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Do You Know the History of ERP?


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Part 3 in the blog series "What is ERP?"

Until the early 1990’s most business systems were designed around data or business process ‘silos’ or purpose-built systems for a specific business function.  While silo data systems were a huge advancement over previous paper or punch card systems, they frequently didn’t integrate (talk) well with other data systems.  As a result, one firm may end up with a separate computer system for Purchasing, another for Manufacturing, a third for Sales Order Management and Accounts Receivable, and yet another for General Ledger.

Transactions posted in one system had to be entered into other systems.  Sometimes the integration was automated with data flowing directly from one system to another, while in many cases data had to be manually entered in several of the systems.  Companies that didn't enforce data standards across their organization ended up with one product (item) number in one system, and a completely different product number in another system.  Errors were common and data was frequently inaccurate and unreliable in these data silo systems.

The advent of ERP systems in the mid to late 1990’s allowed companies to purchase a single system that could encompass most, if not all business processes in one software package.  In such a package, issues with data integrity and seamless integration from one business function to another were resolved.  With all users in the same system, the purchasing group can be confident they are ordering the correct raw materials for the manufacturing group, who themselves can rely on real-time inventory levels which are updated the moment product is received.  All transactions also post to the accounting functions of the ERP package giving accurate and real-time information on liabilities and inventory values based upon what was purchased and received.  While common for many companies today, this seamless, reliable flow of data from one business department to another was unheard of just 25 years ago.

ERP systems significantly grew in market share at end of the 1990’s due to the Y2K (Year 2000) issue.  ERP systems designed prior to 1990 were frequently designed with only 2 digit year codes.  As the year 2000 approached, there was a concern that the digit representing the year would reset from ‘99’ to ‘00’ causing systems to think that it was, in effect, the year 1900.  These software programs had to be replaced and as a result a large number of ERP solutions were developed and sold at this time.  Once this artificial bubble of demand had been met, software sales of ERP solutions plunged and many software firms went out of business.

Want to learn more about ERP systems? Read Part 1 “What is an ERP System,” Part 2 "The Origins of ERP Systems" and check back weekly for the next article in the series. By the end of the series, you'll be able to select the right ERP system and ERP consulting partner that will work with you to implement the right ERP system to help your business improve.

by eSoftware Professionals, Montana Microsoft Dynamics Partner

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