What does ERP do?
Think of a single order. Sales takes the order, the warehouse checks stock, production works out the materials, purchasing orders what’s missing and accounts issues the invoice. In a business without ERP, each of these steps runs in a separate program or spreadsheet, and the same information is typed again and again.
With ERP, an order goes in just once. Stock is reserved, a works order is opened, material needs are calculated and the invoice is posted to the customer’s account. Everyone looks at the same data.
A sample screen that runs by itself
The diagram below follows a sales order through an ERP system. The order is entered once; stock, shipping, invoicing and payment all run from the same record.
A sales order is entered. The customer’s credit limit and price list are checked on the same screen.
Stock is reserved. If the warehouse has enough, the items are reserved; if not, a purchase request is raised.
The goods are shipped. A delivery note is issued, stock goes down and the tracking number is added to the order.
The invoice is issued. The amount is posted to the customer’s account and the e-invoice goes out.
Payment arrives. The bank transfer is matched to the invoice; nobody re-enters it for the accountant.
Example: one order runs from sales to accounting on a single record, and nothing is typed in twice.
What ERP stands for and where it came from
The letters stand for enterprise resource planning, and the resources in question are money, materials, machines and people’s time.
Its roots go back to the MRP (material requirements planning) systems of the 1960s, which worked out which materials a factory needed to buy, when and in what quantity. Over time, production capacity, sales, finance and staff were added to the same software. Gartner started using the name ERP in 1990, and it became the general name for software that brings the whole business into one set of data.
Which modules make up an ERP?
Not every business uses every module. A service company has no production module, while in a trading company purchasing and stock come to the fore.
| Module | What it does |
|---|---|
| Sales and orders | Quotes, orders, dispatch, invoices |
| Stock and warehouse | Stock in and out, shelves, counts, transfers |
| Production | Bills of materials, works orders, scrap, due dates |
| Purchasing | Requirements, requests, approvals, suppliers |
| Finance | Customer accounts, payments in and out, cash flow |
| Human resources | Timesheets, leave, payroll exports |
| Item | Qty | Stock | Status |
|---|---|---|---|
| Boiler pump | 4 | 12 → 8 | Reserved |
| Expansion vessel | 2 | 1 | In purchasing |
| Room thermostat | 6 | 31 → 25 | Reserved |
Example: one order touches sales, stock, purchasing and accounts at the same time; the missing item goes straight to purchasing.
Cloud ERP or on-premise ERP?
An ERP is either installed on the business’s own servers or runs on the vendor’s servers and is used in the browser. The difference between the two is mostly how the cost is spread over time.
| Criterion | Cloud ERP | On-premise ERP |
|---|---|---|
| Upfront cost | Low; monthly or annual subscription | High; licences, servers and implementation |
| Updates and backups | Done by the vendor | Up to the business or its reseller |
| Access | Anywhere with an internet connection | Usually the company network or a VPN |
| Customisation | As far as the package allows | Wider, but expensive |
| Where the data is held | In the vendor’s data centre | On the business’s own servers |
In recent years small and mid-sized businesses have leaned towards the cloud, because nobody has to be set aside to look after servers and backups. On-premise ERP is still common for businesses that must keep their data in their own building.
ERP vs CRM
A CRM manages the customer-facing side: enquiries, calls, quotes and sales deals. An ERP manages the inside of the business: stock, production, purchasing and finance. Most modern ERPs include a CRM module, and most CRMs include quotes and orders, which is why the line between them blurs.
| Criterion | CRM | ERP | Bookkeeping |
|---|---|---|---|
| Focus | Customers and sales | The whole business | Invoices and money |
| Typical users | Sales and support | Every department | Owner, accounts |
| Stock and production | None or limited | Yes | Basic stock |
| Setup time | Weeks | Weeks to months | Days to weeks |
ERP vs bookkeeping software
Bookkeeping software keeps track of invoices, payments, customer accounts and cash. For many small businesses it’s enough. Once stock movements, production or workflows across several departments come in, bookkeeping software feels too small, and the business starts filling the gaps with spreadsheets. That’s the first sign that you need an ERP.
Are ERP and SAP the same thing?
No. ERP is the name of a type of software; SAP is a company founded in Germany in 1972 that makes ERP software. Because SAP’s products are the best-known examples of the type, the two words get mixed up in everyday speech. A company that says “we’re moving to SAP” is moving to one of SAP’s ERP products.
Well-known ERP systems
The list below isn’t a ranking; it shows widely used systems and the kind of business each one usually suits. Which one fits depends on your size, sector and processes.
| System | Vendor | Usually suits |
|---|---|---|
| Odoo | Odoo S.A. | Small and mid-sized businesses that want to add apps module by module |
| Sage Intacct, Sage X3 | Sage | Mid-sized businesses; Intacct for finance-led firms, X3 for manufacturing and distribution |
| SAP S/4HANA, SAP Business One | SAP | Large companies and multinational groups; Business One for smaller businesses |
| Microsoft Dynamics 365 | Microsoft | Companies already using Microsoft 365 and operating in several countries |
| Oracle NetSuite | Oracle | Growing companies that want to work in the cloud and have branches abroad |
| Infor CloudSuite | Infor | Mid-sized and large manufacturers and distributors in specific industries |
| Acumatica, Epicor Kinetic | Acumatica; Epicor | Mid-sized distributors and manufacturers that want a cloud ERP |
Pirdir isn’t a packaged ERP like the ones in this list. Only the modules a business uses are set up on a ready-made core, and the statutory accounts stay in the accounting software you already use, connected through an integration. More on the custom ERP development page.
When does a small business need ERP?
ERP use rises sharply with company size. In 2025, 46.5% of EU enterprises with at least 10 employees used ERP software, according to Eurostat: 41% of small enterprises (10–49 employees) and 89% of large ones (250 or more).
ERP is the most widely used type of business software in the EU, ahead of CRM and business intelligence tools.
How much does ERP cost, and what drives the price?
ERP has no one price tag. The same product can cost very different amounts in two businesses, because most of the price comes from implementation, not the licence.
When you budget, compare the five-year total, not just the first year. The cost items are broken down in the guide how much does custom software cost.
When you compare quotes, look at the total over several years, not just the first one. Enter your own numbers:
Calculation: setup + users × monthly fee × 12 × years. Training, data migration and extra modules may be separate lines in a quote; add the same items for every quote you compare.
Six questions to ask when choosing an ERP
Why ERP rollouts get difficult, and how to make them easier
ERP projects tend to overrun for three common reasons: the scope isn’t clear from the start, the existing data is messy, and the team is slow to get used to the new way of working.
