This paper discusses the evolution of ERP systems, from an old standalone system to a new system of integrated business processes. The discussion will first talk about the legacy system before there was the ERP system, including its features and the challenges faced. Then this paper will touch on the evolution and birth of ERP systems by defining ERP systems, describing the structure of modern day ERP systems and its features before moving on to the business values it brings about.
A legacy system is a stand-alone system inherited from the past. It is a system whereby all business processes are segregated and independent of each other.
Legacy systems were programmed using languages such as COBOL, ALGOL and FORTRAN. A main legacy system that was popular is a system known as MRP, short for Material requirements planning developed in the 1970s used in the manufacturing industry for planning of parts and raw materials. (Rashid et al., 2002, p.4)
Legacy systems are considered primitive and have various associated issues.
Legacy systems all have their own implementation and designs which does not communicate or link among other one another. (Ambler, 2000, pp. 4) This makes generating a report or analysing data extremely tedious.
Other associated issues revolve around people, technology and processes. An example would be at the intra-organisational level within an organisation. For example, the warehousing people are unable to communicate with the accounting people. For small businesses this is still acceptable but for bigger businesses, whereby there may be few hundred stock movements in a day, there tend to be a lot of miscommunication in terms of the tracking stock, setting pricing, goods movement etc.
Issues also occur at inter-organisational level when organisations need to coordinate stock movement within organisations. The flow of information if is not automated will cause the organization to become less competitive in providing its goods and services.
Some data are required to be manually re-entered into another legacy system during reconciliation activities which could be automated. Furthermore, this will cause resentment among staff and increase in human error. (Pallmann, 1999)
Another problem faced by the legacy system is the difficulty in adapting and maintenance. During the year 2000, many companies had problems patching their old legacy system to combat the millennium bug. Large amount of money were required to rewrite the programming codes using old languages. (Garvey, 1999)
Because of all these issues the ERP system was born. ERP or Enterprise Resources Planning is an integration of the various business processes in a company's operations into a single information system.