ERP software meaning: what is it?

An Enterprise Resource Planning (ERP) system is composed of multiple resource planning applications, which share data. Each application is usually focused on the needs of one department within a business, such as logistics or finance. Relevant applications are then integrated to meet the specific needs of a business. Instead of using different interfaces and applications to access the IT systems for each department, ERP allows employees of a company to access the IT system of all departments using one application and one interface. Integration is an important requirement for facilitating successful resource management. It also improves the efficiency and utility of the multiple IT systems used throughout a company. For these reasons, ERP software applications are key systems within a company’s IT infrastructure.

The benefits of ERP

ERP simplifies an organisation’s IT systems and enables free-flowing communication and collaboration between departments and employees. By connecting technology, ERP also reduces the costs incurred by a company. It does this by ensuring that technology isn’t mistakenly duplicated, and that incompatible technology isn’t unnecessarily purchased. ERP allows businesses to focus on core business activity by increasing the efficiency of their IT systems, reducing the risk of multiple data entries, and making key business processes, such as tracking customer satisfaction, easier to manage. Lastly, ERP provides a holistic insight into the overall workings of a company by bringing together data from all departments. This information can be used to identify areas for improvement and implement strategic changes to business models.

Examples of ERP

Cloud ERP

The software for Cloud ERP runs on a provider’s cloud computing platform, and the provider is responsible for maintaining the ERP system. This example of ERP can be set as a public cloud that multiple organisations can access, such as Google Cloud. Multi-tenant SaaS is another way of using cloud-based ERP for multiple organisations. In this instance, a company can use the same software like other companies, but the company’s data can only be accessed by its employees. On the other hand, a private cloud system is also available for companies that don’t want shared access to ERP software.

The International Data Corporation (IDC) commented in a report that “demand for cloud-based ERP systems continues to grow because of their ability to access and analyze massive amounts of data in near real-time.” Cloud ERP solutions are also attractive to many businesses because they cost about 30% less than on-premises ERP due to the lack of upfront infrastructure costs. However, cloud-based solutions may not be attractive to long-standing businesses that have been using on-premises ERP for years. This is because switching ERP models often requires significant expense, time, expertise, and energy, which could otherwise be spent on core business activity.

On-premise ERP

On-premise ERP is installed in the data center of an organisation’s IT system, and employees are responsible for maintaining it. On-premise ERP offers businesses more control and privacy over their ERP systems. It might be the most suitable option for organisations that handle highly sensitive information. On-premise ERP also allows for a more customisable style of integration within a company’s IT systems, to suit an organisation’s more specific needs.

Hybrid ERP

When a company uses Hybrid ERP, they use a cloud to run some ERP applications and store some of its business data. They use On-Premise ERP to run different ERP applications and store additional data on-site. This example of ERP might suit an organisation that already has an On-premise ERP system, and wants to add newer cloud-based solutions to introduce new functions and enable remote access to their company’s IT systems for employees. Taking this course of action would be a less expensive option than choosing to expand a company’s existing On-premise ERP, and set up would be much faster, allowing a business to meet their needs more efficiently.

ERP integrates the IT systems of a company; facilitating successful resource planning. ERP benefits organisations in a multitude of ways. Namely, ERP saves money, makes business processes more efficient, and enables easy communication and collaboration throughout a company. Cloud ERP, On-Premise ERP, and Hybrid ERP are three great examples of ERP systems. The type of ERP a company needs depends entirely on their business needs.

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