RESEARCH ON USE OF INFORMATION SYSTEMS BY SMALL AND MEDIUM ENTERPRISES

ByMUDIT ARORA

1

JUNE, 2008

RESEARCH ON USE OF INFORMATION SYSTEMS BY SMALL AND MEDIUM ENTERPRISES

ByMUDIT ARORA

Under the guidance of

Mr.G.V.SRIDHAR Dr. Om Kumar KrishnanProject Manager DesignationTECHTREE IT IMT, Ghaziabad

JUNE, 2008

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Certificate of Approval

The following Summer Project Report titled” Research on use of Information Systems by SMEs" is hereby approved as a certified study in management carried out and presented in a manner satisfactory to warrant its acceptance as a prerequisite for the award of Post-Graduate Diploma in Management for which it has been submitted. It is understood that by this approval the undersigned do not necessarily endorse or approve any statement made, opinion expressed or conclusion drawn therein but approve the Summer Project Report only for the purpose it is submitted.

Summer Project Report Examination Committee for evaluation of Summer Project Report

Name Signature

1. Faculty Examiner _______________________ ___________________

2. PG Summer Project Co-coordinator _______________________ ___________________

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Certificate from Summer Project Guides

This is to certify that Mr. Mudit Arora, a student of the Post-Graduate Diploma in

Management, has worked under our guidance and supervision. This Summer Project Report has

the requisite standard and to the best of our knowledge no part of it has been reproduced from any

other summer project, monograph, report or book.

Faculty Guide Organizational Guide

Designation Designation

IMT, Ghaziabad Organization

Address

Date Date

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Table of Contents

PageAcknowledgement

Abstract

Table of Contents

List of Figures

List of Tables

List of Appendices

List of Abbreviations

I

1.1 Introduction

1.2 Defining SMEs 1.3 SMEs in India 1.3.1

II Understanding about BMS software solutions

2.1 What is SAP B1? 2.2 Why it is suited for SMEs?

2.1.1 How can an SME benefit from the implementation of SAP B1?

III Getting Market Insight: Market Intelligence

IVQuestionnaire Design: Defining the objective and the sample group

3.1Objectives of the Survey

. 3.2 Sampling Group

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3.3 Writing the Questionnaire

IV Meeting SMEs already having BMS/IS Solutions in Bangalore

4.1 Methodology of Survey

4.2 Survey Analysis 4.2.1 Analysis of the major problems in day to day operations4.2.2 Analysis of major problems in the existing Information System4.2.3 Analysis of the requirements 4.2.4 Analysis of the potential customers

4.3 Conclusion Based on Analysis

V Recommendations

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List of Figures

Figure No. Description Page

1

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List of Tables

Table No. Description Page

8

List of Appendices

Table No. Description Page

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Abbreviations

1. BMS- Business Management System 2. AMC- Annual Maintenance Charge

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Abstract

RESEARCH ON USE OF INFORMATION TECHNOLOGY BY SMALL AND MEDIUM

ENTERPRISES

By

Mudit Arora

SMEs have been a sector which contributes immensely to the GDP of India .This is a sector which has shown promise for growth in exports .But many of the SMEs need to improve the way they function. They need to improve on many business processes and the manner in which they are conducted. Information Technology has played a vital role in the growth of many large enterprises and few of the SMEs. Therefore there is a need to cater to needs of SMEs by providing them solutions that are suitable for their businesses and at the same time cost effective solutions.

Objectives of study

The study was conducted in five phases with the objective of:1. Understanfing of various sectors of SMEs and the potential for growth.2. Understanding the various BMS systems namely SAP B1 and Microsoft Dynamics Navision3. Market insight about the existing competitors of BMS systems.4. A survey was conducted in the SMES in the Bangalore region mostly in the PIA.5. Making recommendations to the company (internship), trend analysis and exploring the companies that can be a potential customer for the company.

Survey MethodologyIn this study most of the people contacted were the decision makers or the honchos of the companies. Most of the data was collected from Peenya Industrial Estate. Most of the companies under the study were manufacturing companies because as recommended by most SAP B1 partners SAP B1 is a product most suited for manufacturing companies. The aspects that were surveyed are: 1.) The main business of the companies2.) The products in the product line 3.) The problems faced during day to day operations related to stock outs, on-time delivery of orders, inventory control, lead time, reorder point, maintenance of financial records, working capital management.4.) The information system they are using and what are the lacunas and the drawbacks in that Information System.

