Technology

SAP Solutions for Growth of SMEs

Rishi Sonwal
Dec 2010
The economic order of the country is changing gradually. The journey of an agricultural economy to one of the fastest growing consumption economy has miscellaneous experiences. Remarkable changes in multiple factors are responsible for this landmark metamorphism. The rising economic activities, decontrolling and decentralizing policies along with the inclination towards the career and entrepreneurship have been major contributors to the new economic scenario of the country.

Thrust to the entrepreneurial activities and opening of economy resulted in the establishment of more and more enterprises. As per the data shared by the Ministry of MSMEs there were merely 6.79 million units in the year 1990-91 and it surged to over 26.1 million in the year 2006-07. And if we agree with the various experts there may be over 35 million micro, small and medium enterprises in country.

Data itself tells the story of the rising entrepreneurial activities in the country. Such business houses are being run by the highly skilled and educated professionals. These entrepreneurs never mind taking risk and are very open for the ways that can boost their enterprise. They always implement many strategies and management techniques to ensure their sustainable and profitable growth.

The inclinations towards the innovation and strategies to adopt the newer technologies that can significantly give thrust to their business have created the demand for such solutions which can enable them to maximum utilization of their resources. The endevour goes on constantly and now the situation is that many players have ventured into the market to supply against these demands.

Enterprise Resource Planning

Utilising the resources is necessary to gain the sustainable potential and growth. More often than not, in SMEs the activities are controlled by a single person or a small group. They do their best but, generally, they fail to utilize their resources to the maximum level. The feeling is that they need some handy tools that can provide them absolute control over their businesses and at the same time enable them to give their best.

Tools that can give ultimate solution for the efficient solution for managing the resources and provide control over the whole enterprise operation are often termed as the enterprise resource planning solutions. These solutions have been in huge demand in the SMEs especially the mid-size companies.

The requirement of such solutions is also being understood everywhere. “In a stretched environment of a growing mid size clients, it becomes doubly important to make sure that all stake holders are bought into what's being done as part of the ERP implementation,” says Vinay Singh, CEO of Vital Wires, a pure SAP Solutions and consulting firm.

Systems Applications and Products (SAP)

There are many ERP solutions flooding the market with the promise to give complete solutions for the effective management of the resources and to enable the user companies to control their day to day activities. Systems, Applications and Products (SAP) are getting the maximum demand in the segment.

SAP solution was first introduced by IBM employees in 1972 with the objective to provide customers with the ability to interact with a common corporate database for a comprehensive range of applications. The applications have been assembled with many enterprise solutions and today many corporations, including IBM and Microsoft, are using SAP products to run their own businesses. SAP applications provide the capability to manage financial, asset, and cost accounting, production operations and materials, personnel, plants, and archived documents.

Seeing the rising demand for SAP based solutions, many companies have ventured in the market offering multiple and innovative SAP based solutions for the mid-size companies. Vital Wires is one such company that combines its passion to add business value with deep SAP platform knowledge, industry specific process expertise, and unique methodologies to amaze their clients in every interaction.

“Our methodologies encompass learning from years of consulting practice and deep appreciation for the organizational environment of our target client segments. The most effective method to understand our methodologies will be to have an interaction with us,” Singh says and adds, “Most of our clients are the growing mid size clients who are making significant IT investment for the first time where a big part of the contract is service delivery and its tracking and mutually understandable status of the project at every stage. We work on unique methodologies; a collaborative planning process/tool that inspires consensus, project status measurement technique that is equally appreciated by clients and us and criteria based phase exit of project including criteria based go-live event.”

Singh claims to offer the 'ultimate' solution which has the lowest cost of operation and completive edge which ensure the growth and excellence. “Vital Wire's delivery methodology for SAP engagements factors is our deep appreciation for several reasons for failure and their root causes. Our delivery methodology, staffing approach, premedical teams, central solution center address various possibilities that exist in the real world of a SAP project implementation,” claims Singh who quit a position with Sapient Corporation to return home to begin an enterprise of global repute way back in 2003.

Photo of Vinay singh, SAP solutions

Vinay Singh, in a conversation with SME WORLD highlighted more aspects about their SAP solutions and their benefits for SMEs in India.

Most of the SMEs in India are family businesses or being run by the first generation entrepreneurs. In such organisations, most of activities like production, management, distribution, marketing, promotion, etc. are being handled by the proprietors itself. How the SAP solutions can be useful in such organisations?

In midsize growing organizations trust and accountability is not always driven by elaborate processes and culture of compliance, but by having trust worthy family members at key positions. This is a matter of operational control and visibility. By having SAP, one would automatically get considerable control on these matters. However most of the return on investment from SAP comes from SAP facilitated enablement to drive excellence, strategic decision making and competitive advantages. A mature ERP system such as SAP means higher chances of realizing ROI through a strategic investment even it is a decision driven by emotion.
 
