What is ERP and how it is useful to me

An ERP system brings together information from all corners of an organization – Finance, Manufacturing, Service, Sales, Marketing, Human Resources, Customer Relationship, etc. – to improve efficiencies and effectiveness through optimal usage of resources, better planning, faster decision-making and eliminating redundancies.

An ERP system may be responsible for tracking inventory in Manufacturing, maintaining accounts in Finance, monitoring campaigns in Marketing, procuring materials in Supply Chain Management, and much more. In other words, a single ERP system can replace the traditional paradigm of individual standalone systems for the different business functions that don’t communicate well with one another. In this way, ERP systems transcend functional boundaries in organizations.

While an ERP system in its entirety is beneficial to the entire organization, it can be disaggregated into modules that support different business functions. Some of the common modules in a typical ERP system are:

·         Finance

·         Human Resources

·         Sales & Marketing

·         Supply Chain Management

·         Customer Relationship Management

These individual modules can be combined or decomposed, through ERP customization, depending on organizational needs.

While ERP systems are, as a whole, beneficial for organizations, they come in different sizes and levels of complexity. Accordingly, ERP systems and their vendors are categorized into tiers.

Tier 1 vendors sell ERP systems are typically those that are used by global corporations. Such systems are more complex, provide greater functionality, need higher numbers of trained personnel and have higher cost of ownership. Tier 1 vendors are likely to offer global support to their clients.

Tier 2 ERP vendors mainly serve mid-market businesses. Their products are of medium complexity and functionality, and have lower ownership costs than their Tier 1 counterparts. Often they are focused on individual industry verticals, whereas Tier 1 products are broad-based.

Tier 3 vendors sell ERP systems that are designed for small companies & mid sized companies. Such systems have the least complexity and costs of ownership; at the same time, their broader functionality is also much lower. However, they often have greater focus on individual industry verticals.