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5.) The companies ready to implement a BMS and how much is the willingness to spend.6.) What do they expect from such an implementation, how will it improve the business processes and also efficiency.

Observations The major findings of this report are

1. Most of the SMEs are using Information Systems like TALLY, FOCUS or any customized software. Thus most of companies have tried to automate their work process mostly related to financial management

2. Most of the SMEs have very minimal amount of IT spending .They spend around Rupees 10000 -40000 on software solutions i.e. 0.001 to 0.004 percent of their yearly turnover. Most of the hardware costs being a one time investment.

3. Most of companies I have visited have shown a willingness to have a BMS system in place in near future .Four of the 26 companies I visited have shown willingness to have an ERP system implemented.

4. Most of these companies face problems regarding stock maintenance and inventory records. All the records have been maintained manually .They believe if the inventory records can be automated and all this data can be integrated with all the other business functions such as HR, Finances, CRM, Sales it can to lead to a lot of cost cutting and laying off employees who have very zero or negative or very low work output.

Major data sources were in-depth interviews of some 26 directors, partners or CEOs of various SMEs for a total period of 22 days. Most of the companies under study were auto components companies or manufacturing companies because most of the new BMS systems are designed according to their needs.

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Acknowledgement

I am grateful to Mr. G.V. Sridhar (Project Manager, TECHTREEIT) for his invaluable support throughout the internship.

I am also indebted to Mr. Biplove Belwal, Mr. Sanjay Ahuja (COO, People Tree), Mr Girish Nuli (Business Manager, Techtreeit) and Mr. Anurag Gurani for guiding me in this project and building my concepts in the field. I am also thankful to fellow colleagues for their continuous help and support.

Lastly, this internship could not have been possible without Dr. Om Kumar Krishnan who not only served as my supervisor but also encouraged and challenged me throughout my project.

Mudit Arora

PGDM-IT 07IT-029

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CHAPTER 1

Understanding of SMEs in different sectors

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1.1Introduction

SMEs sector has remained high on the agenda of all political parties, intelligentsia and policy makers since Independence. The special thrust to this sector has been with the multiple objectives of employment generation, regional dispersal of industries and as a seedbed for Entrepreneurship. The contribution of SMEs has been remarkable in the industrial development of the country. It has a share of 40% in the industrial production. 35% of the total manufactured exports of the country are directly accounted for by this sector. In terms of employment generated, this sector is next only to agriculture employing approximately 14 million people.

1.2 Defining SMEs

A well-debated issue, the definition of small and medium enterprises in India was very recently ratified. The Micro, Small and Medium Enterprises Bill, 2006, which came into effect in October 2006, define the segment on the basis of investments in plant and machinery. Small enterprises are those with an investment of not more than Rs. 50 million in plant and machinery, and medium enterprises with an investment of over Rs 50 million but less than Rs 100 million in plant and machinery. This definition has finally put the segment within a legal framework

1.3 SMEs in India

1.3.1Auto Components

Auto component SMEs are one of the fastest growing within the SME category of industries. These units are key contributors to the total production of auto components and also have a significant share in the exports of the industry. As part of a highly fragmented industry, these companies mostly are part of the unorganized sector. They operate in a tier framework, and most of the companies in the SME segment are in the Tier II or below. Few of the suppliers to OEMs are medium scale enterprises.

The SMEs are riding a boom phase, driven by demand from global auto manufacturers. The industry is undergoing a major restructuring and many existing companies are expected to move up in the value chain to a higher tier. Nevertheless, sustenance and survival still remains an issue of concern for these companies as they will have to absorb global best practices in this competitive environment.

1.3.2Textile Industry

The global textile industry, a buyer-driven network, is dominated by retailers, marketers and manufacturers. In the newly defined business environment for textiles, retailers like Zara, H&M, etc. have redefined the life of fashion trends from the earlier five to six months to around two months. In this scenario of such short shelf-life, the small scale operations of Indian SME apparel manufacturers gives them the flexibility to service

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custom-made orders at low cost. It is likely that India will become a preferred destination for global manufacturers and retailers as well, and big opportunities for SMEs are forthcoming. Apart from the big Indian textile manufacturers like Raymonds, Welspun India, Arvind Mills and Madura Garments, several small and medium sized apparel manufacturers have also become significant contributors to the total apparel exports of the country. Cotton knitwear suppliers of Tirupur, hosiery suppliers of Ludhiana and suppliers of home textiles from Tamil Nadu, Kerala and Punjab, among others, have been accepted as high quality and cost effective apparel suppliers in international markets.