There are 35 million SMEs in India and they account for mere 30 per cent of the total IT-expenditure in the country. What could be the reason behind lower inclination towards the IT or ICT solutions?

I believe it is largely because IT and ICT solutions have been purchased and sold as a cost items and not as necessary tool for growth and competitive advantage. Competitive pressure from other countries such as China in manufacturing industry will force Indian SMEs to innovate to be competitive and achieve economy of scale. IT enabled business solutions will emerge as one of the innovations for SMEs. This situation makes SME sector an exciting market for companies like Vital Wires Consulting.

It is market phenomenon that more than 90 per cent of total IT or ICT solutions which are available in the market are either too costly for SMEs or they are too complex in nature for SMEs to reap their maximum benefit?

I do not believe so. Last few years have been dedicated by IT product makers in making these products cash flow friendly by either breaking them into pieces or by offering pay per use through cloud computing model. I believe as a thumb rule SME's can break their growth into three stages. For most industry sectors – there the three stages are indicated by a turnover of upto 10 crore, 30 crore and beyond 30 crore turnover. There are a host of really good solutions available in the market that will always give you the ROI if you map them well with your stage of growth.

Which type of organizations must have the SAP solutions?

Any company that is in the business of manufacturing, production or providing services and has turnover more than 30 crore INR can expect to get its return on the investment from SAP within 2-3 years' time and make more money over next few years.

What infrastructure will be needed for effective implementation of SAP solutions?

Basic server hardware infrastructure ranging from 7 lakhs INR to higher depending on the size of the company is sufficient. Companies that are located over distributed physical locations should have reliable internet connectivity.

How much investment will be needed to establish in any small or mid-size company?

As low as 45 lakhs for total software license, hardware and implementation budget.

What is Vital Wires's business model?

Vital Wires is a pure SAP solutions company which basically focuses on the midsize    organizations and designs unique methodologies for its clients' benefit. The business model of Vital Wires includes the following:-

1) Consulting and Implementation services - Vital Wires presents a radically different approach to SAP implementation for its growing clients. They simply believe on delivering client success and elucidating the following aspects
  •              Lower Operational Cost
  •             Competitive Edge
  •             Enablement for Growth
  •             Excellence Enablement
2) Unique Solution Components
  •             Component Traceability
  •             Customer Account Portal /Distributor Portal
  •             Rebates and Discounts
  •             Job work for others
  •             Import Invoice Processor 
How the company is different from other companies in SAP consultancy? What are the USPs of the company?

The Major difference between Vital Wires and other SAP consultancy companies is that other companies just sell the SAP solution and resolve the problems of their clients if any. But Vital Wires not only sells the SAP solution but it consistently works on it to enhance its efficiency as per the requirement of the respective organization.

What position does Vital Wires holds among the SAP Solutions consulting firms in India?

Vital Wires is a well known consultancy firm among the other companies .It provides great services to its clients and offers unique solution components for rendering support to different activities. It only focuses on the midsize manufacturing firms for its business. There are high prospectives of its growth   in the near future.

What are the verticals Vital Wires has targeted, so far?

Vital Wires target on the Midsize growing companies whose turnover is more than 50 to 60 crores per year. They feel that it is a necessity for these companies to use such software's to enhance the working conditions. Having expertise in the manufacturing sector.

What been the adaptation trend of SAP solutions in India?

For last few years India has been fastest or second fastest growing market for SAP. SAP has generally seen 30% increases in license sales every year except for a year during the economic downturn.

What trend do you expect in years to come?

SME's will recognize mature ERP product enablement as a necessary source of innovation to globally compete and also as source of ROI creator. The adoption trend is going to be aggressively positive. Our company, Vital Wires, is making significant investment to educate SMEs in this area. We are launching a tool to estimate Cost and Return on Investment by Jan 2011. SMEs can just use this tool at our website to formulate a business case that is specific to their company.
 
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1 Comments >>
Princes
21 Sep 2012 (15:05:36)
I wonder how many SME ownres didn't even bother asking having been turned down before. The analysis of Project Merlin that I read had very little new money coming into the accounts of the SMEs. By the time repayments and renewals had been taken into account there was very little by way of expanded lending. More political spin. Project Merlin was, in this article, recognised as being as illusory as Gandalf. I'd like to believe that the banks are lending but they just can't be they don't have the capacity to do so while re-building their balance sheets, providing for sovereign debt write-offs, and upgrading their core ratios to meet the ECB directives following the most recent stress tests.