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By Dan Kraus

How does a small to mid-sized enterprise (SME) owner increase profitability in spite of growing competition? By employing the right technology that will provide a unified, up-to-the-minute view of operations, allowing for improved business-process efficiency and a more efficient business.

Today’s small to mid-sized enterprise is faced with a number of significant challenges.

Recent quarterly indicators by the U.S. Small Business Administration (SBA) have shown that SMEs are performing well in a strong and growing economy, but that many SME owners are worried about the threat of decreased consumer spending connected to rising oil prices and economic infrastructure damage from Hurricane Katrina, as well as the increasing compliance burdens brought about by federal regulatory initiatives. As SME owners decrease their level of optimism, many realize the importance of gaining distinct operational advantages over their competition.

This decrease in business confidence can further be attributed to a variety of factors. Increasingly, SME owners must contend with considerable challenges that have the potential to directly affect their bottom line. Businesses today must be prepared to deal with an educated, savvy, global client base that has access to extensive information via the Internet and global markets. The proliferation of information available to prospective customers poses a formidable challenge. How does a company differentiate itself from competitors who offer similar products or services at reduced rates?

In addition, economic uncertainty adds to the mix, with fluctuations in world markets directly affecting business operations. Cost increases felt by suppliers are quickly passed on to the business owner who has to either absorb the cost directly or pass it on to their customer base. Further, recent corporate governance scandals in larger organizations have shed a more critical light on business operations overall, regardless of company size. The term “accounting irregularities” is now part of the cultural vernacular, further underscoring the need for business to manage a tight-run ship, with operational transparency being the standard, not the exception. This fact alone poses considerable implications.

Most small businesses begin with a simple system, one that works to maintain the basic business operations indicative of a start-up company. As business expands, however, many companies do not keep up technologically, resulting in either inadequate or poorly integrated collections of outmoded applications. The implications of having an out-of-date system are numerous and far-reaching; most importantly, information gaps ensuing from disparate systems often result in business process breakdowns and lost revenue. In addition, data stored in multiple locations that is often not connected, often abandoning valuable customer and production knowledge and slowing business processes. Time is money; accordingly, using an outdated solution can adversely affect a company’s bottom line.

In order to be successful, an SME should utilize a system that at once optimizes business processes, decreases operational costs, and improves customer acquisition and retention. Using technology that can incorporate all of these assets typically will result in a lower total cost of ownership and increased profitability.

SMEs should look for a technology solution that offers the following:

Scalability/Flexibility: The ability to integrate current systems with existing disparate or outmoded applications is one of the keys to operational success. Small to midsize enterprises are wise to utilize a system that is quickly and seamlessly integrated with their current applications. Businesses should also consider software that will allow for support and integration of future business needs. The ability to quickly and easily modify existing IT investments will result in minimal ongoing IT administration and training, leading to a lower total cost of ownership.

Operational Transparency: Today more than ever, companies must closely monitor internal processes. Stricter global accounting and corporate governance requirements have put pressure on businesses to have greater transparency, timelines, and accuracy in both financial reporting and managerial control. The integration of financial and business information readily available within the system allows for a more streamlined, and highly-functioning establishment. Smart business owners will utilize solutions that will facilitate minimal error in the form of a singular, integrated system.

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Dan Kraus is the Vice President of SAP BUsiness One for SAP America.
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