According to popular definition, a "mid-market company" refers to a company that has between 50 and 1 000 users of its IT resources, compared to the thousands of users in a multinational organisation.
"Despite their smaller size, mid-market companies need an ERP solution with the same functionality required by large corporations. Enterprise resource planning has brought much efficiency to many companies, and when a company sinks thousands of Rands into a core business application and re-engineers its business processes around it, the system is bound to become more than an application" says Scott McKenzie, MD of Top-Tech ERP Solutions.
Nowadays, mid-market companies are increasingly faced with the option of using the products and services of large ERP vendors that had previously only concentrated its marketing efforts on larger corporations. This shift in focus is a result of analysts` predictions that the ERP marketplace for large corporations has reached saturation point. These predictions have led to a dramatic share price drop of up to 65% for some of the biggest ERP vendors.
According to AMR Research Inc. the ERP sector will grow to a compound annual growth rate of 32% over the next 5 years (1998 to 2003). Total 1998 ERP revenue hit $16.6 billion, a 39% increase from 1997, but estimated that 1998 ERP infrastructure sales totalled $70 billion.
The ERP `big boys` are therefore compelled to set their sights on the unexplored mid-market by adjusting their existing products to fit the mid-market clients.
McKenzie warns, "ERP is a complex series of various modules available as building blocks to architect a system that will meet your unique business requirements, but these modules still need to be configured and integrated. The implementation of such a system often turns out to be lengthy and expensive, as the applications and products need extensive customisation to fit the smaller profile of the mid-market company. The software and implementation cost ratio of the "big boy`s" is often a staggering 1: 3 in sharp contrast to ours, where Platinum ERA offers an upfront guarantee of a 1.1 ratio. This is possible because we implement products that are specifically designed for the mid-market resulting in a shorter, less complex implementation process.
Most of the smaller companies have no internal IT Department, and lack the skilled resources required to implement and maintain a system that is written in a proprietary language. Outsourcing this function could lead to astronomical costs and a lengthy implementation. When you replace your old systems with new ones, the successful ERP project should cut the fat out of operating costs, generate more-accurate demand forecasts, speed production cycles and greatly enhance customer service - all of which can save a company millions of Rands in the long run. Most mid-market companies are naive and overly optimistic when evaluating the big brand tailored ERP system capabilities"
Through experience many of these companies came to the same conclusion - that they have over-bought and over-extended themselves. Alternatively to avoid major implantation costs, ERP vendors offers industry specific "templates" which could be implemented at a ratio of 1:2 should you have a 95% fit. Should there be any customisation needed, this may result in being a more expensive route to take, as templates do not offer enough flexibility, and customisation could lead to the ratio moving to 1:5 and beyond making the significant element of a ready-made application in the form of a "template", a trap for the buyers."
Mid-sized companies may want to investigate the option of outsourcing a company`s ERP functions, through an Application Service Providers (ASP`s), but McKenzie points out that," here too, there may be trade-offs". The hiring of ERP services from ASP`s amounts to more in the long run, but has definite advantages to the smaller mid-sized market companies and could be considered as an option. Although it is difficult for smaller companies to secure a loan from a commercial bank for intangible assets such as software, it is also an illusion that hiring the services of ASP`s is cheaper than buying and implementing an ERP system.
McKenzie explains: "Companies may eliminate the initial capital outlay needed for the purchasing and licensing of the software products, as well as the cost of database administration, which is carried by the ASP, but through outsourcing to an ASP, you could declare the cost as operational expenditure, oppose to capital expenditure which have added advantages such as increased cash flow, and a saving on employment costs of a specialist to maintain your internal systems. The ideal would be for mid-size enterprises to rather consider purchasing software from suppliers that focus exclusively on the real-world requirements of mid-market companies"
Epicor`s Channel Manager for Africa, Lesley Devitt, agrees, "The vendor`s approach should reflect a deep understanding of mid-market buyers, their dynamic business cycles and requirements. Unlike most major ERP vendors, Epicor`s products have been designed from the ground up for the mid-market to ensure that mid-size companies can automate on their own terms, without losing the value of their best business practises. "
These products are also built on Microsoft`s SQL technology, which means that most mid-market companies are able to integrate the products into their existing databases without unnecessary disruption. Epicor`s deployment guarantee enables mid-market companies to improve business performance without the risks and upheavals of conventional enterprise resource planning systems.
Devitt continues, "To take this a step further, mid-sized companies may, at some stage, want to implement customer relationship management (CRM) software. The people who implement CRM aren`t necessarily the same ones who implemented ERP. This is a very valid problem Epicor anticipated very early on. Epicor`s ERP back-office software, Platinum ERA, is fully integrated with our CRM front-office software, Clientele. This integration will ultimately reflect on your bottom-line. The link between financial accounting and CRM is only now being recognised as an integral link in business today"
McKenzie`s advice to mid-size businesses, "Choose wisely when it comes to ERP. A solution that truly suits the size and needs of your business will prove to be an unbeatable competitive advantage that will enable companies to automate on their own terms and outperform their competition by capitalising on customer relationships. The real driver behind the move to become customer-centric now, is the vast wave of competitive pressures descending on organisations in every sector".
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