Types of ERP Systems: Which One is Right for Your Business?

Types of ERP Systems: Which One is Right for Your Business?

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Rashmi
Rashmi Karan
Manager - Content
Updated on Apr 6, 2023 17:04 IST

Discover the various types of ERP systems available today and learn how they can benefit your business. From on-premise to cloud-based solutions, we’ll explore the features and advantages of each to help you choose the right one for your organization.

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There are different classes, types or modalities of ERP systems according to the needs of each company. Lets us explore them one by one. 

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Must Explore – ERP courses

Types of ERP According to Design

The ERP classes depend on how they are designed, among which we can find the following:

Predefined ERP

The predefined ERPs have a modular structure so users can add or remove any modules according to their preferences. As this system has additional modules that provide various customization options, its purchasing value could be higher for companies wishing to implement it. This type of ERP is characterized by adapting to the most common needs of companies, having already been tested by other users, and is easier to implement in a company. 

Benefits

  • Predefined ERP solutions are often pre-configured and require minimal customization.
  • Predefined ERP systems are less expensive than custom or highly configurable ERP systems.
  • These systems ensure a faster ROI due to the reduced implementation and customization time.

Most small and medium-sized companies implement predefined ERP alternatives for the above reasons.

Also Read – What is ERP?

Custom ERP

A custom ERP has been designed from scratch to adapt to all the processes of an organization. This type of ERP is usually done by a professional developer, a person, a team or a company specialized in creating codes. Custom ERPs have specific and personalized functionalities that respond to all the management needs of the company that acquires them. 

Such systems require a lot of time, effort, and equipment, so their acquisition cost is higher. Custom ERPs are commonly implemented by large companies managing many human and material resources and by medium-sized companies with more complex business processes.

Benefits 

  • Custom ERP solutions can be built with the highest level of security in mind, protecting sensitive business data from potential breaches.
  • Custom ERP software ensures that the software aligns with the company’s workflows and processes.
  • Custom ERP solutions can streamline business operations and automate repetitive tasks
  • Ensures improved efficiency and productivity
  • Custom ERP systems can be easily scaled to accommodate business growth and need

Must Read – Key Phases of ERP Implementation and Best Practices to Follow

Types of ERP According to the Software  

Depending on the type of program or code they use, they can also be divided into different types of ERP:

Licensed ERP  

A licenced ERP is software that is developed and licensed by a vendor for use by businesses. These systems are commercialized under license; therefore, users are prohibited from accessing the source code to make changes. Only the developer company is allowed to carry out modifications, updates or copies. For this reason, companies have to pay for this ERP model if they want to work with it. 

Benefits

  • Licensed ERP solutions come with ongoing vendor support and maintenance, ensuring the software is up-to-date and functioning properly.
  • Licensed ERP solutions often provide more extensive customization options and can be tailored to meet the specific needs of a business.
  • These systems ensure greater operations, maintenance, customization and security guarantees. 
  • Licensed ERP software meets rigorous security testing and compliance regulations, providing businesses with higher security and protection against data breaches.
  • Licensed ERP systems are designed to handle large-scale operations and can be easily scaled to meet the needs of growing businesses.

Open-Source ERP

Open-source ERPs are software distributed under a license agreement that allows third parties access to its source code. This means that companies can freely access the code to make any necessary changes without paying developers to make the changes. However, this does not mean that specialized programmers are not needed to be able to edit the code. 

Benefits

  • These systems are often free and can help businesses save on licensing and maintenance fees.
  • Open-source ERP solutions can be customized and modified to meet the unique needs of a business, allowing for greater flexibility.
  • Open-source ERP software helps businesses to access the source code while meeting security standards.
  • Open-source ERP systems can be easily integrated with other open-source software and applications, ensuring better operations management.
  • Access to a wide community, which can be helpful for the users in case of any modification they want to make, making it evolve as the company grows and changes
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Types of ERP According to the Type of Solution They Offer

In other words, the type of ERP can also depend on its versatility:

Horizontal ERP

A horizontal ERP is a system with a flexible and agile architecture integrated with a wide range of customization tools with which the management functions of any company can be carried out, such as economic control, stock control, commercial management and financial management. 

Benefits

Adopting a horizontal ERP brings a series of advantages, including the following: 

  • Any company can use a horizontal ERP regardless of the sector to which it belongs.
  • Additional functions can be added to it that cover different specific needs.
  • Horizontal ERPs are very easy to use and understand, and their maintenance costs and license are lower because their processes are carried out on the same platform, etc.

Vertical ERP

A vertical ERP is a business management and planning software designed for a specific company sector with specific needs, such as hospitals or warehouses, that usually need very specific resource planning. This type of ERP can cover their operations more broadly. 

Unlike other types of ERPs, vertical ERPs can be used by companies that sell directly to their customers (B2C) and companies that transact with other businesses (B2B). A notable aspect of vertical ERPs is that they have been implemented for decades. Therefore, they have become specialized software capable of optimizing business processes.

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Types of ERP According to the Way of Installation

Another way to differentiate ERP types is by how they were installed:

Local ERP

Local ERPs or On-Premise are the software installed on the company’s servers. They require a high initial investment for installation, configuration, updating and maintenance and a lot of time, equipment and personnel to implement them. 

Benefits

Many organizations opt for this type of ERP because its response time is much faster than that of the cloud or any Windows system. They also provide greater security and confidentiality because the organization manages the data.

ERP in the Cloud

As its name indicates, this type of ERP is installed on a cloud server that eliminates the responsibilities and expenses related to the installation, configuration and maintenance of applications and servers.

To access this ERP, users must pay a monthly fee that varies according to the total number of modules and contracted users, have a stable internet connection and have a device such as a computer, tablet or smartphone. 

Benefits

  • This ERP model is considered safe due to its automatic backup copies and information encryption. 
  • Users can recover their data anywhere and anytime if a security problem occurs.
  • ERPs in the cloud are the ideal alternative for companies that have employees who telework.

Hybrid ERP

Hybrid ERPs consist of a combination between the local ERP and the ERP in the cloud. This type of ERP is ideal for organizations that want to implement an ERP in the cloud but want to retain the tools and functions of their servers. 

Benefits

Hybrid ERP is the most popular type of ERP system. This model has become popular thanks to the fact that it offers various advantages such as the reduction of its acquisition cost, its efficient response capacity to the needs of the company and the ability to reduce the complexity of business processes. 

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Types of ERP According to the Operating System

ERP systems can be classified into different types based on the operating system they run on.

ERP for Windows

Most ERPs work for Windows. Multiple options on the market adapt to this operating system, but the most recommended are Odoo, Bitrix24,a3ERP, ERPAG and SYSPRO.

ERP for Mac

The options of ERPs for Macthey are scarcer compared to those that exist for Windows. However, there are ERP programs for Mac computers capable of covering all the needs of a business. Among the best ERPs for Dynamics 365 by Microsoft, xPower ERP by Powersoft, GoFrugal y GOFRUGAL by GOFRUGAL Technologies, Bitrix24 by Bitrix, QuickBooks Desktop Enterprise by Intuit, etc.

Conclusion

Several types of ERP systems are available in the market, each designed to meet the specific needs of different industries and businesses. It is important for businesses to carefully evaluate their specific needs and requirements before selecting an ERP system. Businesses can streamline their operations by choosing the right ERP system, increasing efficiency, and improving their bottom line.

About the Author
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Rashmi Karan
Manager - Content

Rashmi is a postgraduate in Biotechnology with a flair for research-oriented work and has an experience of over 13 years in content creation and social media handling. She has a diversified writing portfolio and aim... Read Full Bio

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