Different Approaches To Implement ERP Systems: Traditional And Cloud-Based

Traditional Approach of ERP Implementation

Enterprise Resource Planning (ERP) systems are being used in the business organizations and have succeeded in providing the enterprises with a lot many benefits. ERP is a software suite which is configured and installed in the enterprise for the integration of the functions and technologies at the back-end. The automation of the functions is done as an outcome. Some of the business operations that are synced in an ERP system include human resource management, customer relationship management, supplier relationship management, production processes, manufacturing cycles, and a lot more. There are benefits that have been experienced with the implementation of ERP systems in the organizations. Some of these benefits include better collaboration of services, enhanced security of the data sets, improved flexibility and scalability levels along with faster processing of operations.

There are different methods that can be used to implement the ERP systems. The first is the traditional approach of implementation in which on premise ERP systems are installed. In these systems, the license of the ERP system is purchased from the ERP vendor. The implementation is done at the enterprise site. The other two approaches include cloud computing as one of the technologies. These are hosted ERP systems and Cloud ERP systems. These follow the cloud Infrastructure as a Service (IaaS) and cloud Software as a Service (SaaS) models respectively.  

The report serves the purpose of highlighting the different methods that can be used to implement the ERP systems in an organization by covering the traditional and cloud-based approaches.

The report includes a brief introduction that discusses the meaning and applications of ERP and provides the purpose and structure details of the report. The three ERP implementation methods are then discussed in detail and are supported by various case studies. There is a conclusion that is included at the end of the report.

Definition & Set of Advantages 

In these systems, the license of the ERP system is purchased from the ERP vendor. The implementation is done at the enterprise site. It is also known as the traditional method of implementing the ERP systems and comes with a lot many benefits.

• There are a variety of information and data sets that are handled by the ERP systems. Some of these data sets may be extremely critical to the organization and may have higher degree of confidentiality and privacy associated with them. However, there may be certain data sets that may be public or non-critical in nature. The ERP systems that are implemented in the business organizations handle the details of the employees engaged with the organization, client information, details of stakeholders and partners, project information, and a lot more. These data sets are exposed to a variety of security risks and threats. ERP systems include in-built security controls and also ensure advanced access control on the data sets that result in the mitigation and avoidance of the risks [1].
• The cloud-based ERP systems, such as hosted systems or cloud ERP are regulated by the cloud vendor. The decision on the technical requirements and enhancements are taken by the vendor. There are cases wherein the vendor may not be available for communication or may shift to a new business profile. In such cases, there are issues with handling and maintenance of the systems. Such a scenario does not come with on premise ERP systems. The licenses are obtained from the vendor and the entire responsibility is on the organization.  
• There are various costs that are associated with the ERP systems. In the case of on premise ERP systems, there is a higher initial cost that is involved. However, the other costs, such as cost of ownership are much lesser for these systems as compared to their cloud-based counterparts.  
• There are various legacy systems that are installed in the organization. There are also various other applications that an organization may like to use. The expansion of the ERP systems to connect with these applications and systems is not an issue with the on premise ERP systems [2].

These systems provide the enterprises several benefits; however, there are also a few disadvantages that are associated with the ERP systems. Some of the drawbacks are as listed below.

• On premise ERP systems have very high initial costs. The new entrants in the market and the start-ups may not be able to have the bandwidth to make such high investments at one go.
• There are additional costs that are associated with the traditional ERP systems, such as maintenance costs and energy costs. The overall budget may go up as an outcome.
• The vendor plays a limited role in these systems and the responsibility of managing the systems and installing the updates is on the organization itself. The involvement of unskilled resources in these processes may do more harm than good.

Omantel is a telecommunications company that is based out of Oman. The company implemented traditional ERP systems in its architecture and could achieve several advantages as an outcome. Some of these benefits include better collaboration of services, enhanced security of the data sets, improved flexibility and scalability levels along with faster processing of operations [3]. The ERP systems that were implemented in the business organizations handled the details of the employees engaged with the organization, client information, details of stakeholders and partners, project information, and a lot more. These data sets were earlier exposed to a variety of security risks and threats. ERP systems included in-built security controls and also ensured advanced access control on the data sets that resulted in the mitigation and avoidance of the risks.

Case Studies: Traditional ERP Implementation

Another organization that has witnessed successful implementation of on premise ERP is an Ethiopian organization called Mesfine Industrial Engineering (MIE) Pvt. Ltd. The company has its domain as metal construction and electromechanical engineering. The legacy systems that were installed in the organization experienced issues associated with the communication and connectivity between the stakeholders internal and external to the organization. These systems also could not handle the expansion of the organization and were not flexible enough to meet the modifications being carried out. The implementation of traditional ERP package was done and it was done in a series of seven phases. The start date of implementation was 17^th March 2008 and the end date of the process was 20^th October 2008 which resulted in successful implementation of the ERP systems [4]. There were various legacy systems that were installed in the organization. There were also various other applications that an organization aspired to use. The expansion of the ERP systems to connect with these applications and systems was not an issue with the on premise ERP systems.

There are cloud-based ERP systems that are being used by the organizations with the increase in the need for virtualization. Hosted ERP is one of the implementation mechanisms that are high on demand and in this case, the ERP license is purchased by the enterprise. The configuration and deployment is done at the third-party infrastructure and it followed the cloud deployment model as Infrastructure as a Service (IaaS). There are a lot many benefits that are provided by the organization with the aid of the hosted ERP systems.

