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ERP for the SMB
SMBs are paying more for ERP systems than enterprises but receiving less business benefit, a study reveals.
Posted Jan 3, 2007
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SMBs require just as much functionality as their enterprise big brothers. According to a new Aberdeen Group study, "Benchmarking ERP in SMB Report," though SMBs require less complexity from their ERP solutions, they do require the same functionality. Small- to medium-sized businesses are using a mere 6 percent less functionality than the average of 1,200 companies of all sizes, according to the study. The report identifies two key reasons for high implementation rates of ERP among the SMB segment. First, the price performance of ERP and its underlying infrastructure, such as hardware and databases, has improved steadily over the past two decades. Additionally, new delivery models such as software as a service provides lower risk alternatives to any capital expenditures associated with acquiring and maintaining the software. While the report indicated that ERP is generally accomplishing the job it was meant for, on average, business benefits of SMB companies fall far short of those companies identified as best in class in the report. Lacking size and scale, SMBs pay more per user, per functionality used, and per percentage point of average performance improvement than larger companies. Though 86 percent of small companies reach their first milestone within a year, as compared to 64 percent of mid-size companies and 47 percent of large companies, Cindy Jutras, vice president of manufacturing and ERP research at Aberdeen, says the end results are decidedly average. "By placing emphasis on the cost of software and service over the process and cost savings, they don't achieve the full potential of business benefits," she says. "It demonstrates a certain level of short-sightedness and requires a change of focus." To realize more business benefits, Jutras says SMBs should start setting more goals for their ERP implementation. "Many companies fall short of best-in-class status because performance metrics are not established," she says. Additionally, they should push beyond the limits of current implementations for added benefits and lower total cost of ownership. Finally, SMBs should look to automate manually intensive and spreadsheet-based processes and expand the implementation to "include all fundamental basics of your business," she says.
Related articles: Extending ERP Throughout the Enterprise Market Focus: Manufacturing: Money for Future Muscle
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