Enterprise resource planning (ERP) systems have traditionally been thought of as a pure enterprise type of technology, the thinking being that small and medium-sized businesses (SMBs) don't have the need for that comprehensive

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level of software.

More and more, however, SMBs are discovering that smaller size doesn't necessarily translate to less sophisticated accounting or sales or customer relationship management needs, and the ERP market is expanding in the SMB sector.

"A lot of smaller companies are realizing the competitive advantage that lies with technology and process," said Joshua Greenbaum, principal of Enterprise Applications Consulting in Berkeley, Calif. "A company can be small in size but still compete in a global market against larger companies. These companies are becoming sophisticated consumers of technology."

SMBs often to turn to ERP as a method of planning for future growth, and it tends to be a watermark project for many. "These companies are often smaller, with less experience, and it's often the first major project they've done on their own," said Maria E. Anzilotti, vice president and CIO at Camden Property Trust, a real estate construction and management company in Houston. "It is a bit of a challenge." Among the issues: many IT employees lack experience in large-scale implementations such as these, while subject matter experts (SME) on the business side of the house are already strapped for time, and find it difficult to get heavily involved in ERP.

"What makes this different for SMBs is the limited SME time, and how to scale ERP as the business grows while being cognizant of budget," said Tom Cullen, CIO at Peet's Coffee & Tea Inc. in Emeryville, Calif. "We can't build a 30-person development team to run ERP."

Anzilotti and Cullen, both of whom are applying their previous experience with ERP to projects at their current, smaller companies, caution that it can be easy for SMBs to get off track with ERP. The following tips should help smaller companies maximize their chance for success:

  • Choose the right implementation model. While many companies choose to implement ERP in-house, others go for a hosted model, for its simplicity of acquisition, deployment or maintenance. How you choose should reflect your future strategic vision for ERP. "There's segmentation around how much companies want to use technology to keep the lights on, versus for competitive advantage," Greenbaum said. "Those companies that want utility-grade back-office functionality should look at a service/hosted kind of deployment."

  • Don't make this a technology project. Cullen has spent considerable time working with senior business executives to capture business capabilities and functional requirements before creating his request for proposal for Peet's forthcoming ERP implementation.

    "My biggest piece of advice is, 'Don't take the tech-first approach where you decide on technology without vetting the business requirements," Cullen said. "We want it to be a business project and not an IT project, so we're working with our directors on what this might look like."

  • Don't let your vendors call the shots. Many SMBs have long-standing relationships with integrators, and the tendency is to cut short the due diligence process and let the outside vendor call the shots, Anzilotti said. This is a big misstep.

    "The technology is so strategic that to let somebody make the decision for you without in-depth knowledge of the company is a mistake," she said. The key is to involve business stakeholders from the outset, and make sure core business processes and long-term business objectives are reflected in the software, she said. "You want the foundation of ERP to be with you for at least five years, so it must be a match for your long-term strategies for the company."

  • The KISS principle is your friend. Many SMBs underestimate the scale of change wrought by ERP, and opt for a big-bang implementation approach. Cullen, however, advocates CIOs to focus first on getting core foundational functionality into place first, and then add additional components incrementally. "Simplicity is the mantra," he said. "Get the basics and burn it in with the business first."

  • Take a pointer from the big boys. Anzilotti's evaluation process involves due diligence, product and vendor research, detailed demonstrations, site visits and talks with customers. All that may be fairly standard for technology evaluations at large enterprises, but it can be new to the SMB. "Big companies are ingrained with this process, but SMBs don't do this as often, so they're going to look for shortcuts or easy way outs," she said. "They may see one product and think it looks awesome, so why look further?"

  • Outside help is key, but be choosy. While outside consultative help with ERP installations can be vital to staff-strapped SMBs, make sure to choose a vendor that's steeped in your particular industry.

"A lot of high-end product is sold by channel partners in the SMB space, and often technology partners don't necessarily understand the specific vertical industry or line of business," Greenbaum said. Partnering with a provider with a deep understanding of both your industry and ERP is vital. "As we look at integrators, we're surprised at how many there are, but very niche in focus," Cullen said.

In the end, many SMBs will find that ERP implementations mark a real turning point in company growth. "It's not an easy implementation," Anzilotti said. "It's important, but it's very difficult. I've never seen anybody skip through them, anywhere. But if you stay focused and partnered and keep the lines of communications open you will succeed, and the company will be pleased."

Carol Hildebrand is a contributing writer based in Wellesley, Mass. Let us know what you think about this story; email editor@searchcio-midmarket.com.

This was first published in May 2007

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