Advantages And Disadvantages Of ERP Cloud Models In Business

Research Objectives

In the last few years there has been a significant increase in the use of cloud in business. There have been a significant hype and media attention about the potential of the cloud technologies. Different companies are investigating the process by which cloud can be put to their business use. With the increase in the use of cloud, the different companies are presented with a number of options. These include on premise or traditional approach, the hosted ERP system approach and cloud ERP approach (Leon 2014). The on premise ERP system mainly refers to the traditional approach of making use of cloud. In this approach, a company buys the ERP license to install the system within the company. This is one of the most basic approaches of cloud computing. In hosted enterprise resource planning system (ERP), a company purchases the license of an ERP system and installs the same in a hosted third party’s infrastructure (Chiu et al. 2014). This type of cloud service is often called an Infrastructure as a Service. In the cloud ERP system, the said ERP system is developed for operating in a purely cloud environment.  This works on a subscription basis where a company pays a subscription for accessing the enterprise resource planning system in which it is subscribed to. This type of cloud services is termed as software as a service. A research report will be developed to identify the advantages and the disadvantages of each of the cloud approaches (Shaul and Tauber 2013). The report will be identifying the research objectives, the concepts of enterprise resource planning system in cloud and the advantages and the disadvantages of each of the cloud approaches (Hoch and Dulebohn 2013). ERP in cloud has become famous in no time mainly because of its ease of use and the user friendly less. The different aspects of cloud ERP will be discussed in the following paragraphs.

In order to develop a research report, it is essential to identify the research objectives. The objectives of the research project are as follows-

• To understand the concept of cloud ERP
• To identify the use of ERP systems
• To evaluate the strength and weakness of on premise cloud system
• To evaluate the strength and weakness of hosted ERP system
• To evaluate the strength and weakness of cloud ERP system

The on premise cloud approach is a traditional approach where a company purchase the license of an ERP to deploy and install it within the company. The use of on premise ERP however, seems to contradict the central principle of cloud ERP (Chofreh et al. 2014). The cloud ERP works on subscription basis while in on premise ERP, has to be installed in the local computers of the organization. Thus the on premise cloud needs to be managed by the IT staffs of the organization. This is one of the basis versions of enterprise resource planning system. 

On Premise ERP System

The implementation and the deployment of On premise cloud is a tiring and complex task. The needs of the organization are needed to be determined before planning the implementation process (Matende and Ogao 2013). The deployment of On-premise cloud therefore requires the presence of a good infrastructure space for deployment of the service and data storage. On premise cloud is not a viable option to consider as the implementation cost of this cloud system is quite high.

The hosted cloud ERP system is an ERP system where the company buyes the ERP license to it on infrastructure of third part. This type of cloud services is often referred to infrastructure as a service. The hosted ERP solution is cost effective in comparison to the on premise cloud (Tian and Xu 2015). The companies that have lack of infrastructure space mainly make use of this type of cloud ERP. It is a secure option of deploying ERP by leveraging the infrastructure from a third party service provider. The hosted enterprise resource planning system is therefore quite efficient and effective for the organization that mainly has a lack of infrastructure space.  

As discussed earlier, cloud ERP systems are developed in such a way that it can operate in a cloud environment (Seethamraju 2015). The company neither has to buy a license nor has to have infrastructure space for making use of cloud ERP system (Seo 2013). This model of cloud typically works on subscription basis and is known as software as a service. This is one of the mostly used cloud models in business processes. However, there are certain risks associated with the use of cloud ERP which are evaluated in the following sections.

The enterprise resource planning system is a process of integrating the different business process of a company. An Enterprise Resource Planning system integrates sales, inventory, marketing, human resource finance and other similar business process within the organization (Zeng and Skibniewski 2013). ERP system is an essential need of a company as it helps in easier management of the different business processes running within an organization. It is basically the software for business process management that allows an organization to make use of a system of different integrated applications that automates mainly majority of the back office functionalities associated with the services offered by the business, the use of technology and the human resources.   

ERP cloud can be described as a enterprise resource planning software that is hosted on a cloud computing platform. The cloud ERP system is a system that is deployed on a cloud platform rather than in the infrastructure within the enterprise (Shen, Chen and Wang 2016). Cloud computing can be described as a shared pool of a configurable resources capable of rapid provisioning with a minimal effort from the management (Ha and Ahn 2014). Integration of ERP with cloud makes it easier for different business enterprises to make use of enterprise resource planning system (Zeng and Skibniewski 2013). This is possible because cloud provides infrastructure to deploy the ERP model while the customers can make use of that ERP on a subscription basis through approaches such as Infrastructure as a Service or Software as a service.  

