Why ERP Software for Smaller Companies Are Shining During The Economic Doldrums
If you are familiar with the significant costs and resources associated in a full scale ERP software implementation, you also understand the risk that is involved if the enterprise systems implementation is unsuccessful. In a sluggish economy where cash is watched like a hawk, both the high cost and risk of business disruption have significantly stymied the flow of large ERP software implementations over the last 12 months. However, what activity there has been for ERP vendors during the recovering economy has seemed to been focused on smaller ERP applications that require less capital and generally less risk for IT manager and company executives to purchasing these solutions. ERP solutions targeting the SMB market (small and medium business) have thrived. Cutting to the chase, these smaller enterprise systems solutions are continuing to gain traction because companies are now changing the ERP paradigm, at least for smaller companies, as they search for a quicker payback driven by the challenging economy.
With larger ERP implementations generally a return on investment won't be realized for many years and in some cases even a decade or longer. Given the intense pressures to cut costs, any expenditures made in today's market is required to have a detailed ROI analysis with a payback generally within 18 months or less.
This financial driver is also a key factor for companies staying put with their current systems. Keeping status quo has little to do with ERP software functionality or tools. Most companies do not switch ERP vendors because the costs involved with scrapping old systems. The business disruption is significant, the process takes years to fully complete, and getting employees retrained and the new system deployed successfully is another challenge all to itself. This is good news for vendors already in, but a significant hurdle for new vendors to win over a competitor's client.
However, with more affordable, easier to use and easier to deploy applications emerging on the market, this paradigm is also changing and more and more companies are beginning to look for other alternatives. Subsequently, the spotlight and benefits of smaller sized ERP solutions are starting to emerge, particularly with web-based, software as a service or SaaS ERP applications. SaaS ERP applications have targeted the SMB market and the pay as you go pricing model makes these solutions affordable and justifiable from an ROI perspective. Web-based applications are also flexible to scale up or down with your business trends and are generally much simpler to deploy, requiring days versus months to train. ERP vendor sales seems to support this new trend. Last year the sales results for the large Tier 1 ERP vendors on average reported single digit sales declines year over year whereas a significant number of the ERP vendors focusing on the SMB market reported year over year growth.
If you are familiar with the significant costs and resources associated in a full scale ERP software implementation, you also understand the risk that is involved if the enterprise systems implementation is unsuccessful. In a sluggish economy where cash is watched like a hawk, both the high cost and risk of business disruption have significantly stymied the flow of large ERP software implementations over the last 12 months. However, what activity there has been for ERP vendors during the recovering economy has seemed to been focused on smaller ERP applications that require less capital and generally less risk for IT manager and company executives to purchasing these solutions. ERP solutions targeting the SMB market (small and medium business) have thrived. Cutting to the chase, these smaller enterprise systems solutions are continuing to gain traction because companies are now changing the ERP paradigm, at least for smaller companies, as they search for a quicker payback driven by the challenging economy.
With larger ERP implementations generally a return on investment won't be realized for many years and in some cases even a decade or longer. Given the intense pressures to cut costs, any expenditures made in today's market is required to have a detailed ROI analysis with a payback generally within 18 months or less.
This financial driver is also a key factor for companies staying put with their current systems. Keeping status quo has little to do with ERP software functionality or tools. Most companies do not switch ERP vendors because the costs involved with scrapping old systems. The business disruption is significant, the process takes years to fully complete, and getting employees retrained and the new system deployed successfully is another challenge all to itself. This is good news for vendors already in, but a significant hurdle for new vendors to win over a competitor's client.
However, with more affordable, easier to use and easier to deploy applications emerging on the market, this paradigm is also changing and more and more companies are beginning to look for other alternatives. Subsequently, the spotlight and benefits of smaller sized ERP solutions are starting to emerge, particularly with web-based, software as a service or SaaS ERP applications. SaaS ERP applications have targeted the SMB market and the pay as you go pricing model makes these solutions affordable and justifiable from an ROI perspective. Web-based applications are also flexible to scale up or down with your business trends and are generally much simpler to deploy, requiring days versus months to train. ERP vendor sales seems to support this new trend. Last year the sales results for the large Tier 1 ERP vendors on average reported single digit sales declines year over year whereas a significant number of the ERP vendors focusing on the SMB market reported year over year growth.