How ERP Can Be Used By Smaller Businesses
When most people think of Enterprise Resource Planning, they think of a complex system that costs millions of dollars to implement. They may also think of the risks and difficulties involved with setting it up. While there is some truth to these concerns, ERP is not simply something that can only be utilized by large companies.
While this may have been true in the 1990s, the costs of this technology have continued to increase as we move further into the 21st century. To use ERP effectively, you must first know how to look at it. The concept of ERP can simply be defined as a method that is used to integrate the various elements of an organization into a single entity that is much more efficient.
The decreasing costs of this technology have opened up a new market where small to medium sized businesses can benefit. In fact, a number of studies have demonstrated that it is small businesses, not large companies, that will drive the future growth of this industry. There are a number of reasons why more smaller companies are taking advantage of this technology. One of the reason for this trend is because of the advent of small vendors. As you may expect, the smaller vendors have prices which are significantly lower than the large vendors. Statistics show that many small vendors are charging prices that are 10 percent lower than their larger counterparts.
In addition to charging lower prices, small vendors tend to be much more skilled when it comes to customer service an implementation. One reason for this is because they know their business is small, and they can’t afford to lose customers. The advent of small vendors has led to an industry that is experiencing a rapid change. A decade ago, only Fortune 1000 companies could afford the expenses and time involved with setting up an ERP system. It should also be noted that at this time, only the largest companies could afford to lose the millions of dollars that were at risk by attempting to implement such a system. To offer Enterprise Resource Planning to smaller companies, a number of changes had to be made.
First, the technology had to be scaled down considerably. Small businesses do not have the same needs as their larger cousins, and the ERP vendors had to adopt to this. The other change that had to be made is the cost. Very few small to medium sized businesses have the millions of dollars necessary to pay for ERP systems. One of the reasons why the small business market has become a lucrative industry for these vendors is because of the many failures that occured with larger companies. There have been cases where a large company lost hundreds of millions of dollars due to failing to properly utilize their ERP tools. The growth of the ERP industry with large companies has continued to fall since the end of the 1990s.
It would seem natural that small to medium sized businesses would be the next logical target. A number of these vendors are focusing on specializing in specific ERP systems. One of the industries these vendors are focusing on is the industry that started the ERP revolution, and this is the manufacturing industry. As of this writing, about 70% of all small to medium sized businesses that are using ERP systems are those that compete in the manufacturing industry. Some vendors have catered to these companies by offering products in highly specialized areas that deal with things such as cabinets, windows, or office furniture. Other vendors are dealing with financial or customer issues.
The primary difference between small businesses and large corporations is that small businesses cannot afford to fail when the attempt to implement ERP systems. Because of this, many small businesses will not work with vendors who cannot greatly increase their chances of success. To solve this problems, many vendors are now paying more attention to functionality. The system must be able to meet the needs of the company that uses it. In addition to price, many of these small companies are paying attention to the ability of the vendor to offer them a high level of support. The price of the product means little if they don’t know how to use it.