Business Systems for SMBsrtf

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					Business Systems at the Service of Small and Medium Businesses
Margus Tammeraja Marketing Director, HansaWorld

We all have our goals and objectives, that we are aiming at, and that require more than just a bright mind and a pair of hands to realize. Most of the people reading this article are either employers or employees and come to contact with different IT solutions in their everyday work one way or another. These are the devices that help us be more clever and smart and achieve our aims. To many employers IT plays an important role in supporting the stability and development of their business. For employees IT is a means of fulfilling their everyday tasks. With its new series of articles, ITee is going to take a closer look at the different topics concerning business information systems from these two viewpoints and also give some practical advice. What business information systems we are talking about There might be someone reading these lines who has never even touched a computer and asking how can IT help me?. Using electricity, communication services, banks and transportation each and every one of us is dependent on the information systems of the infrastructural enterprises. It would not be possible to offer most of these services at such level (or not at all) without the presence of information systems. Try to imagine banking without computers, for example. Here we can divide all businesses into three large groups: 1) fully dependent on information systems; 2) partially dependent on information systems; and 3) very little dependent on information systems. If you now intend to classify your business, then the smaller the business and the more distant its main activity from IT, the more likely it belongs to the third group. Let us leave aside the infrastructural enterprises and try to find out which IT solutions you could use to be more efficient. Any small business should pay taxes and therefore needs to do some information processing for tax reporting and book-keeping. It is possible, of course, to do this manually with pen and paper, but only with a very small volume of transactions. If you have customers paying you in cash, you probably need a POS system (plus a bank terminal for card payments). To sell your services better, you might want to use the internet. You need a system to keep the administration in order (a word processor or a spread sheet at least), and the e-mail is there to help you communicate with the outside world. To be able to use all that, you need at least one computer and access to the internet. You can of course outsource some of the above (book-keeping, internet solution), but it is often cheaper to pay for your own accounting software licence in order

to be able to issue invoices, for example. For any larger company it would only be wise to enter all the everyday transactions into their own system, even if they are buying the service from an accounting company. For small businesses, the first more important piece of their information system is accounting software. Adding a POS or warehouse management solution gives us already a business information system or even an ERP system. I would collect all the information systems that are needed for business management, under the term “business system”. Although the business systems of small and large businesses are based on software solutions from totally different categories, they serve the same aim – to improve management and help the employees be more efficient. Attention to smaller information systems We usually read about larger software solutions, which can sometimes be found presented as also suitable for small businesses. But if we take a look at the prices of these so called small business solutions, then we see that these are not affordable for a small (or even medium sized business), in Estonia at least. For example, Microsoft is offering a so-called fully functional business software package with a user licence priced EEK 30,000. Assuming that a small company would probably need 5…10 user licences, we get a price of EEK 150,000…300,000 for the licence alone. There are similar solutions on the market that have been specifically designed to answer the needs of a small business, which cost EEK 50,000…100,000 – which is three times less! And if you are willing to take the risk, you can find even cheaper “home-made” solutions. Taking a look at the Estonian enterprises, we can see that ca 74% of them are small businesses with yearly turnovers of up to 3 million and a number of employees of less than 5. About 20% have a yearly turnover of 3…20 million. This means that about 94% of all Estonian companies need a small business solution. But where is all the money then? About 73% of the total turnover of all Estonian companies is shared between large companies forming just 6% of all our enterprises. Therefore it is understandable why the more serious business software vendors are targeting the purses of the rich minority. As selling software and services to small businesses is not too profitable as compared to bigger systems, most of the more complex solutions have remained the privilege of larger companies. But as the technology develops and the necessary technical devices (computers, recorders, communication devices, etc) become cheaper, even smaller businesses can afford more complex systems sometimes. On the other hand, this brings along the danger to make your life too complicated. Theoretically it is possible for a small business to implement a business information system as functional and powerful as that of some bank or power engineering company, if they choose to do so. Technically, an innovative three-man transportation company can start using a satellite communication navigation system together with a route planner, which is integrated with an internet based ordering system, which in it’s turn is a part of a software system that is bought as

an ASP service. Putting all this in use, calls for an absolutely different administration and organisation of work as compared to a simple three-trailer transportation company. Intentions to automate the business processes of a small company bring along managerial issues rather than IT problems. One of the main objectives of this series of articles is to throw light on such issues and look for practical solutions. Big becomes small and small becomes big While making the decision about their business system, small and medium sized businesses have two different groups of business software packages to choose from – one, that have come to being as a result of clipping some larger system, and others, that have grown out of some single user system into a small to medium sized business solution. Both have their advantages and disadvantages: we already talked about the complexity of “growing smaller”; on the other hand, with “growing larger” you may get stuck with some functionality that requires higher flexibility; or a technological problem (e.g database performance problems). The actual situation on the world’s business software market still shows us that historically small companies use software solutions which have specially been designed for them, and which gradually adopt the functionality of larger systems. Although the authors of larger business software systems have launched their so-called clipped versions for years, these have not achieved much popularity on the market. One of the problems might be their relatively high price, and the authors of larger systems do not always understand what a small business actually needs. It is thought that small businesses should just copy larger companies in everything they are successful in, but it often takes a completely different approach to manage a small company. A small company does not have the resources to make its business processes more complex or “over administrate” the business. At the same time, a small business can easily benefit from some technologically innovative solution, which would take a lot of effort to implement in a large company. Leaning on my long time practical experience I see the optimum solution in a combination of innovative but simple technological solutions (e.g efficient combining of communication devices with your business system) and a developing business software system that has specially been designed to answer the needs of a small company. Important points to note with any business system are: easy to implement: you can start using it sooner with lower costs; easy to use: you are more efficient scalability: your business system grows together with your company technologically innovative: you keep pace with time, this is a competitive advantage integration: all your data easily accessible in one comprehensive system good support and education: helps you understand your needs and find solutions. I would also like to point out the fact that most of small businesses never grow large.

Besides their lifespan tends to be relatively short. Entrepreneurs know very well that all projects cannot be successful and many employees know what it means to lose one’s job. Therefore it would be very important to find the optimum solution with minimum investment. An alternative would be to rent a system, which enables you to start using the functionality of an expensive solution straight away, without burdening yourself with an investment that might be beyond your powers and which would just hinder the cash flow of the young business.

The coming articles will handle the above topics in more detail – first we will answer the question “How to create a suitable business system for your company?”. You are welcome to send us your ideas about the topics. indrek.kald@aripaev.ee, margus.tammeraja@hansaworld.com


				
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