Imagine yourself in possession of a computing device that is powered by air and able to use elastics to provide real-time meaningful insight into every aspect of your business. What if this device could ensure that the products and services you deliver surpass those of your competition? How much is that worth?
The U.S. Census Bureau reports that over 98% of all businesses in America have receipts of under $5 million per year, with three quarters of those companies being self-employed individuals. According to Statistics Canada, 58% of employer firms are considered to be small and medium sized enterprises (SMEs), with one to four employees. This means that a significant portion of the diverse and dynamic North American economy is comprised of companies with very limited resources.
Unless a company is able to boast an imbedded customer base, things like service, quality, and location are often overshadowed by the need to be price competitive. However, competing on price alone is not good for anybody. In lean times, these are the first companies to go under, dragging down the entire economy with them. In boom times, it stifles innovation and advancements. Still, while there are many ways for companies to differentiate themselves from their competition, they can only do what is within their means.
The idea that effective use of available and emerging technologies can turn the tables on their competition is a bit of a pie in the sky for most SMEs. Many regard tools like fully integrated equipment resource planning software (ERP), that can be accessed securely and remotely, to be unattainable and something that only large companies with deep pockets can do. Until recently, this was very true since it required access to round-the-clock, dedicated and often expensive expert skill sets, and costly computer hardware and software. This is no longer the case.
The concept of ERP has been around for over 40 years. It was initially developed to improve inventory control and management at manufacturing firms. As its popularity grew, so did its scope. About 20 years ago, other business sectors began to notice the benefits associated with implementing one of these systems. Companies from various industries started coming to the conclusion that a company would be most productive if it was able to achieve organizational efficiency. This could only be done by linking all of its internal business processes into a single interrelated and synchronized organism. The resulting connection between front and back office operations enabled companies to be more proactive, enabling them to better identify areas of concern and address them before they escalated.
Modern ERP systems incorporate best practices, typically from a company’s quality manual, with software and hardware to automate mission critical back office operations. The systems are made up of a series of modules which all feed information into a common relational database. Unique information, such as a product code or a client name is entered only once and then used by various departments. This way, any information related to that product or that customer is always easily located, up to date, and linked throughout the database to all modules that may be affected by it.
In addition to reducing the possibility of human error and redundant data entry, the system enables departments that previously tended to act as silos, such as Accounting, Human Resources, Operations, and Shipping, to adapt a more collaborative approach. Coordination of departmental priorities and their alignment with the organization as a whole enhances all aspects of key operations. It effectively forces everybody to speak the same language.
The reduction of redundant activities, enforcement of standardized methodologies and elimination of data silos improves not only the speed with which information is gathered but, also its quality and accuracy. Thus, strategic planning can be based much more on empirical data rather than the SWAG approach. The information output from an ERP takes the focus away from the onerous task of gathering and assessing outcomes and allows management to focus on quantifying goals and determining how to realize them.
Because an ERP is modular in nature, it is scaleable. This means that any company of any size can benefit from a system which summarizes all of its operational areas and allows them to have a real-time bird’s eye view of any one aspect, at any given time. Reporting generated through the system will easily identify and highlight any gaps that may have been easily otherwise overlooked.
The systems typically incorporate user-level security settings so that while every department is able to input information that other departments need to use, individual employees are only able to see what is within their scope of work. Most ERPs on the market include modules related to quality, sales, manufacturing, and supply chain management.
The Quality system contains any quality standards to which the company has committed itself as well as organizational charts and process flow charts. Sales modules typically include order entry, tracking and client details. The Manufacturing module contains things like scheduling, production job specifications, material requirements, inventory control and job tracking. Supply Chain Management will usually contain information related to not only tracking current orders but, also provide management with an opportunity to monitor supplier performance.
For the past three decades people viewed the Internet and the personal computer as two separate entities that sometimes needed to connect to each other. They knew exactly who owned what files and exactly where there were stored. Often, a company’s ability to provide certain products, services, or quality guarantees was hampered by their inability to afford the supporting software and training. The concept of Cloud Computing, formerly known as Web 2.0, is rapidly changing all that.
The forces behind the latest incarnation of the web are pushing the notion that end-users should embrace outsourcing all the complicated and costly aspects of getting it done and only focus on firmly identifying their requirements and deliverables. The technical stuff should be outsourced for minimal pay-per-use expense. By taking advantage of hosted and managed services organizations would be able to focus on what they know best and leave the rest to the experts.
The impact of this on the SME’s bottom line can be significant. If a company hires an IS/IT department, purchases software licenses, and installs hardware they have to deal with all the costs associated with financing, installation, training, management, service interruptions, malfunctions, and support. They will pay for these things when they will use them, and they will pay for them when they will not be using them. In addition to providing access to limitless resources, Cloud Computing acts as a virtual time-sharing program. During peak times clients are able to instantly access infinite computer and software resources. When the requirement is met, they are released back into the Cloud. It’s as simple as flicking a switch and takes place seamlessly and instantly.
The idea is not all that different from the model used by utility companies. For instance, when there is high demand on the electricity grid the utility company feeds more power into the grid. When demand is low they scale back the amount provided. If demand surpasses available supply they outsource what is needed.
Similarly, billing is based on consumption. Businesses pay for what they actually use, which is just a fraction of the overall capacity. Effectively, they are buying milk whenever they are thirsty instead of the whole cow, the farm it lives on, and all the farmhands that make sure it is properly taken care of. Amazon calls this concept the Elastic Compute Cloud (EC2) where customers buy computer time so that they can load and run their own applications. Users are able to set up server instances in insulated zones to allow for backup and server redundancy, minimizing any downtime.
