The SMB Market - not so small and not so medium!

September, 2008


It's hard to believe but the summer is gone. And with the end of summer comes the cold hard reality that life and business goes on, and with it our newsletter designed to help our customers, prospects and partners achieve ERP Success. In case you missed our pre-summer article on Document management, take a look Document Management 

Look for more on this topic as we will be sponsoring an informative webinar with our partner Altec. This month we focus on a topic that has been getting a lot of press - the SMB ERP market - exactly what is an SMB anyway?

 

The SMB market - not so small and not so medium! By Paul Sita, Principal, Innovative IT Consulting, LLC. Paul can be reached at 631-549-1685 or psita@innovativeitc.com.

Heard on the street - SMB. For the last several years you can’t pick up an IT publication without hearing that the major ERP vendors are “targeting the SMB segment” or that the “SMBs represent a large untapped market”. I think we all know what the acronym means – Small and Medium Business (SMB). But what exactly is an SMB? Does this mean anything to you? And what if anything is really going on in this space? As a participant in the SMB market, I’d like to take this opportunity to debunk some of the myths floating around about this marketplace in the interest of putting ERP for SMB’s in the right perspective.

Size matters (or does it?).

Most of the ERP software vendors have dividing lines for the SMB market. Some consider it any business less than 1,000 employees, or under $1 Billion in annual sales. Others draw the line at the number of users, such as somewhere between 25 and 100. But these are just statistics. Here's what really matters!

Apples vs. Oranges. $1 Billion for a distributor of large, heavy equipment is very different from a $500 million manufacturere of consumer cosmetics. Which one is an SMB and which one is not? The number of users can be very misleading. With many users now working remotely, and with integrated web portals and web catalogs, counting users is not the simple process it used to be.

Enter the SMALL ENTERPRISE. I'm coining a new phrase, the Small Enterprise. These are the SMB companies who NEED ERP as desperately as the large enterprises. These Small Enterprises are characterized by the same set of criteria as their larger brethren – except that they’re smaller. They’re smaller in volume, not complexity. They’re not defined by any set of statistics, more by the overall complexity that they represent, the depth of their requirements, and the extent of the capabilities that they demand – oh and yes , they need it for less than the 10-20 million that an enterprise ERP implementation typically costs.

What are some of the characteristics of these Small Enterprises? 1 ) They have complex needs within their own vertical market, frequently needing complex customizations. Virtually every ERP project we get involved in has at least one extensive area of customization.

2) They need integration, either with other critical operational systems that are not being replaced as part of ERP, or with outside data sources and feeds. In many cases, due to the limited IT budgets and personnel that they operate with, small enterprises pose more complex integration challenges than larger organizations.

3) They need multi-currency, global capabilities. Global expansion is either driving them to a competitive advantage, or they are desperately trying to keep up through globalization. In either case, it’s not an afterthought or a nice to have any longer.

4) They need extended supply chain capabilities. Integrating with key customers, suppliers and partners is a given, either through portals, web access or web services.

5) They are in dynamic markets, or in a dynamic growth curve. They may in fact have multiple business units operating under a single roof.

6) They require flexible business processes since in many cases their value add in their market is based on the flexibility they bring to the customer or supplier relationship. They are not as “process oriented” as larger enterprises, and their culture is more tolerant of special ways of doing business. They expect systems to adapt to their needs, not the other way around.

7) They require collaboration capabilities, workflow, alerts and other manage by exception functionality.

8) In many cases, key management personnel are younger, having grown up in the era of the PC. Their expectations are higher, they expect faster results and are less patient with the complexities of ERP implementations.

Got the picture? Companies can be as small as $20 million and have these needs, or as large as a billion. Most frequently, we see an inflection point somewhere between 50 and 100 million and another one at around 200, and then again at 500 – but the only rule of thumb is that there is no hard and fast rule.

By now you should have gotten the message as to why the SMB (I mean Small Enterprise) space is so critical to the ERP vendors. The needs are enormous, the challenges are great, but many hundreds of billions are going to be spent re-tooling the SMB market to play in the market with their larger competitors.

Smaller, maybe, simpler – no way ! -->


Tip of the Month

One "Upgrade Go-Live Strategy" Does Not Fit All
By John Pellegrino, Principal, Innovative IT Consulting, LLC. John can be reached at 631-549-1685 or jpellegrino@innovativeitc.com.

In the few months’ newsletters prior to our summer hiatus I discussed the ERP software upgrade. Topics included the types of upgrades and how to stay informed about them, factors used to determine when the right time to upgrade is, and the different steps needed to get ready for the actual upgrade, which differ for the two types of upgrades. Now it is time to discuss the last step, the culmination of all the effort – the strategy for putting the upgrade into production so that your company can gain the benefits of the upgrade.

It's the same difference. I’ve always thought this saying made no sense (unless you were talking about subtraction, e.g. 6 – 4 and 5 – 3), but I see a new value in it now. For planning the go-live strategy of an upgrade the questions are the same, but the answers are different depending on the type of upgrade (patch level or major release) and other factors. You will have to fill in the answers, but here are some of the questions to think about:

1. When can I do the upgrade so as to least impact the business? Off hours? Weekend?

2. What are all the steps to setup for installation, install the upgrade, and bring the ERP system back on-line? What are the estimated times for all the steps?

3. Will I have to convert or move any current production data?

4. Do I need to shutdown any supporting services or hardware (e.g. email) that interacts with my ERP software? Does this create extra steps that need to be planned for?

5. Do I need any business people involved in the process?

6. How will I ensure that all is OK after the upgrade?

7. How can I recover my original production environment if the upgrade fails?

8. How will I communicate the success (or failure) of the upgrade to the business users?

All good things must come to an end. This concludes the 4-part series on ERP software upgrades. You can get the entire series by visiting our web site and going to the Newsletters link under the Resources tab. The series is in the March 2008, May 2008, June 2008 and September 2008 editions - Become an upgrade expert


What's new?

The Question of the month!! Every month we field a question from one of our fearless readers! Don't be shy. Submit your hardest question and see how we do.

Word Scramble time.
“A corporation smaller than a Fortune 500 company with complex needs that require the capabilities of a full-blown ERP system. (2 words)
_ _ _ _ _   _ _ _ _ _ _ _ _ _ _

L E R A L S S P R I T E M E N


Answer to last month's word scramble.

“ A complete environment to test and implement a new version of your ERP system. (2 words).(SEPARATE INSTANCE)

Question of the month. This month's question comes from Larry in New York City.

We have a good accounting system. However, we have an entire staff devoted to producing special sales and marketing reports that management says they need to run the business. Whenever we try to suggest a better way, management pushes back indicating that IT is just looking for new technology for technology's sake. What can we do? Larry, this one requires some delicate work on your part. Your management needs to be educated on what's possible with modern ERP systems. They need to understand the value of real-time information and a single version of the truth. They need to be SHOWN, NOT TOLD. See if you can arrange a demo, or an educational lunch and learn session for them. Most importantly, it has to be based on a competitor or someone in a similar industry or they will not relate to it. Many of the leading ERP vendors can help with these kinds of situations. Good luck!  


A Look Ahead To Next Month

We continue our look at the ERP marketplace and current developments. Stay tuned!!  

We want your feedback. Contact us

Innovative IT Consulting, LLC
(631) 549-1685