What is enterprise resource planning (ERP)?

ERP stands for enterprise resource planning—a way of organizing, integrating, and managing business processes and information across an organization. It provides a system to centralize the massive amounts of data within an enterprise, enabling information to flow between different teams seamlessly and automatically. Because data is so critical to the success of any modern organization, it can begin to sprawl as an organization grows—in different forms, structures, and conventions—across teams and departments that need a consistent, single source of truth

When we speak of using “an ERP solution,” we usually mean a piece of software that will centralize data and automate processes. By using a management system like an ERP deployment as the single source of information company-wide, a business can be sure that its data is correct, up-to-date, and complete. It’s how growing organizations can unify back-office data throughout a company, make it available to the personnel who need it, and do so with minimal need for manual processes. Deploying cloud-based ERP systems is a popular choice for businesses that want to achieve this level of integration and data consistency—and also reduce upfront costs and increase scalability.

Almost everything companies do can be managed by ERP modules, which manage specific business operations.

What are the main components of an ERP solution?

Though different ERP systems and implementations can include many different components tailored for specific business solutions, the main components of an ERP solution are:

• Financial management: tracking and financial reporting on financial data and risk management, general ledger accounting, accounts payable and receivable, and streamlining and automating accounting software and data entry tasks.
• Manufacturing resource management: managing processes, manufacturing resource planning (MRP II), inventory management, providers, procurement, production planning, regulatory compliance, workflow and project management, and scheduling.
• Supply chain management: tracking inventory across company facilities and material requirements planning for production.
• Human resources and human capital management: managing employee-related tasks like payroll, hiring, and performance monitoring.
• Sales: monitoring product availability, pricing, e-commerce and order management, as well as customer relationship management (CRM).

ERP deployment models

Modern ERP solutions are highly evolved software implementations. Businesses can deploy different types of ERP apps on-premises or in the cloud. Cloud-based ERP deployments also provide extensive connectivity and security features, along with a range of deployment options that allow them to evolve and grow with business needs. Deploying these systems is often streamlined and managed by the ERP vendors, helping smooth the transition while offering ongoing management.

The core features of ERP technology help business processes run more efficiently. They specialize in integrating business functions, ensuring they are all working from a common database. This means that employees across the organization can monitor and streamline individual operations, whether tracking inventory, fulfilling orders, or counting revenues and expenditures.

Key benefits of using an ERP solution include:  

• Centralized data management: Integrating all business processes into an ERP system improves data consistency, accuracy, and accessibility across departments.
• Efficiency and productivity: An ERP solution can automate tasks like inventory tracking, order processing, and financial reporting to reduce manual work and streamline operations.
• Better decision-making: The real-time analytics and reporting provided by the system can drive insights into business performance, helping make more informed decisions.
• Improved collaboration: With a unified ERP platform, employees from different departments can easily share data, improving communication and teamwork.
• Cost savings: By reducing inefficiencies, minimizing redundancies, and optimizing resource allocation, an ERP solution can lead to lower operational costs.
• Scalability and flexibility: As businesses grow, ERP systems can scale to accommodate new processes, users, and locations.
• Regulatory compliance and security: Many ERP solutions include built-in compliance features and security controls to help businesses meet industry regulations and protect sensitive data.
• Better customer service: With the streamlined order processing, inventory management, and customer data tracking available in an ERP system, businesses can improve response times thereby increasing customer satisfaction.  

Using an enterprise resource planning system means eliminating many of the issues that businesses deal with regularly. Companies and small businesses expend a great deal of effort assembling financial data and metrics every quarter from multiple software systems or a mess of spreadsheets. ERP systems create business intelligence reports automatically, and not just once a quarter. This means a company can monitor its finances and profitability with customized dashboards and real-time data.

Sophisticated new artificial intelligence (AI) and machine learning (ML) capabilities are constantly emerging. A company can configure these technologies with the extensive, enterprise-wide data managed by enterprise resource planning software to enhance their decision making and business management, while also improving key operations like sales forecasting, inventory optimization, and customer behavior analysis.

Implementing an enterprise resource planning initiative involves many challenges present in other digital transformations.  As an ERP brings a cultural and financial change, it also presents challenges in people management and technical implementation. 

• Time and financial costs: ERP systems can present a significant expense and the time needed to implement them correctly can be a difficult requirement to manage.
• Complex data migration: Data migration is always a challenge and moving to an ERP system will require thorough cleaning and validation.
• Integration issues: Integrating an ERP system with existing software, especially legacy applications, third-party tools, or external databases, may require additional development and extended timelines.
• Security and compliance factors: As with all major digital initiatives, ERP implementation must ensure data security, access control, and compliance with industry regulations (such as GDPR or HIPAA). This can be complex, especially in cloud-based ERP solutions.
• Change management: Because implementing an ERP system likely means business processes will need to adapt to the new solution, the adoption of an ERP requires a shift in people’s mindsets and processes, making effective change management a requirement.

The German company SAP® has developed new ERP solutions since the 1970s, and it is so well known that the company name is almost synonymous with ERP. It is also responsible for releasing the SAP HANA® in-memory database. Their next generation ERP suite, SAP S/4HANA® (which runs only on the SAP HANA database), is faster, simpler, and more efficient than its predecessor, and it was built for organizations that want to take advantage of the cloud. SAP S/4 HANA® Cloud is the Software-as-a-Service (SaaS) deployment of SAP S/4HANA. 

For many companies using SAP solutions, their migration is already underway. To fully understand the migration process and the benefits of making the move, it is important to look at why SAP is mandating this change.

Read more about the SAP HANA migration

SAP S/4HANA runs exclusively on the Linux® operating system (OS). Red Hat has been working with SAP for over 20 years, and it was selected as the first Linux OS to run SAP in 1999. Red Hat Enterprise Linux is a Linux distribution that is not only certified by SAP, but optimized for SAP. 

Red Hat Enterprise Linux® for SAP Solutions goes beyond providing an operating system. Red Hat Enterprise Linux for SAP Solutions delivers key features and benefits that meet the specific requirements of SAP applications by combining the reliability, scalability, and performance of Red Hat Enterprise Linux with content specific to operating SAP landscapes. It provides the foundation to migrate to SAP S/4HANA and run it efficiently in combination with Red Hat Ansible® Automation Platform to simplify the entire lifecycle and minimize human error to a great extent. Furthermore, adding Red Hat OpenShift and Red Hat Integration completes a platform that allows organizations to modernize their SAP landscape, bring in cloud native development, and use containers. This cloud-native approach enhances the flexibility and scalability of the system, making it a robust solution for evolving business needs. The platform is also a basis for enhancing their SAP Data Intelligence with Internet of Things (IoT) capabilities, making the most out of the hybrid ERP environment for better operational efficiency.

Red Hat Enterprise Linux for SAP Solutions includes:

• The Red Hat Enterprise Linux operating system.
• High Availability Add-On for increased uptime.
• Red Hat Satellite for life-cycle management.
• Red Hat Insights for proactive issue identification and remediation.
• Technical components to support SAP HANA, SAP S/4HANA, and business applications and workloads.
• Update Services for SAP solutions for up to four years.

Standardize on a single, open platform with Red Hat Enterprise Linux for SAP Solutions, and build on a strong foundation to make the most of SAP S/4HANA well beyond migration.

Red Hat also provides an enterprise automation framework with Ansible Automation Platform to enhance your SAP implementation.

Get the datasheet: Red Hat Enterprise Linux for SAP Solutions