Definition of ERP Systems

By Constance Keasler

Enterprise Resource Planning systems (abbreviated as ERP) are software modules that handle the core functions of a business enterprise, including sales, inventory, purchasing, and accounting. The modules are integrated so that data and transactions pass between departments, most commonly using one central database. Companies use ERP systems to maximize resources, improve customer and vendor relationships, and empower decision makers. Often, companies adopt better business processes with the implementation of an ERP system.


Stemming from the success of material resource planning (MRP) software, ERP appeared in the 1990s. Previously, MRP focused strictly on the manufacturer's production activities with little integration and information shared with other departments. ERP systems extended into all core areas, supporting multiple users at the same time. Leaving the MRP systems to do what they did best, ERP systems became the enterprise foundation from which evolved other software applications, such as customer relationship management and supply-chain management software. As of 2009, there were more than 25 active ERP software vendors, including large vendors such as SAP and Oracle.


ERP software is used as the main system by companies that make products rather than provide services. A single database that includes information about the items, customers and vendors is accessible from any module, by any department. The integration of all the modules, such as sales/invoicing, purchasing, shipping, and accounting, is the feature that characterizes ERP. Depending on the software vendor, specific features relating to inquiry or decision-making information are available.


The server platform that ERP software runs on is important, because other software can be added to it and run in tandem with it. As different servers have been introduced, ERP vendors have either rewritten the software to run on newer technology, or used tools to modify the application software. Although Microsoft platforms are the most common, some ERP systems were written using older technology like FoxPro, Progress, SQL windows, Paradox, Centura, GUPTA and proprietary languages.

Expert Insight

According to the Gartner Group, a technology research firm, new license revenue for ERP software will reach $721 million by 2010. The largest growth is expected in the Asia/Pacific region. The largest market for ERP systems is the mid-market, companies with 100 to 1,000 employees. Gartner, in its magic quadrant report, picks Microsoft Dynamics AX as the leader in ERP for the mid-market. It also includes SAP Business All-In-One and Epicore Vantage as visionaries.

Emerging Trends

Due to the needs of companies today, certain trends are changing the landscape of ERP systems. ERP systems need to be deployed globally, address industry-specific needs and be more event driven. Service Oriented Architecture (SOA) enables companies to address those needs and help further reduce costs and increase efficiencies.