What Swiss companies should know about ERP systems

What is an ERP system, and what is it for?

ERP stands for enterprise resource planning. An ERP system is a comprehensive software solution that brings a company’s various business processes together in one place and automates them. It provides a central platform where data from different departments — finance, production, procurement, logistics, sales, and HR — is captured and processed in real time. That shared database lets companies retrieve and use information quickly and accurately across departmental boundaries.

Using an ERP system provides greater transparency across the organization, because every business area and process is connected. Departments can not only complete their own work more efficiently, but also collaborate seamlessly with others. Finance can always pull current figures from production to manage budgets and costs more effectively. That improves efficiency and clearly reduces the risk of errors and lost information.

An ERP system also provides a solid foundation for planning and controlling business resources, which matters especially in complex, growing companies. Resources such as materials and labor can be planned and allocated optimally to avoid bottlenecks and maximize operational performance.

How does an ERP system differ from other business software?

Unlike other business software, an ERP system is designed to cover and integrate a company’s core processes. Specialized tools such as customer relationship management (CRM) systems or accounting software usually focus on specific functions within the organization.

• A CRM system supports customer relationship management and therefore primarily sales and marketing. It helps organize sales processes, track customer interactions, and improve customer retention.
• Accounting software is built specifically for financial processes such as preparing balance sheets, monitoring income and expenses in controlling, and meeting tax requirements. It does not offer deeper integration into other areas such as logistics or HR.

What makes an ERP system distinctive is that it brings these individual solutions together on a single platform. All data is linked, so a change in one area (for example, purchase orders) is immediately visible in others (such as inventory or financial accounting). That not only cuts the time spent on manual data transfers, but also reduces the risk of data errors and inconsistencies.

An ERP system therefore offers a holistic solution that lets companies manage and optimize every aspect of their operations on one shared data foundation. It is especially relevant for companies that are growing or whose processes are becoming more complex.

A brief history of ERP systems

The roots of ERP systems go back to the 1960s, when companies began using material requirements planning (MRP) systems. Those early systems mainly helped production by determining material needs and optimizing the manufacturing process. In the 1980s, MRP systems evolved into MRP II — manufacturing resource planning. Alongside material planning, they included production planning, quality management, and financial functions.

In the 1990s, modern ERP emerged. It integrates not only production and finance, but all major business areas, from procurement and HR through to sales. With the rise of cloud technologies from the 2010s onward, many ERP programs moved to the cloud, which increased flexibility and scalability. Today’s ERP systems offer a comprehensive solution for companies of every size and industry.

SAP and ERP: Are they the same thing?

SAP is one of the largest and best-known ERP software vendors worldwide. The term SAP is often used incorrectly as a synonym for ERP. ERP is a category of software that integrates and automates various business processes. SAP is simply one provider of such a solution. Many other software products address different needs and company sizes.

SAP offers a highly capable, versatile ERP solution tailored to the requirements of large, complex organizations. SAP S/4HANA, the current version of SAP’s ERP system, covers a broad range of functions — from financial accounting and production control through to supply chain optimization. That breadth makes SAP especially attractive for large corporations that manage multiple sites and international operations.

A major difference between SAP and other ERP systems, such as Microsoft Dynamics 365 Business Central, is the complexity and effort of implementation. SAP solutions are often extensive and require detailed adaptation to a company’s specific processes. That makes SAP a robust choice for large corporations willing to invest in a demanding implementation to meet complex requirements.

By contrast, ERP solutions such as Microsoft Dynamics 365 Business Central are often more flexible and especially suitable for small and medium-sized enterprises (SMEs). Dynamics 365 is modular, so companies can use only the functions they actually need. The system grows with the organization. That flexibility and the lower effort required to implement Business Central make it a popular choice for SMEs that want to optimize their processes without the cost and effort of a full-scale SAP implementation.

While SAP targets the complex needs of large enterprises, ERP offerings such as Business Central, Abacus, or myfactory provide solutions tailored specifically to SMEs. These systems are easier to implement, still offer strong integration, and are often more cost-effective for smaller companies.

Typical functions of an ERP system

ERP systems consist of a set of modules that support and interconnect different business processes. Each module focuses on specific company functions, but the defining feature of an ERP system is the integration of all these modules on a shared platform. That ensures data is entered only once and is available in real time wherever it is needed.

Here are some of the most important functions typically included in an ERP system:

Finance and accounting

The finance module is often one of the most important, because it manages all financial transactions in the company. That includes recording income and expenses, automating accounting, managing payments and payables, producing financial reports, and supporting controlling. Companies can steer their finances more efficiently and, with real-time data, see clearly where they stand. Tax calculations and compliance with legal requirements can also be automated, which reduces the risk of human error.

Logistics and procurement

The logistics and procurement module lets companies manage inventory, orders, and supply chains efficiently. An ERP system can automatically track inventory levels and flag when materials or products run low. Orders can be managed from request through to delivery. That improves material planning and prevents shortages that could disrupt production or sales. Integration with the finance module means procurement and warehousing costs can be monitored in real time.

