E-guide

The Ultimate
Guide to ERP
 E-guide

In this e-guide
In this e-guide:
The ultimate guide to ERP p. 2
ERP is the nervous system of modern businesses. Learn how it
What does an ERP system do? p. 2
works, understand its risks and benefits, and get tips on
What are the advantages and
disadvantages of ERP? p. 5 deployment in this wide-ranging guide.
Key features of ERP systems p. 7

On-premises ERP vs. cloud ERP vs.

hybrid ERP p. 9

How to choose an ERP system p.11

ERP implementation p. 14

ERP support p. 15

Multi-tiered ERP systems p. 16

Why is ERP important? p. 17

Further reading p. 21

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In this e-guide
The ultimate guide to ERP
The ultimate guide to ERP p. 2
David Essex, Editor at Large, SearchERP.com
What does an ERP system do? p. 2

What are the advantages and It is hard to imagine modern business without ERP. From its roots more than 50
disadvantages of ERP? p. 5
years ago in the first financial and production planning tools used by
Key features of ERP systems p. 7 manufacturers, ERP has grown to become a mainstay in all but the smallest
On-premises ERP vs. cloud ERP vs. businesses.
hybrid ERP p. 9

How to choose an ERP system p.11 ERP, or enterprise resource planning, is networked software that handles the
ERP implementation p. 14 transactions and record-keeping of the essential functions of any business, such
ERP support p. 15 as sales, purchasing, accounting and human resources. Installing an ERP
Multi-tiered ERP systems p. 16 system is one of the boldest steps an organization can take to computerize its
Why is ERP important? p. 17
business activities.
Further reading p. 21
Read on to learn the basics of ERP and the steps to deploy it, and click on the
links for more detail and in-depth analysis.

What does an ERP system do?

ERP software consists of connected but distinct components, or modules, each
of which enables workers to carry out the functions of a particular business

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process or department, such as sales, customer relationship management

In this e-guide (CRM), inventory management and finance.

The ultimate guide to ERP p. 2 ERP differs in essential ways from other types of business software -- say, a
What does an ERP system do? p. 2 basic accounting package used by one person or a small group.
What are the advantages and
disadvantages of ERP? p. 5 An important differentiating feature of ERP is the integration between modules
Key features of ERP systems p. 7 that enables the modules and users to interact. For example, a sales order
On-premises ERP vs. cloud ERP vs. created in the CRM module will be shared with the production module so
hybrid ERP p. 9
workers in the manufacturing department will have the information about what
How to choose an ERP system p.11 product to make. When the product is shipped, data in the inventory
ERP implementation p. 14 management module changes, and when the customer pays, the accounting
ERP support p. 15 module records the revenue.
Multi-tiered ERP systems p. 16
Another distinguishing feature of ERP software is the central database in which
Why is ERP important? p. 17
the modules record transactions and other information, access that data and
Further reading p. 21
share it (see Figure 1). Having this "single source of truth" -- that's an ERP
industry buzz phrase -- saves users from having to enter information more than
once. It also improves data accuracy and facilitates reporting and collaboration.

ERP also usually maintains a consistent look and feel across modules, unlike a
collection of separate software applications from different vendors. This
consistency, at least in theory, makes it easy for workers to learn the system
and move around the modules. In reality, many people find ERP software

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difficult to use -- especially if it is a decade or two old and hasn't been updated
In this e-guide with graphical user interfaces (GUIs) and other usability improvements.

The ultimate guide to ERP p. 2

What does an ERP system do? p. 2

What are the advantages and

disadvantages of ERP? p. 5

Key features of ERP systems p. 7

On-premises ERP vs. cloud ERP vs.

hybrid ERP p. 9

How to choose an ERP system p.11

ERP implementation p. 14

ERP support p. 15

Multi-tiered ERP systems p. 16

Why is ERP important? p. 17

Further reading p. 21

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In this e-guide
What are the advantages and disadvantages of
The ultimate guide to ERP p. 2 ERP?
What does an ERP system do? p. 2
The sheer size, interconnectedness and complexity of ERP is both a blessing
What are the advantages and
disadvantages of ERP? p. 5 and a curse (see Figure 2).
Key features of ERP systems p. 7
When ERP software is running well and closely aligned with an organization's
On-premises ERP vs. cloud ERP vs.
hybrid ERP p. 9
ways of doing business, it makes an enterprise's all-important business
processes function more smoothly and opens up new possibilities, such as
How to choose an ERP system p.11
redeploying workers or implementing an omnichannel e-commerce strategy. But
ERP implementation p. 14
when deployment is delayed or the system goes down unexpectedly, ERP can
ERP support p. 15
bring business to a standstill and force users to scramble, looking for manual
Multi-tiered ERP systems p. 16
alternatives. And an older ERP system with unintuitive screens and poorly
Why is ERP important? p. 17
designed workflows can put a drag on a business that threatens its very
Further reading p. 21 existence.

