What Is An ERP And What Does It Bring To Users?

The figures of the 2019 edition of the digital observatory, published by the General Directorate of Enterprises reveal that only 39% of some European companies use an ERP (or Integrated Management Software) It is true that ERP implementation projects are most of the time expensive, and the implementation period considered too long (16 to 25 months on average), remains that the adoption of an ERP is clearly a factor in improving the productivity of companies and their performance, according to a study carried out by the firm Accenture.

The emergence of ERP

The first computer applications were programs coded by developers and programmers internal to companies, what is called “homemade or specific”. In fact, they wrote programs meeting the specifications that were requested of them and described in the specifications issued by the contracting authorities. Thus, each company developed its own applications, relying on the famous syndrome that no two companies operate in the same way. Which obviously was expensive, to develop but also to maintain and upgrade. However, software editors will show that the reuse of code and programs allows them to be more productive, and therefore less expensive, to develop business software, called software packages,

In 1972, 5 IBM developer engineers created the company SAP in Germany. They have in their baggage their experience acquired at Big Blue, in the implementation of programs using an MRP system (Material Requirements Planning), then MRP II (Manufacturing Resources Planning), which laid the first foundations of integrated systems where the functions planning control, scheduling are interrelated with supplies, purchases, stocks, financial management, management control….

During those years, only large industrial customers used these software packages, because the computing and data manipulation capacities required very powerful computers for the time, and very expensive, based on a technology and an architecture called “Mainframes”.

Gradually these systems evolved towards what is called ERP, (Enterprise Resource Planning) whose main characteristics are based on modularity (accounting module, Purchasing module, etc.), being configurable to best adapt to the organization of the entity, on the transversality of the processes between the various functions of a company, and their automation. Clearly, the organization of the ERP is no longer based on a silo system, each entity having all the information in real-time, generated by the other entities, and this in an automated way, without any need to re-enter information, thus avoiding human errors, and also increasing productivity. Another major characteristic is the use of a single database, to avoid any duplication of data, and thus ensure the uniqueness and integrity of the data.

Also Read: ERP – The Advantages Of ERP In Business Management

The explosion of the ERP market

A pioneer in this field, the success of the company SAP AG (now SAP SE) was not long in coming, and the version of their SAP R / 2 ERP (succeeding an initial version R) has equipped a large number of large industrial customers who could afford it in the 1980s. Alongside this, other offerings like Salesforce Training started to emerge to equip professionals with the skills to navigate these complex systems. The other companies continued to use “in-house” applications that were still as difficult to develop and maintain, and for which the return on investment was just as long. The advantage was that these applications met the specifications specific to each company, and therefore, were supposed to give them a competitive advantage. Except that the rapid changes in business processes imposed by technological developments, economic markets, and global competition were difficult to implement because it required long and costly works and projects. This is why the application chains at that time had a very long lifespan.

But the arrival of new types of servers in the 90s, much smaller, much cheaper, but still quite powerful, and using a distributed (decentralized) architecture of the Client-Server type, will revolutionize the ERP market (and the IT market in general). First under the open UNIX operating system, then under Windows when the x86 processors were powerful enough, sales of software packages, and sales of ERP exploded, the hardware platforms being less expensive, to acquire and to be kept in operation.

The advantages of an ERP

As we have seen, the major benefit expected from an ERP is to increase the overall performance of the company, by playing on several factors. The organization of the company will be based more and more on processes, and not functions. And the automation of these processes can only improve productivity, by optimizing the efficiency of the operational staff, the information circulating automatically and in real-time, accelerating its processing, without re-entering the data, thus limiting human errors.

The information circulating quickly and having gained in reliability is thus more easily and quickly exploitable by the decision-makers. Especially since decision-making modules are often either linked or integrated into the ERP.

In addition, market publishers are developing their product according to new technologies and innovations (SAP S / 4 HANA uses the processing of large volumes of data in memory, which further accelerates their processing) and also current best practices. This generally gives their products the best practices and features on the market.

Many companies have long hesitated to take the step of installing an ERP, using “in-house” applications and software or very well-configured Excel-type office tools, allowing them to monitor their daily activity. But an information system based on such tools is not designed to ensure the sustainability of the company in changing environments, such as strong internal and/or external growth, or in the case of multi-site, multinational sites, etc…, the solidity of the IS not being sufficient, and the maintenance of in-house tools becoming very heavy and tedious. Moreover, a highly publicized SME in the Montpellier region, specializing in its early days in scaffolding rental, was fiercely attached to its spreadsheets… but opted for an ERP by becoming an international construction group, through its multiple acquisitions. All is not white, of course, because the personalization of an ERP is not trivial, and frequently, it is more than advised to take advantage of it to standardize its processes to limit the modifications of the software package. Not to mention that the support of an integrator is almost necessary for the implementation, training, and very often the management of the project.

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ERP, yes, but how?

The question arises for many organizations, not specifically for their ERP. But as soon as this very often constitutes the heart of the information system, should companies, will they evolve towards the cloud, and / or SaaS offers?

Today, many companies hesitate to take the plunge, because it is difficult to entrust its IS to an external service provider, given the risks in terms of security and confidentiality. Depending on the type of business, it is clear that the choices may differ. Indeed, a start-up or a VSE will have more interest in opting for a SaaS-type solution, which will avoid the investment of acquiring hardware, software, secure premises to house them, and of course technical skills. to operate and maintain them. Furthermore, given the current risks of cyber attacks, it seems more secure to entrust your IS to a structure that implements the latest technologies in cybersecurity.

For SMEs, mid-cap companies, and large companies, the options are different and more numerous, because it will be possible for them to gradually move to the cloud, and to migrate step by step, business by business, to these outsourced solutions, whether the public cloud, but more surely private or hybrid. When it comes to Saas mode, the example of Salesforce in CRM shows the relevance of this approach. But the information systems department must retain all the legitimacy to maintain the consistency of the company’s information system by participating in the choice of options with the business lines, towards this evolution which seems inevitable. Many large publishers on the market offer its solutions in Cloud and On-Premise mode, companies still have the choice… .but for how long?