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You're the IT manager in a small business selling widgets, and your managing director has a problem.

You're the IT manager in a small business selling widgets, and your managing director has a problem.

Sales people without access to credit control data are shipping new products to customers that are behind with their bills. This means your receivables are rocketing, while your bank balance is in the red.

To make things worse, the sales department is promising customers products that are back ordered for weeks, because no one is checking with the warehouse to discuss inventory. What do you do?

Integrated software is supposed to solve these problems. Stitching business functions together in a single suite or set of well connected packages can eliminate the need to re-key data into different software applications manually. It can help fulfil customer orders more effectively while giving executives a deeper view into day-to-day operations.

But integrated business packages are not right for everyone. Companies must meet certain criteria if they are to take full advantage.

Each of the small number of integrated business systems on the market sits in one of two categories. Bottom-up suppliers offer simpler tools designed to suit the majority of business needs, with limited customisation facilities. They are gradually moving these tools into larger, more complex operations.

Top-down suppliers have either developed fully integrated packages or acquired and cobbled them together. Such firms generally offer more customisation capabilities due to their experience selling to larger businesses, and have expanded into the small to medium-sized enterprise space.

NetSuite falls into the former category, providing a collection of business functions for smaller SMEs. Selling a web-based service rather than on-site software, NetSuite's value proposition is two-fold.

First, integrating functions into a single package enables firms to manage their operations more effectively and provides a clearer day-to-day view of the business. Second, it eliminates the need for small businesses with little or no IT expertise to worry about running their own IT infrastructures.

NetSuite's integrated applications platform features a website front-end that can take e-commerce orders. Because it holds inventory, pricing and customer data, it is easy for the system to keep the website up to date with what is in stock, and to enable customers to track their orders.

Integrating this information with financials provides executives with a dashboard-like view of operations. It lets them drill down to find, say, how much revenue is coming from their five largest customers, whether the number of abandoned shopping baskets has suddenly increased, or which products are moving most quickly. Key performance indicators can be represented by speed gauges enabling them to track receivables, for example, and take action if necessary.

Medical equipment company Endoscopy moved to NetSuite on 1 April last year after using a small financial system called Accounting Office. Financial controller Keith Davis says he has not had time to set up a web store yet, but he is using NetSuite for accounts and customer relationship management.

"We needed CRM software because we had no interface between the customer system and the accounting system, and it meant we were not being as effective as we might have been in following up quotations," Davis says.

Now he can follow details of repairs, loan equipment, sales and shipments, all centred around a single record per customer, rather than duplicating such records in different applications. "The whole thing is traceable through just one centre by our sales and admin people. It makes the customer's transactions transparent to everyone," he explains.

Nevertheless, hosted systems represent challenges for some customers who want to keep data inside the firewall. Those who remember application service provider performance five years ago might be loath to trust their entire back office operation to someone else. NetSuite's 99.5% uptime guarantee means it can be down for 44 hours each year without incurring financial penalties from customers.

Security is another concern, according to  Joel Martin, vice-president for enterprise software at market researcher IDC. "Our research shows that when people are asked 'Will you have financial information hosted over the internet for your employees?' there's very little uptake compared to just the CRM aspect, where people like Salesforce.com play."

NetSuite's vice-president of product management, Mini Peiris, says putting customer data in a highly secured datacentre is probably more secure than leaving it on an SQL server in the corner of your office. True, perhaps, but psychologically, customers understandably prefer to have their data close.

Configurability is another issue. NetSuite's Netflex system lets you configure dashboards and custom records and fields on web forms, but is not yet able to fundamentally alter a business' workflow around different combinations of web forms, for example.

For more complex customisation, companies like Oracle, SAP and Microsoft might be more appropriate. Oracle aims its eBusiness Suite at mid-range firms, while SAP sells Business One and All In One, SME and mid-range versions of the fully-fledged R/3 system with its roots in the Fortune 500 market.

Microsoft's proposition centres around its Dynamics range. It is currently unifying the different products in this family, including Dynamics GP (an integrated platform with a more standard configuration available out of the box), Navision (more customisable), and Axapta (a more scalable alternative to Navision), which it acquired over a period of years.

