Small and Medium Size Enterprises and It

Introduction:

Many large companies are outsourcing business processes to medium and small size business to cut the cost at the same time they are looking for more innovative peers in the market.

In large enterprises IT is used to support the business processes but for SMEs its still in developing stage (palvia,1996) . Any business system consists of many business processes.

Business Process:

According to Lewis and Nigel (2004) a business process is defined as set of logically related tasks performed to achieve a defined business outcome. A set of processes forms a business system.

To increase the efficiency of the business processes companies prefer to computerise. To automate the Processes of company under one common software platform using the technology called Enterprise Resource Planning (ERP). It will help in providing solutions to problems that arise with massive companies.

Enterprise Resource Planning (ERP) :

ERP is defined as an integrated computer based system that manages all internal and external resources of organization. ERP facilitates information flow between various departments dealing with business functions with uniform system environment (Bidgoli, H., 2004)

The History of ERP Evolution: The foundation for ERP started with the concept of inventory control in the 1960s. Based on traditional inventory control concepts such as reorder point system, customized software packages were designed to suit the requirements of manufacturing companies. In the 1970s the focus shifted to material requirement planning (MRP) systems to plan and control manufacturing. These systems played an important role in translating the master production schedule required to finish items by monitoring times for assembly, the sub-assemblies, components, raw materials planning, and procurement. The system launches order to control work- in -processes and raw material inventories through proper timing of order placement (Schroeder, 2003; Shankarnarayan et al., 2000). Next version of MRP system evolved by combining the output of MRP and routing information to determine the capacity required. This is used to make sure that the MRP plans generated are valid for the capacity available. In the 1980s MRP systems further evolved into manufacturing resource planning (MRPII) system which includes components to be manufactured in-house as well as those to be procured from outside. Thus MRP - II essentially was an extension of MRP to the shop floor and distribution management.

Information systems were being developed and implemented in other functional areas, each with its own database and data architecture to enable managers to focus on its role and to improve decision making within a specific functional area - marketing, finance, and human resource. Even though such practical information systems matured in terms of functionalities over the years of testing, modification, and maintenance, these systems had also caused trouble such as data redundancy, information inconsistency and inaccuracy and high system maintenance cost. In late 1970s and early 1980s the need for enterprise wide integrated systems intensified as global Competition became unavoidable, products innovation became important factors to retain customer and quicker production and distribution became standard. (Robinson, et al 2000).

ERP system means that whatever happens in one area has a ripple effect in other areas. Understanding the implications of actions of one area, on other areas of the company, is not something that happens overnight.

ERP systems are widely adopted by large companies to support business functions and to monitor the performance. How ever the SME’s are not proactive in adopting ERP system because of cost issues, maintenance and staffing problems. Now they have an option of new technology called Software as a Service (SAAS).

What is software as a Service(SAAS).

SAAS is an application software delivery which is web based. Rather than having dedicated software running on user pc, all the functions are stored on a remote computer and accessed at various location using internet. This reduces a lot maintenance and initial licensing cost. It’s like a service provided by outsider and the company pays for using the service.

Maintenance and upgrading of functionalities of application are the duties of the service provider unlike other dedicated software’s where end user of buyer is also involved. All the end user data is securely store and can be retrieved or modified by end user any time.

SAAS History:

According to Dempsey, d. (2006) SAAS history is traced back to year 1970’s where mainframe computers are time shared and rented among companies which do not wish to buy a mainframe but want to use its computing power.

In 80’s and 90’s new micro computers client-server architecture is similar to SAAS technology. As the complexity of business application increase every day during late 90’s a new Application Service Provider (ASPs) came in to market which host software such as SAP, Oracle Financials etc for the end user.

According to Dempsey (2006) ASPs provide customer all the advantages of out sourcing the maintenance and development of business applications. However the companies still have to pay fro full license of the software which is very expensive.

In Early 2000’s the term SAAS came it to market ASP is the fore runner and will be similar to SAAS except that Client would not have to pay for full license. the new SAAS is given importance by all the major companies in software industry and promoting SAAS as future of Software industry.

Benioff (2006) adds that the future of technology industry is not set of heterogeneous services delivered over a network, services are scalable and reliable, that are always available and fully Integratable in one word its SAAS.

According to Gates (2005) services designed to scale from ten to hundreds of millions will change the nature and cost of solution deliverable to SME’s.

In addition Rippert (2005) says SAAS will have a big impact on smaller and subsidiaries of large companies because it can be implemented easily and is priced per user per month with no software license. This will be the major advantage to use technology with out cost associated with it.