In Today's Business Environment, What You Don't Know Can Hurt You
By Ken Dickinson
As Sam Renfro, CEO of Granite Industries, hung up his phone his
head was spinning. Sam is the third generation leader of Granite
Industries, a family owned distribution company providing
products and services to electric, gas, and water utilities.
Sam had just finished a call with Joe McDonald who has been a close
friend for more than 20 years and is CEO of InfoTek, a
key product supplier to Granite Industries. This product line accounts
for more than 30% of Granite's business and has been trending upward
for the past eight quarters.
Joe had told Sam that he would really like Granite Industries to be the first
master distributor for their automated meter product. This would allow Granite
to finally become the master distributor for the western region of the United
States and supply the smaller distributors from Granite's five distribution
warehouses. In order to do this, Granite would need to provide real time inventory
management information to InfoTek in order to properly stock inventory to meet
projected demand in the western region. This would require that the two companies
be able to share inventory data real time.
Sam was enthusiastic on the phone with Joe and very much wants to move forward
with this new opportunity for his business. He has been looking for a way to
step up to the next level with his business and leverage his multiple locations
and unify his inventory and product management. Sam immediately arranges a
lunch with his most trusted advisor, Linda Hollingsworth, his
CPA for more than a decade. He prepares a list of questions for Linda:
- Who does he call? His management team is great but no one has any time to spare
- What will this cost?
- Software projects have historically gone over on cost and have under-delivered on expectations
- Consultants are expensive and someone has to spend time with them to bring them up to speed on the company and the industry
- He wonders if his already taxed internal systems and IT staff could handle additional requirements.
- Most of all, Sam wonders why should his business be held back from a major opportunity because he can't meet the technology requirements?
Over lunch, Linda assures Sam that there are affordable alternatives available to Granite. In fact, Linda has recently researched the viability and applicability of a new offering which has evolved steadily over the past 10 years and has matured significantly in the past 2-3 years for other clients as well as for her own business. This alternative is Software as a Service (SaaS). She encourages Sam to engage a partner firm for a brief review of alternative packages and services and to recommend potential fit for Granite's business. She is enthusiastic about the low cost of implementation as well as the predictable cost for usage. Sam leaves lunch relieved and encouraged.
Whether the business is distribution, services, manufacturing, consumer goods, or design and packaging, this scenario is being played out every day as our economy becomes more integrated and more global. The winning SME executive team develops productive and meaningful partnerships with key players in communications, transportation, manufacturing, and technology systems. These partnerships provide a way to extend an SME's reach and to leverage their assets. A typical small to medium enterprise (SME) business lack the resources in capital and management team depth to dedicate time to research options and negotiation to acquire the software solutions available to SME's today.
In the end, the SME settles for incremental improvement as opposed to having the resources in time, talent and capital to research new options available to them in the marketplace today. These options hold the potential to improve an SME's business by orders of magnitude for a reasonable cost. The key is to become educated on these options and discern the impact on the business before their competition does.
Ideally, companies like Granite Industries would be able to adopt a business technology solution which would provide:
- No incremental IT infrastructure or staff
- No incremental software purchase
- World wide 24 X 7 availability
- $0 maintenance & support cost for software ownership which is now running
at 22%
- Full system monitoring and data protection as a part of the cost
- Predictable fixed monthly cost
- Minimal implementation cost and effort
- A 360 view of their business
- Simplicity in integration with clients and suppliers
- Automated tools for managing people, inventory, projects, and partners
- Common look and feel for all functional areas
- Intuitive for current staff to learn and use and for new hires to come onto
- Flexible and adaptable to organizational changes
- More than just ERP: full spectrum business support including HRIS, Warehouse management, service order management with warranty information, project and billing management, price quotes and proposals, manufacturing, accounting, budgeting and forecasting, and full order management under one umbrella
- Compliance to tax and management laws built in and updated regularly
- Version control and update of the software done centrally
- Provides cost avoidance
- No future upgrade on software
- Avoid hardware upgrade/replacement
- Sunset current software products
This has been the wish list for SME's for the past decade. CEO's like Sam have been asking more frequently:
- Why can't I buy all of the software and processing for my business like
I can buy other online services like SalesForce.com?
- Why do I have to settle for technology which has not changed in 20 years
to run my business, when I can experience full Internet functionality and
integration like I use in everyday life as a consumer?
- Why can't I expect the same up-to-date technology and functionality in the
systems I can run my full business on?
The good news is that a few world class vendors have heard the question loud and clear and have begun to offer products which answer this need. Vendors such as SAP and a handful of others are using their experience and solution knowledge in facilitating the global marketplace to provide the same functionality to the SME marketplace.
What has made this possible is the evolution of Software as a Service (SaaS) offerings over the past decade. Several things had to happen to make this possible:
- Internet availability and significant access speed to end user – 10 years ago we were depending on 28.8 dial up modems. Now we can depend on a 100mbps connection most anywhere
- The business model had to make sense for the vendor and the client
- The volume model allows pricing to be set lower
- The steep decline in hardware prices coupled with the continued increase in processing speed and reliability
- The steep and rapid decline in $/megabyte storage costs
- The advent and adoption of the global labor marketplace allowing the cost of new software development to decline
- A growing acceptance of doing business on internet
- Banks and financial institutions have successfully managed financial data via the internet with a miniscule number of actual breeches and loss of a material nature
- Acceptance rates of SaaS have accelerated in the past 24 months
- The question is increasingly shifting from "Why" to "Why
wouldn't we" consider SaaS in our next evaluation round
- A growing awareness of the advisor community which specializes in the SME space
- SME's look to their CPA firm and legal advisors for input on strategy and
what to consider in the future.
- Low risk – these solutions can often be adopted in steps and do not require a full implementation and adoption in a short timeframe.
- Predictable cost – most often SaaS is a monthly fee based model with a minimum term of 24-36 months, just like a cell phone contract.
- Manageable and predictable implementation costs: the preconfigured nature of the software provides a quick start in using the software with the most time consuming activity being data migration to the new platform
The good news is that Sam is able to evaluate SaaS as a viable solution which not only will provide full data integration with InfoTek for the master distribution arrangement, but will also provide Granite Industries a platform to improve their business processes and management significantly with minimal investment and no incremental on-going IT cost.
Ken Dickinson has spent more
than 20 years working with businesses to evaluate business challenges and
architect solutions for them. Ken attended University of New Mexico and
earned a BBA and an MBA. Ken has worked for Deloitte & Touche, CGI
and Tatum, LLC. Ken now lives in Denver, CO and continues to serve the
SME space working for SAP supporting their Business ByDesign SaaS offering.
You can contact Ken at Ken.Dickinson@sap.com.
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