Economies of Scale, Idli for a rupee, Software Service for Re.1...

As quoted in wikipedia, economies of scale are the cost advantages that enterprises obtain due to size, with cost per unit of output generally decreasing with increasing scale as fixed costs are spread out over more units of output. Often operational efficiency is also greater with increasing scale, leading to lower variable cost as well

Chennai Corporation’s 100s of budget restaurants run by women self-help groups offer idli for a rupee, sambar rice for Rs.5 and curd rice for Rs.3 Amazing right?

Photo Courtesy : Creative Commons CC BY 2.0 Original work of Leon Brocard

Certainly leadership of the state chief minister and some amount of government subsidy would be hand holding this initiative for some period. However the other element of success is nothing but scalability.

Economies of scale and scope are factors that help to reduce the average cost of a product as the volume of output increases. For example, it could cost approximately Rs.10-15 million to install 100 copies of enterprise payroll software with database and necessary hardware for companies with average manpower size 100. At the same time with Rs.3 -4 million, we could have achieved 100 instances of payroll when we adopt cloud based Software as a Service. The average cost in this case has reduced to 1/5.

Definitely there could be a question? Why should we adopt some features, which are readily available in the tool and compromise the current practice. Being the business owner or person accountable for operations, you have absolute right to seek this. However you should look at the feature, check how many companies are using it (500+ firms can not stick to a wrong a practice, right?) and end of the day evaluate whether to spend and customize it for you or use the global feature.

Traditional enterprise software deployment would be a time consuming activity, too exclusive and going to be a costly affair just like when you get in to a fine dine restaurant for dinner. Book your seat, take order, have starter, serve main course, find some pastry, bill, tips… If you have enough time and money and love to spend, enjoy it !!!

Let's look at the ready-to-eat shops, who offer standard food items (standard menu, quantity, quality and price) with standard service. Here just go, give the order, eat. 5 minutes, 30 minutes or 1 hour, it is up to you. As nobody cook exclusively for you and offer any special service, cost could be 1/10, enjoy it!!! Software as a Service (SAAS) is your ready-to-use shop for software and this delivery mode made software affordable for small business too

For a small and medium enterprise, maintaining the cash flow, expanding the trade horizon, improve the effectiveness and retain talent etc. could be truly business critical. However the most critical differentiators to any business is human resources and nurturing people to stay and contribute makes employee information, communication, time and discipline, compensation, expense claims, document management, report and analytics as equally important and strategic.

When you grow, you should rely on a good tool for automating basic human resources processes like employee information, leave of absence, time tracking, expenses and payroll and statutory. Advanced technology like cloud servers and software as a service made the service delivery, amazingly scalable

Here is the most critical and visible benefits of Software as a Service for Small and Medium Enterprises:

1. CAPEX - Zero capital cost as you do not require heavy duty servers, Tech Resources, Annual Maintenance etc.
2. Highly Flexible – Start up with less people, grow and add up more people on the go, start new units and so on. Whatever it could be no need to break your head for software service. SaaS is simply scalable
3. Access 24x7 - Software as a service is internet based and services can be accessed anywhere in the world
4. Private & Secure - No worries of database crash, data loss etc. Data will be stored in a data center and data will be maintained as per mutually agreed standard terms.
5. Seamless Upgrades - No need to buy additional hardware or further investments on infrastructure. Upgrades will be simple and periodic

*Software service for Re.1 is arrived at by computing the average cost of subscription per employee per day with a per month subscription charge of Rs.2995 for 100 employees

Saas Made Software Affordable For SMEs

Today, intelligent business applications like HR & Payroll, POS, CRM, Project Collaboration, Market Research, e-commerce portals etc. are affordable to Small & Medium Enterprises.Thanks to Software as a Service (SaaS) offers via cloud!

See the figure 1 for understanding SaaS value map

 

Let’s visualize Payroll process of a 25-30 people strong Tour & Travel Operations Company. Every month, Supervisors will forward the attendance report together with employee leave details duly signed by concerned Managers to Accounts Manager. Accounts will enter leave details in a register for record maintenance and cross verification in future, loan payments, deductions etc. Then Accounts Manager will update required information in a spreadsheet to calculate the salary payable to employees. Once the salary statement is ready, will take a print out and get the signature of General Manager and forward to Cashier for payout. Next to this Cashier will print payslips. As they are not paying salary through bank account, they will take payslip printouts in duplicate. During salary disbursement, Cashier will collect one copy with the signature of employee and filing purpose.

Now let’s see how a good Online Payroll can make the entire process, simple and enable the Accounts Manager to save time & money and provide so much value add to the process.

1. Connect to Internet, visit SaaS provider’s website URL <30 seconds>
2. Check & verify features, clientele, pricing and testimonials <5-10 minutes>
3. Verify security and privacy policies, terms and conditions <5-10 minutes>
4. Sign up for trial for one month <5 minutes>
5. Set up company information, finish basic configuration <2 minutes>
6. Enter basic employee information including employee’s bank account details (can create a digital file and handover to company’s bank, so that they can transfer the salary to employees) direct entry or data import using a spreadsheet <15-30 minutes>
7. Setup previous months' payroll <5-10 minutes>
8. Define salary structure, import salary information for the last 3 months in the system <15 minutes>
9. Create current payroll month and update salary details <10-15 minutes>
10. Process payroll <1 minute>
11. Generate salary statement, check/verify accuracy of payroll, compare differences (if any) with last month’s payroll <10 minutes>
12. Generate statutory reports and returns <10 minutes>
13. Generate Bank Transfer file and forward to Bank for salary transfer <1 minute>
14. Release payslips to employees, either via employee self service or through mail <1 minute>
    

That is all. We have processed payroll, distributed payslips, generated reports/returns and archived data without any additional efforts. Sounds simple and amazing, right? 

Cost of software for 25 people could be less than your monthly grocery bill. So with priceless value additions in business process, you got incredible cost advantage too.