Introduction

Enterprise Resource Planning (ERP) Systems have been around for more than four decades now,
during each decade the ERP system needs and feature continued to evolve and become more user
friendly and widely used by majority of enterprises.
On one side ERP systems continue to evolve and on other side the business needs continued to
change we moved from industrialization economy to information economy and from information
economy to entrepreneurs economy.
Entrepreneurs economy means its an era where generation x and generation y; who want to
work more independently and have their own businesses are taking entrepreneurial path of
becoming entrepreneurs coming up with their own businesses.
This is leading to flourishing of small and medium business enterprises. These enterprises open a
big window opportunity for simple and effective enterprise resource planning systems.

SME Defined
SME stands for Small and Medium Enterprise. The definition varies country by country based on
every countries economic status. For Singapore SMEs before April 2011 were termed as
companies that have net fixed assets of more than SGD 15 million in manufacturing area and for
non-manufacturing companies with employee base of less 200 staff.
From April 2011 the definition is changed and updated to be companies that have annual sales
turnover of not more than SGD 100 million or have employee base of less than 200 staff.
If we look at SMEs definition for other countries then it varies based on what suites as SME for
the respective country. Although the deciding criteria remains number of staff, annual sales, net
asset investment in most cases the absolute numbers differ per country. For some countries SMEs
are further broken up in definition as small enterprise and medium enterprise.

Why ERP systems for SMEs

Enterprise resource planning systems have been around for more than 4 decades. In past four
decades ERP systems have evolved a lot and so does the vendors offering ERP solutions
evolved. From several vendors the market share came down to handful which acquired several
other smaller vendors to be the vendor of choice. The big 3 names are SAP, Oracle and
Microsoft.
Most of the MNCs and Big size companies have already implemented ERP solution from one of
the top 3 vendors. This is leading to saturation of further implementation of ERP systems and it
turns to more upgrades and managing the customer accounts.

A study of market share shows that SAP, Oracle and Microsoft are leading in market share of up
to 53% in year 2010 while the remaining 47% is shared by other smaller ERP vendors. This leads
to the need of firstly evolving ERP systems that fit small and medium enterprises by efficiency
(simpler and faster to use) and effectiveness (low cost and scalable).
The other solid reason for ERP vendors to move in the direction of SMEs is due to the fact of
growing number of SMEs. Millennium decade is the decade when Generation X are reaching
their late 30s and early 40s leading towards becoming entrepreneurs while Generation Y
phasing in and having the need to work independently leading to initiate their own businesses.
The Enterprise profile statistics report of Singapore (published on 10 th July 2009 by Singapore
Department of Statistics) based on data of year 2003 to 2007 shows that Singapore has 160000
enterprises and 99% of these enterprises are small & medium enterprises (SMEs). Only 1% of
enterprises are non-SMEs (large size businesses). These SMEs value added to Singapore
economy between year 2003 to 2007 have increased up to 49% and theses SMEs are employing
60% of workers in the country. This shows that at least up to 49% of Singapore businesses have
potential for ERP vendors to deliver meaningful solutions to.
Above statistics is just for Singapore and if this is checked worldwide then in opens up a huge
market space which ERP vendors can target to deliver meaningful solutions. Given that number
of SMEs will continue to grow ERP vendors are targeting to capture the market share of SMEs.
For ERP vendors there is also another plus point of entering this market and that is related to
mergers, acquisitions and disentanglements. The fast changing pace of business changes lead to
faster and faster acquiring, merging and disentangling of business divisions by various
enterprises. In doing so if ERP vendors have suitable solutions they would be able to help
transform these businesses much more smoothly and hence keep the market share growing and
their customers satisfied.

ERP Systems Implementation Barriers for

SMEs
ERP systems are by their nature wide ranged covering various business processes in an
enterprise. As ERP systems integrate various business processes and automate them, they are
seen as complex in nature. For ERP systems to be implemented and used by SMEs the biggest
barriers are following.

Costs
Cost of ERP Systems from initiation to whole life cycle management is number one barrier for
implementing ERP systems in SMEs
1. Small and Medium enterprises are generally cash poor with low information technology
budget and spending power.

2. Generally an ERP project implementation has lot of one time implementation costs in the
area of Consultants, Project Mgmt, Software Licenses, Hardware Hosting and PCs, and
User Trainings.
3. Additionally the ongoing maintenance and support costs of good ERP systems are very
high for small and medium enterprises.

Time
ERP systems require a long time for implementation and changes. Time is number 2 barrier in
ERP Systems implementations. Generally full implementation of ERP systems could take from 6
month to 1.5 years depending on size and complexity of enterprise and customization and
integrations requested. Small and Medium Enterprises does not have so much of time to get the
ERP systems implemented. Also more the time and complexity it leads to more costs which is
already number one barrier for ERP systems implementation.

