What the term Enterprise Resource Planning means and to whom.

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What the term Enterprise Resource Planning means and to whom

 Enterprise resource planning

 "Enterprise Resource Planning software is a set of applications that automate finance and human resource departments and help manufacturers handle jobs such as order processing and production scheduling." This is a broad definition that explains in a sentence exactly what ERP software does. Yet, there is much more to it. ERP is an industry term for the broad set of activities supported by multi-module application software that will help a business manage the important parts of their respective businesses. Typically, an ERP system uses, or is integrated with a relational database system. ERP operates through integrated databases and basically one set of data. Therefore, the user will call upon these databases to retrieve information related to manufacturing, human resources and financial data. ERP has said to be the next generation of MRP systems. ERP, though, is much more. MRP, or Materials Resource Planning, can perform scheduling activities in one plant, while ERP can be connected globally (via an Intranet or an Extranet) so that the entire organization appears to be and functions as one seamless unit. The integrated ERP system, 71% of the time, utilizes a UNIX server and Windows-based PC Clients (client/server architecture). ERP can also be installed on a mainframe legacy system but the integration benefits achieved may not be as great as the client/server architecture. ERP is a form of reengineering that utilizes hardware, software and consultants. The hardware is the PC or terminal used, as well as a server or a mainframe. The consultants implement the software and train the users. ERP vendors provide the software. The top ERP vendors provide a generic software program, which functions as the backbone of the entire process. There are also a number of small software vendors that address the particular needs of particular markets, with products configured to "fit into the backbone systems."

 Studies show that 70% of Fortune 1000 firms have or will soon install ERP systems, which will boost the global ERP market from $15 billion now to $50 billion over the next five years. ERP applications make up the largest portion of Information Technology budgets. 39% of large companies and 60% of smaller companies are deploying ERP systems. The expected annual growth rate for the ERP market over the next 5 years is 37%. With the power ERP has over business, it is important to see who the key vendors of ERP software are.

  Suppliers of ERP Software

 SAP, the forerunner of ERP, founded in 1972 by 5 former IBM engineers, is the biggest of the group. SAP’s software is R/3 and is designed to help organize manufacturing processes and accounting. SAP also offer modules for logistics and human resources. Recently, SAP has expanded its product line by including supply chain management, sales-force automation and data warehousing software.

 PeopleSoft is the number two ERP vendor. PeopleSoft made its mark with human resource software. The company currently targets the service sector with products designed to help companies handle their intangible costs.

 SAP and PeopleSoft have seen continued success due to the fact that they offer added features to existing customers as well consistently attracting large, brand name customers.

 The other players in the ERP vendor market are Oracle, Baan and J. D. Edwards. Oracle has been selling ERP applications designed to work with its databases since 1987. Oracle sells most of its applications to manufactures and consumer goods companies, making them a direct competitor with SAP. Oracle has experienced problems recently due to a reorganization of their company sales force as well as user uncertainty about its latest release, version 11.0.

 Baan is a 19-year old Dutch company and sells manufacturing software to companies wary of SAP. They have recently, like some of the other large vendors, stocked up on small software suppliers, which has resulted in a wider variety of product offerings.

 The last of the major vendors is J. D. Edwards. Although they have been selling software for decades, they just went public one year ago. Since they launched their product, OneWorld open-systems ERP package, they have become a viable contender for a slot among the other big 4 vendors. These companies make up the majority of the $7 billion, ERP software industry.

 The remaining competitors are lesser name, small ERP vendors and "best-of-breed" software providers. Since the high-end ERP software providers have focused on the Fortune 500 companies, lesser name vendors have concentrated on the middle market. The customers in this market are made up of mid and small size companies. The established middle market vendors include Systems Software Associates, QAD, PowerCerv and Infinium Software. Middle-market companies are being driven to implement ERP software so that they can be integrated with the large companies they supply to. Many of these large firms have already successfully implemented ERP software, most likely by one of the big 5 vendors. The middle-market vendors have succeeded in the middle-market because they know what their customers need. Middle-market firms need ERP solutions that can be implemented quickly and cost effectively. They typically have small IT staffs and limited resources, which make it difficult to implement one of the generic ERP packages. They require a lot of customization, which lead middle-market customers to vendors who can provide a more personalized application specific relationship, implemented in a short period of time. The middle-market vendors offer advantages to their customers such as cost-savings and component-based architecture, whose components can be moved around and are easier to reconfigure for eventual integration with other systems.

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 The big 5 vendors wish to enter this market, due to the soon-to-be-saturation of the Fortune 500 companies who have already implemented ERP. Therefore, the big 5 have started utilizing best-of-breed tools (industry specific software) and combined them with their own products to fill the niche required to meet all customers business needs. The major vendors have started programs to certify third party producers in their respective application packages. They have also been buying out smaller software companies and have formed alliances with the top 2 or 3 players in the middle-market.

 Consultants, most often from the top accounting firms, ...

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