How can SME’s use cloud technology to ‘punch above their weight’?

17th February 2016

In an environment of constant business disruption small businesses are in an enviable position compared to larger competitors. Unencumbered by complex and inflexible legacy systems, SME’s can tip the balance of competition in their favour by quickly transitioning to the cloud leaving larger competitors mired in a complex mix of expensive and high maintenance on-premise solutions. In fact, a 2015 study quoted in Forbes says 78% of U.S. small businesses will have fully adopted cloud computing by 2020 more than doubling the current 37% as of today.  And it’s the same story in Europe with the European SMB cloud service market projected to grow from €18.9b in 2015 to €30.1b by 20181

So what is driving the voracious appetite for cloud computing in SMEs?

 

 

 

Cloud fulfils SME’s basic business needs

In a market which offers meagre prospects for growth, small businesses are heavily focussed on increasing profitability, reducing operational costs and attracting and retaining new customers.  And while lots of factors impinge on profitability, costs and customer retention, small businesses are finding that cloud-based technology plays a vital role either now, or as they grow.

The ability to cede responsibility for the IT infrastructure, support and maintenance to a third party vendor in the cloud represents a profound shift.  In effect cloud providers are becoming the IT department relieving small businesses of the formidable challenge of keeping technology up-to-date and running sweetly.  This allows SMEs to shed the uncertainty of variable IT costs and replace it with the certainty of a fixed monthly subscription. But even though these operational and economic benefits are welcome it is the business applications themselves, such as ERP, CRM, collaboration tools and mobile that are transforming the competitive landscape.

 

ERP in the cloud is a great ‘leveller’

ERP is no longer the preserve of large businesses, added to which, the advent of the cloud has prompted fresh applications with far greater capabilities and ease of configuration.  In fact SME’s that have moved to the cloud report the speed with which new systems can be implemented in the cloud as a major benefit. PwC says, in its 2015 Global Benchmarking report that “cloud ERP systems can be up and running in weeks, not the multiple months that a traditional ERP implementation typically takes2.”

The notion that small businesses are less complicated than large businesses is frequently misplaced. Very often small businesses have identical challenges – just on a smaller scale.  So the availability, of affordable ERP is a great leveller, allowing small businesses to drive profitability, focus on customer acquisition and retention while simultaneously reducing operational costs.

 

Driving profitability

Unlike the modular design of old on-premise applications modern ERP in the cloud is built as a tightly integrated set of applications linking all of the key business functions in a single environment which is updated in real-time.  This means that business owners can have their ‘fingers on the pulse’ all of the time, with up-to-the-minute information, (cash, sales, profits) available on demand, delivered where they need it.  Embedded analytics and dashboards, lets SMEs look beyond the basic accounts to look at profitability by customer, expose poor margins and weed out unprofitable customers or underperforming products and services. And with modern cloud-based ERP much of that is available on the move from a tablet or mobile device.

 

Attracting and retaining customers

Customers are increasingly in the driving seat and with competitors only a click away, SMEs cannot risk any slip-ups in the way that prospects are handled or customers are managed through the sales cycle. The challenge is that there are numerous, touch points with customers and prospects as they embark on their journey from initial enquiry through to confirmed sales order, invoice and payment – the so called ‘quote to cash’ cycle.  And although most of these touch points are reflected in the ERP system, a crucial part of the journey is recorded in a CRM (customer relationship management) system. 

Modern ERP systems such as FinancialForce close this gap by combining ERP and CRM in one environment. This allows anyone in the business to maximise sales opportunities by tracing customer (and prospect) intentions, behaviour and activity.  But the integration between ERP and CRM also ensures that nobody ‘drops the ball’ as a sale progresses from quote, through sales, credit control, invoicing, warehousing, despatch and accounting. All participants have visibility of the progress of each sales transaction allowing the organisation to preserve the quality of the ‘customer experience’ at every step of the way. Process excellence around the ‘quote to cash’ cycle is an important driver of growth.

 

Reducing operational costs

59% of SMEs using cloud services report significant productivity benefits from information technology compared to just 30% of SMBs not yet using the cloud. 82% of companies have saved on costs by utilizing cloud technology in their business1. Much of this productivity gain flows straight through to the bottom-line through optimising resources or keeping a lid on headcount as the company grows. And it’s relatively easy to see why.

Modern ERP in the cloud leverages collaborative technologies, such as instant communications, for example, FinancialForce’s “Chatter” and workflow to connect all of the stakeholders in a way that was not possible with on-premises software. 

Central to this capability is a unified business model supporting one set of metadata (for example, accounts, time periods, currencies, account definitions, organisational hierarchy) which is common to all processes and users, so that all participants can share in the same information confident in the completeness and accuracy of the underlying data. This reduces the time spent on data manipulation between different business areas (usually in spreadsheets) or simply searching for information.  And since the user interface and navigation is common to all parts of a modern ERP, staff can be moved more easily from one role to another to cover for peaks and troughs in workload, increasing productivity and reducing operational costs. 

 

Summary

Whether it is through increasing profitability, reducing operational costs or attracting new customers, it is clear that ERP in the cloud allows small businesses to compete on an equal footing with much larger businesses, i.e. ‘punch above their weight’.  But the deeper question is whether cloud ERP can confer even greater competitive advantage to SMEs in the longer term.

It used to be thought that eventually small businesses would run out of steam as they grow, for example, be unable to cope with internationalisation and business complexity – areas where mature businesses that are less resource constrained tend to excel. But there are early signs that this might not be the case. In effect a move to the cloud is buying into latent potential, for example, the ability to scale up on demand, to move into new domestic markets, explore operations abroad and offer more sophisticated product and service offerings without ‘breaking’ the ERP functionality.

Once SMEs have tasted the benefits of cloud deployment, few if any will make their way back on-premises.


 

 

 

About the Author

Gary Simon, is rated by Linkedin as one of the UK’s top 10 business leaders in 2015 and is leader of the FSN Modern Finance Forum on Linkedin with more than 43,000 members.  He is a graduate of London University, a Fellow of the Institute of Chartered Accountants in England and Wales and a Fellow of the British Computer Society with more than 30 years’ experience of implementing management and financial reporting systems. He is the author of four books, many product reviews and whitepapers and as a leading authority on the financial systems market is a popular and independent speaker on market developments.  Formerly a partner in Deloitte for more than 16 years, he has led some of the most complex information management assignments for global enterprises in the private and public sector. 

 

 

Bibliography

 

Note1  Roundup Of Small & Medium Business Cloud Computing Forecasts And Market Estimates, 2015 Forbes May 2015

 

 

 

 

 

 

 

 


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Whilst every attempt has been made to ensure that the information in this document is accurate and complete some typographical errors or technical inaccuracies may exist. This report is of a general nature and not intended to be specific to a particular set of circumstances. The publisher and author make no representations or warranties with respect to the accuracy or completeness of the contents of this white paper and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose.  No warranty may be created or extended by sales representatives, or written sales materials.  The advice and strategies contained herein may not be suitable for your situation.  You should consult with a professional where appropriate. FSN Publishing Limited and the author shall not be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

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