It was surprising to hear this question late last year. I had just met someone who had graduated with a degree in accounting and given her my business card on which it says, among the other information, “ERP.” Except she had no idea what this “ERP” is. “Not good,” I thought. Not good partly because such a large industry, that creates, distributes and supports, Enterprise Resource Management (ah, the cat is out of the bag as far as the acronym anyway) solutions is unfamiliar to most people and partly because an accounting degree holder, who very likely will have to work with ERP, has not heard of it.
There are many resources available to read about ERP software and what it does; however, stated as simply as possible Enterprise Resource Planning (ERP) is the collection of software that runs a company and its different departments. Most companies start modestly and need to track their revenue and profits/losses and pay taxes at first. This is where the accounting component comes in. From there the sky is the limit. For instance, when there is a Sales department companies buy software to track sales, when there are enough employees the Human Resources department needs a way to hire employees and assign them roles and privileges, Business Intelligence/Analytics is required to understand, report and plan, if there is a factory they need a method to track and plan things and so on. The combinations are varied and depend on what the company does and how it grows.
This takes us to the next point, which is that most ERP systems or solutions are modular. What does that mean? It means one could add required functionality as one goes along. It also points to another feature of ERP software. The different software and departments that use the software share a database, which means that everyone talks to everybody else and the data is shared (see diagram). This means the company could share its information, coordinates its various functions and collaborates as it should.
A good metaphor for ERP is a house with its occupants being like the company’s ERP users. A house is built on one foundation, where appropriate its residents have admittance rights to its different rooms and functions and the entrance, doors and corridors allow everyone to share and access it just like a database does. Moreover, a house has bedrooms, washrooms and a kitchen just like an ERP system has Accounting, Human Resources, Analytics, ET cetra functionalities. It is important that the corridors and doors connect every part to the other parts because otherwise it is not one unit. This is why whether all bought at the same time or added as time goes on ERP technology is made so all pieces talk to one another.
Things That Need To Go Away: So-Called ERP Software That Only Does One Thing.