Challenges for an SME going for an ERP application

Till recently, Enterprise Resource planning (ERP) applications has always been associated with big companies. With increasing awareness of ERP among Small and Medium Enterprises (SME) and advancement of technology, applications have been created to cater to the SME segment. Even then there are a lot of skeptics for an SME going for an IT application like ERP. Lets look at some of the challenges SME's face.

First is the investment involved to go for ERP. It is a huge capital investment in terms of buying user licenses, database server, application server, networking, customization. Any traditional ERP will have all the above challenges and will cost a SME anything from 40lakhs to 2 crores. Can a SME afford this kind of investment? Will the organization be better off investing this money in expansion?

Second challenge is the time and effort involved. In building a robust IT application like an ERP the time involved will be anything between 8-18 months. The question that arises is, is an SME willing to wait so long for using the ERP.

Once the ERP is up and running the challenges are maintenance, upgrades and scalability. Will the ERP scale up according to the organization growth? How much will that cost and who will manage it? There are more challenges in terms of support and extensions for the ERP. What about software professionals involved? Do you really want to be bothered about managing of the software professional and attrition? Is that your core strength?

The tangible benefits an SME would be interested in, is the ERP giving me the value it promised?
How much of the ERP is being used and how comfortable are the employees using the ERP?
These benefits can be measured only after the ERP has been built and running, and by that time the organization would have invested lot of money, time and effort. Because of all the above reasons an Exit is close to impossible.

Will an SME want to get into an investment where the return is uncertain?

Looking at all the challenges involved an SME will hesitate to go for an ERP even after knowing the application can actually add value and accelerate growth if implemented properly. Now how can SME mitigate all the risks involved and go for an ERP is the ultimate challenge in front of an organization.

The only way an SME can go for an ERP without going through all the uncertainties involved is, ERP delivered as a service. You outsource your ERP, so that the vendor host’s the application and you use it from anywhere in the world. Maintenance, upgrades and scalability is taken care of by the vendor. There is no huge investment involved in terms cost, time and effort. The model is simple and practical. You pay as you use and when you think the ERP is of no use is not giving you the value; you can exit with out any worry. Remember there is no capital investment involved.
The total cost of owner ship will come down by at least 30%. It will be recurring expense which will be almost equal to the recurring expense in the traditional ERP's. The ERP will be up and running in 4-8 weeks. A SME can use an ERP with out any hassles.

For more information: http://www.tvarana.com/

OnDemand ERP

What is On Demand or SaaS?
On demand software is a business solution delivered as a service. The best example of an on demand service or Software as a service (SaaS) is the email service provided by Gmail, yahoo or msn. The application is hosted by a service provider and distributed using the internet and a web browser. The main concept of SaaS is a single instance, multi tenant architecture. Unlike the traditional on premise software model the application in the on demand model is shared by many users. Since the application is shared by many users the cost of ownership is very less compared to the On Premise model.
Benefits of OnDemand ERP compared to traditional On-Premise ERP?
Low Cost: On Demand software works on the pay per use business model. Users pay based on the number of users using the application on a monthly, quarterly or yearly basis. Usually there is a very minimal implementation cost.
No Maintenance: Since the software application is hosted and maintained by the service provider the end user need not worry about maintenance, updates, upgrades etc. Everything is done by the service provider.
Easy Entry and Exit: In an Ondemand ERP, the entry is easy since there is no upfront cost, time or resources required for the implementing the system. Usually the ERP can be implemented in very short span of time. The user’s pays for what they have used and the moment the end user feels there is no value in the system he can come out of it.
IT Resource Cost: One of the major costs for implementing and maintaining an erp system is the IT personnel cost. In an On Demand ERP there is no need of IT resources.

For more information: www.tvarana.com