What Is an ERP System - Insights

What is an ERP system and can an ERP infrastructure or product suite help you mange back office functions for your small or mid-sized business? A few decades ago, fully integrated enterprise resource planning infrastructures were often out of reach for all but the largest fortune five hundred companies with the highest technology budgets and the highest tolerance for the risks associated with business technology implementations. But in recent years, the market landscape for ERP products has shifted, and integrated business technologies are becoming increasingly affordable at the small business level while expanding in capabilities. If you own a smaller enterprise and would like to reap the benefits of an integrated software system, you may have looked into ERP options years ago and found them infeasible or cost ineffective. But recent changes have placed new options on the market and it may be time to reopen your investigation and return the possibility of ERP to the table. But first, what is an ERP system?

What is an ERP system?

An enterprise resource planning system, or manufacturing planning system, is a large software architecture built around a central server that can run a wide variety of applications and house data securely. The very first ERP systems were introduced to the business marketplace in the late 1980s and early 1990s in response to specific demand rising from the manufacturing sector. At that point, many businesses were making use of computers, but companies typically ran each department and business team on a separate software platform. Each platform was designed to handle a specific set of functionalities, but systems could not intersect, which meant that employees could not run standardized applications and could not share access to the databases that would have facilitated overlapping functions.

This presented challenges to operations managers who struggled to coordinate scheduling, ordering, billing and assembly activities on manufacturing shop floors, since these tasks often required the input of multiple departments. These issues slowed productivity and created workflow obstacles and communication problems that were resolved once all employees and business teams were able to share applications run from a central server, which was typically owned and maintained by the company and an in-house IT staff. Even though early ERP architectures were complex and very expensive, they still brought high returns and soon became standard among large manufacturing firms. Their popularity spread beyond the world of manufacturing at that point to all large business entities that could afford them including government offices and university systems.