Introduction to ERP
ERP stands for Enterprise Resource Planning--a methodology for integrating business applications so that they work like one system. ERP started becoming popular in the early 1990s, when a large number of organizations began migrating away from mainframe systems that featured data with a two-digit year to client server systems that took advantage of personal computers that were appearing on everyone's desk.
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History
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Most business software was sold in what is known as "stand alone" applications such as payroll or order processing. They were easy to implement and generally simple because of technology limitations. Gathering information for management reporting was a large effort that had to be repeated every time executives wanted a snapshot of how the organization was doing.
Function
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Types of applications run by businesses include: payroll, human resources(HR), finance, sales and marketing, customer relationship management(CRM), order processing, and supply chain management. There is no definitive list of functions included in an ERP system, and one software package may include some applications that others do not. Different vendors have specialty markets such as higher education, manufacturing and government, so their range of applications will differ from other software firms.
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Features
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The primary feature of an ERP and what makes it different from stand-alone applications is integration. ERP applications usually share one database and one set of definitions for information. A data element called "department" will mean the same thing to the financial application as it does to the customer relationship management application.
Having all of the business transactional applications share and update the same set of information means that management no longer has to gather, translate, format and merge data to generate reports and statistics needed to run the organization. They can view the status of the enterprise quickly enough to make timely business decisions and react to changes in the market.
ERP also means all applications follow standards for processing, navigation and terminology. Users need less training to transition from application to application.
Considerations
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ERP is a large investment in time and money. Stand-alone applications are faster and cheaper to implement but have higher costs to the organization in the long run.
Implementation of an ERP system requires a great deal of coordination and communications between functional areas and organizational units. Even if only one application is implemented at a time, all decisions need to consider future applications.
Expert Insight
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When considering an ERP system, consider your business needs first. Also, consider your technology direction and the vendor's company strength and its place in the market.
A popular product that continues to attract new customers will be around longer and continue to innovate and improve over time. Widely used software also means availability of technical resources with expertise in that product.
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References
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