The origins of ERP can be traced back over a century to the manufacturing industry. In 1913, Ford Whitman Harris introduced the Economic Order Quantity (EOQ) model, a paper-based system for optimizing production schedules. This foundational method was a precursor to modern ERP, emphasizing efficiency in resource management.
In 1964, Black and Decker further revolutionized manufacturing by implementing the first material requirements planning (MRP) system, combining EOQ principles with mainframe computing. By the 1980s, MRP evolved into MRP II, which introduced modular components and integrated manufacturing functions like purchasing, scheduling, and contract management into a unified system. With this innovation, organizations could now share enterprise data across departments, improving production planning and reducing waste.
As technology in the 1990s advanced to integrate additional business activities, including finance, human resources, and customer relationship management (CRM), the term ‘ERP’ finally emerged. Cloud-based ERP solutions arrived in the 2000s, enabling broader adoption and real-time access to data. Today, ERP systems continue to evolve. Modern ERP solutions leverage such emerging technologies as artificial intelligence (AI), machine learning (ML), and the internet of things (IoT), supporting businesses across industries in an increasingly digital landscape.
ERP as a term refers to the full range of tools and strategies designed to improve the way that businesses use their resources. Often, these solutions take the form of ERP software and systems
Cloud ERP refers to systems that are maintained offsite and accessed through the internet. Cloud ERP is a form of software as a service (SaaS). These ERP options are generally purchased through a subscription payment model. Cloud-based ERP allows businesses to enjoy the benefits of ERP without taking responsibility for support, maintenance, updates, or training. However, they will have less control over the ERP itself and may need to work with the provider for customization.
Hybrid ERP refers to any combination of the other two ERP deployment options. Different providers offer different hybrid ERP functionality, but typically, it allows clients to migrate between deployment models and enjoy the flexibility of a best-of-both-worlds solution to fit their needs.
ERP systems exist to improve the efficiency of processes throughout an organization. They do this by optimizing and streamlining how essential resources are put to use. An ERP system reduces the total number of resources needed for the business to function at optimal levels, while also employing a centralized database of important business processes. Managing these processes is likewise simplified through real-time dashboards and reporting, where administrators can review data and measure productivity and profitability.
Although often referred to as a singular entity, ERP actually encompasses a range of different applications, systems, and processes, often supported by a collection of specialized software applications.
Because ERP systems encompass the full range of business processes, they must offer diverse functionality. Generally, this means that ERP systems provide the following features:
- Support for components and applications
To function effectively, ERP systems must be able to work cohesively with a range of different components and software. - Real-time operation
Business is dynamic, and so are many essential business processes. ERP systems must be capable of monitoring and processing data in real time, so that administrators can keep up with the pace of the real world. - Digital user interfaces
Having a consistent look, feel, and functionality for all modules regardless of department allows for easier adoption, and helps significantly reduce the barrier to entry for staff that may move between teams. - Reliable automation
Top ERP solutions allow organizations to automate manual, repetitive tasks. - Multiple deployment options
Effective ERP systems are compatible with all deployment models, including on-premises, cloud-hosted, and SaaS.
Often, the terms ERP and financials are used interchangeably. However, strictly speaking, they are not actually the same thing.
Financials refer to business functions specifically related to accounting, revenue management, expense management, billing, payables and receivables, collections, and other finance-department functions. ERP is a much broader set of functions, relating to business processes across the entire enterprise. Financial systems are included within ERP systems as a subset of modules.
Financials are only one set of modules that make up the whole of ERP. The more business operations that may be reliably grouped into an ERP system, the more effective that system is likely to be. With this in mind, here are many of the most-common ERP modules:
Finance modules (also known as financials) are integral to nearly every ERP system, managing financial data and resources, and facilitating accurate, real-time reporting.
Keeping real-time track of inventory levels and measuring essential inventory metrics, inventory management modules in ERP systems allow inventory-dependent organizations to forecast demand and optimize on-hand stock.
Manufacturing modules assist companies in matching production levels to meet demand, monitoring and reporting on planned, in-progress, and completed items, and coordinating the various steps and processes involved in manufacturing.
Order management modules help organizations prioritize, monitor, and track their customer orders, from payment through delivery. Effective order management helps improve delivery times and reduce the likelihood of late or missing orders.
Managing and automating all company purchases—including finished goods and raw production materials—procurement modules help align procurement with demand and minimize the risk of overbuying and underbuying.
PSA modules are used to conceptualize, plan, and track projects. PSA is capable of monitoring and reporting on resource and time investments, while also improving project-team collaboration.
Receiving, storing, picking, packing, shipping, and monitoring of warehouse goods are all tasks associated with warehouse management. Warehouse management modules help direct and optimize these tasks, for improved warehouse efficiency.
Because ERP systems are designed to improve productivity, reporting, efficiency, and accuracy across essentially every part of a business, the potential benefits are nearly limitless. Here, we briefly detail some of the more impactful advantages of effective ERP:
The primary benefit of ERP, encompassing many of the other advantages on this list, is the ability to reduce costs throughout an organization. Improved process visibility helps administrators identify and eliminate inefficiencies. Automation allows departments to reduce human error from manual input, while increasing focus on other essential tasks. Improved security cuts back on potential costs and damages associated with cyber-attacks and other threats. In each case, cost savings are the end result.
ERP systems bring workflows and other process information together, giving authorized employees and administrators an at-a-glance view of all relevant projects and functions. Project updates are available at the push of a button, and all-important documentation is kept secure and available within the system.
Built-in ERP monitoring tools capture relevant data and present it in a way that is fully comprehensive and easy to follow. This allows for improved accuracy in reporting, and real-time views of essential resources.
