-currency accounting, global trade document/import export management?
5. Suppliers – re they global? How do they get financed? Do you have a direct and critical, consistent need for information sharing and visibility?
6. Growth rate — What is the pace of your growth? Some firms want to stick to a modest IT budget, but many high-growth businesses will allocate more funding to IT and look to scale as they grow.
7. Automation of Business Processes — What business processes will be automated? How central are they to business success? How complex are those processes?
8. Workforce Management — Is your work force centralized or mobile? What kind of skills management is required to support the work?
9. Outsourcing — What will be outsourced and, therefore, operated by others? What kind of integration and data sharing is required between your firm and your service provider?
10. Channel management — Do you distribute, sell, or service through channel partners? If so, how reliant are you on your partner for shared data? What kind of financial and sales activities do you share? Inventory, transportation, trade promotion management, sales agreements and commissions, and other agreements can all be part of the complex set of relationships.
11. And so much more …

This “who am I?” is fundamental to a successful ERP choice. These systems are designed for your business operations — your policies, processes and industry. Answering these questions well will take you half way to selecting your ERP wisely.

This ERP for the SMB series is now combined in the FULL REPORT. At the conclusion of the report we discuss ERP solutions and selection in more depth.

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To view other articles from this issue of the brief, click here.