Whether your business is large or small, it stands to benefit from improving data access to all of its stakeholders — whether they work in upper management, sales, finance or some other supporting role, from manufacturing to the mailroom.
In fact, peer inside some of today's most successful small to midsize businesses (SMBs), and you may find they've already implemented systems that not only keep their employees well-informed but also maintain the flow of timely business information to partners and customers. This article explores how some SMBs are managing to free up the flow of key information that used to be locked away, and deriving new business value from providing data to all stakeholders, whenever they need it, and wherever they happen to be at any point in time.
When Spreadsheets Aren't Enough
InformationWeek SMB recently surveyed nearly 200 SMBs as part of a live, interactive webcast, and learned that only 17.4 percent of respondents had actually moved to purchase a comprehensive business intelligence and management solution, such as an enterprise resource planning (ERP) package, for their business.
What's holding back the other 82.6 percent? According to an Aberdeen Group report released last summer, there are six major reasons SMBs are dragging their feet:
- • ERP systems are too complicated. (10%)
- • We can continue to function effectively without ERP for the foreseeable future. (21%)
- • Costs of software and services are too high. (28%)
- • We already have internal efforts under way. (33%)
- • We've managed to function effectively without ERP in past, so why change? (34%)
- • Our business is too small. (39%)
Perhaps the more important question is: What "clicked" among the success-driven minority of smaller companies that have actually taken the plunge into ERP?
As reported in a recent InformationWeek SMB blog, "Are You Ready for Your ERP Close-up?" the trigger is often a realization that the company has simply outstripped the capabilities of its existing business information solutions.
"A lot of small businesses find themselves with a myriad of spreadsheets, and at some point, they outgrow the ability to work effectively across the different parts of the business by simply using manual processes or spreadsheets," said Jeff Stiles, senior vice president of small and midsize enterprise (SME) marketing for SAP AG, a company primarily known for its ERP solutions for large businesses.
The first area to chafe a growing business is often that of financial management, Stiles said. Spreadsheets typically give way to a single-purpose, or "point" application, such as a dedicated bookkeeping software solution. This may sustain the business for years, depending on the rate of growth, until once again the constraints become too limiting and a more comprehensive solution is sought. "We see an awful lot of folks who work to automate a specific part of their business — and financials is the first that many choose — and then they realize that they have outgrown that financials-only system," Stiles said.
Access to better data on the financial side also frequently creates a thirst in the organization for more comprehensive and up-to-date information in other areas of the business, Stiles said, such as for managing distribution, customer relationships, inventory, sales, repairs and warranties, and more. "A lot of customers that have implemented business management software ... have outgrown a niche type of software package and are looking for a more general business management solution."
A Kick in the Backside
Still, most small companies need more than an overwhelming thirst for knowledge to prompt them to break from their spreadsheet- or point application-based approach and seek a more comprehensive ERP solution. According to the Aberdeen report, the transition is usually preceded by one or more "compelling events" that raise the level of awareness to a critical point, forcing SMB decision makers to take action. The researchers ranked these change-provoking events as follows:
- • A disastrous incident proving that current point applications were insufficient to ensure effective operations (19 percent)
- • The need to comply with regulatory requirements (27 percent)
- • Growth beyond a predefined business threshold (29 percent)
- • Explosive or uncontrolled growth (40 percent)
- • Availability of new, low-cost ERP options that minimize risk (44 percent)
Once again, the findings are consistent with trends that leading ERP vendors have seen recently in the marketplace. "Generally speaking, I think there's a much better acceptance of ERP or business management software in small businesses than there was even two years ago," said Stiles of SAP.
In addition, as the Aberdeen study suggests, the greater affordability of ERP packages geared for smaller companies has become a primary driver in the adoption process for SMBs. "The thing we've run into repeatedly is folks wondering whether they can afford — not just to purchase, but to manage — these solutions. What we've seen growing, and this is across geographies, is the understanding that these solutions are affordable," Stiles said.
Pervasive Information: The Big Pay-off
At the end of the day, the biggest question SMB leaders need to ask themselves is what they stand to gain from implementing an ERP system: Will it truly make a measurable difference to operations and ultimately help run the business more efficiently and profitably?
Here's how one chief information officer (CIO) of a U.S.-based midmarket specialty retailer described the fruits of his company's labors, resulting from a recent transition to an ERP solution from SAP.
"We already had fairly consistent and accurate data, but implementing a data warehouse tied to the ERP allowed our users to have access to all levels of data from one source — in a self-serve system," the CIO said. "That was the important part for us. No more waiting for mainframe programmers to develop reports. Instead, users could run one of scores of developed queries that could typically provide the answers they needed — but they could also bring the data down to Excel or Access and continue to analyze it as necessary.
"Perhaps most important: Our store personnel also were given access to that same data. Delivering data to all stakeholders in a unified way does a lot to foster better internal communications," he said.
Better Data, Better Communications, Better Execution of Business Objectives
In his 2009 white paper, "Business Intelligence: A Guide for Midsize Companies," MAS Strategies' founder and Principal Analyst Michael Schiff discussed the ramifications of implementing ERP solutions in smaller businesses, and the transformational impact that can result from access to accurate, real-time business intelligence when it becomes easily accessible across the organization.
"All employees have the responsibility to make the best decisions possible, based upon the data available to them at the time. If their ability to analyze this data and transform it into useful information is improved, the overall quality of their decisions can be improved as well," Schiff wrote. "While many small businesses and midsize companies have relied on spreadsheets as their primary BI tool, most of them have come to realize that this is a stopgap solution and one that's apt to lead to data chaos and inconsistent analysis results.
"Business intelligence … is the underlying technology behind, and a key component for, more effective decision making," Schiff wrote. "Helping to align individual and departmental efforts with overall corporate strategies should lead to improved organizational results."