But the biggest disadvantage of ERP, one that has frequently led to lawsuits, is
the significant risk and cost of a failed or severely delayed implementation. ERP
implementation failures often make headlines; at least two such failures
involved projects that topped $1 billion. One high-profile case was the 2018 suit
that investors of cosmetics maker Revlon filed when problems implementing
SAP ERP allegedly disrupted manufacturing operations and delayed shipments.

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In this e-guide See a larger

version of the
The ultimate guide to ERP p. 2
image here.
What does an ERP system do? p. 2

What are the advantages and

disadvantages of ERP? p. 5

Key features of ERP systems p. 7

On-premises ERP vs. cloud ERP vs.

hybrid ERP p. 9

How to choose an ERP system p.11

ERP implementation p. 14

ERP support p. 15

Multi-tiered ERP systems p. 16

Why is ERP important? p. 17

Further reading p. 21

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Nevertheless, the advantages of ERP usually outweigh the disadvantages.

In this e-guide Among the highlights are the following:

The ultimate guide to ERP p. 2 Advantages

What does an ERP system do? p. 2
• ERP can save money over the long run by streamlining processes.
What are the advantages and
disadvantages of ERP? p. 5
• It provides a unified system that can lower IT, labor and training costs.
• ERP enables a clearer view into critical parts of the business, such as
Key features of ERP systems p. 7
sales, working capital and inventory.
On-premises ERP vs. cloud ERP vs. • It facilitates reporting and planning through improved data and analytics.
hybrid ERP p. 9
• It offers better compliance and security through standardized workflows
How to choose an ERP system p.11 and fine-grained control of user rights.
ERP implementation p. 14
Disadvantages
ERP support p. 15

Multi-tiered ERP systems p. 16 • ERP software can be expensive to deploy and maintain.
• It is often difficult to implement.
Why is ERP important? p. 17
• It requires significant change management.
Further reading p. 21 • ERP modules are often less sophisticated than specialized software and
go unused or must be replaced.

Key features of ERP systems

Most ERP systems handle the core business processes -- either in dedicated
modules or in subfunctions of other modules -- that are common to all kinds of
enterprises. However, the ERP finance module is the only one in every ERP

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product, since every company needs the ability to process financial transactions
In this e-guide and account for them. It automates basic accounting, invoicing, financial
analytics, forecasting and reporting.
The ultimate guide to ERP p. 2

What does an ERP system do? p. 2 Other commonly used core ERP modules include human capital management
What are the advantages and (HCM), order management, sales management or CRM, and purchasing or
disadvantages of ERP? p. 5
procurement.
Key features of ERP systems p. 7

On-premises ERP vs. cloud ERP vs. Companies that make or distribute products need additional modules with
hybrid ERP p. 9
specialized capabilities. The most common ones include the following:
How to choose an ERP system p.11

ERP implementation p. 14 • material requirements planning (MRP);

• inventory management;
ERP support p. 15
• manufacturing management, or production management; and
Multi-tiered ERP systems p. 16 • supply chain management (SCM): complex processes for demand
Why is ERP important? p. 17
planning and logistics, including transportation management systems and
warehouse management systems.
Further reading p. 21

Some organizations add still another layer of modules that are even more
specialized or provide advanced capabilities. For example, a company might
augment the basic HR functions of its HCM system -- such as payroll, benefits
and employee records -- to add talent management software with modules
dedicated to recruiting, training, evaluating and compensating employees. A
consultancy, construction firm or other business whose work is typically
organized into projects might add a project management module. A
manufacturer with its own distribution centers might buy an SCM suite from

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another vendor that has sophisticated transportation and warehouse