It will unify them around a single code base in an initiative called Project Green, eventually replacing them with a single product by 2008. Microsoft CRM 3.0 is still an add-on that must be deployed separately to Dynamics GP (formerly Great Plains).

At the Authentic Food Company, a food manufacturer with a £21m turnover, data was duplicated across different systems before it moved to an integrated suite. This caused production inefficiencies, says business controller Parminder Basran. "We had a situation where the name of product would be entered 12 or 15 times on different systems," he says.

Product names would be generated within its technical specification software, and again in sales. Marketing would do the same, while accounts and shop floor labelling systems would duplicate the data yet again.

In a bid to better integrate its processes, the company examined products including Microsoft's Navision, but eventually opted for SAP's Business One. The development and deployment project, costing over £100,000, has brought significant changes to the way the company does business, says Basran. It now uses ASAP as a central data repository, driving systems including labelling and recipe generation from a single application. "That data is also pulled out for product information sheets on the marketing side," says Basran.

Other benefits include better supply chain integration. Some 80% of Basran's customers now use electronic data interchange links to feed data into his system. Each of the 200 stock-keeping units in his business is now set up as a bill of materials so that he knows what to order, week on week.

Finally, integrated CRM enables sales people to examine customers, suppliers and leads. Telephone calls, meetings and contact information, along with financial data such as invoices and credit notes, can all be accessed by different business departments.

"Previously, CRM was everyone's individual contacts folder," says Basran. "There was no central place to hold activity reports."

Nevertheless, things are not perfect. As a cut-down version of SAP's R/3, there are some product limitations. "The main issue arises when we get into manufacturing resource planning," says Basran, complaining that in Business One the function does not handle line scheduling.

"We will only ever get to the stage where the system will tell us what we need to make via the master production schedule." R/3 would describe which line it should be made on, and how long it will take to make. Instead, the company uses spreadsheets to schedule its five production lines manually.

The challenges when implementing integrated systems are not merely technical, however. "NetSuite is extremely data hungry. Because it can handle lots of data, getting it into the system and keeping the whole thing up to date takes a fair amount of time," says Davis. Companies must have the discipline to "feed" the systems with the right data, which in turn means getting cooperation from staff.

Basran took a different approach to many companies when deciding which supplier to use for his integrated system - he asked them to present to his users. "In any business, if you are trying to implement any process change, you need the users' buy-in," he says. "We wanted them to feel listened to."

Users liked the drill-down and reporting features in Business One, plus the ability to change the user interface. These represented a different set of criteria than that of the IT department, which was more interested in improving back-end process efficiency.

Ultimately, the value of integrated systems lies in reducing logistical pressure on companies dealing in high-volume products and services for whom automation can yield rewards.

If you are in the business of selling high-value, low-volume goods, keeping track of financials, customer relationships and inventory may not be such a huge challenge. You might decide that the investment needed to customise and deploy an integrated system simply is not right for your company.

On the other hand, if fragmented back-office functions and volatile financials and inventory are making your business opaque to senior executives, it might be worth trying to join the dots together.

Case study: in harmony at Ministry of Sound

The Ministry of Sound nightclub has been using Microsoft's Dynamics GP (Great Plains) and CRM packages to unite elements of its business. CTO and head of operations, James Bacchus, says the system has helped its digital sales, tours and events departments to automate the sales process.

"Previously the sales people would create a billing request in Excel, send that to accounts, and someone would have to re-key it into the finance system to generate invoices," he says. "Now, they can raise a sales order within CRM and that will transfer into Great Plains and an invoice will be created from that."

The system has also made the sales process more structured, says Bacchus. Previously, sales people would use Excel for sales planning. "Now details of opportunities are entered into the CRM system and sales people can run off the opportunity pipeline report so that they can see what revenue they expect when," he says.

The company used a third party consultancy to integrate CRM 3.0 and Great Plains - something that had to be done with a bundled version of Microsoft's Biztalk software. The cost of the eight-seat project was under £10,000, he says, half of which was consultancy fees.

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