SMBS: THINK YOU’RE TOO SMALL FOR ERP? THINK AGAIN · SMBs: Think You’re Too Small for ERP?...

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?