In this e-guide management software that comes with prepackaged integration to the ERP.
In recent years, ERP vendors have bolstered their products with emerging
The ultimate guide to ERP p. 2
technologies that are sweeping through other sectors of the IT industry. Today,
What does an ERP system do? p. 2
the hottest ERP trends are all about making ERP more interactive, intuitive and
What are the advantages and "intelligent."
disadvantages of ERP? p. 5

Key features of ERP systems p. 7 Chatbots are taking over many of the ERP tasks, such as invoice processing
On-premises ERP vs. cloud ERP vs. and customer service, formerly handled by humans. Artificial intelligence
hybrid ERP p. 9
improves ERP data analytics by "learning" to recognize patterns and make
How to choose an ERP system p.11
recommendations. Natural language processing makes it possible to control
ERP implementation p. 14
ERP by speaking into a voice user interface.
ERP support p. 15

Multi-tiered ERP systems p. 16

Why is ERP important? p. 17 On-premises ERP vs. cloud ERP vs. hybrid ERP
Further reading p. 21
ERP systems are designed to run either "on premises" in the owner's data
center, or in the cloud on computers maintained by the vendor and delivered to
users over the internet.

Choosing a deployment option is one of the biggest decisions an ERP buyer

has to make because it affects almost every aspect of an ERP system, including
the types of features that are available, implementation time, user-friendliness
and cost.

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Early cloud versions of ERP had fewer modules and capabilities than on-
In this e-guide premises versions. Today, the two systems have neared parity, with cloud
deployments offering some important advantages.
The ultimate guide to ERP p. 2

What does an ERP system do? p. 2 In most cases, cloud ERP doesn't require the computing infrastructure of on-
What are the advantages and premises ERP. Instead, the software vendor or cloud service provider manages
disadvantages of ERP? p. 5
it. A cloud ERP implementation can therefore be far cheaper in terms of
Key features of ERP systems p. 7 purchase, deployment and maintenance costs.
On-premises ERP vs. cloud ERP vs.
hybrid ERP p. 9
Thanks to the flexibility of cloud computing resources, cloud ERP can be easier
How to choose an ERP system p.11 to scale up and down as needs fluctuate. Automatic upgrades, which are also
ERP implementation p. 14 managed by the vendor, can deliver new technologies faster and with less
ERP support p. 15 hassle than is possible with on-premises ERP.
Multi-tiered ERP systems p. 16
However, not all cloud ERP deployment options are alike, and ERP vendors
Why is ERP important? p. 17
often fudge the terminology. Options include the following:
Further reading p. 21

• Multi-tenant. The purest type of cloud ERP, multi-tenant SaaS ERP, is

usually streamlined with fewer modules and features than on-premises
ERP. Multiple users share the same copy of the software, which makes it
cheaper, simpler and more standardized than most on-premises ERP.
• Single tenant. Another type of SaaS, called single tenant, cordons off
the software to give the buyer more control over the ERP, including the
ability to customize it, which is usually not possible with multi-tenant
SaaS.
• Private cloud and hosted ERP. Two other varieties of cloud ERP,
private cloud and hosted ERP, typically just involve running the same on-

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premises software on an outside provider's data centers, though they

In this e-guide may have some characteristics of cloud computing such as economies of
scale from shared infrastructure as well as on-demand use and pricing.
The ultimate guide to ERP p. 2
Some companies maintain their own private cloud infrastructure -- an
extreme example of how much the lines between on-premises and cloud
What does an ERP system do? p. 2 ERP have blurred.
What are the advantages and • Hybrid ERP. The fact that SaaS ERP, particularly multi-tenant, usually
disadvantages of ERP? p. 5 can't be customized is a major drawback for companies that need the
Key features of ERP systems p. 7 custom features and integrations of an on-premises ERP system into
which they have usually sunk significant time and money. As a result,
On-premises ERP vs. cloud ERP vs.
hybrid ERP p. 9 hybrid ERP, which combines on-premises and cloud ERP modules and
related applications, is an increasingly popular way to gain some of the
How to choose an ERP system p.11
technological benefits of SaaS without losing the security of an older,
ERP implementation p. 14 familiar system. It raises daunting integration challenges, however.
ERP support p. 15

Multi-tiered ERP systems p. 16

Payment terms also vary for the different types of ERP deployments. Unlike on-
premises ERP, which usually requires an expensive long-term license paid
Why is ERP important? p. 17
upfront, SaaS is generally sold by monthly per-user subscriptions. However, the
Further reading p. 21
differences between cloud ERP and on-premises ERP pricing aren't quite so
clear-cut because some vendors combine features of the two.

