The relationship between ERP and IoT

Bruce Leith

Blog by: Bruce Leith - 24 / Jan / 2020

IoT. ERP. Two acronyms you’re likely to have come across by now in relation to enterprise IT. The former refers to the Internet of Things – networks of connected sensors or devices deployed throughout a massive variety of settings in order to collect data, transmit it back to a centralised analytics engine, and develop new insights, analysis and actions. The latter refers to Enterprise Resource Planning, typically meaning a software system providing a shared database which supports multiple core business functions such as HR and accounting.

Given, then, that the IoT is all about generating new forms of data, and ERP systems are all about harnessing data in a centralised way, we can start to see how they might work together. But what is the relationship between them? The answer – not yet as sophisticated as it could be.

Transformational possibilities

Ultimately, businesses which are able to automatically collect and analyse key data from across their environments – or from across their products once sold – can harness that data in some truly powerful ways.

The Industrial Internet of Things (IIoT), for example, refers to the deployment of connected sensors through the hardware on factory floors and other industrial settings. This data is then used to inform more proactive, predictive approaches to equipment maintenance and more efficient production lines. Integrate this with ERP systems, and it becomes possible to perform far more accurate financial forecasting and procurement planning, because the ERP system has more sophisticated and accurate information pertaining to production levels and equipment condition.

However, an IFS survey of 200 industrial and contracting executives found that only 16% consume IoT data in their ERP software. Of course, this is specific to industrial contexts, but it still suggests something of a disconnect between the rich data being generated by IoT deployments, and the embedding of that data into business processes.

Another transformational possibility of the IoT and ERP software working together lies in company’s products after they have been sold. If these are equipped with connected sensors which track how the product is being used or how it is performing, and if that data is then integrated with the ERP system, there are huge possibilities for organisations to proactively enhance their products, to set up different charging models for their customers such as pay-per-use, and to automatically offer upgrade and replacements to existing customers.

Some organisations are already doing this; manufacturers of aircraft engines, for example which charge for the time the engines are operating and then take on all the maintenance and repair possibilities. In a way, this is very similar to the lease model of purchasing a car. There is huge potential for this model to be rolled out in other industries as organisations get better at integrating ERP and IoT technology.

What are we waiting for?

What, then, needs to happen in order for more sectors and more businesses to take up these exciting new possibilities?

Ultimately, the ERP system in such a setup needs to be able to collect, manage, analyse and display the data generated by the IoT. It needs to be flexible, agile and highly scalable. Choose the right ERP system and you could have the foundations in place for a truly innovative and exciting approach to managing your internal operations, your purchasing and your customer relationships.




Topics: IoT, ERP

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