SMBS:THINKYOU’RETOOSMALLFORERP?THINKAGAIN
CANYOUAFFORDNOTTOINVEST?
Smalltomedium-sizebusinesses(SMBs)facetoughdecisionsfromtheverybeginning.Intheveryearlystagesyouhavebigdreams,butlimitedcapital.Anycapitalyoudohavemustbeinvestedinanoperationalfoundationthatwilldirectlybuildthebusiness.BackofficesolutionssuchasEnterpriseResourcePlanning(ERP)mayseemlikealuxuryyousimplycan’tafford.Soyoustartoutrunningthebusinessbytheseatofyourpants.“Managementbywalkingaround”iscommon.Soaremanualprocessesandspreadsheets.Decision-makingisdrivenmorebygutfeelthandataandhardfacts.Andthatworks…foralittlewhile.Butthenyouhaveabitofsuccessandyoustarttofindyourselfstumblingabit.
Youstartoffthinking,“Allweneedis…”Atfirstyourlistmightbequitesmall.Yoursalesteamcan’tlivewithoutatooltomanagecontacts,opportunitiesandpipeline.Somaybeyoufindsomeinexpensive(orevenfree!)software.AccountingneedstobalancethebooksandturnstoQuickenorQuickbooks.Operationsneedssomerudimentaryinventorycontrol.Anotherinexpensiveorfreepieceofsoftwarefillsthatgap.Andyou’restillmanagingordersinspreadsheets.Noneofthesetalktoeachother,andbeforeyouknowit,your“backofficesolution”isheldtogetherwiththeequivalentofbalingwireandducttape.
Thesesamesolutionsthatwereintendedtosolveproblemsandsavetimearenowcostingyouintermsofefficiency,productivityandmayevenbelimitingyouintermsofscalingyourbusiness.Inotherwords,theyareholdingyouback.Ifyoudon’thaveasolutionthatishelpingmorethanitishinderingyourbusiness,ifitisnotgivingyouadistinctcompetitiveadvantageintoday’sdigitalworld,ifitisnotacompletesolutionthatiseasytouse,thenyouaredefinitelyoperatingatadisadvantage.Whileyoumightthinkyouaresavingmoneybynotinvesting,insteadyouaremorelikelytobeleavingmoneyonthetable.It’stimetomakeamove.
WHATISRUNNINGYOURBUSINESSTODAY?Whilespreadsheets,manualprocessesordesktopsolutionsmightsufficeinveryearlystagesofstart-ups,withanykindofsuccessatall,theyquicklybecomeinhibitorsratherthanenablersofgrowth.Yetmanycontinuetolimpalongwithsystemsthatfallfarshortofamodern,technology-enabled,integratedERPsolution.ManytodayusetheacronymERPasablankettermto
Data Source InthisreportMintJutrasreferencesdatacollectedfromits2016EnterpriseSolutionStudy,investigatingthegoals,challengesandstatusofthosesolutionsthatareusedtorunbusinessestoday.Italsobenchmarksperformanceoftheseimplementations.
Thestudycollected~525responsesfromcompaniesofallsizes.Forthisreportwefocusoncompanieswithannualrevenuesof$100millionorlessandwerefertothissubsetof272respondentsassmalltomedium-sizebusinesses(SMBs).
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representanykindofsoftwareusedintherunningofabusinessandthereforeagoodpercentagethinktheyarerunningERPwheninfacttheyarenot.OthersbelieveERPisonlyforthe“bigguys.”Theycan’tpossiblyaffordit.Andyet,MintJutraswouldcontendperhapstheyneeditevenmorethantheirlargercounterparts.
Tobeclear:MintJutrasdefinesERPasanintegratedsuiteofmodulesthatprovidestheoperationalandtransactionalsystemofrecordforyourbusiness.