These regions are also SME dominated textile clusters that have emerged either due to market access, availability of raw material or private initiatives. The textile industry of India operates largely in the form of clusters with roughly 70 textile clusters producing 80% of the country’s total textiles. Based on a UNIDO study conducted on SME clusters in India, some noteworthy textile clusters include:

1. Panipat, accounting for 75% of the total blankets produced in the country

2. Tirupur, responsible for 80% of the country’s hosiery exports

3. Ludhiana, which accounts for 95% of the country’s woolen knitwear produced

1.4 Problems faced by SMEs in IndiaCost competitiveness, customer orientation, lead time, are some key factors the SMEs will have to imbibe to survive in the new global set-up. At the same time, these companies face the limitations of being SMEs, like

1. Low capital base

2. Limited generation of surplus funds for re-investment due to tight working capital cycle

3. Lack of awareness of business opportunities

4. Inadequate exposure to international environment

5. Limited geographical diversity of markets

6. Obsolete Technology

7. Poor infrastructure facilities

1.5 Risks involved

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Despite these limitations, the SMEs have managed to significantly contribute towards development of India’s industrial base. The key risks that the SMEs face include:

1. Fluctuations in the cost of production; especially raw materials like steel, aluminum, polymers.

2. Poor negotiation powers due to fragmented nature of industry; which in turn limits their pricing power.

3. Dependence on traders and agents to access overseas markets which threatens their competitiveness.

4. Product substitutes due to fast-changing technology.

5. Fluctuations in the value of the Indian Rupee against the dollar.

Addressing these challenges and risks will be crucial to promoting SMEs in the industry. To over come the problems in fluctuation of prices especially of those of raw materials ,to have a better Customer Relationship Management (CRM) so that the traders and the agents need not access overseas markets or to keep abreast with product substitutes due to fast changing technology they should have some BMS system in place. Since the BMS system like SAP B1 can be customized to implement WEB based CRM and E-commerce it further enhances the need for having a BMS implemented.

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CHAPTER II

Getting Market Insight: Market Intelligence

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2.1. Introduction This part of the report contains certain details which have been obtained through Market Intelligence. (The details of the strategies used cannot be revealed but can be explained orally during the presentation.)

MI has been conducted only for SAP B1.Since the company relatively new to this concept of venturing into BMS market we got a lot of information while going through the market intelligence phase. These details are as follows

2.2. Minimum Hardware and Software Requirements for SAP Business One These hardware details provide with the options that we can provide to our customer and opening varied opportunities for him. He can choose either of the options.

Option 1 is beneficial to those organizations who already have a good IT infrastructure consisting of servers or those who are ready to make an initial investment on servers.

Option 2 is beneficial to those organizations who don’t have pre requisite IT infrastructure consisting of servers or those who are not ready to make an initial investment on hardware

2.2.1Option1We can have our own server connecting in one place connecting various offices all over the country .These are the hardware requirements for option 1.

SERVEROperating System • Microsoft Windows Small Business Server 2003 SP1• Microsoft Windows Server 2003 SP1 Standard / Enterprise 32 BitCPU • MS SQL Server – 1x Intel Pentium III• IBM DB2 Universal Database Express Edition – 1x Intel Pentium IVRAM • MS SQL Server – 1 GB• IBM DB2 Universal Database Express Edition – 1 GB HD Free Space • MS SQL Server – System partition 0.5 GB/Data partition 2 GB• IBM DB2 Universal Database Express Edition – System partition 0.5 GB/Data partition 2 GBDVD-ROM Drive 24x or higherDisplay 640 x 480 with 256 colors or higherDatabase• Microsoft SQL Server 2000 SP4 Standard or Enterprise Edition• Microsoft SQL Server 2005 Standard or Enterprise Edition (only on Windows 2003 Server operating system)• IBM DB2 Universal Database 8.2.2 FP5 Express EditionSoftware• Microsoft Internet Explorer 6.0 SP1 or higher

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• Microsoft Data Access Components 2.6 (MDAC) or higher• For IBM DB2 UDB only – Microsoft .NET SDK

WORKSTATION

Operating System Microsoft Windows XP Professional SP2 32 Bit CPU 1x Intel PentiumRAM 128 MB + 60–80 MB per additional add-on running on the workstation.

HD Free Space 500 MBCD-ROM Drive 24x or higherDisplay 800 x 600 with 24 bit colors or higherSoftware • Microsoft IE 6.0 SP1• MDAC 2.6 or higher

2.2.2OPTION 2

Connectivity using Go Global Server

.

