82% of SMEs with less than US$50 million of annual revenue use ERP systems
The Commerce Department defines Small and Medium-sized Enterprises (SMEs) as the companies with employee size ranging from 3 to 250. There were estimated to be approximately 332.99 million SMEs worldwide in 2021.
Major Statistics
- In the Asia-Pacific region, SMEs comprise 98% of enterprises and employ 50% of the workforce.
- The Middle East & Africa is the fourth largest region in the global Enterprise Resource Planning software market. It is projected to grow at a CAGR of 8.3%.
- Adopting ERPs has become a major business practice in the UK in recent years and now 67% of businesses have adopted it. But only 30% of SMEs use it. SMEs through Funding Circle generated a £6.9 billion contribution to UK GDP, supporting nearly 106,000 jobs.
SMEs played a role in Asia's economic growth
In the Asia-Pacific region SMEs comprise more than 98% of the number of enterprises. These contribute from about 17% to the national GDP in low-income countries including India to about 40 to 50% in higher-income countries like Malaysia and Singapore.
In Asia, in general, SMEs end up playing an important role in the overall social and economic well-being of their countries. However, when companies reach roughly 100 employees or $10 million in annual revenue, it is found that they outgrow many of the processes and systems that used to work just fine. Sometimes it hits earlier, at $5 million, and sometimes it’s closer to $15 million, but sooner or later, it’s time for scalable systems.
Inventory management by clipboard and spreadsheet becomes unwieldy. Letting sales teams track customers and prospects ad hoc becomes unproductive. To maintain continued growth requires a data-driven approach to marketing. And so it goes, department by department.
In this blog post, we will further understand the reason for such a widespread adoption of ERP:
Enterprise Resource Planning (ERP) systems are comprehensive software solutions designed to streamline and integrate various business processes, including finance, human resources, supply chain management, and customer relationship management.
Historically, ERP systems were mainly associated with large corporations due to their complexity and cost. However, recent years have seen a notable shift in the adoption of ERP systems among SMEs. The few reasons for such a widespread adoption are:
1. Improved Efficiency and Productivity: One of the primary reasons for the increased adoption of ERP systems among SMEs is the promise of improved efficiency and productivity. By centralising data and automating repetitive tasks, SMEs reduce manual errors, save time, and allocate resources more effectively.
2. Data-Driven Decision Making: The access to real-time data and analytics enabling informed decision-making through ERP systems provides SMEs with a data-driven approach. This helps in identifying growth opportunities, optimising processes, and responding quickly to market changes.
3. Enhanced Customer Experience: In times where customer experience is paramount for all kinds of organisations because of their contribution towards success, reputation and sustainability. With ERP systems, SMEs can better manage customer relationships, track interactions, and provide personalised experiences leading to increased customer satisfaction and loyalty. This leads to a competitive advantage, employee satisfaction, regulatory compliance, revenue growth and cost savings all in the long term.
4. Scalability: As the years pass, a successful business grows and expands in various areas and ERP systems are designed to grow with your business. This scalability is particularly beneficial for SMEs, as they can start with essential modules and add more functionalities as their needs evolve with time.
5. Cost Savings: As an organisation willing to grow, it is important to understand that long-term goals and investments are of greater importance. Contrary to the perception that ERP systems are expensive, they often result in long-term cost savings. Reduced operational inefficiencies, better inventory management, and optimised procurement lead to significant financial benefits.
Challenges and Considerations:
While the adoption of ERP systems among SMEs offers numerous advantages, it is essential to consider potential challenges to be able to curb them in time.
1. Implementation Costs: While we understand that adoption of ERP systems results in long-term cost savings, its initial implementation is a significant investment and careful budgeting and planning can play a crucial role while choosing and considering various options before the implementation.
2. Change Management: Changes are not always welcome because they bring a certain disruption. Every new change initially is uncomfortable and adapting a new ERP system brings changes in the workflow and processes. It is vital to understand the flow of change and invest in strategies to ensure a smooth transition for their employees.
3. Training and Support: Once the ERP system is adopted in an organisation it is important to maximise its benefits as soon as possible which can be done with adequate training and ongoing support. A major step in this direction could be partnering with experienced ERP providers who make the onboarding process smooth and reduce the scale of disruption caused due to the change. Allocating resources for appropriate training is also vital during the adoption.
Conclusion
ERP systems empower SMEs and level the playing field for them to compete with larger enterprises. While there are challenges, the long-term benefits of an ERP are clear and a strategic plan to invest in them will enable data-driven decision-making and enhance the customer experience.
The statistic that 82% of SMEs with less than $50 million in annual revenue are using ERP systems is a strong indicator of the fact that there is an increased awareness in the industry about the transformative potential of an ERP system and the positive change it brings. As a result, they have adopted these systems to harness these advantages, and this trend is growing.
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