December 21, 2000, 10:25 AM — When CIO Enterprise set out to provide valuable and accessible information on the IT nitty-gritty to non-IT execs in the form of the Learning Curve column, the goal was simple. It was, as stated in an early mission statement, for the column to be "A technology primer for non-IS executives, defining technology buzzwords (data mining, for example) and explaining their applications to business."
We have tried to keep you up to speed on the latest trends and terms, always with an eye toward what's hot and what's most important to our non-IT readership. Yet with the maddening rate of change in IT and the frustratingly brief time available for poring over magazines, we know you might have missed a Learning Curve or two over the past two years. So here are Learning Curve's greatest hits, so to speak, conveniently packaged together in this last edition of CIO Enterprise. Not available in stores!
What Is ERP?
ERP (EXCUSE ME) STANDS FOR enterprise resource planning, a software system that aims to serve as a backbone for your whole business. It integrates key business and management processes to provide a sky-level view of much of what's going on in your organization. ERP tracks company financials, human resources data and (if applicable) all the manufacturing information such as where you put your inventory and when it needs to be taken from the parts warehouse to the shop floor.
The leader in ERP market share, and the one that invented the market to an extent, is the German company SAP AG with its R/3 software. Other big players include PeopleSoft Inc., Oracle Corp., Baan Co. NV and J.D. Edwards & Co.
Big whoop. We've always had software for those processes.
Yes, but each piece of the puzzle was provided by a different software vendor, and those pieces typically didn't talk to one another. The accounting system didn't exchange data with the manufacturing system, for example. At least not without a great deal of poking and prodding and rewriting from the techies in IS.
The idea behind ERP is that the software needs to communicate across functions. With an ERP system, the financial software can cut an accounts payable check as soon as the loading dock clerk confirms that the goods have been received in inventory. Similarly, the accounts receivable module can generate an invoice as soon as the shipping clerk says the finished goods are on the truck to the customer. All this is done with a minimum of human intervention and paperwork.
ERP aims to replicate business processes (how do we record a sale? how do we verify hourly workers' paychecks?) in software, guide the employees responsible for those processes through them step by step and automate as many procedures as desired.
Sounds great. Is there a downside?