What is ERP and Why Do You Need It?

Data management, security, and storage are among the most important needs of any major twenty-first-century business, but managing these systems can be complicated and expensive. The array of applications designed to host and handle your most sensitive operations can be costly and don’t always integrate seamlessly.

Enterprise resource planning (ERP) offers real-time, software-driven solutions to a corporation’s biggest needs. Solving these problems begins with a firm understanding of what ERP is, what it has to offer, and how it can be used to meet your company’s specific goals.

What is ERP?

Enterprise resource planning (ERP) is the consolidated management of key business operations using software and broader technology as mediating tools. ERP is not a single program but usually a stack or suite of applications working seamlessly together. They provide broad access to the storage and control of key data points pertaining to various aspects of business operations.

Enterprise resource planning is gaining popularity as a solution for businesses of all sizes because it is an error-free and efficient means of handling big data and operational concerns. Modern ERP practices of the last several years have been more heavily democratized through the use of accessible and effective technologies such as the cloud.

Thus, the definition of ERP is somewhat flexible, because each company will have its own experiences and unique needs.

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ERP software and tools

ERP software allows businesses to manage data and conduct other office functions (such as human resources) by use of coordinated applications that work cooperatively to maximize efficiency.

The specifics of the tools and technologies that contribute to a company’s ERP solution will, again, depend largely on the needs of the organization. ERP is highly customizable, though there are common methodologies across the industry.

Cloud technology, for example, continues to drive ERP forward, because it allows data access with only an internet connection. Cloud-based ERP systems are prized for their affordability and their general ease of use.

The business value of ERP

The objective of an ERP system is to consolidate data pertaining to all business operations into one easily accessed and understood location. This makes it difficult to overstate the business value of an effective ERP. Here are just a few examples of an ERP’s benefits:

  • Reduced risk: ERP assists companies with day-to-day operations by eliminating the potential for data duplications and inaccuracies and generally maximizing efficiency.

  • Improved efficiency: ERP automates business processes across departments to avoid costly, unnecessary repetitions.
  • Better business intelligence: ERPs also maximize your business intelligence by providing robust access to accurate data anywhere in the world. With a cloud-based ERP, all you need is an internet connection to review key information.

All of these benefits result in cost savings and more efficient business functions overall.

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A brief history of ERP

The term ERP was coined by Gartner in 1990. However, the origins of this broad and flexible service extend back to the 1960s.

While software wasn’t the biggest concern back then, business management certainly was. The term for these management-needs fulfillment programs was manufacturing resource planning (MRP).

However, as business needs continued to expand, the definition of MRP began to change. As more services fell into this broad term, it became clear that a new name was required. By the year 1990, what had once been known as MRP became ERP.

The idea is similar to what it once was, but the technology is different. And, of course, as new tools came along, new responsibilities came with them. Where MRP handled inventories, ERP can now do anything from accounting to finance to supply chain management. As the technology continues to expand, so too will the meaning of ERP.

ERP and the cloud

A major difference between cloud-based ERP and its original on-premises incarnation is where the programs are located. Whereas the software was once hosted on company property, and available only to companies that could afford the large sticker price, it’s now often available on web browsers for an affordable monthly fee.

In addition to how cloud-based ERP has democratized the technology, it has also had a variety of other impacts:

  • Safety: Cloud-based servers maximize security through data encryption and authentication controls, making it difficult for outsiders to access sensitive information.
  • Flexibility:  The cloud provides more flexibility, as companies can expand or shrink their services as their needs fluctuate—also giving them the opportunity to pay for only what they are using. Essentially, the cloud’s flexibility maximizes the efficiency potential of an ERP — an already efficiency-driven technology.
  • Access: Cloud-based ERP enhances accessibility, giving business managers the opportunity to view their information from anywhere that has an internet connection.

Gut check: Do I need an ERP?

There are a variety of factors that go into determining whether or not an organization needs an ERP.

Does your business rely on big data?

One of the key ways to determine how valuable an ERP program could be to a business is to consider data needs. If your operations rely heavily on big data, chances are good that basic programs aren’t sufficient.

Big data is one of ERP’s specialties. It is able to store and manage trusted data across various business operations, to ensure easy access and keep records as accurate as possible.

Are you struggling with inefficiency?

Struggling with inefficiencies in your use of different technologies and applications is another surefire sign that an ERP might be in your future. One of the principal benefits of this process is its ability to consolidate technologies, especially when partnered with a cloud-based ESB to help integrate software and applications. As a result, organizations don’t waste time with duplicate processes or data entries. All information is being handled by a single, highly streamlined server.

Are your software expenses higher than they should be?

You might also have noticed that your software expenses are higher than you would like them to be. While ERP used to be considered an expensive and inaccessible business solution, the cloud has done much to mediate this concern.

As a result, cloud-based ERP might actually be more affordable than maintaining the various licensing fees of numerous programs that don’t even communicate well together.

Are you struggling to keep up with customer demands?

Is current software making it difficult to keep up with customer demands? A poorly coordinated tech stack makes it difficult to maintain data consistency, or even fulfill orders in a timely/accurate manner.  

A robust ERP will help manage orders by automating processes across all aspects of your business. For instance, if the company receives transactional orders, an ERP system extracts the billing data, then sends relevant shipping information to the corresponding department. This allows you to fulfill orders quicker and more accurately for optimal customer satisfaction.

If your business is growing at a healthy rate these are all problems you are likely to encounter. A cloud-based ERP will not only help solve these problems in the short term, but it will also continue to serve your needs as your business grows.

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3 challenges of adopting an ERP

With all its benefits, there are also challenges to adopting an ERP. Here are a few problems that many businesses encounter when first implementing an ERP.

1. An implementation skills gap

The point of an ERP is streamlined efficiency, but this only works when the people using the program know what they are doing. As with anything new, there is a learning curve associated with the early stages of ERP implementation.

There is actually an association between ERP and employee turnover during the implementation, likely stemming from the fact that some staffers are given significant new responsibilities. Proper orientation and ample training sessions will ensure everyone knows what they need to.

2. A lack of upper management support

It is particularly important that management is completely behind the integration. Without support from business leaders, an ERP will not operate to its full potential. Managers' buy-in of ERP is required for the implementation to be successful.

3. Integrating too much too fast

Another problem companies encounter is that they try to integrate too many options at the same time. Rather than taking everything on all at once, it’s more prudent to establish a moderate timeline. Make a plan that reflects your business’s capacity to properly train and inform employees about the new operating system.

Speeding up business with ERP

ERP solutions are optimized for streamlining business, storing and securing data, and keeping operations agile and efficient. Thanks to cloud technology, enterprise resource planning is now more accessible than ever before and can be affordably applied to businesses of every size.

Start by assessing your organization’s needs and setting some initial goals. When you’re ready to get started, ease the initial setup and launch by making sure that all of your data—whether in the cloud or on-premises—is integrated, optimized, and secure.

Talend Data Fabric provides a unified suite of apps to manage all of your organization’s data, so you’re ready for an efficient ERP. Data Fabric uses machine learning to manage data quality and governance, support streaming or batch use cases, provide real-time data management, and more. Try Talend Data Fabric today to increase the speed of your business.

| Last Updated: May 25th, 2019