Integratedisakeywordinourdefinitionandperhapsthebiggestreasonwhy,ifyouareanSMB,youcan’taffordnottoinvestinERP.Youneedmost,ifnotallthekeycomponentsrequiredbylargeenterprises,andyetyoudon’thavethedeeppocketstostitchdifferentpiecesofthepuzzletogethertomakeitacohesivesolution.
Furthermore,whileourdefinitionrepresentstheminimumrequirements,mostERPsolutionstodaycandomuchmore.AndyetmostSMBssettleforsomethingless,leavingthemwithlittlecontrolandevenlessvisibilityintothedataneededforeffectivetimemanagementanddata-drivendecision-making.Yestherearecomplexandexpensivesolutionsonthemarket,buttherearealsoveryaffordablealternativesthatprovideacompleteandintegratedsolution.
Whataresomeofthetell-talesignsyoudoindeedneedanintegratedsolution?
• You’renotincontrol:Processesaremanual;dataisscatteredinfilecabinets,offlinespreadsheetsandacrossdesktops.Thatdataistransferredbetweendesksfourorfiveorevensixoreighttimes,addinglittlevalueandintroducingtheriskoferrors.
• Youspendmoretimesearchingfordatathanyoucanreallyafford:You’reoperatingblind,notknowingwhereorwhenacrisismightdevelop.Youneeddataatyourfingertipsandyouneedbettertimemanagement.
• You’venoideahowandwheretoexpand:Yourbusinessisgrowing.Youwanttocontinuetoaddnewgeographiesandnewmarketsegments.Butyouhavenovisibilityastowhereyoumadeyourbestprofit.Wasitinhealthcareinthenortheast?Wasitincommercialbusinessonthewestcoast?Wasitingovernmentcontracts?
• Youcan’tmeetcustomerdemand:Yourinventorylevelsarerising,yetyoustillcan’tseemtomeetcustomerrequestedshipdates.Howdoyoubetterforecastdemand,leanoutyourinventory,andproduceproductjustintime?
• Yourofficemanageralsomanagesyourpayrollandadministersbenefits:Thesamepersonwhoordersyourofficesuppliesisthepersonyouremployeesturntowhentheyhaveaquestionorissue
Definition of ERP MintJutrasdefinesERPasanintegratedsuiteofmodulesthatprovidestheoperationalandtransactionalsystemofrecordforyourbusiness.HowevermostERPsolutionstodaydomuchmore.AndyetmostSMBssettleforsomethingless,leavingthemwithlittlecontrolandevenlessvisibilityintohowbesttogrowmostprofitably.
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withtheirbenefits.Andthispersonalsorunsyourpayroll.Isthatpersonexpertandup-to-dateonthelatestpayrollregulations?Doesthisinvolvespreadsheets?Arethey100%error-free?Doyouhaveabackupifthispersonisill,injuredortakesanextendedleaveofabsence?
• YouhavenoITstaff:TheclosestyouhavetoanInformationTechnology(IT)staffisthatbrightkidyouhiredtomanageyourinternalnetwork,yourlaptopsandphones.Technologyisleavingyoubehindbutyou’regrowingandwouldratherinvestinrevenue-generatingactivities,notoverhead.
• Cashistight:Whetheryouneedtofinanceyoursupplychaincostsorinvestingrowth,creditisstilltight.Youarehandicappedinmaintainingacloseeyeoncashandliquidity.
Andthenofcoursethereisthedigitaleconomy.TheInternethasleveledtheplayingfield.Companiesofanysizecanestablishaglobalpresence.Butasyoubuildyourbrandglobally,youbetterbeabletocommunicate,collaborateandconductbusinessatanunprecedentedspeedandwithahighleveloftransparency.
Manycompanies,particularlySMBs,overestimatetheirdigitalpreparednesstoday.Whilealmosthalf(48%)oftheSMBsparticipatinginthe2016MintJutrasEnterpriseSolutionStudyfelttheywerealreadywell-prepared,morethan80%stillrelyatleastpartiallyonspreadsheets,paperand/ormanualprocessestomanageactvitiesandonly20%to40%haveacompletelydigitalsystemofrecordofdifferenttypesoftransactions.Andmanyofthosedigitalrecordsstillrequiremanualentry.
