Why ERP?
some reasoning for large companies

Usual goal with ERP, as accordingly would be stated in business or IT strategy, is to unify the systems, processes and data used in the corporate. Rationale may lay in leveraging development work: costs of development can be split among several units thus improving the business case. Or it may be in leveraging sales: common system enables cross selling, as all sales units can see products and production possibilities across the business. And in similar way the there is greater possibility to centralize and optimize work between units (common purchasing or global supply chain planning), if systems are common and united. 

ERP vs traditional IT

Comparing to traditional IT systems there is additional benefit that some of the external changes (or their impact to IT development) is automatically outsourced (as product vendor provides them), so that the business can concentrate on building new programs and capabilities that create business advantages. 

ERP as platform

So ERP systems can be seen as enabling technology or platform to run business with related IT. There is some kind of generic template process for almost every possible requirement, and option to enhance each process further if seen worth the effort. Such enhancement work does not have to be spent against administrative, supporting and generic functions and processes, customer can focus on competence building and strategically important features. In case business changes, e.g. due to expansion to new countries, or by mergers and acquisitions, the ERP system has wide repository of processes, country-specific accounting modules, local external resources are usually available and capable of doing needed customizations etc. which enable relatively fast rollouts. This way ERP systems directly address uncertainty related to IT system requirements from strategic perspective, compared to the alternative of building all IT systems customer specifically. In case of no major external change, standard processes can be replaced by building optimized ones, to constantly increase efficiency. This can be done gradually over time, based on whether more hasty or critical projects are on the table (so that key people have time for them).

High stakes project

It is also essential to acknowledge that ERP projects are quite fundamental to organizations. They usually affect all or most functions in the organization, most geographical locations, and change the most critical business processes especially related to supply chain management. If failing to produce working, robust and efficient processes, the productivity of the enterprise can fall considerably, sales can be lost causing market share to shrink, or deliveries get delayed or missed or orders lost finally causing some companies even to go bankrupt. It is not necessarily the project per se that consumes all the money, but the quality of new processes or poorly done change management that causes the organisations to enter chaos.

Why ERP?
Pekka 1 September, 2022
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What are ERP systems
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