What is an ERP?
Enterprise Resource Planning Software (ERP Software) is a business management software capable of managing the entire business and its processes from a single dashboard using the power of clouds, AI (Artificial Intelligence), and Machine Learning. It integrates all the processes, establishes data connectivity, and provides true insights to optimize the processes anytime and from anywhere.
The ERP solution offers various features to modern businesses, like customized deployment options, complete privacy and security, seamless functioning, practicability, automation, app integrations, and software customizations. These powerful factors will not only help you build your business for today, but also help you prepare for tomorrow.
There are a lot of ERP solutions available in the market, but choosing the best for the business is the most important task for a professional, researcher, or business owner.
However, selecting the best ERP software depends on the business’s nature, ERP usage, and unique requirements. Before getting into the factors to select the best ERP, let us tell you more about the ERP and its structure.
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Evolution of ERP Systems
In 1913, Ford Whitman Harris developed a system for production scheduling named the EOQ (Economic Order Quantity) model, and people accepted it as a standard for manufacturing. But in 1964, Toolmaker Black and Decker became the first company to endorse an MRP (Material Requirements Planning) solution with the features of EOQ integrated with a mainframe computer system.
MRP became the manufacturing standard for organizations until MRP II was introduced in 1983. MRP II includes the modules and major manufacturing components like material bills, scheduling, purchase, and management of contracts. The MRP II gave the vision to use software for integrating and sharing the organization’s data with increased efficiency, less inventory storage, and workable production planning.
With the increasing computer technologies, systems like MRP II were started to develop by various organizations to manage the processes of finance, sales and marketing, human resources, supply chain management, and manufacturing.
Even many organizations started to create personalized computer systems as per customized requirements of a business. With time, it became difficult to manage all systems due to managing different databases, lack of accessibility, costly maintenance, and patch updates. Thereafter ERPs were introduced as a one-stop solution for business stability and seamless functioning of the department altogether.
Till 2000, the demand for ERP solutions started to increase, and so did the cost of implementation. The reason is the higher software and hardware deployment cost on company premises with huge server rooms.
Organizations had to invest a lot of resources, whether money or workforce, to set up the entire ERP system as per the customized requirements. Also, the capital invested in setting up isn’t enough because organizations still needed to invest money on customizations as per changing business needs, updates, ERP learning, and maintenance.
With the advancement of technology and business management solutions, on-premises deployment options cannot cope with modern business needs. The ERP solution with the Cloud deployment can push the modern business toward automation, adaptability, scalability, and complete data security.
The Cloud option drastically reduces the ERP investment and maintenance cost due to servers hosted on the cloud. From hardware requirements to installing updates, the service provider manages all with full security and privacy, unlike expensive upgrades of on-premises deployment. This makes the organizations invest more time and resources in business growth rather than spending on ERP software.
Technical ERP Structure
The ways of business management are changing, and so is the technology that deals with it. Modern ERP solutions must be updated with the latest features and functionalities to match such business needs, like adopting new technologies and processes, changes in operations, business acquisitions, compatibility with business scalability, and more.
To understand more about ERP, you need to understand its technical structure that specifies various factors, like deployment options, whether on-premises or cloud, user interface, updates, and application layout.
The ERA of Mainframe
- Before 1980, the ERPs were running on mainframe computer systems capable of managing hundreds of users altogether.
- Terminals with no processing and memory power were used to establish a connection between the system and users.
- The user interface was difficult to understand and work with. Only a few users were able to completely understand it and make it work for the business growth.
Client Server ERPs
- From 1990 to 2000, people started using Client Server ERPs, and they became widely popular among users due to their powerful and easy-to-use user interface.
- Organizations started replacing the mainframe computer system with robust PC servers (AS/400) for the sake of ease of work, adaptability, and scalability.
- The Client Server ERP solutions could replace the mainframe system with localized and multilayered technical architecture.
- This helped the organizations to host the main database on servers that helps them update and integrate any changes faster than ever.
- The application for the Client Server needs to be installed, updated, and maintained manually on each system of the organization, making it a cumbersome and laborious process.
- From 2000, organizations started adopting Web-Enabled ERPs with the use of cloud servers that enable users to access the data anytime and from anywhere. This ERP era started using the power of internet technology to make business management flexible and easy.
- URL (Uniform Resource Locator) and Internet Browsers were introduced to fetch data from servers. It eliminates the need to install a software program on each desktop of the organization.
- Also, HTTP; is a new layer of web server added to the database servers to create web (HTML) pages whenever a user asks for data.
- Caching servers were also invented to increase the speed and performance of loading webpages.
Fundamentals of ERP
ERP is a system that integrates technologies, people, processes, and operations with each other. It is designed to collect the entire data of an organization in a single database, making it accessible for everyone in a centralized manner. It interconnects and uniforms the way of processing and analyzing data for all users, whether it is an admin user or a data operator. The data reporting and sharing between the departments, like finance, inventory, supply chain, marketing, operations, and more, becomes productive and seamless for the people.
