SVLuma - Fotolia
This may be the year ERP hits the SMB market with force.
In its recent "Annual Report on the State of ERP," ERP Advisors Group said the rise of cloud as a deployment platform and the integration of next-generation tools such as AI and advanced analytics are making ERP applications more attractive to SMBs. ERP systems, which have traditionally been seen as fit only for large enterprises, are becoming a cost-effective reality for SMBs, and there is a wealth of options available.
ERP Advisors Group, based in Lakewood, Colo., consults with organizations on ERP implementation and management projects. The firm focuses primarily on the SMB market, organizations that are generally $750 million and under in revenue.
In this Q&A, Shawn Windle, founder and managing principal of ERP Advisors Group, discusses some of the ERP trends for the year ahead. To determine the trends, ERP Advisors Group examined data gathered in 2019 from clients and prospects on their ERP budgets and investment initiatives. Windle began his career as a CPA and gained ERP expertise while working at Oracle PeopleSoft and JD Edwards.
What are some of the ERP trends that you've seen develop as you've worked with clients in the last year?
Shawn Windle: There's kind of a trifecta thing that's happening in the market where we have companies that traditionally would just be fine with a QuickBooks or Excel saying they want ERP software. We also started to see that the implementation partners are becoming more micro-vertical focused -- not just distribution but seafood distribution, for example. There's a lot of pent-up demand that we're seeing going into 2020, almost independent of macroeconomic changes. The reality is that the organizations that we're working with -- and we're talking to a lot of different businesses and different types of organizations -- are saying it's time to buy software and take the risk and do it. And with [technologies like] robotic process automation, AI and blockchain, a lot of different factors are converging that actually help it make sense for SMBs to start looking at an ERP system for the first time. Prices are also becoming more affordable for businesses that couldn't even conceive of it before.
Can you give some examples of SMBs considering ERP now that might not have previously?
Windle: There are all different types, but one example is in the seafood industry. We're seeing a ton of opportunity for helping different types of seafood businesses -- distribution companies, manufacturers, companies that do shrimp de-peeling. [They] are saying they've been on an old system and it's time to change.
Are the demands of their businesses changing or getting more complex and so they need more complex ERP systems?
Windle: That's a big part of it, but now business buyers are demanding apps that support their specific business, and they think they exist. We have one business, that's not that huge of a firm but a good-sized one, that works with Fortune 500 customers on construction projects and some other types of work. Every one of their customers demands totally different invoicing, so this business needs to have a solution to automate this invoicing because it's costing them a ton of time to do it. They went with Acumatica because that can provide the flexibility that they were looking for, but at a cost point that's effective for them to substantiate getting off QuickBooks.
What are some of the ERP systems that are best suited for this market?
Windle: One is Acumatica; they're coming of age, and we're looking at their capabilities, what industries they're strong in, and what industries they're not. They've got strong financials, and manufacturing is more their core side. Infor is another with the CloudSuite Industrial product specifically. It's a good application, especially for some of these companies that are medium to larger sized of $500 million or more that are coming off of old legacy systems that were green or blue screens like AS/400. They don't really want to go to the next-generation applications like pure multi-tenant SaaS apps, but they want something that still looks good and is flexible and Infor is really good there. There's [Sage] Intacct, especially for a best-of-breed around the financials. They're competitive price wise and have strong feature functionality and they've re-skinned their applications, so the user experience is quite appealing. Then there's Microsoft, which really could dominate this area because everybody uses Microsoft 365. So companies might say, 'Why not just upgrade to Microsoft Dynamics 365 Business Central?' NetSuite is really dominating the space now. … It's a great technology platform, it's landed at Oracle, so you know it's going to be fine for the long term. Then we see Oracle ERP Cloud playing down a little bit to the SMB space, but ERP Cloud is still a big challenge for a mid-sized business to take on an app that doesn't have a ton of references yet.
What are some of the main factors driving ERP toward the SMB market?
Windle: We feel there's a synergistic relationship between the clients and the vendors that are driving this trend, where the clients are becoming increasingly more aware of the solutions that are available to them. The vendors are noticing this and coming up with ways to fill that demand, and they are going to be marketing more and more to the SMBs throughout 2020. So it will be feeding off of itself. We're seeing a lot of growth in North America and also in Europe with entrepreneur-led organizations and private equity-backed companies that are more aggressive about growth and not afraid to spend money now. There's been a little bit of pent-up demand in the last few years and we expect to see a lot of growth globally. We have operations in China that are looking to replace their solution and now we're going to push Chinese vendors to offer best practices, which are a little different than in North America. There's no doubt that we expect a lot of investment from SMBs this year, but you have to be able to talk the language of their business -- not just talk about software feature functions.