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8/21/2003
06:46 PM
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Big Ambitions

Small and midsize companies have the same technology needs, and the same goals, as large ones

If you think small and midsize companies don't face many of the same challenges as their larger competitors, then you haven't walked a mile in Daniel Feldstein's shoes.

As VP of operations at Crestron Electronics Inc., a $150 million-a-year maker of audiovisual control systems, Feldstein helps direct the daily activities of a small but bustling business with big ambitions. The 500-employee company has hundreds of suppliers providing everything from high-tech chips to plastic moldings. Its two New Jersey manufacturing sites process about 200 orders a day, some of them comprised of hundreds of line items. And it sells some 500 finished goods to thousands of customers all over the world. "We're a small company with medium- to large-sized company problems and issues," Feldstein says.

Daniel Feldstein, VP of operations at Crestron Electronics Inc.

Crestron is a small company with big-company problems, Feldstein says.

Photo by Erika Larsen/Redux
There are plenty of companies in the same position, and such a dichotomy can make finding the right enterprise software difficult. Though their needs are complex, they've got millions of dollars less to spend on software and supporting IT infrastructure than large companies. Their IT shops may have only small handfuls of employees, and they generally don't have a lot of time to spend on software implementations. Yet many of them must compete with much-larger companies.

To overcome these constraints, small and midsize businesses are looking for enterprise applications that support the business processes they need now and as they grow, without integration headaches, complex training regimens, or massive support costs. Typically, they don't want to sink all their money into customer-relationship-management or enterprise-resource-planning apps as much as they want software that helps them track and follow up on sales leads or manage the order-to-cash process. They want partners who will be there every step of the way, from needs assessment to implementation and ongoing maintenance. Often, they want to outsource some applications, but they don't want to be burned, as some were when a lot of apps-hosting vendors went belly up a few years ago.

Most analysts estimate the IT market for small and midsize companies--which generally includes companies ranging from $50 million to $500 million in annual revenue--to be more than $300 billion. These companies will account for 54% of total IT spending this year, according to market researcher IDC. And their spending is growing fast: Their IT budgets are expected to increase 17% versus 1.3% for large companies, according to Forrester Research.

Why the amplified spending? For one thing, many small and midsize companies have done little to their IT infrastructures since dealing with the Y2K problem. The patchwork of systems that got some of them through that crisis may be running out of steam or may have become too difficult to support, especially if the vendors that created those applications no longer exist. Other companies struggle with the limitations of early stripped-down versions of big vendors' enterprise software. Smaller private companies often have more spending flexibility, too. "They don't have to answer to Wall Street," says Meredith Child, an associate analyst at Forrester.

Many small and midsize companies also are starting to take a more-pointed interest in strategic business-technology initiatives--including ERP, supply chain, and CRM--to create greater efficiencies and improve bottom lines.


blinn

Ferrotec USA needed enterprise software to help it grow globally, so it migrated to Oracle applications, Blinn says.

Photo by Jason Grow
Ferrotec USA, the U.S. subsidiary of Japan's Ferrotec Corp., knows how difficult it can be to develop IT services that deliver bottom-line benefits when key operational software has outlived its usefulness. Ferrotec's combined revenue tops just $150 million annually, but it operates on three continents. The low-end, standalone financial system it installed in the 1990s can no longer meet its needs. The company, a maker of magnetic liquids used in acoustical and other products, is replacing that system with Oracle applications. "We needed enterprise software that allows us to grow globally as well as meet requirements such as multicurrencies, multilanguages, and different cultures," says Rob Blinn, IT director of Ferrotec USA. "The applications we were running didn't meet those needs."

All the major enterprise providers have taken a closer look at how they sell to companies like Ferrotec USA (see story, Back In The Game). True, they've set their sights on this market before, but this time the dynamics have changed. The large enterprise market is stalled. Take a quick look at PeopleSoft's, Oracle's, SAP's, or Siebel Systems' quarterly reports, and the numbers make it clear: Growth is coming mainly from maintenance and service fees, not new licensing megadeals.

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