IMGCAP(1)] I’ve been using computers before the plans for the first “personal” computer were published (which, by the way, was not the Altair 8080, but the Mark-8, an 8008-based machine designed by Jonathon Titus and published about six months earlier in Radio Electronics magazine). In the years since, I’ve seen all kinds of definitions accounting software vendors have come up with to position their products and their target markets.
Over the years, the characteristics segmenting small and mid-sized business have frequently focused on yearly revenue or number of employees. The most obvious artefact of this is per-user or per-seat licensing. And the capability of various accounting software offerings has fluctuated from multi-user time-shared offerings on mainframe, minicomputers, and the first generation of multiuser PCs using the M/PM operating system, to single user applications on the first popular PCs from Commodore, Tandy, Apple, IBM and others. Today, we have very useable multiuser accounting software on networked PCs, and more recently, the cloud.
But classifying software seems to be stuck in the past, with “SMB” (small and medium sized businesses) and “enterprise” the labels that many software vendors still stick on their target markets.
I’ve never really bought into the whole SMB/enterprise segmenting idea. I found myself validated recently when I was commissioned to review a number of small and medium enterprise (SME) enterprise resource planning (ERP) systems. To perform these reviews, I had to first attempt to quantify both the SME market and what I considered to be an ERP system to provide a baseline.
What do you need?
My starting point has been the same as it has for decades: Look at what a business needs, not its size in terms of dollar revenue or number of employees. To be honest, that’s what most of you do anyway. Business requirements planning is an integral part of most consulting engagements, regardless of what classification software vendors give to their products or intended market. But this approach is often more generally applied to what has come to be known as “middleware” or for even larger firms, ERP.
However, in recent years, the way business is conducted has undergone a sea change. eCommerce has greatly overtaken brick-and-mortar retailing, and very small companies — sometimes startups with just a person or two — are engaged in multinational business with complex accounting and management information system requirements.
And it’s the need for the overall information necessary to effectively run a business that determines what size application your client requires. That applies to applications that include and go beyond just financial accounting software.
Enter ERP
Just as defining precisely what an SME actually is, defining ERP is fairly nebulous. Every vendor seems to have their own idea of what constitutes an enterprise resource planning system. In my mind, ERP comes into play when you take a highly functional financial accounting system and build it out with other business management applications to computerize all (or at least most) aspects of managing a business. ERP doesn’t add just one new application to the mix; it extends information management to all aspects of a particular business.
This may mean production management including inventory scheduling/supply chain management and other areas of logistics. Project management up to and including critical path and cost accounting are common ERP subsystems, as are CRM (customer relationship management), sales force management, and possibly service and service contract management. Notice that the word “management” appears in many of the subsystem titles. That’s not coincidence: ERP is all about managing and, of course, planning.
Vendors sometimes concentrate on specific types of entities, and a number of ERP vendors have a diverse vertical selection including nonprofit accounting. Retail, eCommerce, and POS (point of sale) are other areas you will often find in an ERP system, though these are available in many offerings which are basically financial accounting as well.
Might be affordable
Just as financial accounting software comes in different capabilities, vertical offerings, and prices, so do ERP systems. A Global 1000 company installing SAP is likely to spend $1 million or more on licensing and implementation. And getting the system up and running can take months or even years.
But many vendors now offer ERP-grade business software in the cloud at a very affordable price. Depending on a client’s needs, they can go for SAP’s offering for the SME market for as little as $80 or $90 dollars a month per user for its BusinessOne system. NetSuite and Acumatica also offer very attractive per user/per month pricing for very robust ERP, and there are probably a dozen or more other vendors that might be affordable by your clients who need the sophistication and functionality that ERP brings to the table.
And, of course, your client gets all the benefits of cloud-based computing such as reduced capital expenditures, operating costs and maintenance, as well as enhanced mobile access.
There is a downside to this, however. While the monthly cost is affordable, getting there may not be. Some vendors of ERP software will sell directly to your client, but many will insist that they deal with a reseller or partner. And even if the software is available directly from the vendor, chances are that your clients will still need to deal with a reseller to get configured, up and running, and have the system fine-tuned.
Still, if your client needs more than just basic financial accounting and would benefit from having an integrated system that includes features such as production planning, enhanced inventory, advanced payroll/HP, and business analytics, check out ERP. It may not be as out of reach as you might think.
