Most SMEs are spending on IT for data mgmt, decision-making initiatives

Indian SMEs, which are aggressive on IT adoption, make the the $8-billion Indian SME IT spend market one of the most exciting avenues for growth, says Vinod Krishnan, managing director, TVS Infotech (TVSi). In an interview with FE’s S Saroj Kumar, he says that tech spend by SMEs is getting a fillip, since SMEs today have access to funding, technology and above all, the legacy of family-owned business. Excerpts:

The Indian enterprise software market will witness a growth of 12.3% between 2009 and 2014, according to Gartner. How do you view this in the context of SMEs?

You will see more businesses in tier III zones which will adopt technology to enhance their business value. The very fact that all tier I companies targeting this segment today points to this fact. Today, most SMEs are spending on IT for data management and those who have already automated their businesses will spend on decision-making initiatives. This is TVSi’s mantra — to help companies in fields ranging from data management to decision making, to help them focus on their core business activities and not be worried about keeping their servers, attrition, disaster recovery, their mail servers being down, ERP support etc. We will be their ‘CIO’ on demand.

Is it true that ERP system vendors like Oracle, Microsoft and SAP are planning to jump into the end customer fray, bypassing customising vendors like TVSi?

I doubt this is true. For any enterprise software vendor, it is imperative to develop a strong channel strategy and build an ecosystem of vendors and promote their products and solutions. Even with ‘ERP on the cloud’ gaining a strong momentum, the channels will coexist.

You say that 90% of your clients lie outside TVS group companies. Will group companies remain a virgin territory to be tapped later?

TVS Group companies will not give any special preference to TVSi just because of the group affiliation. We have to earn our way on merit. TVSi has looked at the whole market from the beginning, with TVS Group companies being an important part of the target market. We expect to progress on both the fronts in the coming years.

On a standalone basis, what is TVSi’s contribution to the group company and how much is it expected to grow?

Our current contribution to the group is in a single digit, but I expect this to change over the next few years.

ERP solutions bare the whole gamut of operations of an SME. Traditionally, family-owned proprietary SMEs do not wish to expose their operations fearing competition and tax implications. How do you succeed in convincing your clients about the suite of ERP solutions?

We have never come across an instance in which a customer feared exposing its operations. Most of them talk of doubling/tripling their turnover in the next 3-4 years. For this, they need to have a strong foundation and a principled approach towards business. Today, companies cannot run businesses like their predecessors did decades ago. Second and third generation entrepreneurs are taking over the mantle of running these family-owned businesses. They understand the necessity of a strong backbone in terms of an ERP/IT systems for the growth envisaged and the requirements for security and confidentiality to be in place.

Is vendor lock-in an issue in enterprise software segment? What do you think of the call to develop solutions in open standards and open architecture?

Yes, to an extent there is a fear of lock-in, but this fear in is there in every business transaction, including that of a mobile service provider. If you ask an enterprise today to go with open standards-based solution, they will hesitate, both to build or to buy such a system off the shelf.

The ERP segment is a highly reference-based environment, with a herd mentality for procuring technologies. If you consider the manufacturing domain, SAP is dominant and will remain so for a long time to come because the adoption of SAP in this sector. If you drill down further within SAP for manufacturing, you will find a slew of solutions for every micro-vertical you can think of. Considering these dynamics, it is always better to entertain a known devil than an unknown one. Developing solutions in open standards will become a norm in the near future but enterprises would not risk taking the gamble right now. Their risk appetite for their core business is very high. However, this is not the case in non-core areas like IT. It is also a well-known fact that it is possible to integrate system architectures of better known ERP systems with open source solutions.

Changing Indian ERP scenario

ERP Market growthIN recent times, the ERP scenario in India is witnessing a rapid growth. A number of manufacturing firms, automotive, steel, oil, textile and pharmaceutical companies have already been implemented ERP solution thus making ERP dominating the overall picture in these organizations.

For the early adopters of ERP solution, Finance and Accounting, Sales and Distribution, Materials Management/Purchase, and Manufacturing are the most popular ERP modules implemented. In recent times Plant Maintenance, HR, Transportation and Service modules are also growing in popularity.

We find different industrial sectors like cement sector, power sector, and food sector are going for ERP solutions. The construction or project companies have also implemented different ERP solutions suitable to their needs.

Currently, the SME segment in India has been one of the most aggressive adopters of ERP software. In fact almost 60 per cent companies in the SME segment have already implemented ERP. This substantial increase in the penetration level in the SME segment is attributed to the introduction of low cost ERP solutions such as eresource ERP which also caters the country-specific localizations and availability of large pool of skilled functional and technical talents.

The primal objectives that the SMEs have for switching to ERP is to get aid in smooth inventory management, timely scheduling of production cycles and shipment of goods, managing human resources and online data communication.