By taking advantage of the scalability offered by elastic networking, companies could stop worrying about losing market share because they were unable to keep up with the demand placed on their servers. Server crashes and lack of storage space have become non-issues because of the virtually unlimited ability to get more whenever it is necessary and not be burdened with anything that is not actively being utilized. For an SME, the ability to scale its technological requirements up or down, on demand, allows for cost allocation where it is needed most and a drastic reduction in overhead expenses.
In addition to hosting services such as the company website, and managed services such as email, on-the-cloud-computing allows companies to lease software instead of purchasing costly software licenses. This is known as software as a service (SaaS). Early adopters of SaaS were companies within industries for whom personal computing developments meant not just the decline of their industries but, a steady free-fall into the depths of oblivion. One such example is the professional photofinishing industry. Digital cameras and the ability to manipulate and cherry pick which images to print posed a serious risk to their business.
So, the industry migrated to the web, successfully convincing millions of people to let them handle all of the issues related to storing and managing their photo archives and providing software solutions that enabled users to customize their prints for optimal output on almost limitless media, from paper to blankets. The services were fully integrated with file uploading, storage, archival, retrieval, production, and distribution systems. The only thing the customer cared about was the ability to get a 12 or 18-month calendar customized with their family’s most favorite moments and special dates, delivered either to any store of their choosing or right to their home.
There are two types of SaaS and both have to do with who manages the end-user’s data. Social networking sites upload members’ information and store it in the Clouds to populate SaaS applications. For an SME, relinquishing control of their company’s proprietary information can be a deal breaker. This is where the Clouds start to float on AIR. Adobe Integrated Runtime (AIR) is a cross-platform runtime environment for building rich Internet applications. In plain English this translates to not having to purchase and install software. Instead, it is possible to lease the software on a pay-per-use basis. The software resides on a Cloud server while the data remains with the end-user.
Large Fortune 500 companies routinely utilize ERP software as a significant competitive advantage over the little guys. A robust ERP application is the most effective way for an enterprise to grasp its total cost of ownership (TCO) by delivering a 360-degree view of all of its attributes including its customers, products, and operations. This information fosters the right environment for effective strategic planning and development activities. It promotes best practice implementation for management and quality processes. The net results are lowered costs that can be passed along to the customer, and an improved ability to deliver superior service and quality.
The use of on-the-cloud tools levels the playing field by substantially reducing capital expenditures while providing a gateway to leading-edge technology. A SaaS ERP application offers even the smallest of SMEs the ability to offer their clients the exact same deliverables as their largest competitor. Since no two companies are exactly the same, the Cloud enables SMEs to multiply their ability to identify not only a strong competitive advantage but, also a sustainable one.
The list of organizations championing Cloud technology is impressive. Some interested parties include: Cisco, Intel, Thomson Reuters, orange, Sun Microsystems, enomaly, Adaptivity, Appistry, SOASTA Testing in the Cloud, Zero Nines, CloudCamp, SIMtone Corporation, IBM, RSA, Google, Yahoo, and Microsoft. With so much invested in its success the biggest question is: “Who Owns Cloud Computing?” The answer is that nobody knows. It isn’t even certain who owns an end user’s meta-data. The technology is so exciting and emerging at such a rapid pace that the logistics have yet to be ironed out. What is certain is that this is the single most significant technological advancement since the advent of the Internet and is not going to go away.
The Cloud Computing Interoperability Forum is hoping to ensure that the communication between interested parties is open and that all are working toward a common goal. According to their disclaimer, it “is a group of industry stakeholders that are active in cloud computing. The groups’ goal is to define an organization that would enable interoperable enterprise-class cloud computing platforms through application integration and stakeholder cooperation.” Setting and implementing compliance standards will be a large task with a long road ahead of it.
The other major stumbling block is concerns over security. Even after the issue will be addressed it will still be a fantastic chore to convince the average SME stakeholder that risks involved are being adequately mitigated. Many are still holding on to physical filing cabinets because they are weary of the rapid and volatile nature of software development and the related backward compatibility issues. The smaller the enterprise, the more it is averse to risk. Asking them to surrender their critical data to a consortium of unknown providers in the sky may be a bit of a tough sell.
The most interesting factor is that the choice may not be up to the user. In one way or another anybody who is using the Internet is already taking advantage of somebody else’s decision to utilize hosted and managed services. If you access the Internet for email, banking, education or library resources, use an online service for photo developing, shop, view streamed episodes of your favorite shows, and any number of other things you have already taken advantage of Cloud computing in some way.
Smart mobile devices such as the iPhone, Blackberry, or a connected GPS are all examples of popularly adopted computing hardware that work with Cloud Computing to deliver their cornucopia of digital delights. Using smart mobile devices loaded with a SaaS ERP application can provide an organization with anywhere, anytime access to any data that has been defined by the user as critical.
For an SME, where just about everybody wears many hats, the right tools can make all the difference. The ability to be notified and respond in a timely manner to urgent developments enable the provision of the highest quality of service and response to customer requirements, ensuring elevated customer satisfaction and service levels that significantly exceed those of their competitors.
Sources:
http://www.sme-fdi.gc.ca/eic/site/sme_fdi-prf_pme.nsf/eng/00647.html
http://www.census.gov/epcd/www/smallbus.html
http://www.business-software.com/top-10-erp-software-vendors-confirmation.php
http://www.youtube.com/watch_popup?v=6PNuQHUiV3Q#t=20
http://www.cloudcamp.com/
http://groups.google.com/group/cloudforum
