Have you ever felt like you’re drowning in spreadsheets, struggling to keep track of your business's moving parts? You know, like your sales team is off in their own world, while inventory management has no clue what production is up to. This is where understanding "what is ERP" comes in. That’s the reality for many companies before they invest in an ERP, which stands for enterprise resource planning. ERP software can truly be the glue that binds different departments and processes together.
And let me tell you, as an SAP-certified project manager who's lived and breathed ERP implementations for years, I've seen how this software can transform a business. It's about so much more than just software; it’s about creating a more efficient, integrated, and data-driven organization.
Use Our Hubspot Inbound Marketing and Sales ROI Calculator to Find out the ROI you can Get From Using Hubspot Inbound Marketing and Sales Software.
A Deeper Look at What is ERP
Think of ERP as the central nervous system of your business. An ERP system is a software platform that integrates various business processes, from finance and human resources to manufacturing and supply chain management, into a unified system. This integration allows for seamless data flow between departments, providing a single source of truth for all your business information.
Before ERP, many companies relied on separate software systems that didn’t talk to each other. This lack of integration often led to data silos, inefficiencies, and difficulty in getting a clear picture of the overall business performance. I remember working with a manufacturing company that was using different spreadsheets to manage their inventory. This resulted in frequent stockouts, production delays, and frustrated customers.
But why is understanding, "what is erp", important?
It gives you a bird's-eye view of everything that's happening in your business. We're talking financials, inventory levels, customer orders, production schedules — it's all there. No more guessing games, no more relying on outdated spreadsheets. This allows for data-driven decision-making, process optimization, and a more agile and responsive organization overall. The benefits can be substantial.
A Brief History
Now, a little trip down memory lane. Believe it or not, the history of ERP goes back more than 100 years. Think back to a world without computers. Companies relied on manual processes and paper-based systems, and managing inventory was a logistical nightmare.
As computers emerged, so did the first ERP systems, helping organizations manage their materials and resources. However, they were complex, costly, and really only accessible to large corporations. The real turning point? That came in the 1970s with advancements in technology. That's when SAP first delivered their ERP system to the market.
More user-friendly and affordable ERP systems came about and their adoption exploded, and it hasn't slowed down since. In fact, according to G2, “The global ERP software market is projected to reach US$78.40 billion by 2026, growing at a CAGR of 10.2% from 2019 to 2026." It's become indispensable for many organizations.
Types of ERP Systems: On-Premise vs. Cloud
One of the big decisions companies face when selecting an ERP system is choosing between an on-premise and cloud-based solution. Choosing the right ERP deployment option for your organization is an important step in the process.
On-Premise ERP
On-premise ERP systems, once the standard, are installed and managed on a company’s own servers and computers, giving them greater control over their data and infrastructure. It does however, often mean a big upfront investment in hardware and software, and a dedicated IT team to keep everything up and running. This is one of the reasons why many companies are shifting towards cloud-based solutions.
Cloud ERP
Enter cloud ERP, a game-changer, especially for small to midsize businesses. Instead of housing everything on-site, cloud-based ERP systems are hosted on the vendor's servers and are accessed through the internet, a bit like a subscription service. Cloud solutions offer greater flexibility, scalability, and often, lower upfront costs. Plus, the vendor typically handles updates and security.
This shift to the cloud has become increasingly popular. In fact, according to Panorama Research’s 2020 ERP Report, “More than half of organizations are selecting cloud software (63%) instead of on-premises software (37%).”
Small Business ERP Solutions
If you're a small business owner, you may be wondering what ERP solutions exist specifically for you. This is where systems such as SAP byDesign and others come in. They offer scaled down versions of their 'big brother' ERP systems, which can be consumed via the cloud, and can take relatively little time to implement. Enterprise resource planning systems can be scaled both up and down.
Industry-Specific ERP
Many ERP software providers, such as SAP, provide Industry Specific Solutions. While most businesses have common core business processes, such as maintaining a General Ledger, most industries have highly specific, differentiating business processes that must be supported by the ERP.
