What is ERP and How Does it Work?

Overview

Today, the Enterprise Resource Planning (ERP) system is more and more popular and widely used. Thanks to its outstanding features and benefits, this system is chosen by the majority of businesses for their business projects. To understand clearly what ERP is and how it works, this article will provide you with detailed information about it.

What Is Enterprise Resource Planning (ERP)?

Enterprise Resource Planning (ERP) is a system that automates all business processes and manages all business activities: marketing, sales, accounting, human resources, etc. Besides, this system allows the exchange and sharing of data.

What makes today’s ERP software more powerful is that all the disparate processes are unified and automated in one flexible system. As a result, this solution optimizes processes across your entire business. Also, a modern ERP solution offers:

• flexible deployment options
• improved security
• sustainability
• low code customizability.

According to Statista, the ERP software market will be worth 41.7 billion U.S. dollars by 2020. Actually, this software has filled every business need. It has become a vital tool for companies in any industry and of all sizes. Thus, enterprises are increasingly paying attention to ERP when implementing it into their business projects. If you wanted to know more about ERP, Global ERP Reviews would be an ideal blog.

How Does an ERP System Work?

ERP systems automate and unify all data from different departments into one data source. So, employees can share and use all data with other departments. 

This makes it easy for leaders to manage the entire operation of their business, avoiding errors and repetition of data. Additionally, businesses will reduce unnecessary data sources. Yet, they still ensure and improve business operations and revenue. 

Types of ERP Deployment Models

Besides the right ERP solution, the same goes for selecting a software deployment model. To help you choose the right model, here are several popular models that you can consider:

On-Premise ERP

Firstly, the on-premise model is a traditional software managed by an internal IT team. With this model, you will purchase external software as an actual download or DVD/CD to install on your own servers and hard drives on computers and desktops.

Cloud ERP

Secondly, Cloud ERP is software delivered over the Internet. The software and servers will be located in different places and hosted by the vendor, a third party, or by the company itself. Cloud computing provides cloud applications. So, the company won’t need an IT department or server infrastructure to keep the technology up and running. This model deployment models include single-tenant cloud ERP and multi-tenant cloud ERP.

Hybrid Cloud ERP

Following that, a hybrid cloud is a combination of on-premises capabilities and some cloud services. Further, the hybrid solution helps customers migrate from one model to another without losing data or functionality.

Software as a Service (SaaS) ERP

Finally, a SaaS ERP implementation is a model where the software and cloud servers are hosted by the vendor. Vendors will maintain and upgrade the software as part of the service. All computer, storage, and cloud applications are services and not products, which provides a lot of advantages for businesses and lowers costs.

In 2019, 37% of enterprises use on-premises deployment models, 21% use multi-tenant cloud ERP, 20% used SaaS models, 14% used single-tenant cloud ERP, 9% use hybrid cloud, and 2% used others ( Statista survey).

Each ERP approach has its own set of benefits and drawbacks that make it a better or worse fit for different enterprises. SaaS ERP, for example, may often be launched faster and with reduced upfront expenses, although cloud ERP may provide more customization options. For many companies, deciding whether to employ on-premises, software-as-a-service (SaaS), or cloud ERP can be a hard and perplexing process.

What Are the Benefits of an ERP?

ERP is one of the indispensable tools of businesses. This system eliminates data duplication, reduces human error, saves time and money, and improves productivity. Here are its outstanding benefits:

Cost- Savings

Although the investment cost for an ERP project is quite high, it saves you a lot of money in the long run. You will save a lot of personnel costs for manual data entry or operating the company in many different departments. Besides, IT and training costs are also eliminated.

Better Data Security

Data security is very important in business. Businesses can control who can see and edit information. The administrator can also grant or enable access to anyone. In addition, the system allows the backup of confidential and sensitive company information.

Increased Collaboration

With the common use of a unified data source, barriers between departments are removed. Moreover, the same data source helps the company operate more smoothly. The wrong data entry errors of other departments are greatly reduced.

Enhanced Reporting and Planning

ERP systems can easily generate and analyze reports at any time using a single data source. Also, you can analyze and compare functions between departments. The software will help businesses to prepare various reports quickly and easily. Besides, these reports can cover every department such as income and expense reports to KPIs, HR, etc.