Human resources (HR)

In HR, the ERP system supports managing external and internal staff, including payroll, time tracking, vacation planning, and employee development. An HR module provides a complete overview of the company’s workforce and helps run processes such as employment-contract management more efficiently. Compliance with legal requirements — for example around social contributions or working-time rules — is automated.

Customer relationship management (CRM)

The CRM module focuses on managing customer relationships. It captures all customer data, sales opportunities, and customer interactions. Companies can manage their sales processes more effectively, track opportunities, and strengthen customer loyalty. Linked with areas such as sales and inventory, they always have a full picture of orders, deliveries, and invoices.

Interfaces and automation

A key advantage of ERP systems is their ability to integrate with other software and platforms. Modern ERP systems offer interfaces to third-party systems such as e-commerce platforms, payment providers, or supply chain management tools. That lets companies connect different business applications and keep data flowing end to end.

Another central aspect of ERP systems is automation. Manual processes that once took a lot of time and effort can be automated. Orders can be triggered automatically based on inventory levels, and payroll can be calculated automatically from recorded hours and salary agreements. That reduces the risk of errors, speeds up processes, and frees employees from routine work so they can focus on more strategic work.

Cloud vs. on-premises ERP: What are the differences?

When choosing an ERP system, companies must decide not only which functions they need, but also how the system is delivered. There are two main options: cloud-based ERP systems and on-premises ERP systems.

Cloud ERP: Flexible access and less maintenance

With cloud ERP, the entire system is hosted in the cloud. Software and data sit on the provider’s servers and are accessed over the internet. Users only need an internet connection to reach the ERP software from anywhere.

Maintenance, updates, and backups are handled entirely by the provider. That takes pressure off internal IT teams and reduces infrastructure effort. Because updates are applied automatically, companies always run the latest version of the ERP system and do not have to worry about outdated software.

In terms of cost, cloud ERP solutions often use a subscription model (software as a service, SaaS). Companies pay a monthly or annual fee, which significantly lowers upfront investment compared with on-premises systems.

On-premises ERP: More control, more responsibility

By contrast, on-premises ERP is installed and run on the company’s own servers. That gives firms full control over their data, infrastructure, and security measures. For companies that must meet strict data protection policies or industry-specific compliance rules, that can be decisive.

That control also brings greater administrative effort. Companies themselves are responsible for hardware and software maintenance, regular updates, backups, and protection against cyberattacks. That requires a well-equipped IT department and can lead to higher operating costs.

In terms of cost, the upfront investment for on-premises ERP is often higher, because companies must buy and install software licenses and the required hardware. Those one-time investments can be a financial hurdle for smaller companies. For large enterprises, however, ongoing costs can be lower, because — depending on the contract — there may be no recurring subscription fees.

Choosing between cloud and on-premises ERP

The choice between cloud ERP and a self-hosted system depends heavily on individual needs. Cloud ERP offers more flexibility and lower maintenance costs and is well suited to smaller companies or those that value a simple, fast implementation. On-premises ERP is ideal for companies that need more control over their data and software and are willing to accept the higher upfront costs and administrative effort that come with it.

Pros and cons of an ERP system

An ERP system offers many advantages that can significantly improve a company’s efficiency and competitiveness:

• Efficiency: Data is entered only once and is immediately available in every department. That minimizes duplicate work and errors, because everyone works from the same current information.
• Transparency: Real-time data makes it possible to see the whole business at any time. That improves decision-making and responsiveness.
• Scalability: ERP systems grow with the company and adapt readily to rising requirements, whether through additional users, features, or modules.
• Cost savings through automation: Many manual processes such as ordering or invoice handling are automated, which reduces time spent and saves money.

Despite the many benefits, implementing an ERP system also brings challenges:

• High upfront investment: The initial investment in an ERP system — especially an on-premises solution — can be expensive. That applies not only to the software, but also to the required hardware and IT infrastructure.
• Implementation: The rollout can be time-consuming, especially when many processes must be adapted or restructured.
• Customization needs: Depending on how complex existing processes are, the ERP system may need extensive customization, which adds time and cost.
• Operational disruption: Moving to a new system can cause temporary disruptions while users get used to the new workflows.

In our article ERP implementation: Why so many projects go wrong — and how to do better we cover common mistakes and outline a process that reduces the risks.

Well-known ERP systems

There are many ERP systems on the market, tailored to companies of different sizes:

• Microsoft Dynamics 365 Business Central: Flexible and user-friendly, ideal for SMEs.
• SAP: Market leader, especially suited to large enterprises.
• Oracle: Offers comprehensive ERP solutions for internationally active companies.
• Abacus: A Swiss ERP solution for SMEs.
• myfactory: Cloud-based solution for SMEs.

For detailed comparisons, read our articles 10 popular ERP systems in Switzerland compared and Cloud ERP compared: The best solutions for Swiss companies.