Sudhir nair, entrepreneur india, date june 2013, online

URL: http://www.entrepreneurindia.com/magazine/2013/june/ERP -Putting-The-Pieces-Together_1013-1/ Date June 2013

ERP: Putting The Pieces Together SMEs are faced with difficult decisions every day. Decision making is entwined with time. It is no secret that one of the biggest constraints of SMEs is time. They take tough decisions in a number of areas in a short span and a single bad decision could negatively impact their long-term success. ERP solutions allow them to work efficiently minimising the time and effort required in processes.

An organisation runs best when there is a sense of coordination between different departments. In an ordinary, traditional setup, each department maintains its own database and undergoes its own functioning. In short, there is a communication lapse. The introduction of ERP (Enterprise Resource Planning) helped in joining all departments into single juncture so that every department is updated about the functioning of the others. Large companies have reaped business benefits from implementing ERP solutions, and SME are looking to mimic the same.

“Despite their high enthusiasm and inherent capabilities to grow, SMEs in India face a number of challenges like sub-optimal scale of operation, technological obsolescence, supply chain inefficiencies, increasing domestic and global competition, cash crunch and uncertain market conditions. Therefore, to survive and compete with large and global enterprises calls for adopting innovative approaches in their operations and technology,” says Pravin Agarwala, VP-Business ByDesign, SAP Labs.

An ERP system promises big gains, helping a firm to grow revenue, increase productivity, improve efficiency throughout the enterprise and manage costs. Today more and more small and mid-sized companies are looking to replace their outdated systems.

A recent research survey says that in the SMB segment, which continues to outgrow the overall market, companies are buying ERP systems in response to new customer requirements.

ERP’s Growing Demand in SMEs According to Gartner, Inc., “Indian manufacturers and natural resources companies will spend Rs 40,800 crore on IT products and services in 2013, an increase of 9.1 per cent over 2012 revenue of Rs 37,400 crore.” This forecast includes spending by manufacturers and natural resource companies on internal IT (including personnel), hardware, software, external IT services and telecommunications. The telecommunications category remains the biggest spending category

overall in the manufacturing and natural resources industry, and it is forecast to reach Rs 13,200 crore in 2013. Meanwhile, software is achieving the highest growth rate amongst the top level IT spending categories – forecast to exceed 15 per cent in 2013, with especially strong growth forecast for ERP, desktop software and manufacturing-specific applications.

TechNavio’s analysts say that almost all major global players of ERP are serving the Indian market with SAP, Oracle, Microsoft, Ramco Systems and PeopleSoft topping the chart. The ERP software market in India to grow at a CAGR of 22.2 per cent over the period 2011-2015. One of the key factors contributing to this market growth is the growing demand of ERP solutions among SMBs. According to a report by Panorama Consulting 2012, SAP occupies 22 per cent market share worldwide, followed by 15 per cent by Oracle, 10 per cent by Microsoft Dynamics and 53 per cent by other players. In India, SAP has been holding twothirds of the market share in the ERP space.

ERP market in India is projected to grow by 13 per cent this year. Apart from the major ERP software vendors, there are emerging local players who are catering to SMEs. Amongst the regional brands, Tally. ERP 9 Series, launched in 2010, is specifically designed for the Indian SME sector while Eresource Infotech, SSA Global, Invensys, Applane and Sage Accpac are few other listed names.

ERP was looked upon as business solution only for large organisations, however, this is no longer the case now. ERP is a must for companies of any size and number. As SMEs in all sectors are facing greater competition than ever, success depends on having the ability to keep pace with rapidly changing customer and industry demand. The ability to quickly seize new opportunities and the flexibility to achieve sustainable business growth is another success factor for the mid-sized enterprises.

However, for the SME sector, the challenge is bigger than larger players as the larger players have

economies of scale.

SMEs have no choice but to be efficient in managing business activities. Right from sales to deliveries to HR and accounts, processes are backbone for departments to perform. An ERP can help in bringing the right process and also in managing them.

When asked about to elaborate on SAP’s ERP solutions for SMEs, Agarwala says, “SAP’s Business All-in-One and Business ByDesign helps innovation and automates the core processes. This comprehensive, industry-specific ERP solution for fast-growing small or medium enterprises (SMEs) can help manage every aspect of a business – from financials and HR to sales and procurement. These affordable solutions are designed to fit SME current and future needs.”

One such case in point is that of Rajshree Industries. Rajshree had aggressive growth plan but was finding it difficult to support the expansion of its operation with existing manual management system. Due to improper integration of legacy system and poor correlation often suffered disruption in work processes or produced difficulties in maintaining the statutory requirements. Lack of co-ordination also contributed to unusual problems that affected the smooth functioning between manufacturing processes and other various departments.

ERP proved to be the best solution that streamlined the challenges faced by the company. With the implementation of ERP, a niche was created for a single point functioning application, which improved efficiency of work with centralised functioning.

The management now has visibility of all strategic information at one central screen. This has also helped customer gain Operational Excellence.

Shoaib Ahmed, President, Tally Solutions, talks about the efficiency of installing Tally ERP in the SME sector, “Powerful connectivity makes information available with your staff, CA and other professionals, round-the-clock in any place. It is also quick to install and allows incremental implementation – a novel capability that lets you activate just as many of its functions when required, even across locations.”

Requisite Changes in ERP Installation When a new system is introduced, there are always some changes that must be expected in firm’s working or processing methods, and there will be transition period allowing changes to take effect. This transition period from the traditional system or manual processing to ERP can be difficult as new skills have to be learned; new procedures and processes have to be followed and so on. Many employees think that ERP will add more work, make the work more difficult and will force unnecessary procedures. However, if the management and implementation team do their job properly, ensuring that the employees are told what to expect and given proper training, then the transition can be smooth. Once the employees get used to the new system, they will understand the potential benefits and the effort saved through automation of talks and jobs.

“Implementing an ERP in organisation is always a challenge. People will resist changes and they will not like to come out of their comfort zone. The best way for a smoother transition is educating employees and winning them by explaining that how their life will become easier after the software become functional,” Yogesh Agrawal, CEO, Applane.

The theory of implementation cannot be generalised. Sudheer Nair, CEO, Eresource Infotech, says, “There are cases where we have implemented the system in 45 days and there are also cases that have taken even nine months. This all depends on the readiness of audit result, case study, available strength supporting manpower, strength from the management side, volume of business, relevance of ERP at various units and the budget.”

Making Implementation Easy The other side of the coin entails undergoing an on-demand or Saas model of implementation as it requires substantially less efforts than an on premise/traditional ERP. “The hosting challenge is managed by vendor and also solution can be functional from day one. Rest of the complexities of implementation will depend on the amount of changes required in the software and how flexible is the software itself. Applane is a metadata driven architecture, which means that incorporating any changes is quick and we have been able to successfully get the product running in less than a week’s time,” adds Agarwal.

“One of the core benefits of ERP is the standardisation of processes across the organisation and enhancement in internal processes. ERP solutions also ensure timely business information and a cost-effective supply chain that helps strengthen the business of the SMEs,” says Agarwala.

Ashish Interbuild Pvt Ltd has seen exceptional growth after ERP implementation. They have their presence in all leading cities of the country and are specialists in executing interiors of restaurants, hotels and offices. The company has started using ERP software to thoroughly consolidate their operations and make information flow seamlessly from the project sites, wherever they may be, across the country, to their offices, which provide them immediate support and guidance, besides adding transparency.