Looking at the history of ERP helps understand why the ERP market look like what is it right now and explains some of their advantages and disadvantages.
ERP systems have been around since the late 80’s. Back when computers looked like a weird big box and internet was unknown outside universities and military facilities. Storage was as expensive as diamonds and most people didn’t even know how to boot a computer.
The 1970’s – Inception
The 1970’s were an interesting decade for computing in general, but not really for ERP systems. Computing was barely known, storage and interfaces to communicate with computers were a nightmare to operate. “User-friendly” was a word that didn’t exists at the time.
Business systems that would manage sales, purchases, manufacturing and accounting were still science-fiction.
The 1980’s – Rise of computing
The history of ERP really started in the 80’s with the rise of personal computing. Nobody had a clue what internet was back then. Owning a computer was the exception and companies just started to see that computers could be very good for companies. They couldn’t be called an ERP systems at that time, but still business systems started during this decade, first with accounting and then manufacturing.
Accounting was one of the first departments – for a good reason – to build systems around their needs. For that reason, IT departments were – for a very long time – structured under the CFO or the accounting manager. That structure caused problems in businesses later in the 90’s when IT began to support the whole company but was still under the management of finance.
This is when companies started to create a CIO position – Chief Information Officer – to include IT in strategic decisions (some businesses sometimes still struggle today as they see IT as an expense, more than an investment).
At the end of the 80’s, we began to see manufacturing software on the market. Managing plants, costs, timesheets, etc. This is where IT began to be an essential part of businesses and that ERP systems as we know them started to appear.
SAP as been a pioneer and built the first ERP system. They were the first to integrate manufacturing, accounting, sales and everything that needed to be managed by a computer system.
The 1990’s – internet and networking becomes mainstream
The ERP market grew very fast and the 1990’s brought more competitors and much cheaper machines and networks. We began to see a breed of different systems for specialized needs.
Many major players started in that time, like PeopleSoft, JD Edwards. You probably never heard of those because most of them were later bought by the one of the big three (SAP, Oracle and Microsoft).
Small businesses also jumped into the ERP train, building products for specifics needs. And then they were bought again. But instead of moving towards a market where we only have a few major players, the market has specialized. We saw many minor systems – that eventually became bigger – take the market where the big three couldn’t. Greater flexibility, more tailored to specific needs and lower cost of ownership were part of the reasons why they became popular.
The 2000’s to today – History of ERP being made
The big three still plays a major role – they still hold almost 50% of the market – but they are mostly popular among large companies.
Nowadays, there are many different ERP systems per industry. There was a time when it was quite easy: you had the choice between one or two major ERP companies or you hire you cousin to build a custom system. Now, you have a selection of many different systems for your specific needs. So many of them that it’s sometimes though to choose the right one. But choice is always good right?
History of ERP – What’s next?
I think that the next few years are going to bring more flexibility and specialization in the tools provided by ERP systems. We might see more specialized systems at lower cost since the market is rather mature now (you can even install complete ERP systems for ‘free’ if you look towards open-source).
Big-data is going to play a major part in leveraging business systems. Businesses that have an efficient ERP system will produce a lot of high quality data and should have a definite advantage over the competition.
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