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Can you afford NOT to invest in ERP for your SMB?

February 5, 2014

If you lead a small business and are trying to decide if your company can afford to implement an ERP solution, a better question may be to ask yourself what the cost would be of not having one.

Last year, Mint Jutras, an independent research-based consulting firm specializing in analyzing the business impact of enterprise applications, conducted a survey that asked that question of 475 business owners.

The study, “World class ERP for small business? You can’t afford not to!(published in May 2013), investigated ERP goals and challenges of 175 respondents, each having 100 or fewer employees, in addition to taking stock and benchmarking the outcomes of their ERP implementations. According to the research company, the study was designed, in part, to help small businesses identify the need and justify the cost of embarking on an ERP implementation.

The survey yielded some very convincing results in favour of ERP solutions for small business. One of the these was that cost savings alone produced 100% return on respondents’ investment (ROI) within the first 1-2 years of implementing an ERP product for 87% of respondents who chose an ERP solution considered by Mint Jutras to be “World Class.” According to the study, the cost savings could be attributed to a number of factors including people, processes and technology – yet ERP was clearly seen as a catalyst, especially when combined with best practices and standardization of methodology.

And cost savings were certainly not the only benefits noted in the study. Respondents with “World Class” ERP systems also reported a 28% increase in profitability YoY and 23%-29% improvements in several other measures, namely complete and on-time delivery, customer retention, cycle times (in distribution and manufacturing) and production (in manufacturing.)

At Illumiti we believe that an efficient, cost-effective operation is key to a company’s long-term viability.  We also believe that some of the improvement areas identified by Mint Jutras and other capabilities enabled by world class ERP solutions can actually lie at the heart of a business’ ability to differentiate.  This is why we recommend to our customers to use Geoffrey A. Moore’s framework of Core vs. Context, outlined in his 2005 book “Dealing with Darwin”, to ensure that their ERP implementations focus first and foremost on processes classified as both “Core” and “Mission Critical.”

We share the view mentioned in the Mint Jutras study, that perhaps small businesses have been asking the wrong question.  When considering ERP solutions they should not be thinking “Can I afford it?”, but should ask instead: “Can I afford not to?”

Does your small business have an integrated ERP system in place?  If not – what improvements and competitive differentiation do you think such a system could help you achieve?

To read the Mint Jutras study, please see http://www.illumiti.com/index.php/landing_pages/world-class-erp-small-business/

 

 


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