The challenges of ERP are well documented and we all know how risky these implementations can be. Risks such as global employee resistance and global supply disruptions may be common for larger organizations, but what about small- and mid-size businesses (SMBs)? While many ERP risks are common to companies of all sizes, there are some that are more common among SMBs.
Common Risks of Failure in SMBs Across North America
- Resource Shortages. While it is difficult for any organization to commit full-time resources to an ERP project, it is even more difficult for an SMB. A company with 100 employees typically has more difficulty creating an employee project team compared to a company with 10,000 employees. Of course, project teams for SMBs are typically smaller, but resources are still much harder to come by.
- Budgetary Limitations. This is a concern for all types of companies, but an owner of a $10 million company is going to feel the pain of a 25% cost overrun much more than the CEO of a large company. Large overruns are painful and unfortunate no matter what size your company is, but this pain is magnified for SMB owners. In addition, SMBs often have implementation budgets of less than $500,000, which automatically eliminates many large ERP vendors from consideration.
- Less Margin of Error for Operational Disruptions. Again, this is unfortunate no matter what size your company, but if a small manufacturing company misses shipments for a week due to a failed ERP implementation, the odds of the business permanently closing down or filing bankruptcy is much higher than for a Fortune 500 company.
- Higher Likelihood of Conforming Processes to ERP. As I have posted in other blog entries, companies should find ERP software that best fits their business processes rather than let ERP dictate their business processes. SMBs often have less developed business processes than larger companies, and therefore may be more likely to allow ERP software to determine their future business processes instead of first defining what business processes will give them a competitive advantage in the future.
So what does this all mean? Should SMBs not consider ERP? That’s not the answer either. These risks highlight the fact that due diligence and careful planning are, in my opinion, even more important for SMBs than for large companies. Of course, all companies should be careful and exercise careful planning. However, this is even more true for SMBs.
So these smaller companies need to start by choosing the right ERP vendor as part of their software selection process. Then, they need to carefully manage costs and benefits as part of an overall ERP benefits realization program. Once these risks are minimized, then SMBs can begin focusing on maximizing ERP benefits.