The major task of ERP is to centralize the data collected from different sources and make it available to the concerned person. With a connected and secured database, users access the correct and up-to-date data in real-time without any chance of error.
Benefits of ERP Systems for Businesses
From centralizing the data to raising the scalability, there are several benefits of ERP systems for the Business that are discussed below:
Better Productivity and Efficiency
With improved planning and data structure, the ERP system boosts the efficiency of the users as well as of the processes. It speeds up processes like data reporting, on-time shipment, quality management, the performance of vendors, order processing and fulfillment, invoice reconciliation, transactions, cash management, and more. In terms of productivity, it helps users to collect and share data in real-time which helps them to make informed decisions whenever needed.
Scalability and Flexibility
Traditionally, the ERP systems were not configured to adapt to the expanding business needs. But then, modern ERP solutions are flexible enough to extend and reduce the features, functions, and integrations in a matter of minutes using Cloud deployment. If the Business is growing, so the data would be, one can extend the servers with the help of their ERP vendor without any issue.
Improved Data Accuracy
With cloud computing, data accuracy and security have been improved to make it safe and secure for each cloud transaction. It consists of a number of departments, known as modules, where change or of data in one department automatically updates in all without any multiple entries and duplicate data errors.
Top 3 ERP Software of 2022
Various ERP solutions are available based on the type of industry, such as service, manufacturing, distribution, government, retail, and more. Below, the top 3 ERP solutions are given that are compatible with almost all industry types.
Microsoft Dynamics 365
Microsoft Dynamics 365 is an all-in-one business management solution capable of combining processes of various departments altogether using the power of the cloud, machine learning, and data analytics.
Previously known as Microsoft Suite, there are several applications in it that can manage finance, supply chain, inventory, manufacturing, operations, commerce, reporting, human resource, and more precisely.
With the flexibility of customizations, integrations, features, functionalities, and adaptability, Dynamics 365 is one of the favorite ERP solutions for growing organizations.
SAP (System Analysis Program) is a business management solution that enables the business to unite all the departments. The popular SAP products for industries are SAP S/4HANA (cloud), SAP ECC (on-premises), SAP Business By-Design, and SAP Business One. SAP Business one is a fully integrated business management solution for small and mid-sized organizations. In contrast, SAP By-Design is a cloud-based solution with real-time analytics and a pre-built process for automation.
Oracle is generally used to manage the processes of finance and operations. It uses blockchain and loT capabilities to connect customers, operations, machine data, and products. Mostly, the industries that use machine learning and artificial intelligence are the top customers of Oracle.
How to Choose the Right ERP Software for Your Business
Choosing the best option out of many is a challenging task to accomplish in any kind of situation. Similarly, there are various ERP solutions available but choosing the best for the business depends on many factors that are:
Analytics: It must have built-in analytics, reporting, and data insight that can let you update the business anytime.
Central Database: The ERP solution must collect all the data in a central database for ease of accessibility and availability.
Automation: The ERP should support automating repetitive and manual tasks using AI and machine learning.
User Interface: The user interface must be simple, consistent, and easy to use with all modules of the ERP solution.
Data Presentation: The simple data presentation is the key to better data understanding and visualization so that the processes can be modified anytime.
Cloud Deployment: Cloud deployment lets you access and connect any process or operation from anywhere with an internet connection and lets you connect with the business 24X7.
Integrations: With the growing business, there is always a demand to add new applications with the ERP to make the processes easier. The ERP must be compatible with integrating native as well as third-party applications.
Technologies: Implementing innovative technologies is the key to success in the modern business world. The ERP solution must support AI, machine learning, RPA (Robotic Process Automation), digital assistants, loT, SaaS (Software as a Service), and more so that the business can adapt to new technologies easily and be ahead of the competitors.
Still confused about choosing the right ERP software? If so, you can gain valuable insights from the eBook titled “The Ultimate Guide to Choosing the Right ERP for Your Business.” It has helped several business owners and decision-makers to choose the perfect option, and it might help you too.
The selection of the right ERP software is a critical decision that affects the entire business. The right choice can help your business grow and scale with considerable ROI, while the wrong choice can make a huge investment loss.
ERP isn’t simple software to manage your business, but it is a solution that centralizes the data, processes on servers, and shares it whenever required with total privacy and security. The choice of selecting the right ERP depends on the requirements of an organization. Maybe, there is a need to manage the finance department only or to manage all departments of the organization; you need to choose wisely while measuring all aspects of your business.
About the Writer
Alice Jackson is a senior content manager at Dynamics Square, UK’s leading Microsoft Gold partner helping businesses to achieve more with Microsoft Business Applications. With a team of 135+ professionals, we are serving 300+ clients across the globe with our innovative and business-driven solutions.