What is ERP?
ERP stands for Enterprise Resource Planning. It is a type of software package that uses one database and interface to bring together functions for various departments. This means that employees across an organization can see the same information about any order or process, determine what steps need to be taken next, and communicate more easily about how to complete a sale or project.
ERP was originally developed to help streamline the complex processes involved in manufacturing and was initially called MRP, then MRP II (Materials Requirements Planning and Manufacturing Resource Planning, respectively) before the name was switched to ERP.
What functions does an ERP solution provide?
ERP solutions focus primarily on the back end of the business, providing one database to keep track of all the essential administrative functions that go on behind the scenes. These might include:
Recent ERP solutions also provide front-end software such as CRM. This allows back-office staff to see real-time information about customer interactions such as technical-support issues and sales orders.
Do all ERP solutions incorporate every department?
Most often, the term ERP refers to large applications that replace a multitude of independent applications. But different companies have different ERP requirements, and there are many ways to implement a solution.
Stories about failed ERP implementations are more than cautionary tales; they're the stuff of nightmares. Just ask trash-disposal heavyweight Waste Management, who filed a lawsuit last year against ERP provider SAP for $100 million to cover the cost of its failed ERP implementation. And then there's the case of consumer goods giant Nestlé, who committed six long years and $200 million to its ERP implementation. Those are just a couple of horror stories that have painted ERP as a technology with a hefty price tag and painful multiyear deployment periods.
At the crux of the problem is the difficulty most companies experience integrating enterprise-wide data into a single ERP system. "You can't minimize integration work," warned Paul Hamerman, a research analyst with Forrester Research. "It's one of the fundamental challenges that companies have with their overall business-applications footprint."
George Goodall, a senior research analyst with Info-Tech Research Group, agreed. "There are always going to be integration problems and issues regarding how to bring legacy data into a new system," he said. "There are also going to be issues about the granularity of data and at what level data should be collected."