How to choose an ERP system

Finding an ERP product that will fit the organization's needs requires following a
methodical process that typically includes these major steps:

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1. Assigning a team. The ERP buying process starts with forming a project
In this e-guide team led by a project manager and usually consisting of department
heads, senior executives and IT.
The ultimate guide to ERP p. 2
2. Defining requirements. The project team is charged with understanding
the organization's current and aspirational ERP use cases, then
What does an ERP system do? p. 2 gathering the requirements and wish lists of stakeholders.
What are the advantages and 3. Researching vendors. The requirements planning stage provides the
disadvantages of ERP? p. 5 framework for researching ERP software vendors and asking the most
Key features of ERP systems p. 7 promising ones to respond to a request for proposal (RFP) detailing how
they will deliver the requirements. Some vendors may be called in to give
On-premises ERP vs. cloud ERP vs.
hybrid ERP p. 9 sales presentations.
4. Identifying the shortlist. The project team names a small group of
How to choose an ERP system p.11
vendors it believes is most likely to meet the requirements.
ERP implementation p. 14 5. Scheduling demos. The shortlisted vendors are called in to demonstrate
ERP support p. 15 how their software performs in real-world circumstances, sometimes in a
competitive "bake-off."
Multi-tiered ERP systems p. 16
6. Selecting a vendor. After negotiating price and terms, the buyer signs a
Why is ERP important? p. 17 contract with the chosen vendor.
Further reading p. 21
In practice, completing each major step requires several substeps and
significant data collection. For example, requirements planning often involves
surveys and meetings with users, or a formal gap analysis to determine whether
the organization's business software meets current and future needs. Many
organizations perform a financial analysis to assess the stability of shortlisted
vendors and interview customers with similar needs.
The final choice usually comes down to how closely a product matches the
buyer's required timeline, features, ease of use and price, and whether it

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supports current or planned business processes. A product's deployment

In this e-guide options can also tip the balance, besides heavily influencing the other criteria. A
SaaS ERP product, for example, is more likely to fit a shorter implementation
The ultimate guide to ERP p. 2
timeline and be easier to use than an on-premises system; but, as noted, it
What does an ERP system do? p. 2
might lack the specialized functions a company needs to stay in business.
What are the advantages and
disadvantages of ERP? p. 5
Buyers entering the market will find a few dozen ERP vendors that vary widely
Key features of ERP systems p. 7 in size and target markets. There is specialized on-premises ERP for small law
On-premises ERP vs. cloud ERP vs. firms and giant chemical producers, basic cloud ERP for the project
hybrid ERP p. 9
management and accounting of global consulting firms, and obscure brands of
How to choose an ERP system p.11
ERP sold mostly to regional manufacturers and distributors in the U.S.
ERP implementation p. 14

ERP support p. 15 Some ERP vendors, including Acumatica, NetSuite and Sage Intacct, specialize
Multi-tiered ERP systems p. 16 in the needs of SMBs, offering relatively affordable and simple ERP for common
Why is ERP important? p. 17 financial, order management and HR functions. Such entry-level products may
Further reading p. 21
be a company's first ERP system when it outgrows basic accounting software,
but they can usually be expanded with additional modules and "scale," or grow,
to accommodate more users and business functions.

Four major-brand ERP vendors -- Infor, Microsoft, Oracle (including NetSuite)

and SAP -- have the biggest market shares, with nearly half the worldwide total.
These four also have the broadest product lines that span from entry-level ERP
to complex software suites for multinational conglomerates, as well as
specialized versions for most major industries. Some market researchers
include Sage Intacct and Workday -- a fast-growing maker of SaaS HCM and

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accounting software -- among the market-share leaders, but neither vendor has
In this e-guide quite the breadth of products as the top four.

