What is an ERP System?
Software industry has made its impact on every modern field of life. From convoluted area of astronomy to simple but fascinated arts, the use of software is getting popular to make the life of people easier. Like every other professional community, business management software have also been rapidly growing by the passage of time. Enterprise Resource Planning (ERP) software is one of such systems which are being used by the business community, specifically by an organization, to collect, interpret, store and manage data from many business activities. Flow of information and coordination of resources and activities are major concerns for any developing business organization, this concern is tackled by ERP systems. It can be considered as companywide information system that helps the company to integrate its each and every aspect. These systems usually support manufacturing, inventory, logistics, shipping as well as distribution to the audience, invoicing, and accounting for the corporation. From managing the human resource in each and every aspects to the sales and distribution of the company products, these systems are helping the organizations to use their resources in a better and organized manner. These systems are structured in such a way that they use a centralized database and share a common computing platform to ensure consistency across the system. Companies, after using this integration, get benefits of this in various ways: competitive pressures and market opportunities are tackled by quick reaction, product configurations are more flexible, inventory is reduced, and supply-chain links are more tightened. Apart from managing the in-house system of a company, these systems assist in organizing connections to the outside stakeholders and helps the organization to enhance performance management consequently. These significances have grabbed the attention of software developing companies to work on these systems.
If we try to answer one of the most important questions that “Why an organization would require to have an ERP system”. Then, ERP software solutions have the most the direct impact on reducing the cost for a corporation. This is due to the fact that a better planning of resources makes it easier for the managing personals to use them is an optimized manner.
A typical ERP system usually have the following characteristics:
- A real time operating integrated system that does not rely on periodic updates
- All applications of the system are supported by a common database
- All the modules have a consistent look and feel
Scope of ERP implies drastic changes to staff work process and practices. Most of the time, three types of services are there to aid the implementation of these changes – consulting, customization, and support. Implementation time of ERP system for a specific company depends on various factors including business size of organization, number of modules of the system, and most importantly, readiness of the customers of the system to take ownership of the project. Since, an ERP system has more than one modules, therefore such systems can be implemented in stages. According to a case study jointly done by Indiana University and Purdue University, a typical project for a large enterprise takes about 14 months and around 150 consultants for its fully functional deployment. Comparing to this, small corporations should take 6 – 7 months and large enterprises can take years for its completion.
To completely understand the architecture of a traditional ERP system, one must know the concept of ‘Tier’ in software applications. Different tiers of an application are usually referred as different layers of the application. Depending on the tasks need to be done by the application, these layers are made and are advised to work independently. Most of the time, applications have three tiers: the first tier interacts with the user and it is responsible for taking users’ inputs and transfer it forward. The second tier usually interacts with the backend of the system and most of the time, this backend is kept in the form of a database. The third tier is called ‘Business layer’ which contains all the necessary logic and computations of the system. Mapping this knowledge to the ERP system, most ERP systems also follow this architecture and applications in the system are modeled in such a way that functionality is divided in layers to make it efficient for the system to do the computations. Currently in the global market, latest client server version of the product is R/3 and the corresponding latest release is 4.0 b.
ERP systems, due to their importance for enterprises and bright future, have been able to grab the attention of business giants. There are different levels of investors who are putting their investment in the ERP market. The first level in the hierarchy contains players like SAP (System Analysis and Program Networking), Oracle, Baan, and PeopleSoft. Out of these companies, SAP relies only on its products related to engineering management and its total assets were €41.39 billion by the end of 2015. This depicts potential of these products for the business community. Similarly, the second level players are J. D. Edwards, Lawson, and QAD.
In short, ERP systems, which were introduced in the era of 1990s, is a fast growing industry and due to its necessity for the enterprises, will become one of the leading businesses in future. At the moment, the only drawback being faced by these products is that these products are difficult to deploy as compared to the conventional software applications and usually run on a variety of hardware systems with some network configurations to ensure the communication between different components. These systems are considered as the vital tool for organizations which will help them to manage each and every thing related to their enterprise in a smart and efficient way to reduce the cost and the hassle of managers. Business gurus are predicting this industry as one of the safest and profitable to business for the future as the process of deployment is being improved with every latest version of the product.