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SAP making push for SME ERP market with Business One

SAP is known primarily as a provider of ERP systems for enterprises, but its SME ERP platform, Business One, is gaining large numbers of customers.

Like Goldilocks trying to find a bed for a good night's sleep, small-to-medium enterprises (SME) face challenges in determining the right software to run business processes. Most find that at some point, accounting packages like Intuit's QuickBooks are too small, while full blown ERPs are too large. However, many have decided that SAP Business One is just the right size SME ERP, providing the tools to manage a growing business, but also being easier to implement and manage.

Edesia, is a small, food-manufacturing, non-profit corporation based in Providence, R.I., that makes fortified peanut butter to address malnutrition for UNICEF and the U.S. government, among others. The company began making its ready-to-use food products in 2010, but found that its business software was not adequate as it began to grow. They used a standalone manufacturing application to track production and QuickBooks for financials, which meant that data had to be kept in two different repositories and merged into Excel spreadsheets, said Brian Dugas, Edesia's senior IT manager. This setup would not work as the company planned to increase capacity and move to a larger facility.

"We realized that as we were growing, we needed something that would allow us to see our product from the moment we have a tender all the way through to when we ship it to our customer," Dugas said. "The visibility wasn't really there with the old software. … What we needed was clear visibility to see where we stood on an order or what we were paying for a raw material, you name it. We didn't have the data in one easy-to-find location. It was very difficult to get that information, if we could at all."

After vetting two other ERP systems, Edesia went with Business One because it offered the most out-of-the-box functionality, Dugas said. Working with partner Softengine, Edesia went live with Business One in May 2015, and it has given them everything that they needed to manage all aspects of the business. Edesia is using all of the modules in Business One, as well as a custom quality module written for them by Softengine. "We're able to do warehouse management now, which we weren't able to do before, but other than that, everything is running through SAP: procurement, quality, production, production scheduling, inventory, and finance. We're using all aspects of the application," Dugas said.

Increased visibility  is needed now because Edesia is moving from a 15,000-square-foot facility to an 80,000-square-foot one to meet its goal of feeding 2 million children in the upcoming year.

Redefining the business process at one company

EvoShield, a small sporting goods manufacturer, also implemented Business One because it grew too large for QuickBooks. Based in Athens, Ga., EvoShield has grown in 7 years from a four-person startup to a company with about 70 employees that now competes with giants like Nike and Under Armour.  EvoShield began a multi-channel operation in 2012, and the increased complexity drove it to Business One for an SME ERP system. EvoShield also worked with a partner, Effective Computer Solutions of Jacksonville, Fla., and rolled Business One out in June 2014 after a development period of six months.

What we needed was clear visibility to see where we stood on an order or what we were paying for a raw material.
Brian Dugassenior IT manager, Edesia

David Shinn, EvoShield's vice president of operations, said that SAP HANA analytics in Business One provides the information needed to compete against much larger companies. "We're using the HANA analytics for cost center analysis and for budget analysis, so we've really redefined the entire business-process-owner perspective and we're pushing this information back out to the department heads on a monthly basis to give them better access for P&L management, budgeting and forecasting," he said. "Our inventory group is managing all the cycle counting in SAP, which then allows us to query out of it, so we have a true understanding about all of our inventory -- what the actual turn is, what's moving and what isn't, which we didn't have before."

Further, Shinn explained that the sales order management module has allowed EvoShield to go completely paperless for ordering and invoicing and improved service levels to the point that 95% of consumer orders are shipped same day.

Although the changes have been positive for the most part, Shinn said that small businesses should expect a big cultural shift when implementing an SME ERP like Business One. "When you put in an ERP system like this, it changes the dynamic of the business," he said. "Everything is visible, and not everyone likes being exposed, and those people removed themselves from the organization because it changed how the business was run. The technical impact is 30% tops; the challenge is in how you manage the cultural or psychological impact."

A growing presence in SME ERP market

Although known primarily as a purveyor of ERP systems that cater to vast global enterprises, SAP is quietly growing its presence in the SME ERP market.

SAP Business One has been around quietly for a while -- SAP acquired the software from TopManage in 2002. Although it doesn't generate as much revenue as the more high-profile ERP systems, it leads the company's product roster in its number of customers, with just over 48,000, according to Luis Murguia, SAP senior vice president and general manager for SAP Business One.

"I would describe Business One as the best kept secret within SAP, even within the organization," Murguia said. "We are well known for running, I think, two-thirds of the business transactions in the world, but the reality is that Business One is the most successful ERP we have today."

SAP appears to be making the push for the SME ERP market because that's where the money is, to paraphrase the late bank robber Willie Sutton. Much of the enterprise ERP market has been settled already, but the SME market represents much uncharted territory, according to Ray Boggs, vice president and head of the small and medium-sized business research practice at IDC.

"They've really been shining a grow lamp on the [SME] community because I think they recognize that the big companies are already into ERP and understand it," he said. "Getting new customers is hard because you have to unsell or replace what's already there. But for small and midsize firms, it's a Greenfield opportunity, and you're not displacing an incumbent, you're displacing spreadsheets or even something less sophisticated than that. So it's a terrific opportunity in that way."

Analytics embedded in Business One

Most SMEs decide to implement an ERP system when their customer base grows, they add locations or the business gets more complex, Boggs explained. Furthermore,  Business One -- particularly because it incorporates in-memory SAP HANA analytics -- offers smaller companies a means to get a higher level of business analysis than previously available. This type of insight can tell these companies critical information, such as who their most profitable customer is, rather than simply the customer that generates the most revenue, which is not something an accounting package like Inuit's QuickBooks can offer.

Business One's growth has also been spurred in part because it has a set of comprehensive tools that appeal to a broad set of businesses. This repertoire distinguishes Business One from competitors that focus on one business function, like manufacturing, said Cindy Jutras, president of Mint Jutras, a New Hampshire-based research firm that specializes in ERP systems. A large number of partners are adding functions to Business One that address various industry segment requirements.

"I don't think there's any [ERP system] that's necessarily the right one for everyone, and Business One relies on some partners to add some of the functionality," Jutras said. "For example, Blue Ocean Systems provides manufacturing and operational supplements that add more value on top of Business One. SAP is going to market exclusively with partners, so the partner ecosystem is extremely important to them, and what value and what knowledge those partners have about specific industries is the key to the success."

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This was last published in October 2015

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What are the most important features for an SME ERP to offer?
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These days, with cloud computing now mainstream and more and more organisations looking at Cloud ERP as the next step to drive growth, a full HTML5 client and full web services integration architecture are critical.
Without these components, opportunities for growth are very limited in my opinion (and based on experience as well)
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