Evolution of ERP System
ERP systems have been around for more than 2 decades now, however the complexities that they handle have been changing. As the evolution of computers changed most organizations keeping handwritten records to computer programs like Tally, Quickbooks, Microsoft office, etc. However, computing generation has moved from old big CPU based desktops to I-Phone 7, the technology in business world has also changed over time by evolution of internet, web applications and now cloud computing. As computers have become must for running any small shop to large organization, ERPs have evolved to be a must-have for most businesses.
Before ERP System
Large organizations having various departments also had to use different software applications to automate or handle various business tasks. There were legacy systems called Material requirements planning (MRP) and manufacturing resources planning (MRP II) which were targeted towards inventory management and manufacturing process streamlining. But still most other functions such as accounting and distribution were managed through other software. These different systems were unable to link data with each other, which lead to repetitive entries of the same data in various systems to get the desired results. The business owners soon realize the need for single Software Development and database to reduce operational redundancies and improve coordination between departments.
Early stage ERP Systems
Early ERP systems were introduced in late the 90s targeting other functions of business such as distribution, accounting and human resource management. Emergence of this type of ERP system improved the coordination between various departments with real-time functional data seamlessly flowing between them. However, these ERP systems remained luxury available to large organization only till the late early 21st century. The small business owners were still using different software for various tasks. There were two main reasons for the same:
Cost: There were only a handful of ERP applications that were able to handle all the tasks efficiently and the licence cost for the same was exorbitantly high for small business owners.
Complexity: Most of these early ERP applications were made keeping in mind the complexities of large organizations. However, these complex systems were difficult to understand and implement. And these systems would end up making operations much more difficult rather than easy for smaller organizations.
Material Requirements Planning (MRP)
Manufacturing Resources Planning (MRP II)
Enterprise Resource Planning (ERP)
ERPs as Web applications
ERPs as Web application
ERP evolved and the gap was soon filled by new generation ERP applications that were targeted to small and medium business owners. Development of web applications allowed vendors to cut down the complexities required for large organizations, which made them more cost effective for medium sized companies. This means no need for local install, just open the browser and sign in to ERP and start using. But the licencing cost was still a hurdle for companies having a thin IT budget. On top of it, the implementation and customization can also cost fortunes. Further the maintaining the server infrastructure for running these web based ERP systems required dedicated IT team. Due to this reason, generally the reach of these second generation ERPs was limited to companies having more than 100 employees.
Cloud computing has opened a new era for ERP software development. The new open source technologies in web applications have allowed ERP software to become much more cost effective. There are quite a few open source ERP applications available for the businesses, which takes away the initial pain of licencing cost. Files and data will be stored on cloud, which can be much safer even compared to having local server. Cloud also increases the reliability and availability of server with reduced maintenance cost. Mobile applications of ERP systems are also making it easy to access the required data at anywhere on the move, in line with today’s 24×7 generation.
Even though the technology has evolved to make ERPs cost effective, there is still little awareness about the same. The belief “ERPs have predominantly been tools for large organization” still prevails. However, there are new generation young entrepreneurs are more aggressive in adapting new technology faster. The old Dos based legacy systems have stopped making sense for most business owners. As websites have become an integral part of any organization the ERP applications are also going to be a must-have for the businesses. After all a powerful computer is nothing without a program which can make life easy!
MD, Finbyz Tech Pvt Ltd