Best Practices: Lessons Learned In What SMB’s Want From Their ERP Provider

Published on November 2, 2009 by R "Ray" Wang

Competition Intensifies For The Small And Medium Organization’s Software Budget

Software vendors such as Oracle and SAP can no longer rely on their large enterprise customers for double digit year-over-year growth.  In fact, their customers have not only reached a saturation point in being able to consume new solutions, but have also faced demands to cut their large maintenance bills.  With nowhere to go, enterprise apps vendors now turn to the small and medium sized market to drive their growth plans.  Consequently, billion to multi-billion dollar SMB stalwarts such as Infor, Microsoft, Sage, and Lawson are not standing still.  In fact, they seek opportunities to take market share from the industry leaders while fending off challenges from sub $500M SMB vendors such as Agresso, CDC Software, Deltek, Epicor, Exact, IFS, NetSuite, QAD, and Syspro.

Small And Medium-Sized Organizations Seek Enterprise Class Solutions Without The Resource Overhead

Globalization, regulatory compliance, and economic demands results in similar market pressures for all sizes of business.  Size no longer plays a relevant role in business requirements.  In fact, a recent survey of over 100 small and medium sized organizations, shows similar needs as large enterprises.  However, small and medium-sized organizations can not afford the resource overhead required to maintain large and complex software systems.  The 10 areas that drive vendor selection decisions include (see Figure 1):

Figure 1. Small and medium sized organizations seek enterprise class solutions without the resource overhead

screen-shot-2009-10-24-at-82008-am

The Bottom Line – Ten Lessons Learned Emerge From Recent Vendor Selection Trends

  • Invest in last mile industry focused solutions.Customers expect their vendor to speak their language.  Solutions that lack vertical fluency and limited industry customer referencability will be relegated to the ERP graveyard.
    Lessons learned: Demonstrate thought leadership in each vertical and lead industry discussions.  Focus on a handful of verticals.
  • Focus on rapid implementation and realization. Gone are the days of 12 to 18 month deployments.  Customers seek deployments times with less than 3 months.
    Lessons learned: Consider SaaS and OnDemand options.  Templates and productized roll-outs improve time to market but can’t compete with  SaaS solutions and onDemand offerings in demonstrating value to customers.
  • Expand the number of trusted partners and vendors. As SMB’s expand across the globe, they expect vendors to invest in trusted partners for both delivery and product footprint.  Customers expect partners to assist with localization in new geographies, extend vertical solutions, and integration.
    Lessons learned: Build partner ecosystems to geometrically expand reach while meeting customer needs.  No vendor can deliver on all customer needs.
  • Deploy easy to use reporting tools and BI. Value out of the box requires BI and reporting tools to be proactive and pervasive.  Users should have access to relevant and timely information along business processes.
    Lessons learned: Design reporting tools with the end in mind.   Start with the value of information and embed throughout the business process.
  • Reduce administrative complexity and ownership costs. SMB’s seek enterprise class capabilities sans the resource overhead of traditional large ERP products.  Business users need to be able to make changes and extend the system.  Ownership costs such as maintenance should deliver value or be reduced.
    Lessons learned: Design self-service administration capabilities from the get-go, not an afterthought.  Software maintenance needs to deliver value or be offered in tiers based on perceived value.
  • Apply Web 2.0 style usability. Solutions should not require extensive training.  New generations of work expect the simplicity and ease of use from consumer based web applications.
    Lessons learned: Invest in user experience and user interaction.  Design process flow based on role-based personas.
  • Improve stakeholder access. Employees, partners, and customers must gain access to key business information.   Value should not be locked away from users when disconnected.  Mobile remains a future growth area.
    Lessons learned: Allow information to be accessed by everyone, everywhere, and at anytime.  New stakeholders will need access so apps should be designed with bullet-proof role based security.
  • Embed Microsoft Office Integration. Ability to use productivity tools should be a given.  Customers seek the ability to seamlessly integrate.
    Lessons learned. Success requires the design Office integration to be both a user interface and gateway into applications.  Clunky interfaces into Microsoft fail in adoption.
  • Deliver worry free updates. Customers should be able to update and upgrade software without significant time spent testing integrations and taking down the system.
    Lessons learned. Design application management into the system design.  Consider the business impact of down time.
  • Provide financing options.  Customers now expect vendors to provide financing to facilitate license purchases.  In many cases, clients seek financing to preserve cash position and add additional services such as training and implementation.
    Lessons learned. Use financing as deal enabler to drive not only license growth, but also larger deal sizes.  Financing is a weapon.

Your POV

Prospects and customers – do these requirements ring true?  Vendors -where are you with your SMB strategy? Let us know how we can assist.  Please post or send on your comments to rwang0 (at) gmail (dot) com or r (at) altimetergroup (dot) com and we’ll keep your anonymity.

Copyright © 2009 R Wang. All rights reserved.

  • Allan

    Good points. Technology alone isn’t the right approach. A bit of design thinking matched to business value seems to be what’s helping early adopters and innovators succeed. Thanks for sharing your thoughts.

    R

  • One problem that comes when discussing ERP is that vendors are product-oriented, customers are price-and-function oriented, and… too often no one is business-oriented. In other words, accounting drives certain requirements, the distribution center will drive others, the maintenance people drive yet more, and so on – but too often there is no overall business strategy worth the name.

    With the various options available today, from old-style proprietary systems to web 2.0 cloud-based services, there should be no problem finding technology. The problem is ensuring that there’s a coherent business strategy (with proper cost/benefit analysis, success metrics, etc.) and proper coordination between business units. Too often there’s a gap where there should be seamless integration. And when this happens, reporting will be a mess.