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GO

GLOBAL

SERVER

ERP

Database

Server

SME

LOC 2

LOC 3

LOC 4

LOC 1

LOC 5

Benefits of Go-Global Server

S. No Benefits Features Description

1 Rapid applicationdeployment

Applicationpublishing

Simplify deployment of new applications,updates and patch deployment —regardless of the diversity of the accessdevices, software languages, computingarchitectures, and networks that areinvolved

2 Always available

Load balancing

Maximize server resources by connectingusers to those servers with the least load

Session reliability

Maintain open work items when networkconnectivity is lost

Zone preferenceand fail over

Simplify business continuity byautomatically connecting users to the bestserver group that is available

3 Consistent UserExperience

Centralizedcomputing

Deploy an intuitive user experience thatlooks and feels as interactive and rich as afull-featured desktop with the option of afully mobile environment

4 Increased systemperformance

Application isolationenvironments

Prevent build-up of application-specificserver silos by safely installing and reliablyrunning multiple application versions andincompatible applications on the sameserver

High user-density

Reduce the number of required serversand cost-effectively provide room to growby supporting more simultaneous users ona single server

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5 IT visibility andaccountability

UnifiedManagementConsole and ReportCenter

Observe, monitor, measure, audit, andreport on application availability andsystem performance from a single console

2.3 Implementation Methodology

In this section explains how a company should go about the implementation. This methodology was very important from the company point of view because it contains the various phases implementation is to be done. We need to make a very good first impression over the customer therefore we need to have a methodology planned out to make the discussion interesting.This would be very helpful when the company’s representatives meet its first potential customer.The implementation is divided into five project phases:Phase 1: Project PreparationDuring this phase, the team prepares and conducts a project kick-off meeting and goes through initial planning and preparation for the SAP B1 implementation.Phase 2: Business BlueprintDuring this phase, a requirements workshop is conducted with various key stakeholders to define project objectives, scope, and schedule. In addition, the relevant business process scenarios are defined. In order to document the results gathered during the workshops, the Business Blueprint is created.Phase 3: Project RealizationThe purpose of this phase is to implement all business process requirements based on the Business Blueprint. Other key focal areas of this phase are conducting integration tests and drawing up end user documentation.Phase 4: Final PreparationThe purpose of this phase is to complete final preparation (including user and administrator training, system management and cutover activities) to finalize go-live readiness. Upon successful completion of this phase, the SAP B1 system is ready to be used as a productive environment.Phase 5: Go-Live and SupportThe purpose of this phase is to move from a project-oriented, pre-production environment to live production operation. The most important elements include setting up production support, monitoring system transactions, and optimizing overall system performance.

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Figure Implementation Process

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ACTIVITIES

Solution Management1. Upgrade and patches.

2. System Backup

3. Analysis &Monitoring

Handover

1. Go live check

2. SolutionDocumentation

Training

1. Product Training2. System Operation3. SupportInfra-structure

Installation

1. SBO product & Add Ons

2. Data Transfer

3. Support Automation Tools

Analysis& Design1. User & System Requirements

2. Service LevelAgreement

ImplementationOperations& ContinuousImprovement

GoLive

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Evaluation

Presentsolution/implementation approachValidatecustomer fitSetexpectationswith customerCreateProposalDocument

DeltaRequirements

PresentprototypesystemAssess datacomplexityIdentify DeltarequirementsDesign DeltasolutionGet customerto sign offblueprint withDeltaFinalizeStatement of

Customer Qualified

Pre-ProjectActivities

Review andReview datarequirementsand datacleansing planTrain projectteamPrepareOrganizationalChangemanagementSet up projectteamenvironmentDecide systemlandscape andInstallhardwareOrder fromSAP

Project Preparation

Plan project Build projectCharter Set upImplementation standardsandproceduresExecute kickoffSystem setup(DEV&QA)Productionhardwareinstallation

Realization

ValidateorganizationalconfigurationValidatebusinessprocessesRealize deltarequirementsConductorganizationalchangemanagementPlanning forproductionsupport andcutoverRunIntegration &acceptancetestPlan end-usertraining

FinalPreparation

Refine cutoverplansEstablish longterm supportplanTrain endusersCreate & staffhelp deskSystemmanagementExecutecutoverQuality check:FinalpreparationStart ofproduction

Go-Live &Support

Monitor liveenvironmentClose openissuesStart longtermsupportplanQuality check:Go-liveproject