Soifyoufindyourselflessthanfullyprepared,you’renotalone.Andthatmeansthereisstilltimetogainacompetitiveedge.Butthewindowofopportunityisrapidlyclosing.IfyouareafirsttimebuyerofERPorperhapsstrugglingwithanoutdatedorbrokensolution,thetimeisripeforinvestinginacompletesolutionthatleveragesdigitaltechnologies.
EYESWIDEOPEN:ESTABLISHGOALSNobodyshouldembarkonanERPjourneyhoweverwithoutestablishingsomecleargoals.Fortunatelymostdo.Only3%ofour2016MintJutrasEnterpriseSolutionStudySMBparticipantsindicatedtheyhadnospecificgoals–theyjustknewtheyneededtodosomething.Butthekeytosuccessisnotonlyestablishinggoalsbutalsoinmonitoringprogressagainstmeetingthem.
WeaskedourstudyparticipantstoselecttheirtopthreegoalsforERP(Figure1).Relievingfrustrationandimprovingefficienciesarerightatthetopofthelist.IfyouareplaguedwithfrustratedemployeesandinefficienciesyoumightbethinkinganERPimplementationistheverylastthingyoushouldconsider.Granted,earlyERPimplementationstendedtoproducemoreofthesame.
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Andthiswasenoughtoscareawaysmallercompanies,particularlyasmanyindustryobserversfocusonfailedandexpensiveimplementationsthatneverseemtoend.Andofcourseyouinitiallyneedtospendmoney(andtimeandeffort)toimplementasolution.Sowhygotoallthattroubleifyouarejustgoingtoperpetuatethesituation?Butthattypeofthinkingisoutdated.Solutionstodayhaveprogressedfarbeyondthis,offeringmorefeaturesandtechnologyatamuchmoreaffordableprice.
Figure1:Top3GoalsforERP
Source: Mint Jutras 2016 Enterprise Solution Study
However,focusingexclusivelyonthecostofERP,eventheTotalCostofOwnership(TCO),willnotovercometheinitialreluctancetoinvest.Instead,anycompany(largeorsmall)investinginERPneedstocostjustifytheexpenditurebyestimatingthereturnonthatinvestment,eitherintermsofdollarsortimetorecouptheinitialinvestment,orboth.WhatcanyoureasonablyexpectintermsofperformanceimprovementsandcostsavingsafterimplementingERP?
WeactuallybenchmarksomeoftheseimprovementsinordertomeasuretheoverallperformanceofERPimplementationsanddeterminethosewhichare“WorldClass.”
Figure2:SelectedPerformanceImprovementsSinceImplementingERP
*Manufacturing Only
**Manufacturing and Distribution only Source: Mint Jutras 2016 Enterprise Solution Study
World Class ERP Performance
MintJutrasdefinesWorldClassusingacompositemetricwhichincludes:
üActualmeasuredresultsexperiencedsinceimplementation
üProgressmadeinachievingcompany-specificgoals
üCurrentperformanceinselectedKPIs
Thetop15%ofallsurveyrespondentscomprise“WorldClass.”Theremaining85%arereferencedas“AllOthers.”
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Theactualsavingscanbeasdiverseasthecompaniesthemselves.Themetricsweuse(Figure2)arequitegeneral,butareselectedasuniversallyapplicabletomostanybusiness(thosespecifictomanufacturinganddistributionareflaggedassuch).Weencourageyoutobemorespecific.Perhapstherearesomeselectelementsofoperatingcost(labor,facility,shippingcosts,etc.)orasegmentofinventoryfromwhichyoucangainthemostbenefit.Andalsoconsiderotherimprovementsthatmayeitherdirectlyorindirectlyimpacttoporbottomlineperformance.
