BANGALORE, INDIA: Traditionally businesses have ERP deployments on-premise licensing model setting up their own infrastructure ton support their business applications and expansion plans. But that’s changing, at least for SMBs.

Today most small business prefers an integrated business application such as an ERP in a hosted model rather than setting up own infrastructure, which is a CAPEX intensive exercise. Reason being simple—one, they want off the self products that can help them go-live in shortest possible time [to avoid customization costs], they do not have expertise and talent to manage their IT infrastructure in-house, and most importantly they don’t have to do a CAPEX for setting up the infrastructure.

These are three basic elements are driving SMBs to go for standard integrated business application (ERP) in a hosted model. Now translate this business [hosted model for ERP] proposition to the numerous SMBs have in India and suddenly it becomes a huge market for the IT vendors.

 The requirements for mid-size companies are no less complicated in terms of functionalities required when compared with large Enterprises. These enterprises are looking at applications with functions including sales, production, financials and inventory. Even though SMBs need for an integrated platform to manage business process such as payroll, accounting, inventory etc, why are they shying away from ERP?

“For most of the mid-market organizations, the complexity of managing an ERP system is a constraint, as the smaller the organization, the bigger is the constraint. Their outlook is to have a system that helps them in doing business without bothering much about what is happening at the back-end,” said Sushant Dwivedi, director, Microsoft India Business Solutions.

According to Sunderaraj, Senior Vice President, Indian operations, Ramco India, discipline and rigidity associated with ERP acts as irritant to SMB managers as they always desire for flexibility.

“In majority of the SMB businesses, demand and supply are highly unpredictable. These factors have their own impact in production and downstream operations. ERP implementation needs skillful handling to give the desired results, and requires standard business processes to be in place already,” said Suderaraj.

He further noted that since legacy systems have the flexibility to keep modifying their existing application any time based on ad hoc user requirements, using them is more of convenience than trust. Some SMBs have developed their own applications using their in house/EDP department. They are either stand alone applications or have limited integration with other functional areas.

Hosted ERP is changing the game for SMBs

ERP on a hosted/ SaaS platform with its varied benefits seems to be the right choice for small businesses. Seasoned vendors in the ERP segment are focusing on SaaS platform to target the SMBs in India.

Small businesses, micro verticals or clusters, and the companies with stand alone systems are some of the examples that would go for this model due to cost, OPEX model immediately. Since the application is delivered on a subscription model, they need not invest in OS, database, hardware, IT staff and the ongoing overhead.

“Lots of innovation will happen around SaaS model and the partner eco-system will evolve around this,” pointed Suderaraj.

He further said that SMBs expect an integrated ERP solution and also a quick deployment since they do not have the resources to sustain long implementation. Enterprises with on-premises model will shift to the SaaS delivery model for non core areas. Also some enterprises will look at a hybrid model where non core applications will be on SaaS and the core applications like production, financial, order management will still be On Premises model.

Samik Roy, Head–Growth Applications Business, Oracle India, added “Mid-size enterprises are poised to drive the next wave of economic growth for the country. This segment is striving to bring in efficiencies and improve their business processes through various IT initiatives.”

According to him there would be a gradual uptake for Software-as-a-Service, across industries like telecom, manufacturing, retail and insurance.

Hosted model serves the purpose of small businesses, as it doesn't give them the headache of worrying about huge investments, maintenance, hiring professional etc. In short, with this platform, organizations can stick to their focuses on the core business rather than dealing with the back-end applications. Another advantage that comes with it is the quick deployment and running of the system.

“Readiness of the system is critically important, and makes a lot of difference in customers as they will be able to use the system in a much better way. For, a manufacturing company can provide a package and ready inventory management solution, which can be easily deployed and is ready to use from the day one,” said Dwivedi

According to him, today any roll-out has to be more of packaged than customized.