Digital transformation is all the buzz in corporate circles but small and midsized businesses (SMBs) are also capitalizing on the trend, according to a recent survey from German business software giant SAP conducted by technology research firm IDC.
The study found that four out of five SMBs have experienced growing sales, better employee productivity, declining costs or other benefits after kicking off their digital transformation efforts. But what does digital transformation even mean?
"Digital transformation is directly related to the changing digital economy with individuals, businesses, and society becoming interconnected in real-time, supported by technology," stated the report. It encompasses many of the latest innovations, including cloud computing and other services that enable hyper-connectivity, real-time collaboration and access to practically unlimited computing power, among a plethora of other business-enhancing capabilities.
To ensure success in this tech-fueled landscape, SMBs are increasing their software investments. Last year, they reported using 3.8 applications on average. This year, the survey's 3,904 respondents said they used an average of 4.8 software solutions.
Sixty percent said they use collaboration software, up from 55 percent in 2016, earning the category the top spot. Customer relationship management software (CRM) came in second with 54 percent, up from 50 percent last year. Vendor and ecommerce solutions took third place with 51 percent after jumping 13 points while human resources and talent management took third place with 48 percent.
Enterprise resource planning (ERP), despite giving off an air of big-business exclusivity, is also popular among SMBs, taking fifth place with 45 percent, above business intelligence (BI) and social media analytics.
And when it comes to SMB software application buying decisions, practicality is the name of the game.
"SMBs are the growth engine of the economy because of their laser focus in market opportunity. Every decision a successful SMB makes must create value, and contracting business applications is a great example of value-creation decision making," SAP's Luis Murguia, global senior vice president of SAP Business One, told Small Business Computing.
Business Applications as a Growth Engine
Success, and the growth that often comes with it, can be attained with forward-looking technology strategies.
"Business application software is the biggest enabler of scalability for SMBs. In the early days, a few manual processes (e.g.: order entry or inventory management) could take care of business," continued Murguia. "But once an SMB grows, adding hundreds of customers, dozens of employees, and newer product lines, things become more complicated. Orders are delayed and the wrong items are produced, leaving employees and customers frustrated."
Don't wait for the cracks in aging business processes and workflows to begin to show, advised Murguia. "Savvy SMB leaders adopt business application software before this breaking point occurs. They have a vision on how great the future will be, managing the present in a proactive way."
ERP is for Smaller Enterprises, Too
Although its helps large, multinational organizations run like clockwork, ERP software is also attainable and accessible to SMBs. Moreover, it can massively accelerate their digital transformation efforts.
"In Olympic sports, gold medalists win the attention and excitement of the crowd. However, the reality is that behind the glamour of a gold medal, there are years of planning, training and hard work," Murguia explained.
"The same is true with the Digital Transformation process. Optimized digital experiences for customers can only be created if the SMB has a steady timeline of digitizing their operating processes (e.g.: the warehouse pick lists, the return processes, etc.)," he continued. "This is why implementing an ERP is often the first and most important step for SMBs in digital transformation."
In essence, ERP can act as a springboard for new, revenue-boosting opportunities. "By having the day-to-day operations managed and tracked digitally, SMBs can then build digital extensions for their customers, vendors and employees," said Murguia.