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Previously, only the largest manufacturers would consider giant software vendors like SAP and Oracle for enterprise resource planning (ERP). The cost and complexity of the systems were too much for a smaller company to contemplate. No more. In fact, the top two players (SAP and Oracle) offer a variety of options tailored to meet the needs of small to mid-sized manufacturers and distributors.
"When a smaller organization hears the names SAP or Oracle, they might think it's not for them," said Nick Castellina research director at Aberdeen Group. "But they should be part of the landscape." He noted that implementation partners and consultants are especially critical for the small to mid-sized business (SMB) audience. SAP and Oracle partners offer specific products for vertical and sub-vertical industries.
"Don't rule out the big names," agreed Frank Scavo, president of management consulting firm Strativa. The giants' cloud offerings make a particularly good fit for the SMB audience, he added.
SAP brings strong focus to SMB market
According to Carrie Maslen, SAP vice president for small and mid-sized enterprises, SMBs make up 80% of the company's customer base. "We have a lot of experience here," Maslen said. "We spend a lot of time listening to small businesses."
What SMBs most want, she added, is not a specific set of new-fangled features but a way to grow their business by leveraging new capabilities while minimizing risk. "They are saying, 'Don't make me throw out a system, buy new infrastructure and retrain my staff again.'"
As with their larger counterparts, SMB manufacturers are embracing cloud-based ERP due to its cost advantage, increased business agility and ease of startup and maintenance. But some companies, including those with a high need for customization and extreme security concerns, are staying with on-premises ERP.
SAP offers Business by Design, a cloud-based ERP system, and Business One, the on-premises version, both aimed at SMBs in manufacturing and other verticals. According to Maslen, the strength of SAP's offerings lies in the breadth of its 13,000-strong partner ecosystem. SAP does not sell directly to SMBs but provides tools like Partner Finder on its website to steer SMBs to the right match. Preconfigured, industry-specific software can save companies time and energy in ERP selection and implementation.
Oracle sees SMBs moving to cloud
As for the other ERP platform giant, small to mid-size manufacturers and distributors are adopting cloud-based ERP from Oracle at a much greater rate than they are the traditional on-premises version, according to a company spokesperson.
Typically, SMBs have less in the way of IT and budgetary resources versus their larger counterparts, said Rod Johnson, group vice president, cloud GTM, Oracle. "Oracle ERP Cloud provides an affordable and manageable ERP platform that helps SMBs do more with less, while providing all the advanced capabilities these companies need to take their business to the next level," he said.
Benefits of hosting ERP sometimes overlooked in SaaS ERP hype
Software as a service ERP is grabbing a lot of attention as an alternative to traditional on-premises ERP, but for many companies, the reality is quite different. The more commonly used option is hosting ERP at a third-party provider that runs an instance of the ERP system off site, according to Eric Kimberling, managing partner of Panorama Consulting Solutions.
Kimberling explains the benefits of hosted ERP providers versus multi-tenant SaaS ERP in this video interview at Panorama's ERP Boot Camp, which took place in Vail, Colo.
More than half of the Oracle ERP Cloud customers are SMBs, added Johnson. The upfront investment for companies of this size is minimal, and they can be secure in knowing the Oracle platform will scale up over time as much as their growing business might need.
Cloud-based or software as a service (SaaS) ERP is a top choice for SMBs -- on that, there is no question. But there are still small to mid-sized manufacturers that implement a traditional on-premises approach, or a hybrid on-premises and cloud platform.
Why two companies chose SAP offerings
At Sapphire Now, SAP's massive user conference, two SAP SMB customers talked about the decisions that led them to pick on-premises and cloud offerings, respectively, from SAP. Tom Gustafson, director of operations for Rifle Paper Co., a stationery and invitation maker, told how the company needed to implement a modern ERP platform to cope with massive growth.
Gustafson knew the company would need much customization in order to offer the highly aesthetically pleasing user interface they wanted to offer customers. So, the company chose Business One rather than having to try to make a standardized cloud offering work.
Another SAP customer, WL Plastics, also needed to implement ERP for the first time after experiencing high growth. Brad Crimin, business analyst at WL Plastics, talked about the company's lack of a large IT staff, which pointed the way to a decision to use Business by Design, SAP's cloud offering. WL Plastics has only two IT people, so the company was not able to install and maintain an on-premises system.
SAP is committed to packaging and pricing its ERP products to suit the SMB market, Maslen said. High-powered tools such as SAP's HANA in-memory database and Ariba purchasing platform are within reach for smaller manufacturers. "HANA is way more accessible than before," Maslen said.
"We're here to grow with the small business," she added. "These companies are the drivers of the economy and jobs. We are totally excited about this space."
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