WhiletheimprovementsshowninFigure2doimpacttopand/orbottomlineperformance,costsavings(Figure3)hitthebottomlinedirectlyandalsoinitiallyhelpdefraythecostofthesolution.WefindtheaverageSMBachieves100%ROIinapproximately27months(2.28years).
Figure3:CostSavingsExperiencedSinceImplementingERP
*Manufacturing and Distribution only
Source: Mint Jutras 2016 Enterprise Solution Study
PAYINGFORYOURSOLUTION
NewERPsolutionsusedtoalwaysrequirecapitalinvestment,butcloudoptions,subscription-basedpricingandsolutionsthataredeliveredasSoftwareasaService(SaaS)providemoreoptionstoday.Capitalinvestments(CapEx)inhardwareandsoftwarecanoftennowbereplacedwithoperatingexpense(OpEx).Ofcoursetherewillbesomeupfrontcostsassociatedwithanewimplementation,butsavingsinefficiencyandproductivity,inadditiontohardcashsavings,canhelpdefraythoseshort-termcosts.MoreonSaaSlater.
WhilethecostsavingsandimprovementsofWorldClassERPimplementationsaretypicallymorethandouble(oreventripleorquadruple)thoseoftheaverageSMB,itisimportanttonotethateventheaveragecostsavingscaneasilycostjustifytheinitialexpense.YetthereisnologicalreasonnottoaspiretobecomingaWorldClassimplementation.Settingyoursightstoolowcanbealotmoredangerousthansettingthemtoohigh.
Theaforementionedperformanceimprovementsandcostsavingsshouldbeeasytomeasure,particularlyonceyouhavethebasicsofanERPsysteminplace.However,whataboutthattopgoalofreducingfrustration?Typically
ThereisnologicalreasonnottoaspiretobecomingaWorldClassimplementation.Settingyoursightstoolowcanbealotmoredangerousthansettingthemtoohigh.
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productivityandefficiencyareabithardertomeasure,andthewholeuserexperienceinworkingwithanytypeofsolutionisabitmoresubjective.
RELIEVINGFRUSTRATIONANDINEFFICIENCIESButfrustrationdoesn’tonlycomefromsoftwarethatishardtouse.Frustrationcaneasilyarisewhenindividualsstrugglewithouttheapplicationsnecessarytorunthebusiness.Inthesecases,theyoftenturntospreadsheetstofillthegap.Whilespreadsheetsrepresentacomfortzone,sotospeak,theyonlyaddtoinefficienciesandlackofproductivity,nottomentionthe“worryfactor.”Thechancesoferrorswithinspreadsheetsisawell-known,yetconstantlyoverlookedfactor.
Butwhenapplicationsareimplemented,theleveloffrustrationisacombinationofcompletenessofsolution(toavoidwork-aroundsandthosespreadsheets),aswellasafunctionofhoweasy(orhard)itistouse.“Easeofuse”usedtobeviewedas”soft”or“fuzzy”andyes,it’sanintangible.Usersofearlysystemsweresimplyexpectedto“grinandbearit.”Butyourhumanassetsarecertainlyamongyourmostpreciousresourcestodayandeventheintangiblescancostyouintermsoftime,effortandcold,hardcash.
Weasksurveyparticipantstoselectthetopthreemostimportantfactorsindefining“easeofuse”(Figure4).
Figure4:Defineeaseofusebyselectingyour“Top3”
Source: Mint Jutras 2016 Enterprise Solution Study
MintJutrassurveyparticipantsconsistentlyputefficiency(minimizingthetimetocompletetasks)nearthetopoftheprioritylistof“easeofuse”factors.“Intuitivenavigation,”whichtakesacommandingleadoverallotherfactorsinSMBs,goeshandinhandwithminimizingtimetocompletetasks.InfactMintJutrasstronglybelievesthatoftentimesthebestuserinterfaceisnouser
Yourhumanassetsarecertainlyamongyourmostpreciousresourcestodayandeventheintangiblescancostyouintermsoftime,effortandcold,hardcash.