    How many companies can really run the business on a single reliable set of numbers all the way from the bottom to the top? How many can really track assets, handle inventory, understand customers’ emerging requirements, etc? Precious few.

    As long as we keep thinking in terms of technology alone, ERP will continue to disappoint. Businesses that dodge the hard up-front work can’t expect technology miracles to supply the missing pieces – though salesfolk are generally happy enough to imply that their product will make it all better.

    And given that doing it right requires significant effort, one good approach is to do it a bit at a time, so as to ensure the organization isn’t overwhelmed, lessons learned can be rolled into the next phase to make it easier and more efficient, and success can be engineered in step-by-step instead of management having to trust that it will all come right in the end. Compared to all of this, selecting the right vendor should be a piece of cake.

  • I second the previous remark.
    Refreshing and we have fast forwarded two years into the future. Oddly, the speed of change has not kept up with the opportunity for change. Syspro continues to stand out. thank you for the point by point lessons which continue to apply.

  • Out of over 154 Google Alerts in the past ten days, this is the most refreshing combination of posts and comments I have come across. Ray, Doug, Amit and Richard – I like what you write and the way you think. For too long small businesses have been under served. overcharged and misled by Accounting system and ERP vendors.

    The ‘cloud’ is changing everything – new entrants to the ERP market have hindsight, foresight and agility in their favour.

    Looking back we see cost and complexity, looking forward we see savvier small business owners wanting easy to afford, use and roll out ERP. Not ‘off the shelf’ accounting, dispirit CRM and mid office systems, high costs and long term commitments. There are thousands of niches all needing a custom (or vertical if you will)solution. A few ‘big’ vendors cannot possibly service this need and one vendor alone certainly cannot.

    What’s needed here is the collective thought and actions of a tribe of small business ERP vendors and VARS.

    I’ll warmly welcome, debate and work with folks to give this much needed change some momentum.

    Cheers

    Nick

    CEO

    http://www.salesorder.com

    small business (ERP) heroes

  • Really?!?

    If I were a small- to mid-sized business enterprise, here’s what I’d like from my VAR:

    1. Help identifying exactly — not generically — WHAT NEEDS TO CHANGE in my organization (the “system” that goes beyond the software and the hardware) so that I can be assured that I can make more money tomorrow than I’m making today.

    2. Help me and my management team determine WHAT THE CHANGE SHOULD LOOK LIKE. Help us determine what elements in the CHANGE actually NEED technology to aid in the change.

    3. Tell me HOW TO EFFECT THE CHANGE. Don’t tell me I need traditional ERP — an EVERYTHING REPLACEMENT PROJECT. Give between one and five very specific areas where I can make changes that will INCREASE THROUGHPUT, REDUCE INVENTORIES or the DEMAND FOR NEW INVESTMENT, and/or DRIVE DOWN OR HOLD THE LINE ON OPERATING EXPENSES while I grow my business.

  • Nice learnings Ray. As you have rightly pointed out rapid implementation and quick ROI is the key.

    Extending your point about Web 2.0 style usability, application of Web 2.0 is not only about usability – but it’s also about a shift in the thinking – from one way communication (broadcast) towards a more 2 way communication (collaborative approach) – SMB are requesting for ERP solutions with support for online communities. It enables businesses to provide customer service to their customers at a relatively lower cost and increase engagement, participating and apparently trust.

    Infact most of the ERP vendors have realized this and are adding the social touch to their products in one or the other way

  • Hi Ray,

    Michael Kringsman recommended me to ask you a question that I have. So, I have one question and may be you can answer.

    I worked in SAP in US for 2 years and now I’m working for a local company as a SAP manager. I also have my own ERP company established from where I plan to support local as well as off shore SAP projects. I have a team to do that. I am trying to know how can I have some kind of contract with SAP on any kind of SAP rights in Nepal. For example, licensing agreement or educational partner which will make me SAP’s agent in Nepal to implement SAP, if required. Are you aware of such scenarios?

    Looking forward
    to hear from you.

    Kind Regards
    Prabin

  • Great article and gets to the core of what SME customers are looking for.

    Adding to Doug Hadden’s post above [vertical specialization] and with regards to ‘rapid implementation’, this is something we have to address as VARs as not only is it directly related to the ROI, it is also needed to increase trust and confidence. However, to ensure that ‘the last mile of industry solution’ is delivered it does require investment by the VAR (opposed to the software vendor / author) especially in smaller industry groups. Otherwise the ‘last industry mile’ and ‘rapid implementation’ conflict with each other when having to tailor the solution to deliver this last mile of productivity.

    In addition to Doug Hadden’s post, the need to be agile is also needed after the solution is live. This allows SMEs to continue to grow efficiently unimpeded by software rigidity and is (in my opinion) an often overlooked aspect of a system when looking to install a solution that will help the organisation now.

    Thanks for the continued insights and analysis.

  • Once again, Ray, you hit the nail on the head. Small business is driving growth around the world, so this is timely advice.

    Speed to implementation and ease of use/adminstration are becoming key concerns for small business. It is very much about agility.

    Technology markets mature. Vendors in the early market often need to support complex feature sets because their customers are quite large. Therefore, excellent products from market leaders like Oracle and SAP were skewed with larger businesses in mind. Their challenge, today, is to adjust products for this market – not dumb them down – actually smarten them up. Focus on the need rather than “features”. User driven.

    Many of the companies that you mention in your tags have been able to achieve faster implementations and lower long-term costs through some vertical specialization.

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