ERP serves as an important component that connects various business operations and verticals in an organisation. As a part of digital strategy, many organisations have started adopting digital tools and technologies where an Enterprise Resource Planning (ERP) solution is one of the primary components. ERP was originally applied to manufacturing systems, but today it describes the software at the core of an organisation’s business, without which it could not function.
ERP software has evolved significantly since it first came into widespread existence in the 1980s. Major vendors like SAP and Oracle offer sophisticated suites of software that integrate several functions. Other vendors offer ‘best-of-breed’ applications optimised for a particular purpose or market segment. The implementation, maintenance and efficient management of ERP software is a large industry in its own right. ERP services companies are a major part of the global ICT industry.
Enterprise applications are core to the business
All enterprises run core application software essential to their business. These include financial software and applications like human resources/human capital management (HR/HCM) and customer relationship management (CRM). They also typically run mission-critical applications like manufacturing, distribution and logistics and others, depending on their vertical market sector. ERP better integrates various business units and data flowing in departments such as backend office operations, accounting, inventory management and finance management throughout an organisation.
Some of the industries benefitting from ERP include banks and insurance companies that run vast client databases, manufacturers running sophisticated production and asset management systems, retailers, government agencies, educational institutions, transport companies – organisations in every market sector – run specialised applications that enable them to efficiently run and manage their operations.
Cloud transforming ERP
Like all applications, ERP systems are increasingly becoming cloud-based, or use cloud infrastructure for much of their functionality. Today, almost all the major vendors are migrating their product offerings to the cloud, using the SaaS (Software-as-a-Service) model.
As ERP migrates to the cloud it is changing the business models of both vendors and user organisations. It is also affecting the ERP services market. The global Ecosystm study on Cloud ERP Solutions – Best Practices and Vendor Selection finds that organisations which are planning to use Cloud ERP solutions prioritise industry expertise and local presence of data centres as a significant selection criterion for vendors.
Cloud computing encourages a pay-per-use subscription model for ERP and other applications which are changing the structure of the industry. Users are moving their budgets from the CapEx (capital expenditure) to the OpEx (operational expenditure) model, where outgoings are better able to be varied according to use.
A giant, mission-critical matrix
ERP is referred to as ‘mission-critical’ applications for a very good reason. An organisation’s core business functions are non-negotiable and without them, the organisation will cease to function. In addition, they need to be robust and flexible and capable of meeting the demands of changing technologies, economics and business conditions.
In this increasingly connected world, ERP extends beyond the enterprise. Modern ERP systems are interconnected in a giant business matrix that enables a world of global commerce. ERP systems support multiple interfaces and act as a modular system to any organisations demands. Their importance to the global business should not be underestimated.