Taken from an article "Thinking Small, Acting Small" by Bijal Mehta.

Small business owners in the UK and throughout the world are growing increasingly frustrated with the inability of the large software firms to satisfy their needs.

According to Gartner, 50% of small to medium-sized businesses (SMBs) have yet to deploy enterprise resource planning (ERP) solutions because of concerns about the level of resources required to make such an implementation. Large software firms have long underserved this ignored market. In order to better satisfy the needs of the SMB market segment, software vendors need to think small and act even smaller.

At one point in the mid-1990s, the Internet was said to have leveled the playing field for all businesses, giving small businesses the same resources and potential through the World Wide Web as their enterprise counterparts. But while SMBs did have the same access to the Internet community, they were still disadvantaged when it came to building an online presence, creating a pleasant customer experience, and integrating its back end infrastructure to build a competitive, scalable business around an e-commerce store front. It took a team of web designers, database administrators, e-commerce specialists, and content developers and thus significant resources—just to leverage the potential of the Internet. Then, with a web store open for business, companies fell down when it came to all the back-end support of taking orders, tracking payments, shipping products, etc. Customers soon realized that their business was better off with the better-known players than the e-commerce specialists (case in point: CDNow.com eventually wound up living on Amazon.com).

It didn’t take long for the software giants to realize the market opportunity with the SMB segment of the market. They figured that if they’re doing multi-million dollar ERP implementations for the Fortune 1000 they could just as easily scale down their solutions, cut out code, and slash prices to offer a “mini-ERP” for the SMB space.

But alas, you can’t perfume the pig and still expect to bring home the bacon. The only way to appropriately serve a small business is to act like one. And the only way to act like a small business is to be a small business. SMBs need mini-ERP solutions designed from the SMB owner’s perspective—from the ground up, not something pieced together through various acquisitions or a scaled-down, stripped-out, repackaged solution originally designed for billion-dollar corporations.

There are over 10 million businesses with fewer than 100 employees in the U.S. alone. Conversely, there are only about 250,000 businesses with greater than 100 employees in the U.S. This “tip of the iceberg” is where most major software firms have traditionally placed their bets. But the real critical mass is in the SMBs.

If large software vendors are serious about moving down market into the SMB space, as many have proclaimed to be, they need to rebuild their software for the small business owner. Solutions that take up to a year to implement and cost more than a month’s revenue won’t cut it for a small business.

Microsoft, for example, is one large software firm feeling this pain, having reported a 1% decline in revenues for the first quarter, 2003 compared to the same period in the previous year (minus revenues from Navision, which was acquired in 2002). According to CNET News.com, Microsoft is also stripping out more features and attempting to cut prices in order to better reach the SMB space. Even Microsoft resellers are second-guessing Microsoft’s strategy, seeking safe harbor with smaller firms with ERP solutions built from the ground up.

But stripping out features only lessens the value to the SMB and further confirms that the pig is just being perfumed. Small business owners can see right through this approach. The only way to adequately serve the SMB space with mini-ERP solutions is to start over, get in the market, talk to small business owners, and design an effective solution that’s tailored to their unique requirement set.

Small business owners deserve to have affordable “mini-ERP” solutions that allow them to integrate their entire businesses—from accounting, to e-commerce, point-of-sale, inventory, shipping, CRM, marketing, and sales analysis. They need solutions that empower them with insightful analytics on the performance of their business. They need the ability to build and maintain an e-commerce store that doesn’t require an army of developers, and that’s totally integrated into their back office accounting and inventory systems. They need “mini-ERP” solutions that are up and running within weeks, not months or years.

Any software vendor selling to the SMB market needs to provide a solution that fulfills the unique needs of a small business and scales as the business grows. Large software vendors that develop multi-million dollar solutions for enterprises need to get a better understanding of the pains of a small business as it grows. Yes, it’s a paradox, but how else can an ERP vendor possibly understand the needs of an SMB without truly being one itself?