According to estimates, the ERP market in India has witnessed a growth rate of 70 per cent in the last decade. As a result, the market has leapfrogged over the years to a tremendous volume in terms of monetary gains. There were many reports which underlined the tangible quantitative benefits accrued by Indian companies in post-ERP implementation era.

Most of the time these benefits are difficult to prove on statistical grounds as soft benefits like comfort in work life, maturity in planning, attitude changes, transparency, visibility etc are either practically impossible to measure or correlate such improvements to ERP implementation. Companies are supposed to set their objectives prior to implementation followed by measuring of the achievements after implementation, and only then should they conclude about the effects of ERP.

SMEs most aggressive adopters of ERP

Over the last decade or so, information technology has taken some giant steps and this exponential growth has changed the way we live and interact with the world. No wonder information technology has enabled many small and medium businesses to carve a niche for themselves. Indeed, IT has triggered the growth of many SMEs and SMBs. And now, Indian SMEs are coming forward and adopting ERP solution like never before to improve their output. When it comes to implementing the latest technology for their business needs, a lot of Indian SMEs are on par with their western counterparts.

Slowly but surely, Indian SMEs are willing to invest in Information Technology to improve their output and efficiency. Over the last couple of years, Indian SMEs have been adopting Enterprise Resource Planning (ERP), clubbing it with Customer Relationship Management (CRM) and sometimes even with Supply Chain Management (SCM). These small and medium enterprises have realized that to maximize the potential of available information technology, ERP solution must be implemented in tandem.

The way ERP system was used by organizations is now changing rapidly. Initially, an ERP solution was mostly preferred by manufacturing industry and that too for the Finance and Accounting, Sales and Distribution and Materials Management/Purchase process. Lately, they have included Plant Maintenance, HR, Transportation and Service modules for easy operational process.

Today every industry is looking for an ERP solution to run their business smoothly. Like the manufacturing industry, process industry also has benefited handsomely from implementation of eresource ERP system. Fleet Management, Construction, Chemical, Automotive and Trading Industries all are finding eresource ERP system as an effective business solution to overcome the market challenges.

Apart from the above industries other industrial sectors like cement sector, power sector, and food sector are going for eresource ERP solution. Many construction and project companies have also implemented eresource ERP solution for an effective business process.

The SME segment in India has been one of the most aggressive adopters of eresource ERP software. In fact almost 60 per cent companies in our client list are from the SME segment. This increase in the penetration level in the SME segment is attributed to the introduction of low cost eresource ERP solution.

The implementation of eresource ERP helped the SMEs to get aid in smooth inventory management, timely scheduling of production cycles and shipment of goods, managing human resources and online data communication.

The emerging trend in the ERP market shows a steady increase in the implementation of ERP system in every industrial sector. As a result, these industrial sectors have witnessed tangible quantitative benefits in the post-ERP implementation period.

While Indian SMEs usually overlook the benefits of ERP citing ERP software being beyond their budgets as the reason, it is beyond doubt that ERP implementation can improve a company’s performance manifold. Despite the fact that usage of IT in SMEs is much below its potential, they are now slowly waking up to the importance of adoption of ERP in their operations and are realizing the necessity of setting up intra- and inter-office networks. Considering the current market realities, SMEs today need to understand that with ERP software they can not only systematically arrange and assimilate all systems of entering data and processes, but also understand and adapt to retailers’ business requirements and thus respond faster and frequently to product orders from retailers.

Adapting to changes in the multilateral trading system, and for the management to know what is happening in the organization is of utmost importance and ERP implementation can help businesses achieve cost control and low working capital as also integrate latest technologies to remain competitive for survival.

Through proper ERP integration, businesses can expect far-reaching results like reduced working capital requirements and improved customer service. They can also reduce purchase costs considerably and bring in more clarity and accountability throughout the organization. Implementation of ERP in businesses will not only act as a complete business software solution, but will also help companies to expand their reach of business quickly.

The companies who implemented the ERP system must realize that most of the time all the benefits are difficult to prove on statistical grounds as soft benefits like comfort in work life, maturity in planning, attitude changes, transparency, visibility etc are either practically impossible to measure or correlate such improvements to ERP implementation. For the real effect of ERP system, companies are supposed to set their objectives prior to implementation followed by measuring of the achievements after implementation, and only then should they conclude about the effects of ERP.

We must also remember that as the Indian market seems to be filled with many ERP solutions, companies must pay extra attention while choosing the right ERP system. Apart from operational efficiency, successful implementation also holds the key for an ERP system.  The structured implementation programmers such as eresource ERP’s Guaranteed On-Time implementation, can speed up system deployment and return on investment.