The ultimate guide to ERP p. 2 Other prominent ERP vendors include Epicor, IFS, Kenandy, Plex Systems,
What does an ERP system do? p. 2 QAD and Syspro.
What are the advantages and
disadvantages of ERP? p. 5

Key features of ERP systems p. 7 ERP implementation

On-premises ERP vs. cloud ERP vs.
hybrid ERP p. 9
ERP implementation best practices call for a formal process, overseen by an ad
How to choose an ERP system p.11 hoc team drawn from every major department, that extends from the conceptual
ERP implementation p. 14 stage to post-implementation support and, ultimately, upgrading or replacing the
ERP support p. 15 system. Project management methodologies, tools and software are essential in
Multi-tiered ERP systems p. 16 managing what could be a multiyear process.
Why is ERP important? p. 17
Once a vendor is chosen, the implementation begins. In the case of an ERP
Further reading p. 21
upgrade from one system to another, companies usually run and test the new
ERP system in parallel with the old one to confirm that it works properly before
committing to a launch date. Data migration then consumes much of the time
and resources needed to ensure the new system can take over business
processes with minimal disruption.

The best practices don't end when the system is deployed. Companies must
communicate the benefits and features of the new system in advance, then
maintain a training process for current and incoming employees. A

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comprehensive, effective change management strategy can be the difference

In this e-guide between ERP implementation success and failure.

The ultimate guide to ERP p. 2

What does an ERP system do? p. 2 ERP support

What are the advantages and
disadvantages of ERP? p. 5
The new system also has to be maintained. ERP vendors or their support
Key features of ERP systems p. 7 partners offer tech-support services, usually contracted for an additional fee.
On-premises ERP vs. cloud ERP vs. They typically include a help desk reachable by phone, email or online; a
hybrid ERP p. 9
dedicated customer web portal with FAQs, user manuals and other
How to choose an ERP system p.11
documentation; and access to discussion forums. On-site support typically
ERP implementation p. 14
provides implementation assistance, troubleshooting and training. Software
ERP support p. 15
development may be a significant part of support if the ERP system needs
Multi-tiered ERP systems p. 16 customizing, extending or integrating with other systems.
Why is ERP important? p. 17

Further reading p. 21
Most companies maintain their own ERP support staff, even if it is just one IT
person who has other responsibilities. Larger companies may have several
people whose job it is to keep the ERP system running, train users and interact
with the ERP vendor, systems integrator or service provider. "ERP
administrator" is a common title in the IT world.

The growing popularity of cloud ERP is bringing major changes to the internal
ERP support function, which used to focus mostly on maintaining the ERP
system itself. Now, ERP administrators must be knowledgeable about the
capabilities of SaaS business applications, figure out how to assemble them into

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an ERP system, and understand the needs of customers and other external
In this e-guide users.

The ultimate guide to ERP p. 2

What does an ERP system do? p. 2 Multi-tiered ERP systems

What are the advantages and
disadvantages of ERP? p. 5
The word tier comes up often in the context of ERP. It has two meanings.
Key features of ERP systems p. 7

On-premises ERP vs. cloud ERP vs. The most important -- because it describes an actual software architecture -- is
hybrid ERP p. 9
what's referred to as two-tier ERP, a strategy that typically involves pairing a
How to choose an ERP system p.11 large, often older (or "legacy") on-premises ERP system in corporate
ERP implementation p. 14 headquarters with smaller, cheaper, often SaaS-based ERP systems at
ERP support p. 15 divisions and remote offices. The two tiers are integrated, especially for
Multi-tiered ERP systems p. 16 accounting, finance and other companywide processes such as HCM, and can
Why is ERP important? p. 17 be from different vendors.
Further reading p. 21
Two-tier ERP can be a good strategy for extending ERP to more locations while
providing remote offices with more control, flexibility and agility to meet local
needs.

The second use of tier is as a way of classifying ERP software and vendors by
size. In this scheme, tier 1 ERP products are built for and typically purchased by
the world's largest name-brand companies and sold by the biggest vendors. The
tier 1 group usually includes SAP, Oracle, Microsoft and Infor. Tier 2 vendors
are next in the rankings, measured roughly by revenue. Like tier 1 vendors, they

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sell systems for both large companies and SMBs. Tier 3 vendors are the
In this e-guide smallest and often sell ERP for niche industries.

The ultimate guide to ERP p. 2 The tier-ranking system for vendors and products is controversial, highly
What does an ERP system do? p. 2 arbitrary and has begun to fall out of use.
What are the advantages and
disadvantages of ERP? p. 5

Key features of ERP systems p. 7 Why is ERP important?

