Spread Sheets and luck

Report on Business: Technology
SMALL & MEDIUM BUSINESS: PLANNING

From ‘spreadsheet and luck’ to state of the art; Software gives small businesses planning power an affordable cost

TERRENCE BELFORD
SPECIAL TO THE GLOBE AND MAIL
13 October 2005
The Globe and Mail

All material copyright Bell Globemedia Publishing Inc. or its licensors. All rights reserved.

Special to The Globe and Mail — Two years ago, when Ron Routledge took over as production manager at Springland Manufacturing Ltd., the company ran “by spreadsheet and luck,” he says.

The Rivers, Man.-based company’s staff of 25 make grain handling equipment for markets as far away as Kazakhstan. While engineering and design used up-to-date computer-aided-design (CAD) software, accounting was handled by an off-the-shelf accounting package, inventory control was by paper on clipboard, and job estimating by spreadsheet.

Today Springland boasts a state-of-the-art enterprise resource planning (ERP) system, a software marvel that is slowly being rolled out to handle everything from ordering parts to customer follow up. What is truly remarkable is that the entire system costs just $11,200, compared with the normal $50,000 to $200,000 most small business owners face to get ERP up and running.

Springland’s Abaci solution, purchased from IntegrateIT of Fergus, Ont., cost $6,200 for the software plus another $5,000 for a series of setup and training DVDs on how to install and use it. Mr. Routledge and one of Springland’s partners used the DVDs to install Abaci themselves.

“Before we chose this software I did all the research,” he says. “I talked with another small business owner in a similar business out here and he said he had just paid $50,000 for the software alone. It was costing him somewhere between $50,000 to $100,000 to install it. He was two years down the road in the process and he was facing another $40,000 bill to have the integrators he chose keep working at it.”

Springland’s installation took about two months. The primary focus was on accounting, inventory control and job estimating.

“Those were a snap to install and are marvellously easy to use,” he says. “We can now batch process invoices automatically. If a customer in the Ukraine calls up and wants to increase an order to 200 machines and asks for a price break, the system can work one out in minutes . . . Before we had it, the choice was either throw a dart and hope for the best or spend two weeks doing it manually.”

Besides lightening the administrative load for the company, the ERP system is also affecting the bottom line.

“We now have tremendous control over what we do and it is starting to show up in increased profit margins. It paid for itself within just a few months,” Mr. Routledge says.

When it comes to Canadian small businesses and ERP technology, Springland is in the minority, says Michael Hyjek, an analyst at IDC Canada in Toronto. The company not only made the decision to install an ERP system, it also found one it could afford and which works.

“Can small businesses benefit from ERP solutions? In many cases, yes,” Mr. Hyjek says. “The problem often is one of education. Small businesses are reactive rather than proactive. If they have an IT problem today they focus on that rather than long-term planning.

“They don’t have large IT staffs and they don’t have the time to search out ERP solutions and make recommendations.”

Cost, he adds, is another factor. Large software makers are only now starting to focus on providing solutions to the small business market, and those products are aimed at companies occupying the high end of that range, Mr. Hyjek says.

“They are going to focus on the bigger companies and charge bigger bucks. The cost of marketing to small companies is a real problem. There is no easy way to reach them and the price they can afford to pay may not support large marketing efforts,” he says.

And yet small business in Canada represent a huge potential market, he adds. “There are more than one million small- and medium-sized businesses in Canada and 97.7 per cent have fewer than 100 employees. About 70 per cent of Canadians work for a company with 10 or fewer people on the payroll.”

It was this underserved lower end of the small business sector Mike Carlo had in mind when he launched IntegrateIT in 2001. In 1994 he had helped create Profit Solutions International Inc. That venture’s ERP software, PSI, was marketed to large organizations.

“The systems sold for $100,000 plus installation,” he says. “The sales cycle ran between three and six months and you only closed one out of 10 times. Besides, by the time Y2K was over every big company already had an ERP solution.”

His idea for IntegrateIT was to sell a scaled down version of PSI called Abaci. It costs about $10,000 for a license for three users, plus $1,200 for each additional user, and that fee includes 32 hours of tutorials on the system’s installation and use. His main market is companies with revenue between $1-million and $10-million, and more than 10 employees.

To date, IntegrateIT has sold about 60 systems through its five-person staff. The sales cycle is down to between six and eight hours, Mr. Carlo said.

Abaci includes most of the functionality of larger ERP systems, including full financials, production scheduling, materials management planning, inventory control and shipping, and it’s even bar code capable. It can work through a Web browser as well as on a desk top-based system. “You can use it on any server less than three years old and on any Windows or Unix platform,” he adds.

Mr. Carlo’s problem, however, is the one identified by IDC’s Mr. Hyjek: IntegrateIT has yet to find an effective way to reach a small business mass audience.

“We have an affordable product that small business owners can install themselves,” Mr. Carlo says. “It does all the things big ERP systems do. The problem is getting the message out there.”

Currently he is trying things like hands-on trials on a dedicated website, which is showing promising results. “That was one of the things that set IntegrateIT apart from the others,” Mr. Routledge says. “All the other sales pitches were Powerpoint presentations. Mike gave me a Web address and said ‘go play with it.’

“That experience sold me on the system.”