Dave Caruso: SMB advisory: Use ERP to attack “spreadsheet syndrome”

You see it everywhere: companies running their entire businesses on spreadsheets. And nowhere is this more prevalent than in the small and midsize business (SMB) space. The gray market of e-mail- and spreadsheet-based information systems is running many organizations today, and while this will work for some time inside the four walls of a company, executives realize that the resulting decision ...
By Dave Caruso September 1, 2007

You see it everywhere: companies running their entire businesses on spreadsheets. And nowhere is this more prevalent than in the small and midsize business (SMB) space. The gray market of e-mail- and spreadsheet-based information systems is running many organizations today, and while this will work for some time inside the four walls of a company, executives realize that the resulting decision latency may be holding them back.

A company’s performance in its supply chain ecosystem plays a critical role in its ability to grow. Therefore, executives must consider improving information flow between plant-floor and enterprise systems—extending out to the supplier ranks, and customers.

As a result, many SMBs find themselves at the crossroads as it relates to their IT infrastructure, and they are looking to evaluate new ERP systems to manage their businesses. But there’s a difference this time.

Usually we talk about ERP as a vehicle to reduce cost, but I’m finding that SMBs are looking to ERP investments as a way to unlock their growth potential. That’s a powerful motivator, and explains the degree of selection activity among SMB manufacturers of late. The great majority of the action is around ERP system replacements and first-time buys.

This is proved out in the numbers. Midmarket ERP sales were up 18 percent in 2006, and the small business segment—less than $30 million in annual revenue—posted growth of 27 percent. That there is high growth here isn’t surprising. Midsize manufacturers comprise a great percentage of the North American manufacturing sector. In fact, 80 percent of the plants have parent companies earning less than $1 billion in annual revenues, and most of those—60 percent overall—belong to companies that earn less than $100 million annually.

So why would an SMB rush out to buy an ERP system? Because much has changed since the days when you selected an operating environment—remember the VAX?—and got as much software as was available for that platform. While few failed, many companies came up short in their first-time buys. (Here come those spreadsheets!)

Today nearly all ERP vendors that cater to the midmarket have a surprisingly strong and complete offering—from customer service and sales through manufacturing and inbound and outbound supply chain tools. Coverage and fit just aren’t issues any longer.

At the same time, new methods for purchase and deployment are gaining traction with SMBs. As the market becomes educated, more SMBs are considering alternative approaches, such as hosting, subscription-based pricing, and Software-as-a-Service (SaaS) as viable approaches to their entire IT strategy. Some see a way to get ERP capabilities without major capital expenditure; others use SaaS as a way to play the core-competencies philosophy to its full extent. Regardless, CEOs can breathe easier, not worrying whether their employees are in over their heads, or adding headcount just to survive the technology.

Maybe this will trigger a lot more SMB executives to finally wipe out the spreadsheet culture.

Author Information
Dave Caruso has 30 years of manufacturing and technology industry experience. He has worked with Fortune 500 companies and led research on enterprise applications, supply chain, and manufacturing industry best practices. Before starting his own firm, David was a senior VP at AMR Research, and held several senior positions with software vendors. Today, David collaborates with AMR and interacts with numerous clients on AMR’s behalf. He can be reached at dj.caruso@comcast.net