The Business Systems Challenge Facing SMEs

Business Systems Challenges Facing SMEs

By Robert O’Carroll

Download the full article and more in our Procurement Sense Magazine.

Late on a recent Friday afternoon our sales manager walked briskly into my office.

“Can you check the materials for this?” he asked, upon handing me a PO. The rush order had just arrived by fax, but what was more remarkable to me was the handwritten order lines. This event triggered all sorts of thoughts for me, not least of which is how is this multi-million dollar business achieving profitability if hand-written orders are representative of its business systems?

My own experience in manufacturing provided me with somewhat of an explanation of how work practices fail to move with the times. In my previous job working for a multinational company with blue-chip OEMs as customers, I was exposed to a constantly evolving work landscape, especially in terms of IT and software. Training and investment accompanied each new installation.

Now working for a small business with a disparate customer base of predominantly SMEs, my experience is very different. In a small business each person covers multiple roles and in doing so can compromise maintaining advanced level knowledge in specific areas. For the business, it is very difficult to remain abreast of industry trends and developments not having a subject expert on staff. With increasing complexity, the norm for IT network infrastructure and key software such the ERP system, as well as other areas, the need for subject matter experts continues to grow. Also, creating the time to critically evaluate existing practices and research the next steps is an ever-present challenge.

These challenges present a significant market and opportunity for businesses that can provide solutions. A win-win scenario is conceivable whereby SMEs improve their profitability and agility by modernizing their business practices and availing of the ever growing range of products available. Vendors of software and other products oriented towards streamlining business processes have a large, relatively untapped market.

However, accessing this market will not be easy. Many SMEs do not recognize that their processes are dated and are often focused primarily on manufacturing and shipping their own product. The awareness that improving business processes can boost profitability at a greater rate than iterative product development frequently does not exist. Also, change often comes slowly. If a process works why change it?

For example, payments by cheque are more common than wire transfer or electronic transactions (transaction charges and cash flow management, though, may influence this). Additionally, when sourcing a service or product the range of offerings can be daunting. Determining which products meet the requirements or even, which of the many vendors will be around in five years’ time, requires a significant procurement effort for a topic that for many is not a priority.

For most of us in manufacturing there will be increased competition, erosion of margins, which will be a catalyst for change. Not all businesses can afford to wait that long. For vendors the first challenge is to assist the customer to realize that they have a problem and to articulate it in terms of a real impact to their bottom line. Providers who can effectively present and breakdown solutions into simple terms will have an advantage. The ability to implement and demonstrate success quickly will be a differentiator.

SMEs, free of the bureaucracy of larger companies have the capacity to adopt new systems quickly, but can have resource and skill constraints. Vendors will likely lead installation activities and customer support will need to be strong.

There must be awareness that the needs of an SME customer are very different to those of larger businesses with mature IT organizations internally. For the provider who can convince the business owner that handwriting PO lines is a scenario he needs to move beyond, who can explain in simple terms the alternative, and implement and support a user-friendly solution the market potential is huge.