Every business wants to grow. But if a budding enterprise expects to scale effectively, its IT systems must be able to scale as well. That means taking control of your organization's technical infrastructure early on to be ready for the inevitable expanded roster of customers, suppliers, and employees that growth brings.
The size of an organization shouldn't determine functionality. In fact, smaller businesses often require enterprise-class hardware, software, and services in many areas -- particularly in networking, security, and Web provisioning, and sometimes in accounting and order management. Yet despite their oversize needs, smaller businesses are typically outfitted with an uncoordinated collection of point applications and systems managed by their individual expert users, notes AMR Research analyst Bob Locke.
Similarly, midsize enterprises often have departmental systems managed by IT experts, but lack a companywide IT infrastructure to tie the systems together. This approach can spell trouble when business takes off.
To increase the odds of success, enterprises of all sizes should adopt and implement a process-driven, automated approach, rather than relying on in-house experts to keep different parts of the company running. "As you grow, you need to put in real processes to manage the system," says Michael DiPaolo, a consultant at Hitachi Consulting. "No one individual can handle this complexity."
The emergence of the Internet as a standard wide area network bolstered through standardized interfaces and application platforms such as XML and Java has lowered the bar for linking applications and data systems, even in distributed environments. This development has provided more traditional enterprise-class capability at a smaller scale and lower cost. At the same time, technology providers that once served only the largest enterprises are steadily moving down the food chain. "It's been creeping down for years," says Chris Ogburn, sales development director at Hewlett-Packard.
Most vendor attention is being placed on midsize enterprises, or companies with 500 to 5,000 employees that have scale, complexity, and integration needs mirroring the large enterprise's IT profile. But even small enterprises -- those with 100 to 500 employees -- now have access to traditional enterprise-class technology in critical areas such as networking and database management.
When crafting an IT strategy and platform for growth, small and midsize enterprises face critical technology choices in three areas: front-office applications such as ERP, database and storage management, and networking and security. In each area, the choices and issues vary.
Front office: three main choices
ERP is the latest area to see enterprise-class functionality move into small and midsize enterprises, as Oracle and SAP have all but consolidated the large-enterprise market and have set their sights on new customers. Today, for front-office needs such as accounting and sales, smaller companies have limited basic options.
First, they can look to big-system providers such as Oracle and SAP, Locke says, as Oracle's Small Business Edition and SAP's All-in-One suites can be cost-effective at a small scale and then grow with the business. Second, they can adopt Microsoft's suite of business tools. Third, they can outsource these services to avoid having to build the needed expertise in-house -- Salesforce.com, RightNow, and NetSuite have shown this to be a popular model for CRM deployment. Another option, and previously the only one, is to buy from a niche vendor, one aimed at vertical industries and typically small companies therein. But that route is increasingly becoming unviable because niche providers have typically fallen too far behind the technology curve, says Hitachi's DiPaolo.
Adopting big-provider ERP: Adopting a database, ERP, or CRM technology originally developed for large enterprises can trip up a smaller enterprise, warns Eliot Colon, vice president at Miro Consulting, which helps clients negotiate and monitor Oracle licenses. Smaller firms must take care to buy what they need for the moment but have the flexibility to add modules or capacity as they go along; they must balance initially overspending to avoid later getting caught with their pants down.
In some cases, unwary enterprises use noncommercial or trial licenses from vendors such as Oracle, PeopleSoft, SAP, and Sun as part of a larger software license.
This can prove dangerous, as some companies have been known to get hooked, rolling out applications to more and more users -- even to customers and suppliers -- over the Web, Colon notes. Then they get a call from someone saying that they are violating their software license and must pay a lot of money for their noncommercial use, both internally and externally. They're also told that they must license additional software as specified in the original license that no one really bothered to study.
Hitachi's DiPaolo says some small enterprises fall into this trap, while others avoid it by being savvy up front. Another pitfall for such companies is not thinking through all the license implications when they grow through acquisition, he adds.
Adopting Microsoft ERP: Growing enterprises that sign up for Microsoft's emerging enterprise business tools should note that the extent of how far these platforms may be able to scale isn't yet known, AMR's Locke cautions. He's unsure that they can scale once a company has a few thousand employees. Microsoft is in a multiyear effort to integrate and enhance these tools, so future versions may scale into the large enterprise, he notes.
The current generation of Microsoft's ERP tools -- cobbled together from the acquisitions of Great Plains Software, Navision, and Solomon -- can scale only to the low thousands, says Paul Hernacki, director of IT at the consultancy Definition 6.