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Q7-5 What Are the Elements of an ERP System?

An ERP solution is an information system and, as such, has all five components. We consider
each in turn.
Hardware

Traditionally, organizations hosted ERP solutions on their own in-house, networked server com-
puters. Such hosting is still the case for many large ERP applications, as well as for those ERP appli-
cations that were installed years ago and for which the hardware infrastructure is stable and well
managed.
Increasingly, however, organizations are turning to cloud-based hosting in one of two modes:

• PaaS: Replace an organization’s existing hardware infrastructure with hardware in the
cloud. Install ERP software and databases on that cloud hardware. The using organization
then manages the ERP software on the cloud hardware.
• SaaS: Acquire a cloud-based ERP solution. SAP, Oracle, Microsoft, and the other major
ERP vendors offer their ERP software as a service. The vendor manages the ERP software
and offers it to customers as a service.

During your career, existing in-house ERP solutions are likely to migrate to one of these two
modes. Larger installations will likely move to PaaS; smaller and new ERP systems are likely to use
SaaS.

ERP Application Programs

ERP vendors design application programs to be configurable so that development teams
can alter them to meet an organization’s requirements without changing program code.
Accordingly, during the ERP development process, the development team sets configuration
parameters that specify how ERP application programs will operate. For example, an hourly
payroll application is configured to specify the number of hours in the standard workweek,
hourly wages for different job categories, wage adjustments for overtime and holiday work, and
so forth. Deciding on the initial configuration values and adapting them to new requirements
is a challenging collaboration activity. It is also one that you might be involved in as a business
professional.
Of course, there are limits to how much configuration can be done. If a new ERP customer
has requirements that cannot be met via program configuration, then it needs to either adapt
its business to what the software can do or write (or pay another vendor to write) application
code to meet its requirements. As stated in Chapter 4, such custom programming is expen-
sive, both initially and in long-term maintenance costs. Thus, choosing an ERP solution with
applications that function close to the organization’s requirements is critical to its successful
implementation.

ERP Databases

An ERP solution includes a database design as well as initial configuration data. It does not, of
course, contain the company’s operational data. During development, the team must enter the
initial values for that data as part of the development effort.
If your only experience with databases is creating a few tables in Microsoft Access, then you
probably underestimate the value and importance of ERP database designs. SAP, the leading ven-
dor of ERP solutions, provides ERP databases that contain more than 15,000 tables. The design
includes the metadata for those tables, as well as their relationships to each other, and rules and
constraints about how the data in some tables must relate to data in other tables. The ERP solu-
tion also contains tables filled with initial configuration data.