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interfaceatall.Themoreroutineandmenialtaskscanbeautomated,themoreyoustarttoreallyimproveonproductivityandefficiency.Sodon’tjustlookfor“beautifulsoftware;”(notewhere“visuallyappealinguserinterface”fallsinthepriorities),lookforsoftwarethatcaneliminatethoseroutineandrepeatabletasksandfreeupyourpeopletotrulyaddvaluetoyourbusiness.
TheremainingfactorsshowninFigure4donotjustrepresentwishfulthinkingbyoursurveyparticipants.Thesearerealfeaturesthatshouldbeavailableinmodernsolutionstoday.
Ifwhateveryouusetodaytorunyourbusiness(includingspreadsheets)doesnotgetapassinggradeintermsofeaseofuse,itcouldbehidingmanyotherperformanceissuesandcouldevennegativelyimpactyourabilitytoattractandretaintalent.ThatalonecouldjustifyinvestmentinyourfirstERPorareplacement.
STRAPPEDFORCASHANDCAPITAL?Sofarwe’vebeenmakingacasefortakingtheplungeonanew,modernERPsolution.Butifyouareasmallormidsizecompanythatisgrowing,thereisaverygoodchanceyoumightbestrappedforcash.However,thatisnolongeravalidreasonforpostponingyourERPjourney.ManysolutionstodayareavailableasSoftwareasaService(SaaS).
Inspiteof,orperhapsbecauseofthehugevolumeofdiscussionaroundSaaSandcloudcomputing,thereremainsmuchconfusionovertheterminology.Manyusetheterms“cloud”and“SaaS”interchangeably,buttherearesomeimportantdifferences.Solet’sdistinguishbetweenthetwo:
• Cloudreferstoaccesstocomputing,softwareandstorageofdataoveranetwork(generallytheInternet.)Youmayhavepurchasedalicenseforthesoftwareandinstalleditonyourowncomputersorthoseownedandmanagedbyanothercompany,butyouraccessisthroughtheInternetandthereforethroughthe“cloud,”whetherprivateorpublic.
• SaaSisexactlywhatisimpliedbytheacronym.Softwareisdeliveredonlyasaservice.ItisnotdeliveredonaCDorothermediatobeloadedonyourown(oranother’s)computer.Itisgenerallypaidforonasubscriptionbasisanddoesnotresideonyourcomputersatall.
AllSaaSiscloudcomputing,butnotallcloudcomputingisSaaS.Traditionalon-premiseorhostedsolutionsmight(ormightnot)beaccessedviathecloud,althoughthisismorelikelytobeaprivatecloudandmaynotrelieveyouoftheburdenofanoutlayofcash.Ifyouareshortoncapitalorstrappedforcash,SaaSmaybeyourbestoption.Notonlyistherenocapitaloutlayforhardwareandupfrontsoftwarelicenses,butthisdeploymentoptionalsoallowsyoutoaccountfortheinvestmentasoperatingexpense(OpEx)versusacapitalexpense(CapEx).
AllSaaSiscloudcomputing,butnotallcloudcomputingisSaaS.
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Thebottomline:Youareabletoaffordamuchmorecompleteandrobustsolution.ButthatisnottheonlybenefitofaSaaSsolution.
ForyearsnowMintJutrashasbeendocumentingtheperceivedappealofSaaS,buttheadoptionofSaaShasgrowntothepointwherewecannowcomparetheanticipatedbenefitsagainsttheactualbenefitsrealizedfromrealSaaSdeployments.Weaskthoserunningmoretraditionalon-premiseorhostedsolutionswhattheyfindappealingaboutSaaS.WeaskthosewhohaveaSaaSdeploymentwhatbenefitstheyhaveactuallyrealized.Inbothcases,respondentsareallowedtoselectallthatapply.