Evaluation Cycle Implementation Cycle

Figure Implementation Methodology2.4 Pricing for 4 licenses

In this section we get the know how the product is actually being priced and how can we bring out variations in pricing so as to provide value for money to the customers and at the same time generate more customers.Here we have two options:

Option 1 In this option we charge a high per license fee and low AMC as a result total initial cost will be high .But the recurring benefit will i.e. AMC will be low. Not only this the high

Initial cost will be a turn off for many customers. Deliverables Quantity PricingLicense fees 04(62000/- per license) 2,48,000Implementation charge+Training

4,00,000

AMC @ 17% 42160E-learning modules Free

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Project Kick -Off

STARTGo-live

Instruction lead training FreeGrand Total 690160

Option 2 In this option we charge a low per license fee and high AMC as a result total initial cost will be low .But the recurring benefit will be high i.e. AMC will be high. This low initial cost is able to attract more customers. But a high recurring may sometimes prove unattractive

Deliverables Quantity PricingLicense fees 04(45000/- per license) 1,80,000Implementation charge+Training

4,00,000

AMC @ 26% 46800E-learning modules Free

Instruction lead training FreeGrand Total 625000

Considering the PV of money the grand total for option 2 is less by Rs. 65160.The AMC of option 2 is Rs.4640 more. Assuming an opportunity cost of 10 % we calculate the PV of the increased AMC i.e. AMC = 4640[(1.1) ^10 -1]/[1.1-1]=73961.Thus the second pricing proposal is more appealing who want to make less initial investment. The option 2 is preferable to those who want to pay less recurring costs though both the costs are almost similar ten years down the line.

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CHAPTER 3

Study about BMS software solutions SAP B1 and Microsoft Dynamics Navision

What is SAP B1?

Designed specifically for small businesses, SAP Business One is a single business management solution that streamlines the entire business across sales, customers, operations and financials. With additional capabilities specifically tailored for a wide-range of industries, SAP Business One can adapt to the unique and fast-changing needs of small businesses.

SAP Business One offers the following unique value propositions to small businesses:

1. Streamline the entire business in a single integrated system: Seamlessly integrate the entire business across financials, sales, customers and operations in one system, eliminating duplicate entries and errors.

2. Build stronger customer relationships : Track and instantly access all customer contacts, records and history so you can anticipate and respond to their needs faster and better than competition.

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3. Act on instant and complete information: Rely on a single source to instantly drill down complete, upto-date information, enabling you to quickly respond to changing business needs.

4. Adapt to changing business needs: Combined with additional industry-specific capabilities, SAP Business One can be flexibly tailored to match your evolving business needs for today and tomorrow, as your business grows. .

5. Designed exclusively for small business: SAP Business One is an affordable small business management solution that is quick to install, easy to use and simple to maintain.

Why is its best suited for SMEs?

While SAP Business One has many satisfied larger customers, it is ideally suited for companies with 10 to100 employees. SAP Business One serves companies in many industries, but fits best for companies in retail, wholesale, basic manufacturing (discrete and process), and professional services. SAP Business One is optimized for performance with up to 50 concurrent users. According to SAP B1 experts SAP Business One implementations are significantly more successful when we target prospects that fit the profile SAP B1 used while designing the product, as follows: 1.10–100 employees1, approximately half of them using SAP Business One concurrently 2. Annual revenues of up to 100M 3. Up to five inventory-holding warehouse locations 4. Moderate customization requirements 5. Some IT support required depending upon individual requirements

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6. No more than five SSP solutions running on their SAP Business One implementation (may vary depending on the complexity and breadth of the specific solution)

Though our market intelligence we have got the knowledge that the product costs around rupees 60000 per license per user, added to that is the implementation charge Rs.1 lakh to Rs.1.25 lakhs per man month and 17% Annual Maintenance Charge (AMC). Thus a company with a requirement of 3-4 licenses can implement an ERP solution with just an investment of 4 to 5 lakhs.

SNAPSHOT OF SAP B1

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How can an SME benefit from the implementation of SAP B1?

SAP Business One covers all the core operations necessary to run a business, including accounting and banking, customer relationship management, vendor management, material resource planning, purchasing and selling, and reporting and analysis, yet it is still simple to use and easy to implement .It is ideal for those companies that require less complex functionality from their IT solutions.

