Let’s note some curtail facts first:
- ERP has become a hygiene for smooth operations of any company.
- ERP users are either Generation X or Millennials. They are accustomed to using user friendly & easy to use software. Thus, it is important to equip them with a good ERP irrespective of you company size and number of licenses you will consume.
- License cost of most of top tier ERP vendors remains same irrespective of the customer’s business size. Small/Medium sized businesses might not have such deep pockets. Could be because they are still in start-up stage and are struggling to reach the breakeven point or their operations size is still small.
- Efforts of ERP implementation is more inclined to ‘complexity of business’ than number of licenses the customer buys. Thus, it requires relatively similar efforts to implement ERP in a small/medium sized business.
- ERP is a complex B2B product and requires enormous efforts from BD teams to understand customer requirement and prepare proposal. It requires multiple meetings with different levels of the client’s company. Is this effort worth it?
Some bookish knowledge:
The below matrix explains sales strategy, efforts and its outcome while targetting your prospect:
It is very much evident that, “’It is not worth it’ in targeting very small or small/medium sized company for products that require high touch.
'Not worth' it Projects:
ERP is a high touch product. Profitable companies do not put efforts when its 'not worth it'! But then Top Tier ERP Vendors do not want to lose the business coming from license sale to the SME segment. However, they are clearly not interested in wasting their efforts in pitching and implementing the ERP at such SMEs themselves.
Even big profitable service companies don’t find it worthful in taking up such projects.
This is when the need for developing Small-scale Channel Partners came! These top tier ERP vendors started developing channel partners who can take up these low-profit & high-risk projects. The margins at which these small-scale channel partners operated did not gave them the bandwidth of hiring good quality ERP consultants! And that’s where the problem began!!
Small-scale Channel Partners started winning projects without even knowing the complexity of efforts involved in the project. And when it came to execution, they went dry… falling short of liquidity, knowledge and burning their workforce at the same time.
SMEs' ERP implementation went for a toss:
In desperation of meeting the breakeven point (which included paying salaries to their employees); theese small-scale channel partners strategized the idea of earning profit through 'economies of scale' and started targeting more SMEs. The idea was to share the same resource pool across multiple implementation projects.
While this strategy gave them the liquidity for initial few months; they were unable to handle the stress of so many projects running in parallel. Little did they know, that ERP implementation projects dont work with strategy of 'economies of scale'.
This resulted into either one or all the projects under them going for a toss.
This lead to SMEs failing to reap the benefits of the ERP even they selected a 'TOP TIER' ERP!
These is my personal analysis and will be happy to hear your thoughts and suggestions on this.
