An article by Shamus McGillicuddy, ERP Implementations May Fall Short for Hasty SMBs, notes that small businesses that take the plunge into enterprise resource planning (ERP) tend to go live with their ERP projects faster than midsized and large businesses. Here are several excerpts:
Speed is often a virtue, but businesses that focus on it as a measure of success tend to overlook the true potential ERP has for transforming their operations.
“There is more focus in smaller companies on just getting things in there, which is probably why they’re so fast,” said Cindy Jutras, vice president of manufacturing and ERP research at Boston-based Aberdeen Group Inc. “At the same time they seem to stop short of taking it to the next level. They get in there, and then they kind of stop.”
According to an Aberdeen survey of 1,200 manufacturers about ERP adoption, 86% of small companies achieved their first “go live” milestone within their first year with ERP, whereas midsized companies reached “go live” in less than a year just 64% of the time and large companies just 47%.
Jutras said 24% of the 450 small businesses (companies with less than $50 million in revenue) surveyed measured success by the amount of time it took them to reach their first “go live” milestone.
Jutras said small companies look for a quick launch because of limited resources. There’s only so much time they can devote IT and business staff to getting an ERP system up and running.
Speed is a virtue, but not when it’s a measure of success, Jutras said. There are better performance metrics to measure for, she said. Without them, small businesses won’t be getting the most out of their investment.
“I think they get up and running faster than larger companies but they don’t necessarily use all the functionality that they have available to them,” Jutras said. “There is still a huge reliance on things like spreadsheets. Management by spreadsheets is alive and well not only in small manufacturers but predominantly in small companies.”
Successful implementations are more likely among small businesses that actually set out metrics for measuring return on investment (ROI) and cost savings. Jutras said her survey revealed that less than one-third of small businesses actually compute ROI for ERP.
Eric Klein, research analyst at Boston-based AMR Research Inc., said small companies often are nervous about getting bogged down in the complexity of an ERP implementation. That nervousness partly explains the slow growth in ERP adoption among small businesses.
Klein said vendor revenue from ERP adoption among small customers — those with revenue less than $50 million — grew by just 3.3% last year. It’s the midmarket firms, with revenue between $50 and $250 million, that are seeing the robust adoption rate at 17%. And ERP revenue grew by 13% among companies with $250 million to $1 billion.
“There is a mindset of ERP being too complex,” Klein said. “I think a lot of businesses are afraid of how long it will take to make it work.”
For more, be sure to check out the complete source article.