Instead of silos of financial, inventory, sales management and customer tracking applications, SMEs are looking for an integrated yet easy-to-use and affordable solution designed to provide the visibility and control. That solution must also not involve high financial or manpower investment. SAP Business One is an answer to this salient call by SMEs. SAP has customized SAP Business One for quick implementation (within weeks) and minimal learning curve (which means lower investments for training). Along with its affordability and easy implementation, this makes the solutions value proposition very compelling to SMEs .SAP Business One is a comprehensive solution that covers all the core operations necessary to run business successfully, including:

Accounting Bank Transactions Business Partner Management Sales and Distribution Sales Opportunity Management Material Requirements Planning Purchasing Warehouse Management Production Management Service Management Outlook Integration Reporting

SAP has made 28000 SAP B1 implementations till June 2007 all over the world together with its partners. This solution integrates all the business processes and through an integrated system and helps improve efficiency. Many companies have cut down on their expenses as far 13% and increased revenues by 5% after one year of implementation of this software.

What is Microsoft Dynamics Navision?

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Microsoft Dynamics NAV Value Proposition.

Microsoft Dynamics NAV is a business management solution for small and mid-sized organizations that helps simplify and streamline highly specialized business processes by rapidly adapting to the unique way SMEs do their business, enabling them to be effective and their business to be competitive.

Salient features of NAV

1. Financial ManagementAs the backbone of business management solution, Microsoft Dynamics NAV accounting and finance solutions help track and analyze business information. With end-to-end integration, SMEs can efficiently manage their general ledger, payables, receivables, inventory, analytical accounting, fixed assets, and cash flow as well as perform bank reconciliations and collections. They can also manage their financial processes across multiple currencies, locations or companies.

2. ManufacturingMicrosoft Dynamics NAV provides an integrated suite of manufacturing applications that give companies the tools to plan, manage, and execute a world-class manufacturing operation. They can boost operational efficiency and effectively manage production, including production orders, bills of material,

3. Supply Chain ManagementStreamline sales, purchasing, and pick/pack/ship cycle. With Microsoft Dynamics NAV, SMEs can tailor workflow processes to meet specific needs and keep pace with competitive markets and low margins. Help increase customer loyalty with better responsiveness, rapidly pursue new market opportunities, and improve your profitability by working more efficiently with partners. Improve inventory management, manage single- or multi-site warehouses, and handle order processing and demand planning.

4. Business Intelligence and ReportingBrings strategic insight into their business processes with sophisticated reporting, analysis, and budgeting solutions that help them improve and propel critical decision-making throughout the organization. Directs access to real time, business-critical information and a wide range of analytical and reporting tools can help them manage budgets, create and consolidate reports, and look for trends and relationships, histories, create and launch marketing campaigns, and track customer activity. Makes service operations more profitable by organizing service resources for optimum efficiency, forecasting and tracking parts consumption, proactively managing contracts and service agreements, and gaining tighter control over costs. Accessible from Microsoft Office Outlook and Employee Portal, Microsoft Dynamics NAV helps sales team work without limits.

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5. Workspace CollaborationHelp people across businesses collaborate effectively by expanding access to business applications, information, and processes. In addition, they can use Microsoft Windows Share Point Services to help create workgroups and teams to generate discussion and exchange information related to specific interests and projects.

SNAPSHOT

COMPARISON BETWEEN SAP B1 ANDMICROSOFT DYANMICS NAVISION

Proof Points

PARAMETERS SAP B1 MICROSOFT

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DYNAMICS NAVISION

1.Degree of marketing required

ERP is synonymous with SAP and therefore it sells like hot cakes. Many SMEs do get interested in having an ERP implemented only because they think they are getting SAP product at very less cost. It’s an insignia of trust.

Microsoft NAV is relatively new into the market and thus requires more marketing.

2.Cost structure

A normal SME with 30-100 employees may require at max 10 licenses and minimum 2 licenses. Thus u can implement an ERP in 3- 12 lakhs for any such SMEs having 30 -1000 employees

Whereas as to implement Microsoft navision it may require from 5 lakhs to 20 lakhs to make an implementation for such company

3.Customizibility and scalability

the migration path from Business One to mySAPAll-in-One is difficult and expensive as these two solutions have entirely different architectures and any potential migrations or integrations may add cost.

Microsoft Dynamics NAV offers scalability without the need to migrate to a new solution.

4.Functionality and ROI

As the no of users increase SAP B1 looses out because it is a fit for organizations having 100 users. It can be a expensive proposition to scale up SAP B1 to my sap -all -in –one because both have entirely architectures

Microsoft Dynamics NAV delivers more functionalityAcross core financials, distribution and manufacturing and can scale to 250 plus users.Position value and ROI (Return on Investment) vs. cost of acquisition.

