An enterprise resource planning (ERP) is essentially a business strategy document that defines the objectives, risks, and capabilities of an enterprise. ERPS defines how an enterprise will approach future change and function. ERP mainly focuses on the interaction of an enterprise, its customers, suppliers, employees, and other key players. ERP helps an enterprise to manage its resources and activities in a more effective and efficient manner. ERP helps in improving productivity by providing a unified system for all the internal functions of an enterprise reducing the cost involved in running the business and increasing customer satisfaction.
Business analysts suggest that there has been a substantial amount of change taking place in an organization and this has resulted in several business functions being duplicated in some areas. The traditional architecture of the enterprise resource planning system had no concerns about the interdependence among the various business functions. In most organizations, all the business functions are implemented as separate units with no concern for how these units interact with each other resulting in the duplication of numerous business processes. This can result in the unnecessary duplication of data and hence end up as a waste of resources. ERP has been designed to eliminate the problems of duplication thereby improving the quality of work and increasing the overall efficiency of the business.
Cloud computing, which is a relatively new concept, has been recently proven beneficial to enterprises. Cloud computing helps in managing an enterprise resource planning system across multiple locations and devices. It can be used for real-time processing and collection of information from the devices such as mobile phones and webcams. With the help of cloud computing, many business processes can be accessed from any internet-enabled device irrespective of the place from where the user is accessing these applications. With the help of cloud computing, users need not invest in a large infrastructure for computers, servers, and other technological hardware and software. This is because cloud technology facilitates the provision of resources on the basis of pay per use or the pay as you go basis.
The benefits of ERP provided by cloud-based or service-oriented architectures are very high when compared with traditional ERP systems. The reason behind this factor is that ERP systems can be scaled up and down as per requirement by using either a desktop or a laptop. Another advantage is that it can be customized by using customized software that can be obtained from different vendors. Many vendors have recently introduced specialized software which can be used in conjunction with enterprise resource planning systems to facilitate the analysis of information.
Integration of ERP solutions with other information technology systems such as application service providers, databases, distribution channels, and other allied technologies is also gaining popularity. There are many companies that have started offering hosted solutions that enable the integration of business process management with ERP solutions. Most of the ERP vendors have started offering hosted versions of their applications. Hosted versions can be used in conjunction with application service providers for providing integrated and simplified work processes to small and medium-sized businesses.
There are two types of hosted ERP systems which include central and distributed systems. Central systems are more robust and expensive whereas distributed systems are flexible and cost-effective. The former is ideal for large enterprises whereas distributed systems can be used in medium and small businesses. The majority of small businesses do not require advanced ERP systems and are capable of running on simple accounting and customer relationship management systems. Large enterprises, on the other hand, require more robust systems along with advanced features such as financial modeling, forecasting, etc which can only be provided by enterprise resource planning systems.