IT for niche companies: is an ERP system the solution?

Abstract

Abstract. Niche companies are per definition idiosyncratic. They survive in a competitive world by mastering a small market niche, providing what their customers need. This often requires a flexible organization, and the ability to customize products. To be more efficient, many of these companies rely on extensive use of IT, often by installing general Enterprise Resource Planning (ERP) systems. These systems have grown from isolated systems that handle planning based on incoming orders and the component structure of the various products, to systems with ambitions to embrace the total functioning of the company including vendor and customer relation management. In this paper, we present four case studies. One company is a part of a large enterprise, but performs niche functions within this enterprise. The other three are small‐ or medium‐sized enterprises. Each of these performs in small niche markets. Common to all is the fact that they encounter problems with the utilization of their ERP systems. The major problem seems to be that the ERP system has an inherent business model that may not conform to the needs of the company. Without a good understanding of the underlying models and the constraints under which the fundamental algorithms operate, it is difficult to use these systems correctly. Even excellent systems may give bad results if they are applied to situations where they are not suited. Further, the monolithic structure of an ERP system, with a rather complicated parameter setting, is often insufficient to mould the system to the needs of a niche company. We discuss these problems based on our four case studies, and offer alternative approaches that may be considered.