Business Central | A Cost Effective Choice for Small Manufacturing Companies

I've been part of the manufacturing eco-system since my dad had me (more like forced me) to come in to his plant to help during my summers after 9th grade. Even his small manufacturing company (in the 1980's) had an ERP system that ran on an IBM System 36 (or maybe a System 34).  In the industry, it is well known that ERP systems are a "must have" application for even small manufacturing businesses.  It's been this way for a long time, and most small manufacturing businesses are aware of ERP, it's capabilities, and start looking at the technology soon after they grow beyond a "micro" business.

ASIDE: I was more directly exposed to ERP systems in the early 1990s when I worked with (what is now) Infor Visual ERP.  At the time it was sold by a company out of New Hampshire called Lilly Software Associates.  Infor has stopped investing seriously in Visual ERP, but I met a lot of small manufacturing customers who used it (at one time or another I had done some work for almost 150 different companies that used Visual Manufacturing).  This was considered a pretty good small business ERP at the time. To be honest, one of the reasons I like Business Central is that it is so similar to Visual ERP.

As I discuss in my last blog on the top cloud ERP systems, there are a lot of choices for manufacturers looking for an ERP.  What I didn't show in that article is that there were over 29 additional ERP systems that were listed on the sites I found.  I only focused on systems that appeared at least 5 times on lists, so 8 of the total of 37 made my article.  In the original article on best cloud manufacturing ERP I mention a few of these systems, but once you get down to 2 or 3 mentions - I decided not to include them.

If we take a small manufacturing business to be roughly 40 total staff with about 10 office staff - this is probably the sweet spot for a company to cross from "getting by" without an ERP to "getting desperate" for a system.  If I am talking to a small manufacturing company looking at their first ERP, they tell me that they started looking seriously when they grew to about 10 full office staff.  The pressure to finally make a decision has picked up as they either grew of faced the pressures of growing.

Now to my point

It can be a challenge to pick the right ERP for small business manufacturing, but the cloud and the general trend of the industry is making the choice of Business Central an affordable alternative.

Microsoft has made an effort to keep Business Central at an affordable price point for the small business customer.  The Business Central product starts at $70 USD per full user for the essentials version, per month.  Many manufacturing companies (but certainly not all) do need to upgrade to the Premium version, which is $100 per user per month. You can read a lot more information about Microsoft Dynamics Prices and the differences between products and product versions.

Some customers might think that $100 per month per user is expensive, but let's compare it to some other costs so we can establish a baseline.

This alone is going to save roughly $500 to $1000 a month in capital costs and operating costs for a typical ERP server configuration.  This is not to mention backup power sources and internet failover that are not included.  See the next point for more on that.

Aside from the savings of not having a DIY server, the azure servers are in secure facilities, with backup power and internet that are simply not feasible investments for any normal company.  This is worth another $1000 or more of monthly value.

They average salary of a user of Business Central is going to be in the neighborhood of $5000 a month, absorbed.  So Business Central represents 2% of the salary cost of the users who use it.  It is obvious that a well implemented Business Central deployment is going to give the company a lot more than a 2% boost to productivity of the average staff member.

The most important change supporting small manufacturers being able to afford Business Central is that the modern cloud software technologies forced a rethinking of the classic ERP implementation approaches.  There are more and more ERP vendors today that are applying "cloud implementation" methodologies to cloud ERP.  This change is making Business Central more affordable and attainable by smaller and smaller clients.

Classic ERP implementations are time and material projects, often deployed via in-person training activities with customers somewhat at the whim of the ERP vendor. What cloud implementation means is that the modern technologies and economic models that come from the cloud are being incorporated into project work.

These changes are bringing the cost to implement the ERP down. Here are the ways modern cloud implementations are changing and reducing costs and risk.

With the change to highly predictable, all in, subscription pricing - the economics of buying software has changed radically. 

Not so with the majority of ERP vendors who still operate under a time and material model. 

That said, there is light at the end of the tunnel.  Today a number of vendors are moving to either subscription or fixed fee models, so that predictable, all in pricing is available for deployment too.  My own company, Sabre Limited was an early example of this.  We have competition too, such as WebSan, Catapult and NAB Solutions as a few examples, all of whom offer fixed fee based projects.

You may have noticed that video is pervasive and easy to find today.  Most people use YouTube to learn how to do something new. I built a pressure treated lumber staircase between the back yard and front yard of my new house.  I watched YouTube videos to learn how to do it.  A cloud implementation should rely on this as a major part of providing support and training for ERP.  This keeps costs down for the small manufacturing business.

ASIDE: I do find that Baby Boomers and some Gen-X have trouble with this way of learning, where it's more often that Millennials and Gen-Z prefer to learn through Video.

The last innovation that many ERP vendors have embraced (often forced to by customers and costs) is using remote meeting technologies.  At Sabre we find this is by far the best way to deploy ERP. 

Some people really feel the need for the "face to face" training and coaching, but this method is inflexible and expensive. It's inflexible because you can't easily insert short meetings with client B into your schedule if you are physically out of your office training client A.  It's expensive because of the cost of a hotel, travel to and from an office, and all day sessions (which are less productive than more frequent short sessions).

It can be very hard to find the right manufacturing ERP for small business manufacturing companies, but the cloud has been making it easier and more affordable.  Microsoft Dynamics 365 Business Central is a great choice for the small manufacturing business.  It is affordable as a product with it's predictable monthly costs. Also, changes to the way the product is being deployed by a growing number of Business Central VARs are also making training and consulting services either more affordable or more predictable and less risky.