ERP for SMBs

Updated: May 05, 2009

Issue

Gone are the days when ERP was only available to large enterprises with expansive order-fulfillment, manufacturing and supply-chain processes. Today, a growing crop of vendors offers scaled-down, lower-priced solutions that specifically target the small-business space.

"The good news for small businesses is they have a lot of options right now," said Eric Kimberling, president of Panorama Consulting Group in Denver. "There are a lot of Tier-2 and niche ERP software providers out there that are focusing on small and midsize companies. So ERP is a lot more doable now than it was five years ago from a functionality, flexibility and a cost perspective."

Analysis

Joining SMB-centric vendors such as Epicor, Infor and Intuit are some industry giants. For example, Oracle and Microsoft have also jumped in the game with more generic ERP solutions.

But vendor variety isn't the only factor fueling the popularity of ERP among today's SMBs. The SaaS (Software as a Service) model, with its low monthly fees and hassle-free deployment, is also driving demand. Although SaaS offerings such as NetSuite and SAP Business ByDesign promise to help shave costs and simplify systems, there are shortcomings that small businesses must consider.

"Small businesses are a lot more likely to look at SaaS offerings," said Kimberling, noting that there are nearly 30 ERP vendors currently catering to SMBs. "But the downside is that SaaS and other small-business solutions might be a little less flexible and a little less scalable than their larger counterparts."

Paul Hamerman, a research analyst with Forrester Research, agreed. "[Small-business offerings] are generally not as comprehensive in terms of breadth and depth of functionality," said Hamerman.

In fact, Gartner analyst Denise Ganly wrote in the "SaaS Impact on ERP" report: "Because of the complexity of ERP suites, SaaS offerings for administrative and operational functions typically have provided functionality that is confined to one domain, such as Sales Force Automation, or one business process, such as payroll. Thus, ERP SaaS suite offerings are still immature."

Another risk small businesses face is surpassing the solution's limited capabilities. "The problem with some small companies is that they grow pretty quickly and have ambitious plans, so they sometimes outgrow the smaller ERP solutions," warned Kimberling.

That's especially true when a small business takes pains to highly customize an ERP solution. By adding layers of unique functionality throughout the deployment process, Hamerman warned that a growing company can compromise a system's upgrade path. "There is often a degree of customization but it has to be done properly," said Hamerman. "You're going to have to upgrade these systems every three to five years to take advantage of the latest capabilities and compliance updates. But if you apply a lot of customization to the system, it becomes more difficult to manage and upgrade."

Recommendations

As illustrated above, SMBs have a variety of options when in comes to ERP these days. Picking the right solution for your company, however, still isn't easy. Fortunately, Focus has developed comprehensive and informative research to help you find the best ERP offering for you. Start with the Market Primer: ERP Systems before consulting the Buyer's Guide: ERP Systems and Comparison Guide: Midmarket ERP Solutions. Also, be sure to read community-contributed research and related research briefs for more on ERP.

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