What are Enterprise Resource Planning Systems?
Enterprise resource planning (ERP) is a system of integrated software applications that manage business processes and operations in many areas such as finance, procurement, distribution, human resources, supply chains, and more. ERP systems are critical applications as they integrate all of the disparate processes that an organization needs to run into a single system that, also, facilitates resource planning. ERP systems are categorized based on the size and complexity of the enterprises served1:
- Tier I ERP. Supports large global enterprises, handling all internationalization issues, including currency, language, alphabet, postal code, accounting rules, etc. Tier I vendors include Oracle, SAP, Microsoft, and Infor.
- Tier I Government ERP. Supports large, mostly federal, government agencies. Oracle, SAP, and CompuServe PRISM are considered Tier I with Infor and CGI Momentum close behind.
- Tier II ERP. Supports large enterprises that may operate in multiple countries but lack global reach. Tier II customers can be standalone entities or business units of large global enterprises. Depending on how vendors are categorized there are 25 to 45 vendors in this tier.
- Tier II Government ERP. Focuses on state and local governments with some federal installations. Tyler Technologies and UNIT4 fall in this category.
- Tier III ERP. Supports mid-tier enterprises, handling a handful of languages and currencies but only a single alphabet. Depending on how ERPs are categorized, there are 75 to 100 Tier III ERP solutions.
- Tier IV ERP. Designed for small enterprises and often focuses on accounting.
Key features of ERP systems include:
Enterprise-wide integration. Processes are integrated across departments and business units.
Real-time operations. With enterprise-wide integration, problems can be quickly identified and resolved.
Common database. A common database enables data to be defined one time, for the entire enterprise, and every department will use that definition. Some ERP systems split the physical database to improve performance.
Automation. ERP software can automate repetitive tasks such as payroll, invoicing, order processing, and reporting. This minimizes errors, saves time, and frees up staff to focus on other work.
Consistent UX/UI. ERP systems provide a user interface that is consistent, reducing training time.
Data analysis. ERP breaks down data silos and provides opportunities to reveal more insights into performance.
Accounting. ERP systems with accounting features can track, store, and analyze financial data, and more advanced systems can also handle tasks such as tax management, fixed assets management, revenue recognition, and multi-currency reconciliation.
Customer Relationship management (CRM). ERP solutions can collect customer information in one shared and easily accessible place.
1 Perkins, 2022, “What is ERP? Enterprise resource planning systems explained”