ERP Implementation Challenges and Risks

Successfully implementing ERP projects for businesses will have significant positive effects, raising businesses to new heights. However, implementing this system is not easy. Behind those successful implementations, there are many ERP implementation challenges and risks that businesses have to face. These challenges can disrupt your ERP implementation or even cause it to fail. To avoid implementation not being as expected, businesses need to plan carefully.

ERP Solutions Providers

Currently, there are hundreds of ERP vendors around the world. Each vendor has its own set of features and benefits. So, you need to choose a vendor that is suitable for your business. We have selected and made a list of the top ERP software vendors on the market today. They have provided different solutions and functions to businesses in many different industries.

Oracle Netsuite

Oracle Netsuite is one of the largest cloud software companies in the world. It is a suite of applications that integrate your finance and operations, including blockchain and IoT capabilities that connect your operations data, customers, products, etc. In addition, Oracle Netsuite enables businesses to innovate quickly with modern user experiences and a customer-first approach.

Microsoft

Microsoft is the leader in the ERP market today. This company has more than 83,000 customers around the world. Small and medium-sized businesses and mid-markets often choose this company as the solution. Especially popular among Microsoft products is Dynamics, which includes Dynamics GP, Microsoft Dynamics 365 Business Central, and Microsoft Dynamics 365 Finance and Operations.

SAP

SAP has been a pioneer since the launch of the ERP market. It gets over 425,000 customers from 180 countries. These system solutions include SAP S/4HANA, SAP Business One, and SAP Business ByDesign. Besides, ERP solutions from SAP give you tools designed to simplify business processes and give you an edge over your competitors. And this provider offers solutions for all types and sizes of businesses.

Infor

Infor is the third in the ERP market. This company is famous in the field of cloud computing. It provides software to nearly 70,000 customers around the world. Infor includes many solutions to choose such as Infor M3, Infor LN, Infor SyteLine, Infor Distribution SX.e, Infor SunSystems, etc.

Epicor

Epicor is a company for small and medium-sized businesses with over 20000 customers across 140 countries. Its products have their own unique features. The first product- Epicor 10 is a product that offers multiple deployment models. Otherwise, Prophet 21 leads the way in supply chain optimization. 

Acumatica

Acumatica is a cloud solution designed for small and medium businesses. Acumatica’s suite of integrated applications is very complete, including finance, accounting, inventory management, CRM, and more. With differentiated features like anywhere and any device access, multi-user access, or a “one-size-fits-all” solution, Acumatica cloud ERP will strongly accelerate your business. In particular, this system allows native integration for BigCommerce and Shopify. Therefore, Acumatica integration will expand your business capabilities.

IFS

IFS is a company for large enterprises and large organizations. The majority of IFS systems serve the aerospace, defense, manufacturing, construction, and infrastructure industries, as well as other industries and services. Furthermore, this solution comes with several features, such as:

• Powerful end-to-end functionality
• Artificial intelligence
• Machine learning capabilities.

How to Approach ERP Integration?

There are many ways you can approach ERP integration. Yet, to run your business effectively, you have to choose the right strategy. Here are the three most popular approaches today:

Application Program Interfaces

Application program interfaces (APIs) work by allowing businesses to open and transfer the data and functionality of their applications to other applications or software. API is considered the leading ERP integration strategy for connecting with other systems. In addition, you can use APIs from ERP vendors, create your own, or purchase them from third-party vendors.

Vendor’s Integration Tool

Most ERP vendors have their own tools to integrate their systems with other systems. This will create more convenience for customers to choose their products and services. Each vendor will have different tools and integration approaches.

Third-party Integration Software

Businesses won’t have to worry about building integrations between their ERP systems and other applications, as third-party vendors will do this.

The HexaSync integration platform is the middleware that seamlessly automates the operations of your business. HexaSync integrates ERP with leading systems such as Acumatica, SAP B1, Microsoft Dynamic, and Infor Syteline. Indeed, the HexaSync platform will help your business optimize data sharing, create revenue, and high efficiency.

Final Words

In short, ERP is a great invention for businesses. Understanding “what is ERP and how it works” will help you have a clearer and more specific picture of ERP. Thanks to that, you can choose which model and ERP system provider are suitable for your business.