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Why should TechTreeIT venture into the BMS market?

Reasons why the company should venture into this business are as follows:

1. Constant Demand Since SMEs are such that they grow very fast in the time of economic boom but may get wiped out in days of recession thus there is and will be a constant demand for software products that help them improve their business processes. Not only have these SMEs had a potential and an ambition to grow they are always in search of cost effective products that will help them improve their business processes.

2. Competitiors

To sell a standard BMS product you have to become a partner of the respective company i.e. SAP or Microsoft. All these companies provide a certificate and your certification level increases according to the number of implementations you have made. Thus before entering this market analysis is necessary to gauge the level of competition and potential for growth for a company who wishes to become a BMS solution partner.

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BMS Solution Provider(SAP)

Distributor (KLG Systel, Wipro)

BMS Solution Partner

Figure How a BMS solution reaches end customer

With reference to list of SAP B1 partners (Appendix A) it can be found that there are six SAP B1 partners in Bangalore and fourteen in southern region excluding Bangalore i.e. there are 20 SAP B1 partners in south. In Pune, Bombay region there are 16 SAP B1 partners. In rest of India there are 23 other SAP B1 partners. Many of these competitors have an experience of 1 to 1.5 years in this market and thus do not pose a threat. Since the product is also relatively new concept and there are only few installations (nearly about 100 -125 according to our resources) thus market is totally unsaturated and thus provides a growth opportunities to partner companies.

3. Pricing & PositioningSince the price of the product is very low and since it carries the brand name of SAP it will sell like hot cakes. Since the proposition is value for money for SMEs will definitely go for this product rather than any cheap customized BMS solutions that do no satisfy its needs completely. The product costs around rupees 60000 per license per user, added to that is the implementation charge Rs.1 lakh to Rs.1.25 lakhs per man month and 17% Annual Maintenance Charge (AMC). Thus a company with a requirement of 3-4 licenses can implement an ERP solution with just an investment of 4 to 5 lakhs.

4.Advantage over customized solutions The problem with most of the customized solutions is that they are bugged with errors and exhibit unusual problems and error messages unlike the standard product. Most of the companies that are using customized solutions do not have all the modules in the applications for all the core business processes. Most of the companies I surveyed say that only 50% of their core processes are satisfied by these cutomised solutions. They also say that they cannot get all the modules incorporated in the customized solution because then the solution becomes too costly

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Small and medium enterpriseCustomer

ANALYSIS OF SAP B1 PARTNERS

BANGLORE, 6, 10%

MUMBAI ,PUNE(MAHARAST

RA), 16, 27%

SOUTHERN REGION

EXCLUDING BANGALORE, 14,

24%

REST OF INDIA, 23, 39%

BANGLORE MUMBAI, PUNE (MAHARASTRA) SOUTHERN REGION EXCLUDING BANGALOREREST OF INDIA

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Chapter IV

Questionnaire Design I: Defining the objective and the sample group

3.1 Introduction

The steps for the questionnaire design are as follows:

1. Defining the Objectives of the survey

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2. Determining the Sampling Group 3. Writing the Questionnaire 4. Administering the Questionnaire 5. Interpretation of the Results

3.1.1 Objectives of the Survey

The objectives of the survey was 1. To understand the problems faced by SMEs in day to day operations2. How a BMS solution can help to resolve these problems?3. To understand the problems in the existing BMS/IS solution.4. To gauge the market potential for this product.

3.1.2 Sampling Group

The sampling groups consisted of 26 companies mostly from the Peenya region with the exception of few companies. Most of the companies interviewed were manufacturing companies since these solutions were suitable for manufacturing companies.

Reasons for choosing Peenya Industrial Estate

Some of the salient features of this industrial estate that make it an ideal choice for survey :

1.) No. of Small scale units : about 4000

2.) No. of Medium Enterprises : about 25

3.) Annual turnover : about Rs.150000 million

4.) Exports per annum : about Rs.60000 million

Peenya Industries Association, one of the largest industrial estates in the country employing three lakh people, has its mixed bag of success and failure.Peenya is an industrial area in Bangalore with a dozen of industrial units spread across the town. Some of the major industries set up here are Bata, Krishna Fabrication, Baharat Fertz, Mysore Breweries, Kar Mobiles, Bureau of Indian Standards and Central Engineering Company. The vast area has been divided into 4 phases. While phase 1 houses major industrial units of Bangalore, phase 2, 3 and 4 are residential settlements of the workers working in these factories. There are several small scale industries and workshops spread across this place.

