ERP for SMEs|
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For the modern day corporate firms, Enterprisewide Resource Planning (ERP) systems have become an inherent necessity that cannot be obviated. With the increasing acceptance of ERP systems and the development of multiple ERP vendors with quality systems integrating all the functions of an organization in a central database, ERP adoption has increased beyond 70% among large enterprises. With impending saturation in the ERP market for large enterprises, most of the ERP vendors have turned to catering to the SME sector with customized solutions that tackle the problems of high cost of ERP selection and implementation and the inherent complexity involved in such systems. By means of offering cheaper and simplified solutions, flexible pricing policies, specialized functionalities and pre-configured systems based on best practices and cut down implementation times, ERP vendors have renewed their focus towards small and medium enterprises (SMEs) tremendously in order to capture a large pie of the huge untapped SME market the world over. Specifically, in the Indian context, SMEs have faced tough challenges post the economic liberalization which eased trade barriers and promoted disinvestments and deregulation. Before the economic liberalization in India in the 1990s, SMEs in India faced little competition and operated under a highly regulated business environment. However, following the economic liberalization, the Indian economy was opened up to foreign corporate and hence, Indian SMEs have been left with little choice but to adopt modern business practices and strategies to stay afloat to tackle renewed business challenges of compressed product development cycles, cut throat domestic and foreign competition and rapidly changing customer demands. ERP systems are a way ahead to create and sustain a competitive advantage not least because the custom packages designed by ERP vendors for SMEs are now becoming upwardly scalable in line with the growth of a SME. ERP adoption paves the way for SMEs to boost their overall brand image against their competitors and emerge as big players in the domestic market. A couple of cases in point are Jain Irrigation and Havells India. Jain Irrigation, a Mumbai based irrigation equipment manufacturing company, made four acquisitions overseas to gain access to new product lines and introduce those products in the Indian market. Havells India, on the other hand, acquired a European firm and integrated their key functions of sales and marketing by means of ERP systems.
Of course, ERP offers other distinctive advantages like functional integration, as mentioned before, and streamlining of internal processes. However, ERP systems enable integration of supply chains and provide a common platform for exchange of information between suppliers and customers, which is a key takeaway. Also, ERP systems aid the incorporation of industry best practices which include increasing the visibility of business processes, establishing open and timely communication, linking databases across key organizational functions throughout the value chain and significantly minimizing documentation while ensuring necessary data traceability and availability. In spite of such distinctive advantages, SMEs have been unable to capitalize and make the most of their ERP implementations owing to unclear understanding of business objectives and the role an ERP system can play in achieving performance improvement and gaining a competitive advantage. Moreover, SMEs themselves lack a defined organizational structure and formal organizational procedures which form the core of efficiency as far as an ERP system is concerned. Finally, the change management scenario is also quite unique within SMEs. ERP users are less likely to have significant experience in operating complex computer systems and hence, training of users in ERP is of utmost priority. In...