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What is ERP? A guide to enterprise resource planning systems

Thomas Wailgum | July 28, 2017
Enterprise resource planning (ERP) software doesn’t live up to its acronym. Forget about planning — it doesn’t do much of that — and forget about resource, a throwaway term. But remember the enterprise part. This is ERP’s true ambition. It attempts to integrate all departments and functions across a company onto a single system that can serve all those different departments’ particular needs.

The important thing is not to focus on how long it will take — real transformational ERP efforts usually run between one and three years, on average — but rather to understand why you need it and how you will use it to improve your business.

Over the past several years, internet-driven changes have occurred that can drastically reduce how long it takes vendors to deliver ERP modules. These faster implementations (meaning weeks, not years) are the result of a relatively new category of ERP software delivery referred to as on-demand or software-as-a-service (SaaS). Typically, on-demand and SaaS ERP applications (such as finance or HR packages) are hosted by a third party, and customers access the multitenant (or shared) ERP applications via a web connection. Because the software doesn't need to be installed as in the traditional on-premises manner, implementation times can be drastically shorter.


Is ERP for every industry?


In the race to fix problems, companies often lose sight of the fact that ERP packages are nothing more than generic representations of the ways a typical company does business. While most packages are exhaustively comprehensive, each industry and each business has its quirks that make it unique. Most ERP systems were designed to be used by discrete manufacturing companies (that make physical things that can be counted), which immediately left all the process manufacturers (oil, chemical and utility companies that measure their products by flow rather than individual units) out in the cold. Each of these industries has struggled with the different ERP vendors to modify core ERP programs to their needs.

To help address industry-specific problems and customization needs, ERP vendors started to offer specially tailored application sets. There still is customization work to do to satisfy each and every customer, but packaged applications now target such industries as: retail, media, utilities, high-tech, public sector, higher education and banking. In addition, ERP vendors have further tailored their applications to address the individual concerns within the broad manufacturing space. These range from consumer products to construction to HVAC to aerospace and defense companies.


Will ERP fit how I do business?

It’s critical for companies to figure out if their ways of doing business will fit within a standard ERP package before the checks are signed and the implementation begins. The most common reason that companies walk away from multimillion-dollar ERP projects is that they discover the software does not support one of their important business processes. At that point there are two things they can do: They can change the business process to accommodate the software, which will mean deep changes in long-established ways of doing business and will shake up employees' roles and responsibilities. Or they can modify the software to fit the process, which will slow down the project, introduce dangerous bugs into the system and make upgrading the software to the ERP vendor’s next release excruciatingly difficult because the customizations will need to be torn apart and rewritten to fit with the new version.


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