Small Business Gets Hip to ERP Benefits

By Pedro Hernandez | Posted February 13, 2015

Traditionally, small and midsized business (SMB) IT environments and enterprise resource planning (ERP) software have rarely mixed. And the reason for it lives right in the name.

ERP is the quintessential enterprise-grade application. In a large corporation, it automates and helps coordinate complex business processes, including supply chain management, accounting and human resources—sorely needed capabilities when millions of customer interactions and thousands of jobs are on the line.

For most SMBs, it's simply overkill. Although they are no less committed to their customers, wedging an ERP platform into their business environments would prove needlessly complicated for companies and startups that struggle just to keep the lights on. That is, until ERP vendors began right-sizing their offerings to fit the needs of small businesses.

ERP adoption is picking up in the SMB market, according to Forrest Burnson, a market research associate at Software Advice, and author of Software Advice's report, Enterprise Resource Planning Software BuyerView 2015. One reason is that even small companies can generate a lot of business information, which poses a data management challenge. A good ERP platform can help.

ERP Puts All Your Data in One Place

"More small businesses are starting to realize that they can benefit a lot from having all of their data integrated in one place," Burnson told Small Business Computing. "It saves time and money."

Among those polled by the company, 59 percent said that they were considering ERP solutions based on their need to better integrate data generated by different business processes. Software Advice polled 250 IT buyers—the bulk of which represented SMBs—for its survey.

enterprise resource planning for small business

That integration can also help businesses provide better customer service. "A lot of buyers were looking to improve their CRM [Customer Relationship Management]," Burnson added.

Businesses that link their ERP and CRM systems are "really just starting to see the very real benefits from the trends and patterns" that they can capture, analyze and act upon. Indeed, 47 percent of businesses cited the need to improve their CRM database as a top reason for acquiring an ERP system.

Small Business ERP Still Not the Norm

Despite this change in attitudes, most small businesses have yet to jump on the ERP bandwagon. "Two-thirds of buyers do not currently use an ERP system, and 44 percent rely on a combination of disparate systems to execute ERP processes," stated the report. Many small business owners are "still under the impression that ERP is a very costly investment," offered Burnson as an explanation for why adoption rates are low. It's a mistake that could be hindering their business opportunities.

Cloud computing's growing popularity has brought the cost of ERP within the reach of modest small business IT budgets. The cloud has made it "a lot easier for SMBs to treat ERP more like an operating expense, instead of a capital expenditure," Burnson said. Even legacy vendors like Oracle and SAP have been increasing their SMB ERP offerings, resulting in "much more affordable options."

Yet, ERP is not necessarily a good fit for every small business. Some will never require an ERP solution, like the "mom and pop running an antiques shop," he said.

But for companies that want to capitalize on the inherent value of their business data, or are simply looking to streamline their growing operations, ERP is a path worth exploring, according to Burnson.

When seeking out an ERP solution, "do your research," he said. It's basic advice, he admitted, but ERP is a system that a small business may come to rely on for years on end. Product functionality, use-friendliness and extensibility are pointless if today's hot up-and-coming cloud-based ERP startup folds tomorrow.

"Demand better CRM implementation [and] integration," also advised Burnson. Finally, have vendors provide clear-cut terms when they come to the negotiating table. "Know what [you're] getting and get the best deal possible."

Pedro Hernandez is a contributor to the IT Business Edge Network, the network for technology professionals. Previously, he served as a managing editor for the Internet.com network of IT-related websites and as the Green IT curator for GigaOM Pro. Follow him on Twitter @ecoINSITE

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