Aircraft MRO
For example, one of the more complex industries is aviation maintenance, repair and overhaul. It often involves 3rd party processing, multiple currencies and extremely configuration management requirements. SAP provides and A&D (Aerospace & Defense) Industry Specific Solution for MRO, and in addition, numerous partners provide MRO add-on solutions.
Professional Services
It's not surprising that, given that about 80% of the economy is based on 'services', that SAP has a specific industry solution for Professional Services. This industry has many unique business processes, such as Multi-Resource Planning. Most solutions now also offer integrated Artificial Intelligence and Machine Learning capabilities (AI/ML), which opens up a whole new world of business process capabilities.
Key Components of an ERP
Now, ERP systems can include a vast array of functions, but they're usually broken down into ERP modules. Companies can pick and choose what they need based on their specific industry and size.
Module | Description |
---|---|
Finance | At the heart of ERP, it handles everything from general ledger, accounts payable and receivable, to financial reporting. Helps you keep your financial house in order. |
Human Capital Management (HCM) | Manage your most valuable assets - your employees. Tracks employee data, payroll, benefits, time and attendance, and performance. Helps you optimize your workforce and make informed decisions about your people. |
Supply Chain Management (SCM) | Streamlines the flow of goods from supplier to customer, managing inventory levels, procurement, production, and logistics. Essential for manufacturers and anyone dealing with physical goods. |
Customer Relationship Management (CRM) | Helps you track every customer interaction, from sales leads and marketing campaigns to customer service. Gives you a complete view of your customer journey. |
Manufacturing | Designed for manufacturers, it handles production planning, scheduling, bill of materials, and more, helping to streamline operations and ensure efficient use of resources. |
Why You Should Care About ERP
Here's the thing; in today’s fast-paced business environment, implementing the right technology can make all the difference. ERP helps to manage those growing pains, reduce costs, improve communication, and give you the real-time insights needed to stay competitive. So whether you're a small business owner struggling with spreadsheets, or a growing midsize company feeling the strain of disconnected systems, an ERP could be the key to unlocking a new level of efficiency and growth.
FAQs About What is ERP
What is ERP in Simple Terms?
ERP stands for Enterprise Resource Planning. In the simplest terms, it's software that helps businesses manage their core processes, like finance, HR, inventory, and more. All those processes are brought together into a central system, letting different parts of the business easily talk to each other. Think of it like this - ERP software helps businesses run more smoothly and efficiently.
What is an ERP Example?
Imagine a company that sells furniture. Without an ERP, they might track sales on spreadsheets, inventory on paper, and financials in separate accounting software. That’s a recipe for disaster. An ERP would bring everything together. Now they can track their inventory in real-time, see how much revenue each product is generating, and get a 360-degree view of their business performance.
What is ERP vs. CRM?
That’s a great question because many people get confused. ERP (Enterprise Resource Planning) and CRM (Customer Relationship Management) are both essential business tools, but they have distinct focuses. Think of it like this: ERP is the backbone of your entire business, while CRM focuses on customer interactions. ERP handles financials, inventory, manufacturing, etc.
CRM, on the other hand, helps you manage leads, improve sales, and keep your customers happy.
Are ERP and SAP the Same?
While related, they are not exactly the same. Think of it this way: ERP is a category of software, kind of like the overall term "smartphone," while SAP is like a specific brand, like an iPhone. SAP is one of the world's leading providers of ERP solutions, with a whole range of products. You also have companies like Oracle, Microsoft, Sage, and others (at least 59) that make ERP software as well.
Conclusion
At its core, understanding, “what is erp,” is knowing it provides the foundation for seamless information sharing, collaboration, and ultimately, better business decisions. Choosing the right system isn't one size fits all though. With careful planning and consideration, an ERP can transform your business, creating a more agile, efficient, and data-driven organization.
We are a full-service Hubspot Certified Inbound Marketing and Sales Agency. In addition, we work to integrate your SAP System with Hubspot and Salesforce, where we have a deep delivery capability based on years of experiecne. Please our book a meeting service to get started.