People (Resources)
ERP systems implementation requires various skilled resources to correctly and smoothly
implement the solution. From SMEs it requires skilled business resources that know the business
process very well and able to spend time with the project time during entire project life cycle.
SMEs are generally small in size and its resources are multi hated (play multiple roles) leading to
no or very little time to spend on ERP systems projects. This is one of the key barriers which can
lead unsuccessful ERP systems implementation.

User Trainings and System Friendliness

ERP systems are wide and complex in nature and generally have too many screens, options and
features. This means users need to be well trained and continued to be trained for effective use of
ERP systems. SMEs being small in size have less number of users to be trained but the same
users could have multiple hats leading them learn and remember several options, steps, features
to successfully use ERP system. This leads to information overload and user resistance.
Additionally SMEs being small in size also have faster staff change rate as very often staff joined
in will learn and leave for working in bigger size organisation. This leads to continuous need for
trainings of new staff.

Business Process Management

For effective configuration and installation of ERP systems, business processes of the enterprise
must be well documented, maintained and owned. For SMEs the business process management
is most of the time not formally documented and maintained. This leads to ERP systems
configuration and implementation barrier. It also leads to higher costs of firstly documenting
business processes for the enterprise and then applying the same for ERP systems
implementation.

IT Department and IT Infrastructure

ERP systems require robust infrastructure and IT supporting department to be able to implement
ERP solution. In SMEs IT department is generally very very lean or nonexistent. Also the IT
Infrastructure for hosting and support of applications is nonexistent leading to hiring of outside
service provider resources which leads to higher IT costs and as vendor resource may not have
all SME IT systems knowledge could lead to unsuccessful ERP systems implementation. The
barrier even continues post implementation during ERP systems upgrades and maintenance.

Strategies
Barriers

to

Overcome

Implementation

ERP Systems Implementation barriers for SMEs are Costs, Time, People, User Trainings, System
Friendliness, Business Process Management, IT Department and IT Infrastructure. For
overcoming these barriers ERP vendors have to come up with ERP systems that are optimized
for following areas,
1. User Friendly System with e-learning training options for self-learning
2. Optimized system features, options and steps to meet the core business needs only. So
only must have features enabled, rest disabled/removed to reduce usage complexity. This
would lead to lesser time for training and system knowledge acquisition by enterprise
staff.
3. Well documented business process management overview specific to industry segment
with link to system functions/configurations which will help enterprise to see the end to
end business process overview and how changes would impact configurations. This
would help in reducing amount of time to be spent by enterprise staff on business process
management. Also in many case SMEs could easily see the end to end process and
choose to go with out of the box setup.
4. Pre-defined and success proof ERP Systems project implementation methodology that
would reduce the time required at each step of the project and hence increasing the speed
of implementation and reducing the costs of implementation.
5. Software offering where IT hosting, system maintenance and support is take care by ERP
vendor itself. This would lead to internet based ERP solutions that would be readily
available and can be easily accessed using standard web browser (thin client). This would
address SMEs need as they generally dont have IT department or have very very lean IT
department and infrastructure. This would save huge IT investment costs of ERP Systems
implementation. By managing the ERP Systems IT Infrastructure and Support, ERP
vendors can offer ERP systems with lower costs of ownership to SMEs.
ERP Vendors have to come up with product offerings for SMEs that help address the
implementation barriers. The products offered must be,

Internet hosted

Save Client Implementation and Maintenance Costs

Can be accessed using standard web browser (thin client)

Use standard internet protocols and messages for communication and data exchange

Out of the box

Standard Industry best practice business processes used in the tool

Pre-configured for businesses to allow them to start using within days

Configurable flexibility for businesses that want some parts to be configured

Low Cost

Installation is ERP vendor hosted and managed means no IT Infrastructure costs to SMEs
Pay for Use based on number of users subscribed in every month and
functionality/modules they use

Above can be achieved using Software as a Service (SaaS) technology concept and ERP vendors
are starting to offer products and services using SaaS technology.

Conclusion
ERP vendors are well aware of the growing number of entrepreneurs and SMEs. They also know
the opportunity and growth potential in this area. ERP vendors like SAP, Oracle and Microsoft
have come up with solutions that could fit SMEs. As the opportunity is seen by all IT vendors
there is a lot of competition and new entrants in ERP Systems for SMEs.
For more SMEs to adopt ERP Systems its essential that ERP Systems are internet hosted, out of
the box and low cost. The need and use of ERP Systems will continue to increase for SMEs till
the time the systems are low cost and faster to implement and easy to use meeting SMEs needs.
The challenge for ERP Systems effective implementation and use in SMEs still remains in below
areas.
Lift and Shift
ERP Vendors have to continue to think and come up with plug and play ERP Systems. By plug
and play its meant lift and shift of ERP Systems. SMEs are often acquired by other larger SMEs
or larger enterprises and for such cases ERP systems and data used by SMEs should be easy to
lift and shift or easily portable to other enterprise ERP System.
Mobility

ERP vendors also have think about SME solution to be compatible and light enough to access
from mobile devices and tablets. Given the growing power of mobile devices and growing use of
tablets for business this is an essential must to be brought in place.