ERP (Enterprise Resource Planning) is a system which integrates various business data in a single database and provides cross function reporting on click of a single button. Earlier ERP was made for large organizations but, now it is made for medium and even for small organizations. In this global competitive market, organizations need to upgrade to the latest technologies. Most of the large organizations are using enterprise resource planning systems.

Day By day business companies are managing and conducting their business by implementing information systems. Information systems help run the business in many ways. As a result, today's business demands highly computer literate work force.

An ERP system is a company wide information system covering all functional areas of a business including Financial Management, Sales & Marketing, Supply Chain Management, Manufacturing, Distribution, Customer Relationship Management (CRM), Business Intelligence, Sales Force Automation, E-Procurement etc.

To deal with those large organization SMEs (Small and Medium Enterprises) need to work on a similar type of technology. In this case, importance of ERP system for SMEs increases.

There are many business benefits of enterprise software. Apart from all other basic benefits, enterprise software gives an information system with three important capabilities i.e.

1. Consistency and reliability of business data across the organization
2. Streamlined transaction processing within and outside organization
3. Provides operations level reporting on a click of a button

These capabilities, basic and important as they are, ensure that organizations are ready for specific solutions that improve overall performance. The areas that will increase the basic ERP requirements are like supply chain management (SCM) with electronic collaboration between supplier and customer, customer relationship management (CRM), business intelligence (BI), product data management, complete product life cycle (PLC) management, inventory and warehouse management using RFID tools. For these applications, ERP system becomes the substratum, a kind of gateway to expert functions. That is, enterprise software is a sine qua non for other applications.

In fact, the latest trend is that with basic enterprise resource planning software, tailor-made system is given by ERP companies. ERP vendors are speeding-up to integrate most of these additional capabilities. This type of customized or tailor-made enterprise system is easy to install and implement for SMEs. It also takes less time to implement and chances of implementation failure are lesser.

For many the word ‘ERP’ conjures up an image of an extremely high priced and complicated set of applications that only a few understand and whose services only big organizations can avail. Over the past years, working as an ERP consultants, we have come across many such instances wherein the managers of an SME company are wary of ERP and ask ‘Can it be implemented for a small company like ours?’

With the present economic recessionary environment Small and Medium Enterprises (SMEs) which have been running on very thin bottomline must look at various avenues to reduce their costs and increase the operational efficiencies. The business applications provided by various ERP packages have over the last few decades evolved from just being a transactional system to one that provides functionalities built around industry specific best practices and standards. Notwithstanding the benefits an ERP may provide the IT and business executives of SMEs face the challenge of convincing the stakeholders that this is an investment towards an ability that provides better productivity which would help lead to better profitability, market share and / or customer service.