On-premises ERP vs. cloud ERP vs.
hybrid ERP p. 9
In one form or another, ERP has been at the center of efforts to exploit the data
How to choose an ERP system p.11 processing and calculating capacity of computers to manage complex business
ERP implementation p. 14 processes. This important software began as MRP, a system invented in the
ERP support p. 15 1960s to plan the materials needed in manufacturing that was later extended to
Multi-tiered ERP systems p. 16 other factors such as financials (see Figure 3), and renamed manufacturing
Why is ERP important? p. 17 resource planning (MRP II).
Further reading p. 21
When MRP II grew to encompass even more processes like payroll, HR and
sales, the need for a generic term became clear; in 1990, ERP was coined.
Today, MRP and ERP continue to play essential roles in manufacturing, and
ERP has become the digital nervous system of business.

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In this e-guide

The ultimate guide to ERP p. 2

What does an ERP system do? p. 2

What are the advantages and

disadvantages of ERP? p. 5

Key features of ERP systems p. 7

On-premises ERP vs. cloud ERP vs.

hybrid ERP p. 9

How to choose an ERP system p.11

ERP implementation p. 14

ERP support p. 15

Multi-tiered ERP systems p. 16

Why is ERP important? p. 17

Further reading p. 21

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Few observers would doubt that ERP has also had a positive influence on the
In this e-guide global economy. The anecdotal evidence from individual companies is both
convincing and unsurprising, and it springs largely from the usual benefits of
The ultimate guide to ERP p. 2
computerizing manual, paper-based processes.
What does an ERP system do? p. 2

What are the advantages and Digitizing business transactions and records usually speeds them up and makes
disadvantages of ERP? p. 5
them more accurate and reliable. Sharing this real-time or near-real-time
Key features of ERP systems p. 7 information over a network helps workers across departments make better
On-premises ERP vs. cloud ERP vs. decisions, coordinate their activities, collaborate more effectively and minimize
hybrid ERP p. 9
the avoidable errors caused by miscommunication. It also helps businesses
How to choose an ERP system p.11
respond more quickly to changing conditions.
ERP implementation p. 14

ERP support p. 15 Tapping into the internet to open these ERP channels to the outside world helps
Multi-tiered ERP systems p. 16 to align supply and demand by tying the desires of customers more intimately to
Why is ERP important? p. 17 the actions a company, its suppliers and partners take to develop and deliver
Further reading p. 21
products and services.

This ongoing "digital transformation" of nearly every corner of the business

world, enabled in large part by ERP, has made new conveniences, such as
mobile e-commerce, possible. It has also helped to integrate the world economy
by enabling -- or, at the very least, supporting -- global manufacturing, supply
chain analytics and industrial IoT.

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At the same time, digital transformation calls for a new set of ERP skills that
In this e-guide emphasizes broad business expertise and collaboration to write the next
chapter in the long partnership between ERP and business.
The ultimate guide to ERP p. 2

What does an ERP system do? p. 2

What are the advantages and Further reading

disadvantages of ERP? p. 5

Key features of ERP systems p. 7

On-premises ERP vs. cloud ERP vs.

hybrid ERP p. 9

How to choose an ERP system p.11

ERP implementation p. 14

ERP support p. 15

Multi-tiered ERP systems p. 16

Why is ERP important? p. 17

Further reading p. 21

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In this e-guide
SearchERP
The ultimate guide to ERP p. 2
SearchERP was built to help startups, small and mid-sized businesses, and
What does an ERP system do? p. 2
large corporations better leverage modern ERP technologies and strategies.
What are the advantages and
disadvantages of ERP? p. 5
We cover all pockets of ERP, including: software selections and
Key features of ERP systems p. 7
implementations, on-premise and cloud infrastructures, integration, financials,
On-premises ERP vs. cloud ERP vs.
hybrid ERP p. 9 manufacturing management, internet of things (IoT), artificial intelligence (AI),
How to choose an ERP system p.11 sales and operational planning and much more.
ERP implementation p. 14

ERP support p. 15

Multi-tiered ERP systems p. 16 For further reading, visit us at:

Why is ERP important? p. 17
SearchERP.com
Further reading p. 21
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