Hosted Cloud ERP System

ERP is integrated with cloud models as it offers a number of advantages to the clients. The third party cloud services enables the business organizations to remain focused about their core business processes or business needs without worrying about the need of an infrastructure or resources to make use of an enterprise resource planning system or could computing (Antero 2015). The deployment of cloud computing enables the companies to minimize the cost of infrastructure and the maintenance cost of a complex system like enterprise resource planning system (Zeng and Skibniewski 2013). The integration of enterprise resource planning system with cloud enables the organizations to get their applications operate in a faster manner with improved manageability and considerably less maintenance (Kurbel 2016). Furthermore, the maintenance of the cloud applications mainly depends on the vendor that is providing the cloud services. However, there are certain issues associated with the use of cloud services which are needed to be addressed as well. The advantages and the issues associated with cloud services are discussed in the following sections.

Advantages of making use of Cloud 

Integration of ERP with cloud is advantageous in many aspects. The characteristics and the advantages deploying cloud computing is discussed in the following paragraphs-

One of the most primary advantages of using cloud computing is that it offers on demand services. The different business enterprises provision there computing capabilities without any human interaction (Ptak and Schragenheim 2016). Furthermore, the cloud computing offers resource pooling which is referred to the use of multi tenant model that has different physical and the virtual resources.

Cloud computing furthermore provides rapid elasticity in case of increased demands. Furthermore, the cloud provides measured services to the clients by automatically controlling and optimizing the use of resources. The different advantages of integrating the business processes with cloud are as follows-

1. It is a cost saving approach which is one of the primary advantages of using cloud in business. The data that is stored over cloud can be easily accessed via internet and web browser. It works on a subscription basis thus provides a cost effective solution for the client.
2.  Cloud computing offers mobility which is another significant advantage of making use of cloud in the organizations. Cloud computing allows its clients to access the data with the help of a digital device (Rittinghouse and Ransome 2016). It is a great way of offering mobility to the customers. Mobility offers easy accessibility of the data which is another major advantage of making use of cloud.
3. The use of cloud computing offers increased collaboration of the business with the employees. The process of collaboration is even simpler with cloud as the data can be easily accessed by via internet.
4. Easier disaster recovery is another significant advantage of making use of cloud. Easier disaster recovery is a factor that contributes to the success of a business. It is a part of the business continuity plan. This is because a small amount of unproductive downtime can have a resoundingly negative effect on the business of the company (Garg, Versteeg and Buyya 2013). Different cloud models enable easier disaster recovery thus reducing the downtime. Downtime of the services leads to the less productivity and revenue. Thus the use of cloud is advantageous for any business.
5. The cloud models offer easier implementation and easier accessibility of the services. The simple implementation process is one of the significant advantages of cloud (Hashizume et al. 2013). Furthermore, the use of cloud enhances the accessibility of the stored data and resources thus making it easier and more convenient to use.
6. Once a business subscribes to a cloud model, the company is entitled to automatic and regular software updates. Cloud applications automatically downloads and installs updates which is one of the primary advantages of making use of cloud.
7. Cloud computing offers better sustainability with the business process which is another advantage of making use of cloud.

However, there are certain issues of using cloud computing as well. The issues or the disadvantages of using cloud are discussed in the following section. 

Disadvantages or Risks of making use of Cloud 

1. Privacy and security are major concerns associated with the use of cloud. Since majority of the cloud services and applications work on subscription basis, the cloud vendor has an access to the data of the individual. However, the service providers of cloud ensure security of the data stored.
2. The cloud model is vulnerable to an attack. It is necessary to make security a core aspect of all the associated IT operations (Tasevska, Damij and Damij 2014). For addressing the problem, it should be ensured that the different policies and the procedures are regularly checked and reviewed.
3. Some cloud model offers limited control and flexibility. The varying degrees of cloud users have a less control over the function and the execution of the services. This can become an issue with the use of cloud services (Arora, Parashar and Transforming 2013).
4. The initial implementation cost of cloud model is high if the company is not availing the cloud services on a subscription basis.

The issues associated with cloud can be easily addressed by ensuring easier risk management before implementing cloud. The security issues can be easily mitigated by making use of infrastructure as a service model of cloud.

