What Is An ERP System? Definition, History, Features, Implementation & Comparison
Share via
Share via
Marcie Nguyen
Marcie is a skilled writer at Havi Technology focusing on creating content for marketing, eCommerce, point of sales, and ERP solutions. With over 8 years of experience in the retail, eCommerce and ERP technology sectors, Marcie is dedicated to providing insightful answers to business owners of all scales.
TABLE OF CONTENTS
Want to see how Havi can help with your ERP software implementation?
Let our dedicated team support you every step of the way.
ERP operates as a comprehensive software system that integrates key business operations such as selling, human resources, finance, and supply chain within a single dashboard. This system started as a core manufacturing solution and it continues to transform business processes through its path to AI-powered cloud capabilities.
This guide will explain how ERP has developed through the years while detailing its key characteristics, different types, and differences from other business software systems.
What Is ERP?
Enterprise Resource Planning (ERP) system is a software that integrates core business procedures and performs them through real-time data synchronisation. The system gathers all data from key business functions such as finance, human resources, marketing, supply chain and manufacturing and stores them in a single integrated platform. An ERP system automates workflows to deliver real-time insights, leading to enhanced operational efficiency while improving decision-making capabilities and increasing scalability.
Specifically, businesses can customise ERP systems to create and develop industry-specific features that meet unique operational needs. Read more on our research and analysis of ERP system examples by industries as below:
Who Uses ERP And Why?
Companies of all sizes from many sectors including manufacturing, wholesale distribution, retail, healthcare, high tech, education, or finance industries employ ERP systems. Organisations use ERP software as a tool to achieve operational efficiency, minimise expenses and boost productivity. Here are its key advantages for businesses:
How Does An ERP System Work?
An ERP system allows seamless data flow between departments through its central database and modular architecture. These systems include the following main concepts
What Are The Main Types Of ERP Systems?
Modern ERP solutions come in three primary deployment models:
Features
Cloud ERP
On-Premise ERP
Hybrid ERP
Explanation
Cloud ERP runs on external servers that users can access using a web browser.
On-premise ERP runs on the company's local servers and is managed by internal IT personnel.
Hybrid ERP allows businesses to maintain their core data on local servers whereas they access cloud-based applications.
Deployment
Users can access through the vendor's cloud computing platform. It does not need local server installation.
Users install this system on local servers and their IT teams must take care of setup and ongoing maintenance procedures.
Users combine cloud-based and locally hosted modules within their ERP system infrastructure.
Cost
With subscription-based pricing (SaaS ERP), businesses pay lower initial costs. The payment can be monthly or annually.
Extensive initial funding is necessary to acquire software programs, hardware products or IT capabilities
Moderate costs with flexible pricing. Businesses can optimise financial resources by maintaining core operations on-premises yet utilising cloud features as necessary.
Maintenance
The vendor takes full responsibility for maintaining the system through software updates, security patches and system upgrades.
The system needs dedicated internal IT professionals to conduct technical updates and solve security issues.
IT support for cloud modules can be handled by vendors but businesses need internal staff to maintain their on-site components.
Accessibility
This system operates through the Internet which benefits companies with remote employees or multiple locations.
Employees who want to access the system must either work on-site or through VPN connections.
Cloud-based modules can be accessed remotely but on-premise components need internal network access.
Security & Compliance
The vendor maintains the operational security updates, data protection compliance, and encryption methods to secure system data
Companies maintain complete control of their security policies, data protection and regulatory compliance through dedicated IT resources.
Local servers maintain sensitive data control while cloud solutions handle non-critical tasks. Both the business and its ERP vendor carry joint responsibility for security activities.
Selecting an ERP system depends upon four primary factors: budget limitations, data security needs, industry requirements and the organisation's IT capabilities.
Most businesses find cloud ERP to be their best option due to flexibility and cost-effectiveness, yet regulated sectors often select on-premise ERP for their critical data management needs. Businesses that aim to migrate from legacy systems to cloud-based solutions can benefit from hybrid ERP since it supports core on-premise operations.
How Have ERP Systems Evolved?
According to research published by the International Journal of Research Publications, researcher Goldston stated that since the 1960s, ERP systems have undergone a significant transformation. The diagram below describes the evolution of ERP systems from the 1960s until today, evolving from core inventory management tools to modern AI-powered business platforms:
The concept of ERP systems started during the 1960s when Material Requirements Planning (MRP) became the first solution that helped manufacturers monitor their raw materials and production sequences. Throughout the 1980s, Manufacturing Resource Planning (MRP II) took on scheduling and quality control capabilities.