WhilethosejustconsideringSaaSselectedanaverageof3.57potentialbenefits,thoseactuallyrunningSaaSselected4.83,whichexplainswhyoverallthepercentagesinthesecondcolumnofTable1arebiggerthatthoseinthefirst.Inshort:SaaShasdeliveredmorethananticipated.
Table1:AnticipatedversusRealizedBenefitsofSaaSinSMBs
Note: IT staffing questions were worded differently in the two different questions, making
them difficult to compare Source: Mint Jutras 2016 Enterprise Solution Study
SUMMARYANDRECOMMENDATIONSAlltoooftenSMBstrytocompetewithsomethinglessthanacompleteandintegratedsolution,makingdoinsteadwithacollectionofdisparateapplicationsheldtogetherwiththeequivalentofbalingwireandducttape.Theydon’thavetheexpertiseortheresourcestofillallthegapsseamlesslyandquiteoftenresorttofillingthosegapswithspreadsheets,paperandmanualprocesses.
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Whileithasalwaysbeendifficulttocreateandmaintainacompetitiveedgewiththesetypesofmarginalsolutions,itisevenmoredifficulttodayinthedigitaleconomy,wherebusinessneedstooperateatthespeedoftheInternet.
Ifyoufindyourselfinthissituation,strugglingtocompete,youareapotentialcandidateforanewsystemtorunyourbusiness.Ifyouarestillonthefence,youmaysimplybeputtingofftheinevitable.
Whywait?Yes,decidingtopurchaseanewERPisabigdecision.Ifyouarethinkingyoursituationisnotthatbad,doyouthinkitwillbeanyeasiertofixtheproblemwhenthingsgetworse?Orwhenyourbusinessislargerandmorecomplex?ForyearsMintJutrashasbeencautioningagainsttreatingimplementingorreplacingERPlikebrainsurgery…youdon’tdoitunlessthepatientisdying.Butselectingandimplementinganewsystemthatrunsyourbusiness,whenyourbusinessisunderdistress,istheleastoptimaltiming.
Ifyouareasmallbusinessoperatingwithoutatechnology-enabledmodernERPsolution,askyourselfthetoughquestionslike:
• Areyouincontrol?• Areyoufocusedentirelyonrunningyourbusiness?Ordoyouspend
moretimesearchingforandcollectingdatathananalyzingitandmakingdecisions?
• Areallthedepartmentsinyourorganizationsupported?Isyourcurrentsolutioncomplete?
• Areyoumanagingagainstrealisticandachievablegoals?• Areyousavingmoneyorleavingmoneyonthetable?
Therearedozensmoreyoucouldask.Dependingonhowyouansweredthequestionsabove,insteadofaskingifyoucanaffordERP,thebetterquestiontoaskis,“Canyouaffordnottoinvest?”ThecostoffullyintegratedERPsolutionshavecomedown,whileatthesametimebotheaseofuseaswellasfeaturefunctionalityhaveimprovedsignificantly.Awell-executedERPimplementationcanenablechangeandprovideon-goingsavingsthatcanhelpyousustainandgrowyourbusiness.Whynotgetstartednow?
Abouttheauthor:CindyJutrasisawidelyrecognizedexpertinanalyzingtheimpactofenterpriseapplicationsonbusinessperformance.Utilizing40yearsofcorporateexperienceandspecificexpertiseinmanufacturing,supplychain,customerserviceandbusinessperformancemanagement,Cindyhasspentthepast11+yearsbenchmarkingtheperformanceofsoftwaresolutionsinthecontextofthebusinessbenefitsoftechnology.In2011CindyfoundedMintJutrasLLC(www.mintjutras.com),specializinginanalyzingandcommunicatingthebusinessvalueenterpriseapplicationsbringtotheenterprise.
Ifyouarethinkingyoursituationisnotthatbad,doyouthinkitwillbeanyeasiertofixtheproblemwhenthingsgetworse?Orwhenyourbusinessislargerandmorecomplex?