Advantages of ERP: On premise, Hosted and Cloud

The integration of cloud with ERP will ensure that the organization achieves business benefits with the use of cloud ERP. The advantages of making use of cloud ERP are as follows-

1. The use of enterprise resource planning system helps in streamlining the different business processes of an organization (Manvi and Shyam 2014). It is one of the most primary advantages of using ERP in business. The use of ERP helps in streamlining the different business process that helps in efficient management of the business.
2. Implementing the ERP software is advantageous to the business as it provides the organization with the competitive advantage (Kavis 2014).  Although the initial implementation cost of ERP is very high, it offers a business advantage by efficiently managing all the business processes within the organization.
3. The use of ERP increases the efficiency of the business models. ERP eliminates the need for manual entry of the information. Thus the process of streamlining the different business activities becomes easier with the use of enterprise resource planning system
4. It offers the benefit of easier scalability which is another significant benefit of cloud ERP.
5. The use of ERP provides the business managers with an integrated set of information that facilitates the process of decision making (Mauch, Kunze and Hillenbrand 2013). The streamlined business processes in ERP thus not only becomes easier to manage, but also becomes easier to track.
6. Along with an easier decision making, the use of ERP system makes reporting a lot easier. It offers a business with an easier reporting as the report is auto generated.
7. The use of enterprise resource planning system improves the productivity of a company since it eliminates the need to run any redundant business processes within the organization. This saves a lot of time money and effort.
8. Another significant advantage of making use of cloud ERP system is its flexibility. This is possible mainly because of the services offered by cloud are flexible, which can be tailored according to the unique business needs.
9. The use of Enterprise Resource Planning system in a business is quite secure. The cloud ERP system improves the accuracy, consistency and the security of the business data. The secure data use is possible as built in resources and firewalls are used for data protection.
10. The use of ERP system is particularly useful for managing a globally dispersed enterprise.

Cloud ERP System

Disadvantages of ERP: On premise, Hosted and Cloud

There are certain issues associated with cloud ERP that is needed to be addressed as well. The issues with cloud ERP are as follows (Almorsy, Grundy and Müller 2016)-

1. The initial Implementation Cost is high and it is highly time consuming.
2. The payback time is too high
3.  Majority of the cloud ERP system offers too little customization.
4. Migration of the data that exists in company’s database to a new system is quite difficult and time consuming. Furthermore, integration of the ERP system with other software is quite difficult as well.
5. After implementation of cloud ERP, it becomes a single vendor lock in, that is used for further upgrades.

The three different cloud models that different companies can consider for their business are discussed in the following sections. 

This section of the report gives an idea of the successful cloud implementation by different business organizations.

Nestle: Nestle USA can be considered as an excellent example of successful ERP implementation. With the increase in their business process Nestle was having a tough time for managing the business processes of the organization and therefore it had to implement an ERP. The use of ERP benefited the company in a number of ways and the payback period for the investment was less as well. The payback period was two years which was considerably less. The risk that Nestle faced was schedule risk that could be mitigated easily.

Colgate:  Another company that successfully implemented ERP and integrated their business processes in Colgate (Rahman and Saha 2016). The Company adopted SAP to integrate and manage the different business processes within the organization, which are human resource management, supply chain management, financial management and so on. The ERP implementation process by this company was quite smooth and the company did not face any major risk while implementing ERP system.

Aloca:  The aluminium Company tops the list of the companies that have been successful in their ERP implementation process. The company successfully implemented different business modules that include human resource management and financial management. The use of ERP has considerably helped in improving the management of 100000 employees of the organization.

However, there are certain cases that put forward the greatest example of ERP disaster. The ERP implementation by Hershey tops the list. The ERP implementation project by Hershey failed miserably as the company failed to identify the exact time requirement to successfully deploy such a complex system (Schniederjans and Yadav 2013). Couples with the time issue, the lack of testing the software added to the disaster. Another example is HP’s centralization of the ERP system into one SAP system where the project management team failed to control the disaster even after knowing what could go wrong with the project.

Conclusion 

The research report gives an idea of the different types of ERP system, their advantages and the disadvantages. With the increase in use of cloud ERP systems, it becomes essential to identify the benefits and the risks associated with the same. Enterprise resource planning system helps in integrating different business processes running within the organization and therefore the use of ERP has considerably increased over the years. The research report discusses the three different types of enterprise resource planning system models which are on premise ERP, hosted ERP and Cloud ERP. It has been evaluated that the use of cloud ERP has increased in the recent years mainly because of the benefits it offer. The cloud ERP can be used in a subscription basis that enables easier storage and management of the business data. The strength and weakness of making use of enterprise resource planning system in business processes is evaluated along with the different issues that are needed to be addressed. It has been observed that IaaS provides and the most secure cloud service while that of SaaS provides the most cost effective solution. 

Integration of Cloud with ERP

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