3.1.3 Writing the Questionnaire

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The questionnaire was designed in a logical sequence so that I could get the required information mentioned in the objective. 1. Questions 1-5 were designed with the objective of gathering information about the company, its history and its products so as to engross the concerned person in the discussion and to make the discussion interesting and lively.

2. Question 6 was incorporated to get to know about the problems that companies face in day to day operations which would have remained untouched by the following specific questions.

3. Questions 7-14 discussed about he specific problems that are faced by the manufacturing units. (This information was collected from various sites and books).

4. Questions 15-18 discussed about the IS/BMS solution they were already having .These questions were also used to gauge the level of satisfaction from such applications.

5. Questions 19-23 helped me to gauge whether he was a potential customer or not and what all he expected from a BMS solution.

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DETAILS (Before proceeding further you are required to fill the following DETAILS.)

NAME OF THE ORGANISATION :NAME :AGE :PHONE NO. :DESIGNATION :YEARS OF EXPERIENCE :

Please tick mark the appropriate boxes. Choose the option that represents your choice most suitably.1.) Please tell us something about your organization.____________________________________________________________________________________________________________________________________________________________

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___________________________________________________________________________________________________2.) What are the various products in your product line?_________________________________________________________________________________

3.) What is the scope of your business?

a.)Local b.)Country wide c.)Global

4.) Who are your customers?a.) distributors b.) Resellers c.) End consumers d.) Government agencies

5.) In which cities of India do you have your manufacturing/distributing/retail outlets?________________________________________________________________________________

6.) What problems does your company faces in day to day operations?__________________________________________________________________________________________________________________________________________________________________________

7.) Do you ever face a problem of stock out (having less number of items in the stock than required)?a.)Yes b.)No

8.)Do you think you need to reduce losses resulting from such stock outs(losses arising from loss of loyal customers)?a.)Yes b.)NoPlease specify a reason for your opinion______________________________________________________________________

9.) Does the organization face problems with on - time delivery of orders?a.)Yes b.)No Please specify the reasons ______________________________________________________________________________

10.) Are you able to manage the financial records (accounts) efficiently?a.)Yes b.)NoSpecify the reasons for efficiency/inefficiency_______________________________________________________________________________11.) Do you think you need to maintain financial records and customer records more efficiently so as to have a real-time updation of data and provide quick and immediate delivery to the customer orders and requests?a.)Yes b.)No Please specify the reasons for your opinion__________________________________________________________________________________

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12.) What is your current Days Sale Outstanding (average no. of days an enterprise takes to collect revenues after sale has been made)?_____________

13.) What is your current Days Payable Outstanding (average no. of days an enterprise takes to pay back its creditors)?_____________

14.) Do you feel that there is a need for better working capital management (reduce the DSO and maintain DPO to an optimum level)?a.)Yes b.)No Please specify the reason_____________________________________________________

15.) Do you already have an existing Business Management System (BMS) to tackle the above mentioned problems?a.)Yes b.)No

16.) If you don’t have a BMS, do you have an existing information system?a.)Yes b.)No

17).What is the information system (applications) that is being used in your organization?_____________

18.).How would you rate your existing information system on the ladder scale?

1 2 3 4 5 6 7(7= excellent, 1=poorest)_____________19.) What was your expenditure on information technology last year?_____________20.) If you don’t have a Business Management System in place or if you think the existing information system is inefficient would you like to have BMS implemented in your organization?a)Yes b.)No21.) How much are you willing to invest to have a Business Management System implemented in

your organization?

a.) 1-5 lacs b.)5-10 lacs c.)10 -15 lacs d.) above 15 lacs

22.) What is the yearly turnover of the company?

_____________

23.) What rate of return due you expect from your investment?

___________________________________________________________________

-------------------------------------Thank YOU!!----------------------------------------------NOTE:

1. DSO: measure of the average number of days that a company takes to collect revenue

after a sale has been made. A low DSO number means that it takes a company fewer days

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to collect its accounts receivable. A high DSO number shows that a company is selling its

product to customers on credit and taking longer to collect money.

2.DPO : If the days payable outstanding is rising (i.e. A/P turnover falling) the firm is facing a financial difficulty. Low days payable or high turnover rate might imply suppliers unwilling to offer credit (i.e., insist on cash payment).

3. WORKING CAPITAL =CURRENT ASSETS – CURRENT LIABLITIES

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