Defining ERP Systems
Prior to .the introduction of ERP systems, each functional area within an organization typically had its own software and database. These software packages often were incompatible with each other, which prevented transactions from taking place directly between systems. In addition with more than one database, there often were multiple records for the same piece of data, which, in turn, caused delays and unnecessary error throughout the firm. For example, an employee might be listed as John Smith in the Human Resources database. John S. Smith in the Accounting Department. and Dr. John Smith in the Engineering Department. From the computer systems’ perspective these would be viewed as three different
people. In such an environment, transaction, between functions often. were done manually, which was tedious, slow, and a source of additional errors. As a result. each of the functional areas within an organization was viewed as an independent operation. as illustrated in Exhibit.
To address this issue of incompatibility and multiple databases, ERP systems were developed to provide an infrastructure with a common information technology platform that would not only electronically link all of the functional areas with a single database, but also address their individual needs, as shown in Exhibit Exhibit 4.4 illustrates how SAP, the leading ERP software firm. specifically provides this integration.