What does ERP stand for and how it compares with BI?

Every department within an organization typically has its own computer system, optimized to suit the way that department operates. ERP stands for Enterprise Resource Planning (ERP) software and collates all the information created from these multiple systems and combines them into an integrated software program which runs from a single database. ERP and business intelligence (BI) software are often compared and pitted against the other, yet for many businesses they work as complementary tools.

In this blog, we’ll discuss the key differences between BI and ERP to help you determine how best to use the tools in your business.

What is Enterprise Resource Planning (ERP)?

The central feature of all ERP systems is a shared database that supports multiple functions used by different business units. In practice, this means that people working in different divisions—for example, accounting and sales—can rely on the same information for their specific needs. The integrated software is then divided into software modules that are replicas of their older standalone counterparts.

Gartner states, “ERP tools share a common process and data model, covering broad and deep operational end-to-end processes such as those found in finance, HR, distribution, manufacturing, service and the supply chain”.

What is Business Intelligence (BI) software?

Business intelligence (BI) uses software to convert reams of information into bite-sized insights to inform decision-making. The software receives data from a company's ERP system and other data sets via a sync tool or API. The BI tool then analyzes the data sets and presents findings in reports and dashboards.

What are the key differences between BI and ERP?

Strategic-level vs. operational-level analytics

Self-service BI tools can be leveraged by managers for high level discussions which involve strategic decisions. A BI tool accesses all of the data in your data warehouse, both strategic (revenue, profit and growth), and operational (daily sales performance). BI tools enable you to conduct in-depth analyses to generate comprehensive information that can deliver high-level insights.

ERP, on the other hand, is an operational system chock full of operational and transactional data. It will give you an exact view of your business from an operational perspective, but it is not built to perform trend analyses or give you high-level overviews. It is a tool centred around delivering operational insights.

OLAP vs. OLTP system

BI is built as an Online Analytical Processing system (OLAP), to provide robust analytical capabilities, such as high-speed access to reports, dashboard management and the development of balanced scorecards. BI also comes with advanced analytical features that allow you to view data from different sources on one page, and in the format or perspective you need.

ERP, on the other hand, is an Online Transaction Processing system (OLTP), used to record transactions as and when they take place. The data architecture of ERP software is designed to provide high-speed transaction recording, while keeping disk space utilization at a minimum.

Agility vs. efficiency

Recently there has been a shift of focus in BI - organizations are moving from historical reporting to forecasting and forward planning. Through these future focused capabilities, BI can make organisations become more agile, allowing them to make strategic-level decisions that take advantage of future conditions.

ERP software, on the other hand, is built to deliver efficiencies to an organisation. These efficiencies come in many forms: better interdepartmental communication, IT cost savings and business process efficiencies. Well executed ERP implementation can improve an organisation’s overall performance and adding BI will provide insights about the data in the ERP .

Before you begin choosing tools, first determine your organisation’s objectives. Once you know what you are trying to achieve, you can identify the right approach to help you achieve it.

If you have an in-depth understanding of your operational performance, then look at BI to obtain strategic level insights into your performance. While if you need a better understanding of your operational performance and need to make operational improvements, ERP is the tool you need.

Ultimately, both tools are geared towards business improvement and can deliver significant results.