The History of ERP: The Technology That Revolutionized Business Management

If we were to pick one technological innovation that has revolutionized business operations, enterprise resource planning (ERP) would be the clear choice. From streamlining core business processes like human resources (HR) and inventory management to integrating essential software systems, enterprise resource planning systems have impacted virtually every aspect of modern organizations. 

Nevertheless, to fully understand the impacts of ERP systems, it’s important to consider the history of ERP technology and how it has evolved into what it is today. 

What Is Enterprise Resource Planning Software?

ERP software is an integrated solution that combines various business functions, from raw materials and project management efforts to human resources and accounting capabilities, into a unified system.

By merging multiple business applications, ERP—specifically cloud ERP—technology provides organizational leaders with actionable business intelligence. The latest solutions go beyond basic manufacturing resource planning, being fully equipped with robust artificial intelligence (AI) capabilities. As such, they are capable of supporting a wide range of business models and verticals.

The History of ERP

The history of ERP can be traced back to the 1960s, when material requirements planning (MRP) systems were developed for the manufacturing industry. MRP technology helped businesses manage inventory and production processes, and in the 1970s, MRP evolved into MRP II (the acronym changing to stand for materials resource planning). The latter supported both manufacturing processes as well as labor and machine scheduling. 

The term “ERP” was coined in the 1990s, marking a shift from manufacturing-centric systems to more comprehensive solutions encompassing all core business processes. The decade also saw the integration of new modules, like customer relationship management (CRM), supply chain management, and business intelligence.

Perhaps the greatest developments in the history of ERP came in the 2000s. The period brought further advancements with web-based applications, offering greater accessibility and collaboration. It also marked the start of ERP systems being tailored for specific industries via modular frameworks. Above all, though, was the development of cloud computing.

Cloud vs. On-Premise Solutions 

Traditionally, ERPs were run on-premises, requiring organizations to invest in and maintain significant amounts of computing hardware and infrastructure. While many businesses still rely on on-premise solutions, cloud-based ERPs are the future.

Moving to the cloud gives businesses access to exceptional scalability and versatility. When you adopt a cloud-based solution, you’ll avoid the complexities and upfront costs associated with an on-premise deployment. Your cloud services provider will give you access to computing power and storage capacity via off-site data centers, meaning you get the resources you need when you need them.

On top of that, another major benefit of cloud-based ERP technology is accessibility. Being internet-based, cloud ERP systems can be accessed from anywhere, enhancing collaboration and remote working capabilities. 

Considerations for Businesses 

With so many benefits, cloud-based ERPs are the clear choice for many organizations, but “many” does not equate to “all.” There are limited circumstances where an on-premise solution may still prove to be the best choice for an organization, especially if it needs its ERP system to support several on-premise legacy systems. 

Rolling out an ERP can also be daunting and expensive. But it’s important not to let yourself be consumed by the dollars and cents. Although the numbers need to make sense for your business, going with the cheapest option available is a recipe for disaster. 

Therefore, you must carefully weigh the benefits and potential drawbacks of each option before making your final decision. Because once you do so, you won’t be able to easily adjust course and switch deployment models. Factors you need to evaluate include the following:

Business Size and Complexity

First and foremost, consider the size and complexity of your operations. You may be managing a small to mid-sized company with only one location, or taking charge of a national (or international) enterprise. While most ERPs are highly scalable, not all of them are suited for every business. 

For instance, Microsoft Dynamics is best suited for small to mid-sized organizations, whereas Oracle NetSuite is an enterprise-grade platform that is designed for massive corporations. Dynamics can support the needs of larger companies, but it doesn’t offer some of the enterprise-centric tools that NetSuite does. Conversely, NetSuite is expensive, hard to implement, and difficult to configure, making it prohibitive for small to mid-sized businesses. 

Industry-Specific Features

Look for solutions that offer features tailored to your industry’s unique needs. Top options, like the aforementioned Dynamics and NetSuite, offer modular solutions, which means you can pick and choose which features to implement, tailoring the experience for your industry. 

That said, not every provider will have modules designed for your industry. Less robust solutions will only feature basic modules like CRM, HR, and accounting. 

Integration Capabilities

Make sure the ERP software you choose is able to integrate with your pre-existing tools and software. Leading solutions will include out-of-the-box integrations that make it easy to get all of your applications communicating. But if a system lacks the integration you need, you’ll have to invest in a custom solution. Doing so can be expensive and time-consuming, and though that isn’t necessarily a deal breaker, you need to make sure you work the associated costs into your budget. 

Vendor Support and Training

In your search, you’ll find that many ERP providers rely on a network of third-party vendors to offer support, training, and add-on solutions. For instance, Cavallo offers a suite of robust solutions for Microsoft Dynamics designed to magnify the capabilities of the Microsoft ERP platform and condense your time to value.

When choosing an ERP system, make sure that it is supported by an active network of third-party vendors. Investing in complementary modules can help you maximize your ROI and tailor the solution to align with your unique needs. 

What You Can Achieve With ERP Technology 

The history of ERP has been marked by changing business needs, all in the name of the pursuit of technological innovation. The first MRP solutions were developed to fill a void in the manufacturing technology ecosystem, but new needs were identified, leading developers to expand the feature set, yielding MRP II technologies and—in time—the cloud-based ERP technologies we know today. 

Embracing these emerging technologies will not only help you meet your basic business needs but also tap into significant benefits:

An Edge over other Businesses

ERP systems provide a competitive advantage by way of streamlining your operations, reducing costs, and improving efficiency. They offer a comprehensive view of your processes, making it easier to identify areas for improvement and innovation. 

Furthermore, with AI and machine learning entering the fold, they set the stage for automation at scale, empowering you to do less with more. The two not only offer a major boost to productivity, but they also reduce the strain on your team, which can be great for morale and—perhaps more importantly—the customer experience

Accelerated Manufacturing Processes

For manufacturing businesses, ERP can significantly speed up production processes by optimizing inventory management, improving demand forecasting, and streamlining the production schedule. All of these actions foster reduced lead times and increased customer satisfaction.

Speeding up your manufacturing processes isn’t just about implementing automation, though. You can also obtain granular insights from your ERP and pinpoint sources of friction in your workflows. Once you know what’s holding you back, you can remove these growth barriers and create a more efficient organization. 

Real-Time Insights into Inventory and Sales

If you are using disjointed systems and applications, gathering actionable insights can feel like an impossible task. By the time you get reports, the included data is days or even weeks old, and making decisions using outdated data often leads to missed opportunities and lost revenue.

Conversely, a modern ERP solution provides up-to-the-minute data on inventory levels, sales, and customer orders. That real-time visibility enables you to make informed decisions, respond quickly to market changes, and manage inventory more efficiently. If something is wrong, you’ll know about it and have a chance to fix it.

Improved Customer Experiences

ERP systems help you improve the customer experience by providing tools for better CRM. By centralizing all customer information, you can provide more personalized services and quicker responses.

Understanding the customer journey with a centralized CRM platform will also set the stage for more impactful marketing. You can apply the insights gleaned from it to curate a frictionless journey that customers love. 

The History of ERP Is Rich, and the Future Is Even Brighter

The evolution of ERP technology is a testament to the role it plays in business management. From its origins in manufacturing to its current state as an all-in-one business management solution, ERP has continuously adapted to meet the changing needs of businesses. Whether you opt for a cloud-based or on-premise solution, adopting ERP technology can propel your business forward on its growth journey. 

If you’d like to learn more about ERP and its role as a transformative solution for your business, dive deeper into industry trends like Composable ERP and what they could mean for your business with this short eBook.