ERP Implementation Challenges in Small and Medium Enterprise | 2018
There was a time when Small and Medium Enterprises (SMEs) were not a significant part of the economy’s growth story. They were not doing much on the front of creating jobs and contributing to the productivity growth, as compared to the organized sector. However, times have changed drastically, as today SMEs have a significant role in forming the economic backbone of a nation. In various financial divisions, SMEs are driving development, competition and innovation. This has predominantly happened due to the conducive business environment being provided to the SMEs by the various governmental initiatives, which has given a major impetus to their growth. However, with this growth, changing nature of the market and stiff competition from all quarters, conducting the business in a routine manner has not been that easy for the SMEs.
While the large scale industries have coped up with the competition and changing business dynamics largely with the help of an Enterprise Resource Planning (ERP) software, the SMEs have lagged behind in this regard, primarily due to having lesser faith in ERP. Majority of SMEs have shown reluctance to ERP implementation at their organization for varied reasons. There’s a common perception among them that ERP is best suited for large scale industries due to the high cost of ownership, complexity of implementation and subsequent maintenance cost.
This hasn’t changed much even as the technology has become simpler. Reduced implementation time, the emergence of cloud computing (with pay as you use option), and Cloud ERP for SMEs have made the software an extremely viable option for the SMEs. It has shown them a way that they can still standardize & streamline their processes, achieve operational efficiency, drive up productivity and reduce costs with the help of an ERP which fits their needs as well as budget. Despite this, there remain a few ERP implementation challenges for the SMEs. Let’s take a look at them here:
1. Lack of awareness & resources: Traditionally the SMEs have limited awareness regarding the need as well as the capabilities of an ERP system. Most of the SMEs think that the ERP is mainly for the large scale industries and there is little for them to benefit from it. Also majority of SMEs have lesser workforce, budgets and almost non-existent IT staff. This becomes a major barrier while thinking about an ERP implementation, because there’s a lack of IT knowledge as well as manpower to be assigned for an implementation project which could run for weeks or even months. Furthermore, the SMEs also have limited knowledge on which ERP vendor to trust. They may outsource an ERP consultant, but then again it will hit their finances. This lack of awareness prevents them from opting for an ERP and mostly affects the growth of their business.
2. Costing woes: SMEs usually also have budget restrictions, which means two things: 1) Either they don’t have sufficient budget for an ERP, or 2) even if they opt for an ERP implementation, there is a strong possibility that their accounts department may decide to cut the cost of implementation to save money. The companies, both small and large, often forget that ERP implementation is actually a capital investment in favor of the business, and not an unnecessary expenditure. It helps to support and grow the business beyond its current limits. Nonetheless, financial woes prove to be yet another implementation challenge for the SMEs.
3. Top management interest: The involvement of the top-management in the process of ERP implementation is of paramount importance. It is largely their responsibility to drive any business decision and process, leave aside ERP implementation. Hence, their willingness to take this project forward, active participation, and tight monitoring is required to make implementation a success. Many a times the top leadership does not show enough confidence in having an ERP, and that adds to their ERP implementation challenges.
4. Customization: Most SMEs have specific business processes developed over the years based on their experience, expertise and understanding. They find even the idea of tinkering with those processes as unthinkable. At the same time, for any ERP system to support these specific processes, it would require customization of the standard software. The organization’s apprehensions related to customization can act as a hindrance for successful ERP implementation.
5. Staff resistance: Willingness of the company’s staff to accept the change also plays a key role in effective ERP implementation. A company undergoes massive changes post-implementation, as the work environment becomes systematic, disciplined and strict, often forcing employees to panic and resist the change. This can prove to be a major challenge for the SMEs. However, in such cases, proper training must be imparted to the end users so that they can get familiarized with and understand the system, process, and standards.
Conclusion: An ERP has through the years proved itself to be an indispensable part of businesses of all sizes. Despite all the challenges, ERP implementation can make a significant difference for SMEs. ERP for SMEs can improve the functionality, standardize the processes, and enhance overall productivity of businesses. The benefits might take time to show, but it is a positive investment towards the growth of SMEs, and the earlier they understand, the better for them. The need of the hour is to enhance ERP awareness, keep all the apprehensions aside, train and prepare the staff, and take the ERP plunge.
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