An ERP software application is one that integrates all the departments and business functions of an organisation into a unified information system. Accounting, distribution, manufacturing, human resources, payroll, customer relations – all of these important business aspects are covered in ERP Software, and all are leveraged off a single database.
These days, ERP is becoming increasingly important to businesses of all shapes and sizes, from SMB's to large corporations. However, ERP is still fairly new in the scheme of things. In this article we'll look at a brief history of ERP software to show how it came to be the growing force it is today, as well as what challenges it faces in the future.
Before ERP, there was MRP, which stands for Material Requirements Planning. Initially, MRP was useful in the manufacturing industry for calculating raw material requirements for the production process. Soon however, it was realised that more factors needed to be taken into account – such as sales forecasts, customer interest, capabilities of suppliers and so forth – to manage the manufacturing process most effectively.
Soon enough then, there was MRP2 – Manufacturing Resource Planning. This new and expanded type of software integrated requirements such as product planning, parts purchasing, product distribution and, of course, inventory control.
Eventually, it was realised that the power of such integrated solutions could extend beyond the manufacturing process – all company functions stood to benefit from this Business Software. And not just in the manufacturing industry either – integrated software could benefit businesses of all shapes and sizes.
At that point, many businesses were still stuck in the past, either storing data in cumbersome paper files or using various non-complementary, compartmentalised software applications to handle different business functions. ERP software combined everything into a single software application. That was (and still is) its biggest strength.
ERP into the future
ERP experienced rapid growth in the 1990s and through the 2000s. In recent times however, we've seen a shift in the role and implementation of ERP through the arrival of cloud-based services – commonly referred to as Software as a Service (SaaS). By operating 'in the cloud' (over the internet), SaaS services replaced large capital outlays with monthly subscriptions, supposedly removing the need for internal IT resources and data centre hardware.
However, it's important to point out that SaaS comes with major pitfalls. First of all, business data is no longer stored on a central, company-owned sever; it is stored on the server of the SaaS provider. This raises concerns over data security, inability to access data during internet down-time, problems transferring data arising if you decide to change SaaS providers, and more. Another major problem is that SaaS is not ideal for larger, more complex applications – particularly transactional-intensive applications where data is especially sensitive.
For these reasons ERP software will continue to play an important role in the business world, and integrated ERP and SaaS services are already emerging. After all, the major benefit of SaaS is its ubiquitous access capabilities, allowing it to be accessed from anywhere with nothing more than a computer, a login name and a password.