As financial reporting, data security, and other standards become stricter (and the penalties for failing to achieve regulatory standards become more severe), the right ERP can help organizations remain fully compliant. Cloud- and hybrid-ERP solutions are designed to remain up to date on all regulatory standards, and ERP audit trails make it easy to prove compliance or identify possible problem areas.
Because ERP solutions may also function as effective hubs for collaboration and communication. Users across the entire organization can share files, access customer-service records, set up huddles, see relevant data, and more.
To remain viable when managing the full range of business processes, ERP systems are designed to be extremely flexible. This not only means that they are generally capable of performing most necessary tasks out of the box, it also means that they may be customized to support unique tasks. Additionally, thanks to advanced automation and other resource-saving tools, ERP solutions allow businesses to scale easily to meet increased demand.
Although there are many advantages to implementing an effective ERP solution, there are certain challenges to be aware of. These may include the following:
By improving efficiency and productivity across the entire enterprise, most ERP solutions pay for themselves relatively quickly. That said, they still often require a semi-significant investment of time, money, and effort to implement and adopt. This includes the time commitment and productivity loss from training employees in how to properly use the ERP solution.
To counter this issue, develop a clear ROI analysis and phased implementation plan. Start with the most critical modules and scale over time. This reduces upfront costs and minimizes operational disruption.
Many ERP systems remain unchanged from decades ago, lacking modern capabilities such as AI-driven automation, real-time analytics, and intelligent workflows. Providers may struggle to update their platforms to match evolving business needs, leaving organizations with rigid, outdated systems. At the same time, companies sometimes face diminishing returns, spending more on maintenance and upgrades while seeing fewer benefits.
Businesses should assess their ERP strategy regularly and explore modern solutions that support flexibility and innovation. Cloud-based and modular ERP options allow for continuous updates, easier integration of emerging technologies, and a more adaptable approach to business growth.
As businesses grow, managing core operations with standalone tools like accounting software or CRM systems becomes increasingly inefficient. An ERP system provides a structured approach to recording business events, ensuring streamlined processes and accurate reporting. Here are several key indicators that a business may want to upgrade to ERP:
Relying on disconnected systems for finance, sales, and inventory tracking has created inefficiencies and data inconsistencies.
Lacking a centralized system, monitoring and coordinating essential business functions has become chaotic.
Disparate tools have made it challenging to get a comprehensive view of financials, inventory, and customer interactions.
Implementing an ERP system is a critical process that requires careful planning, strategic decision-making, and dedicated resources. The approach to implementation often varies depending on the organization's size, complexity, and specific needs. Selecting the right strategy and following a structured process can help ensure a successful deployment. Among the most widely used strategies are:
- Single-step deployment
All users transition to the new ERP system at once, enabling faster realization of benefits. However, this approach carries higher risks if issues arise during the transition.
- Phased rollout
ERP components are implemented gradually over time, reducing risk by allowing for troubleshooting in stages. This approach requires more time and resources but provides a smoother transition.
- Parallel deployment
The legacy system and new ERP system run simultaneously for a period, minimizing operational disruptions. While safer, this strategy can be costlier due to dual-system maintenance.
- Hybrid approach
Combines elements of other strategies by tailoring deployment methods for different modules. For example, core functions may use a single-step approach, while complex components adopt a phased or parallel rollout.
While implementation strategies may differ, most follow the same basic process. These steps create a structured approach to transitioning to the new system:
- Discovery and analysis
The organization evaluates its current processes, pain points, and goals. This step relies on stakeholder engagement and requirement gathering to align the ERP system with business needs.
- Strategy and planning
A detailed project plan is created, outlining timelines, budgets, resources, and governance structures. This phase ensures all stakeholders have clear roles and responsibilities.
- Data preparation and migration
Through data mapping and testing, legacy data is cleansed, validated, and transferred to the new ERP system.
- System design and configuration
The ERP software is configured to align with the organization’s specific processes. Customizations, integrations, and any necessary technical adjustments are also addressed during this phase.
- Validation and testing
The system undergoes more rigorous testing to identify and resolve issues. Through user feedback and other forms of validation, the system is brought in line with business requirements.
- Deployment and transition The ERP system is implemented, and the organization officially transitions from their former legacy systems. Users must be trained on the new systems, and the entire process must be closely monitored throughout launch.
- Post-deployment support
Once live, the ERP system is continuously monitored for performance issues. Ongoing support and updates ensure the system remains aligned with business needs—even as those needs evolve.
ERP solutions come in many different shapes and sizes, and, unfortunately, not all of the created equal. In fact, with the proliferation of ERP software solutions necessary for a range of different use cases, some organizations are discovering that their ERP strategy is creating its own, difficult-to-manage data silos. To help ensure that all relevant data is being managed correctly, and that everyone involved has access to a single source of truth for all important company resources, successful businesses around the globe are turning to the ServiceNow App Engine.
ServiceNow App Engine is ServiceNow’s market-leading low-code app development and automation platform, allowing organizations of all shapes and sizes to accelerate their digital transformation. Incorporating advanced AI and analytics capabilities, and empowering users to automate, extend, and create digital workflow apps quickly using low-code, the App Engine provides the essential capabilities businesses need to operate at scale. And, by bringing all relevant information together on a single, centralized dashboard, the App Engine helps ensure that important ERP solutions don’t create difficult-to-manage data silos.
In addition, ServiceNow Finance and Supply Chain (FSC) simplifies ERP-centric processes—such as supply chain, procurement, and finance—so work can keep flowing across different systems and data sources. Add to this the ServiceNow AI Platform and its ability to optimize and support solutions, and it is easy to see why so many companies are relying on ServiceNow to improve their resource-planning capabilities.