During the 1990s, ERP was modernised with the capability to merge business functions such as finance, human resources, and sales. The standard deployment practice during that period was running ERP through on-premise infrastructure, and this required expensive maintenance of local server infrastructure.
During the late 1990s, cloud ERP appeared as a new system and later grew popular during the 2000s. The differentiating factor of cloud systems stems from their external server location, as users can access the system via the Internet. The launch of Cloud ERP has significantly reduced high infrastructure expenses, provided automated software updates, and allowed for remote access.
The market now opts for cloud ERP because of its scalability features, AI automation capabilities, and real-time data processing benefits. Moreover, many organisations go for hybrid ERP implementation - through which they combine control approaches between on-premises and cloud-based installation.
What Are ERP System’s Key Features?
ERP systems include seven essential features that transform them into a robust management tool for organisations across industries:
What Are The Differences Between ERP & Other Business Software?
Many businesses use specialised software to manage different functions, but an ERP system stands out by integrating multiple processes into a single platform. Below, we compare ERP with four key business software to help you understand their differences and determine which solution best fits your needs:
Accounting Software
Customer Relationship Management Software (CRM)
Material Requirements Planning Software (MRP)
Manufacturing Execution Systems (MES)
Explanation
Processes financial information, bookkeeping operations, and reporting requirements.
Handles contacts between businesses and their customers along with other prospects.
Helps manufacturing companies manage and optimise production plans.
Provides real-time tracking and control of actual manufacturing processes.
Key function
Streamlines invoice, payroll and expense processing, as well as taxing standards for compliance.
Stores customer information and tracks sales prospects, providing automated marketing capabilities and better service quality.
Manages raw material management, production scheduling and inventory to enable proper material supply at appropriate times.
Tracks operations, monitors machine status and performs quality checks throughout the manufacturing procedures.
Examples
QuickBooks, Xero, MYOB.
Salesforce, HubSpot, Zoho CRM.
MRPeasy, Access FactoryMaster.
Siemens Opcenter Execution, Infor MES.
Key difference vs. ERPs
Centralises financial data & procedures.
Integrates customer-related data & processes.
Focuses on manufacturing/ production needs.
Streamlines shop-floor management.
If you’re looking for more detailed comparisons between an ERP and another business software, these comprehensive analyses might be what you’re looking for:
Are you running a business that needs to utilise ERP in the long term? Read the next section to explore the best open-source ERP with the most affordable pricing in the market.
Which Is The Best ERP For Growing Businesses In Australia?
Small and medium businesses in Australia should consider using Odoo because the vendor has developed features focusing on the local market requirements with a competitive pricing package. Moreover, Odoo stands apart from other solutions by delivering a modular structure that any growing businesses can utilise later in their long-term growth strategy.
Explore the key reasons in the illustration below to understand why Australian businesses are opting for Odoo:
What Is ERP Implementation?
ERP implementation describes the deployment process of ERP systems into a business’s operations. After selecting the ERP system that best fits your business, get yourself prepared for a strategic implementation project. When ERP implementation succeeds, it enhances operational efficiency while increasing data integrity and providing further growth potential.
The image below demonstrates the seven key stages of an ERP implementation project:
Learn more about the details in the ERP Implementation Guide for beginners.
Getting Started With Leading ERP Solutions
What is ERP’s role in modern business management? ERP systems are beyond basic software. They serve as a strategic tool that helps businesses improve operational efficiency with integration, customisation, and long-term growth capabilities.
To select an optimal ERP solution, you must assess your specific business requirements to determine if it requires cloud, on-premises or hybrid deployment. As an accredited partner of leading ERP vendors in Australia, Havi Technology offers the expertise to support your ERP project with strategic planning and implementation. Schedule a consultation and discuss your requirements with our experts.
1. How do I choose the right ERP system?
To select the right option, take into consideration these main aspects: company size, IT capabilities, financial planning (budget) and industry rules/specifications. Cloud-based ERP pricing is more flexible and affordable, but on-premise systems offer you complete system control. Hybrid ERP combines both.
2. What are the top ERP vendors in the market?
Leading ERP vendors comprise Microsoft, Odoo, Oracle, SAP and Infor. Each system in the list provides solutions that target specific business requirements, types of industries and company sizes.
3. What are the costs of ERP systems?
The cost of ERP depends on three core elements which include deployment method, licensing options and customisation specifications. Cloud ERP users must subscribe to a chosen service package, while on-premise users must make substantial purchases covering software, hardware, and maintenance fees.
4. Is ERP only for large businesses?
No, it is not. The modern cloud-based ERP solutions enable small and mid-sized businesses to access ERP features and automation capabilities at reasonable costs. It helps them automate operations and reach growth targets effectively.
References: