What Is ERP? Its Features, Types, and Top Providers

Enterprise Resource Planning (ERP) refers to the platform companies use to manage and integrate the core parts of their business—such as procurement, risk management, supply chain operations, sales, human resources, and more.

ERP systems are essential for businesses because they consolidate operations into one unified system, simplifying budgeting and reporting for financial results.

An Introduction to ERP

Think of ERP systems as a central gear without which the machine (the business) cannot function—or as glue that binds all the different computer systems within an organization together.

Without ERP, each department would use its own software, but such systems often lack the capabilities of a comprehensive ERP, which provides access to all essential data through a single application and interface.

Another key feature of ERP systems is that they facilitate communication and information sharing between departments. By gathering data from each department separately and making it accessible to authorized users across the company, ERP enhances organizational awareness, coordination, and productivity.

How ERP Systems Work

ERP systems have evolved significantly. Initially, they were simple software requiring manual data entry. Today, many are cloud-based platforms accessible remotely.

Typically, ERP systems are maintained by the developing company. Businesses subscribe to them based on their specific needs, and the service provider installs the ERP on servers the business rents. Once implemented, the system integrates operations and data, offering reports, KPIs, and dashboards to help clients understand performance across departments.

Types of ERP Systems

There are several types of ERP systems designed to meet various business needs. Here's a general overview:

1. On-Premise ERP
   Installed directly on a company’s own servers, these systems offer full control over data and customization. However, they require significant IT resources for maintenance, updates, and security.

2. Cloud ERP
   Hosted on remote servers and accessed online, these are flexible, scalable systems ideal for growing businesses. They typically follow a subscription model, with updates and maintenance handled by the provider.

3. Industry-Specific ERP
   Tailored for particular industries. For example, a manufacturing company needs inventory and supply chain management, while a finance firm needs customer and client tracking. These systems offer built-in features that match day-to-day operations in specific sectors.

4. Open-Source ERP
   These systems provide access to source code, allowing for deep customization. They require technical expertise but offer flexibility and cost-effectiveness for companies with the right resources.

5. Small Business ERP
   Designed for small and medium enterprises (SMEs), these solutions offer a balance between customization and essential functions, with an emphasis on affordability and ease of use.

Other classifications exist based on factors such as company size, employee count, and business activity.

How to Choose the Right ERP System for Your Business

Given the many options and variables, choosing the right ERP can be difficult. Here are some simple steps to help:

1. Identify Business Needs and Goals
   Clearly define what you aim to achieve. Involve stakeholders from various departments to identify which processes the ERP system should improve.

2. Set an Appropriate Budget
   ERP costs vary widely. Consider long-term scalability and flexibility when planning your budget, as these aspects often require dedicated funding.

3. Understand Industry Requirements
   General ERP systems are broad, but businesses in specialized sectors benefit more from tailored solutions. For example, manufacturers need production planning, while healthcare providers need patient management.

4. Check Your Infrastructure
   Assess your current hardware, software, and network capabilities to ensure compatibility with the ERP system. Also factor in costs for potential upgrades or external service providers.

5. Ensure System Compatibility
   Your ERP must integrate with existing systems to avoid data loss and ensure workflow continuity.

6. Prioritize Data Security
   ERP systems handle sensitive business data. Make sure the solution offers strong encryption, regular security updates, and reliable protection against cyber threats.

7. Ease of Use and Provider Reputation
   Choose a system that's user-friendly to minimize employee training challenges. Also, ensure the provider is reputable and offers reliable support.

Top ERP Providers

1. SAP

A global leader based in Germany, SAP is one of the largest ERP providers. Its latest version, SAP S/4HANA, features high-speed data processing and supports accounting, HR, supply chain, sales, marketing, and more.

2. Oracle

Oracle offers a comprehensive suite of ERP applications for financial management, procurement, project management, and other operations. Known for its versatility and breadth.

3. Microsoft

Microsoft’s Dynamics 365 is one of the strongest ERP platforms. It integrates seamlessly with other Microsoft products and offers powerful tools for business management with a user-friendly interface.

Other notable providers include Infor, Sage, and others. However, SAP, Oracle, and Microsoft dominate the ERP market, thanks to their robustness, scalability, and wide adoption.