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A study and market research on ERP software in SMEs (Mumbai)

- Kavita Ramanujam MMS Marketing

FLOW OF PRESENTATION
Part I : Project Introduction
ERP Company Details Need, scope, objectives Research Methodology

Part II : Data Interpretation and Analysis Part III : Outcome

Observations and Findings Limitations, future scope Learning, recommendations, conclusion References

PART I PROJECT INTRODUCTION

ERP??
INTEGRATES all functions to a single computer

system
Finance, IT, HR, Sales, Marketing, Purchases,

customers, suppliers
Integrated database

Helps in report generation

Types

ERP Advantages
Integrate financial information Integrate customer order information Standardize and speed up operations processes Reduce inventory Avoids human errors

ERP Industry
Large no. of local and global players Global Leader: SAP, followed by Oracle Most widely used Software in India: Tally for Accounts Gartner: ERP in India: CAGR of 20-25%

COMPANY PROFILE
Eresource Infotech Private Limited
Established in the year 2003 CEO: Mr. Sudheer Nair 2003-2006: Website design and software applications 2006 onwards: One of the few providers of web-based ERP in India Position: Marketing Intern under BDM

Products and Services

ERP software for: Pharmaceutical industry
Manufacturing industry Fleet and transportation management Kitchen industry Infrastructure and project management Trading and Chemical industry

Services:
Pre Implementation Approach, Project Management and Monitoring, ERP Training and Implementation, etc.

SME SECTOR IN INDIA

SME classified into 2 classes: Manufacturing, Service Enterprises

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Role of SMEs in India

Backbone of Indian economy Contributing to 45% of the industrial output Contributing to 40% of Indias exports Employing 60 million people Create 1.3 million jobs every year Produce more than 8000 quality products for the Indian and international markets Growth rate: About 8% per year

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OBJECTIVES
To analyze the need for ERP in Indian SMEs (Mumbai)

To identify prospective customers

To identify the factors which influence companies to / not

to adopt an ERP

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RESEARCH METHODOLOGY
Exploratory and Descriptive Quantitative research Method: Survey method using Questionnaire Population: About 1, 00,000 companies Sample size: 955 companies Sampling technique: Non probabilistic convenience sampling Area: Western, Central and Harbour regions of Mumbai Data collection: Primary (by survey), Secondary (on the internet)

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Fast Facts
Many SMEs have started adopting Tally Govts encouragement towards SMEs to make more investments for growth and expansion Many SMEs have MNCs as their clients Trying to keep up with advancing technology, but still lagging way behind due to lack of awareness and funds

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PART II DATA ANALYSIS AND INTERPRETATION

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Existing clients
Manufacturing Trading Pharmaceuticals Project Management Oil and gas Computer Accessories 2% 1% 6% 8% 8% 4%

Manufacturing Pharmaceuticals Trading Project Management Logistics Oil and gas Chemical Computer Accessories

40 32 8 8 6 4 2 1

Logistics Chemical

39%

32%

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Region wise segregation: 54% of companies (515) visited were from Western Region (Churchgate to Virar) 35% of companies (333) from Harbour (Panvel to CST) region 11% of companies (106) from Central region (CST to Ambernath) and 1 company from Daman.

Western Central Harbour Outskirts Total

515 106 333 1 955

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Sector-wise segregation:

Manufacturing Chemicals Trading/exports/dealers IT Others

1% 3% 7% 4% 6% 6% 4% 12%

Pharmaceuticals Transportation and logistics Construction/Infrastructure Associations

57%

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Prospect/Non-prospect:
6%

28% Prospects Non prospects 66% Neutral

57 - prospective customers 271 - non-prospects as they already used an ERP or were not planning to implement one in the near future 627 - responded neutrally

684/955 are potential customers

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No. of entities

1 2 3 4 5 >5

626 42 31 24 13 52

3 18%

>5

Undisclosed

3%

1%

5%

4% 3%

66%

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Employee strength
Employee strength 1 to 25 26-50 51-100 100-200 200< Total No. of companies 158 171 151 85 72 637

No. of Companies

200

150
100 50

0
1 to 25 26-50 51-100 100-200 No. of employees 200<

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ERP Awareness
Awareness about ERP Yes No No. of companies 545 252

17%

Yes 26% 57% No Undisclosed

22 Awareness about eresource ERP

Awareness about eresource ERP No. of companies Yes 34 No 763 Undisclosed 158 Total 955

16%

4%

Yes No Undisclosed 80%

Needs a huge awareness program!!!

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Software in use
Tally ERP Udyog Undisclosed SAP Excel Others Oracle Customized Manual/No software

20% 42% 14%

8% 4% 3%

2%

6%

1%

Tally ERP SAP Oracle Udyog Excel Customized Undisclosed Others Manual/No software Total

97 13 3 5 7 10 19 32 47 233

Lead Competitor: Tally

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In house / Outsourced software
In house/Outsourced software In house Outsourced Undisclosed Total
10% 5%

No. of companies 10 157 19 186

In house

Outsourced
Undisclosed 85%

Shows Market Trend

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Client server / Web based ERP
Client-server Web-based Undisclosed Total 147 20 19 186

10% 11%

Client-server

Web-based
79% Undisclosed

Shows Market Trend

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Turnover <1 Cr
1-5 Cr 5-15 Cr 15-25 Cr > 25 Cr

No. of companies 172

158 141 95 52

<1 Cr

1-5 Cr

5-15 Cr

15-25 Cr

> 25 Cr

Undisclosed

18% 36% 16%

5% 10%

15%

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Budget for ERP

< 1 Lac 1 - 5 Lac 5 - 15 Lac 15 - 25 Lac > 25 Lac

Budget for software

8% 15% 28%

No. of companies

< 1 Lac
1 - 5 Lac 5 - 15 Lac

172
158 141 95 52

23% 26%

15 - 25 Lac > 25 Lac

Total

618

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Chi-square tests:
H0: There is no association between employee strength of a company and the company being a prospect/non prospect H1: There is an association between employee strength of a company and the company being a prospect/non prospect H0: There is no association between a companys awareness about ERP and the company being a prospect/non prospect H1: There is an association between a companys awareness about ERP and the company being a prospect/non prospect H0: There is no association between a the no. of branches a company has and the company being a prospect/non prospect H1: There is an association between a the no. of branches a company has and the company being a prospect/non prospect H0: There is no association between a companys turnover and the company being a prospect/non prospect H1: There is an association between a companys turnover and the company being a prospect/non prospect H0: There is no association between a companys current usage of ERP and the company being a prospect/non prospect H1: There is an association between a companys current usage of ERP and the company being a prospect/non prospect

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Employee strength and status

Chi-Square Tests Asymp. Sig. Value Pearson Chi-Square Likelihood Ratio Linear-by-Linear Association N of Valid Cases Symmetric Measures Approx. Value Nominal by Nominal Phi Cramer's V Contingency Coefficient N of Valid Cases 637 .042 .042 .042 Sig. .894 .894 .894 637 1.101a 1.100 .336 df 4 4 1 (2-sided) .894 .894 .562

Accept Ho, No association

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Awareness about ERP and status

Chi-Square Tests Value df Asymp. Sig. Exact Sig. (2- Exact Sig. (1(2-sided) sided) sided)

Pearson Chi-Square Continuity Correctionb

Likelihood Ratio Fisher's Exact Test Linear-by-Linear Association N of Valid Cases

39.368a 37.658
60.092 39.314 719

1 1
1 1

.000 .000
.000 .000 .000 .000

Symmetric Measures Value Nominal by Nominal Phi Cramer's V Contingency Coefficient N of Valid Cases .234 .234 .228 719 Approx. Sig. .000 .000 .000

Reject Ho, weak association between the two

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No. of branches and status

Chi-Square Tests Value Pearson Chi-Square Likelihood Ratio Linear-by-Linear Association N of Valid Cases 44.435a 23.498 7.512 785 df 30 30 1 Asymp. Sig. (2sided) .044 .794 .006

Symmetric Measures Value Nominal Nominal by Phi Cramer's V Contingency Coefficient N of Valid Cases .238 .238 .231 785 Approx. Sig. .044 .044 .044

Reject Ho, there is weak association between the two

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Turnover and status

Chi-Square Tests Value Pearson Chi-Square Likelihood Ratio Linear-by-Linear Association N of Valid Cases 10.839a 12.247 3.347 618 df 4 4 1 Asymp. Sig. (2sided) .028 .016 .067

Symmetric Measures Value Nominal by Nominal Phi Cramer's V Contingency Coefficient N of Valid Cases .132 .132 .131 618 Approx. Sig. .028 .028 .028

Reject Ho, weak relationship between the two

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Using ERP and status

Chi-Square Tests Value Pearson Chi-Square Continuity Correctionb Likelihood Ratio Fisher's Exact Test Linear-by-Linear Association N of Valid Cases 22.474 955 1 .000 22.497a 20.939 18.587 df 1 1 1 Asymp. Sig. Exact Sig. (2- Exact Sig. (1(2-sided) sided) sided) .000 .000 .000 .000 .000

Symmetric Measures Value Nominal by Nominal Phi Cramer's V Contingency Coefficient N of Valid Cases .153 .153 .152 955 Approx. Sig. .000 .000 .000

Reject Ho, weak association between the two

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PART III OUTCOME

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OBSERVATIONS AND FINDINGS

Focus on Manufacturing and Pharmaceutical Sector Aviation, Travel and Tourism, Healthcare, Printing and Packaging, Chemists, etc. have not been targeted Many SMEs already using Tally for Accounts Less/no branches, hence less expansion 57% companies aware about ERP, but many unaware yet, calls for a promotional strategy at the earliest Established companies like SAP, Oracle have still not laid their command over the SME sector Opportunity to enter this market, no strong player except Tally.

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Issues observed
Internet facility needed (web-based) Low budgets by SMEs for software or ITeS High Investment, hence high risk Perception

Earlier Implementations
Change management Employee Retention Implementation timelines

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SWOT ANALYSIS
STRENGTHS Forte in Manufacturing, Pharmaceutical sector Comparatively low cost ERP provider One of the very few web based ERP providers WEAKNESSES x Lack of awareness x Lack of competitive advantage x Needs internet facility

OPPORTUNITIES Expand clients in Manu and Pharmaceutical sector Capture clients in untapped trading, infrastructure, transportation sector

THREATS x Availability of cheaper Accounts software: Tally x Change Management x Competitors pricing

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Benefits to the Company

Identified a lot of prospective customers Prime prospects Flair Pens India Pvt. Ltd. Hal Offshore Ltd. PeeTee Extrusion Pvt. Ltd. Acma Computers (Channel Partnership) Identified ERP market trends and market demand Insights for pricing and promotional strategy Plans to arrange seminars/conferences for various Associations

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LIMITATIONS
No. of respondents for each question varied all through

the project.
Concerned IT persons unavailability

Paucity of time
Questionnaire

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FUTURE SCOPE
ERP penetration in India and Asia

Urban v/s Rural ERP usage

ERP penetration n each sector

Demand for modules

Module wise competitor analysis

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RECOMMENDATIONS
Opportunity in the Trading and Dealing Sector Minimal competition in Project Management (Infrastructure) Cater to individual module requirements and then expand Appropriate pricing

Channel partnerships with Website Development firms

Tie-ups with internet providers can also help tap the rural market Develop a secure mobile App for ERP

Competitive advantage of ERP over Tally

Though high investment, but high returns

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CONCLUSION
Highly potential SME market, but financial and

psychological obstacles
Large no. of small competitors

Lack of awareness
Price sensitivity

Need of the hour = Appropriate promotional and pricing

strategies

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BIBLIOGRAPHY, REFERENCES, WEBSITES

http://www.eresourceerp.com/ http://computer.financialexpress.com/20120430/news08.shtml http://www.dcmsme.gov.in/ssiindia/defination_msme.htm http://www.smechamberofindia.com/ http://www.infosysblogs.com/oracle/2009/01/erp_for_sme_wh y_and_why_now_1.html http://erpservices.hubpages.com/hub/What-is-ERP-Why-doSMEs-need-ERP-Services http://www.erppandit.com/erp-packages.html http://economictimes.indiatimes.com/news/emergingbusinesses/saas-based-erp-adoption-to-grow-at-28-cagr-in-indiagartner/articleshow/21621611.cms Marketing Research By Naresh Malhotra

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