• The first and the foremost are the lower costs that are associated with this method. There are no infrastructure costs that are involved since the vendor is responsible for setting up the infrastructure. There is virtual access to the ERP system that is provided by the vendor to the enterprise and it eliminates the requirement of making any changes in the existing infrastructure of the organization.
• The technology is experiencing several changes. Due to the changes in technology, the enterprise requirements from the ERP system may also change. There are also other factors that may be involved, such as the customer choices, market factors, and a lot more. These changing needs and requirements will be managed and handled by the ERP systems.
• In spite of the security controls and measures, there may be occurrence of a security threat that may come up. The hosted ERP systems include disaster recovery mechanisms that come in-built with these systems. Also, the vendor is responsible for managing and handling the risk.
• The technological changes along with the installation and management of the updates are also done by the ERP vendor.

These systems provide the enterprises several benefits; however, there are also a few disadvantages that are associated with the ERP systems. Some of the drawbacks are as listed below.

• Cloud computing is a technology that is exposed to various security threats and attacks. It is because of certain cloud properties, such as multi-tenancy architecture and sharing of resources. The probability of the security attacks may go up as a result. Some of the most common security attacks that may be launched by the attacks include the ransomware attacks, breaching of the data sets, denial of service and distributed denial of service attacks, manipulation attacks, network-based security attacks, phishing attacks, and injection attacks. These have an impact on the information properties and have other severe impacts. The customer may file a legal suite against the organization and the vendor if the critical and confidential information is captured and exposed by the attacker. The organization reputation also suffers poorly as the customer trust is disturbed and the engagement levels may also come down.  
• The organization will have the responsibility of managing any of the processes involved with the backing up of the data sets. In case of the involvement of unskilled resources or poor execution of the backup processes, the security and privacy of the data sets may get impacted.
• The organization will be responsible for the management of all the virtual machine involved in the system.

Seaport Capital is one of the organizations that implemented hosted ERP system and gained benefits out of the same. There were lower costs that were associated with this method. There were no infrastructure costs that were involved since the vendor was responsible for setting up the infrastructure. There was virtual access to the ERP system that was provided by the vendor to the enterprise and it eliminated the requirement of making any changes in the existing infrastructure of the organization [5].

Ray Allen Manufacturing is an organization that works in the area of manufacturing of canine equipment for police as well as military departments. The organization was incepted in 1948 and primarily worked using the mainframe computers and systems. There were several technical and operational issues that were being reported with these systems. As a result, the senior management decided to implement the cloud-based hosted ERP system [6]. There were benefits provided by the ERP system to the organization. Some of these benefits included better collaboration of services, enhanced security of the data sets, improved flexibility and scalability levels along with faster processing of operations. The technology is experiencing several changes. Due to the changes in technology, the enterprise requirements from the ERP system may also change. There are also other factors that may be involved, such as the customer choices, market factors, and a lot more. These changing needs and requirements will be managed and handled by the ERP systems.

Hosted ERP Systems

Cloud-based ERP systems are being implemented in the organization in the current era. It is the ERP system that carries out all its functions in the cloud environment. The organization purchases the license from the vendor and the cloud model that is involved in this ERP system is Software-as-a-Service (SaaS). There are various benefits that this ERP system provides to the organization that it is implemented in.

• In these ERP systems the extra costs associated with the software licenses is removed. The period of usage of the organization is determined and the subscription fee is attached to it accordingly. The subscription fee in this case is not very high and the new entrants in the market can also bear the costs. The overall cost of the system comes down as an outcome [7].  
• There are upgrades that are needed to be done to maintain the functionality and security of the system. These updates are released by the vendors and are also installed by the vendors. The organization is not involved in these processes and is also not required to bother about the upgrades to be installed. The timeframe selected by the vendor is also of minimal traffic so that the availability is not impacted.
• The technology is experiencing several changes. Due to the changes in technology, the enterprise requirements from the ERP system may also change. There are also other factors that may be involved, such as the customer choices, market factors, and a lot more. These changing needs and requirements will be managed and handled by the ERP systems.
• Disaster recovery and backing up of the data sets is handled and managed by the cloud vendor.
• There are customization options that can be utilized by the organization. As per these options, the functionalities that are critical to the organization are selected and the ones that are not needed are eliminated from the package. The organization pays only for the package that it uses.
• Cloud ERP is very popular among the customers and as a result, there are a lot of vendors that are offering these packages at reasonable prices. The customers get to choose from a wide range of vendors in the market.

These systems provide the enterprises several benefits; however, there are also a few disadvantages that are associated with the ERP systems. Some of the drawbacks are as listed below. .

• Information security and privacy is very critical for the organizations. Cloud computing is a technology that is exposed to various security threats and attacks. It is because of certain cloud properties, such as multi-tenancy architecture and sharing of resources. The probability of the security attacks may go up as a result. Some of the most common security attacks that may be launched by the attacks include the ransomware attacks, breaching of the data sets, denial of service and distributed denial of service attacks, manipulation attacks, network-based security attacks, phishing attacks, and injection attacks. These have an impact on the information properties and have other severe impacts. The customer may file a legal suite against the organization and the vendor if the critical and confidential information is captured and exposed by the attacker. The organization reputation also suffers poorly as the customer trust is disturbed and the engagement levels may also come down [8].
• Cost of ownership along with the ownership issues may be associated with these packages.
• There are scenarios wherein an enterprise may demand heavy customizations. Such requirements will be difficult to meet with cloud ERP.

Bell and Company is an organization that made use of cloud ERP system in its architecture and gained benefits out of the same. The requirements and business size was expanding with each passing day and the organization decided to implement the cloud-based ERP solution so that the overall flexibility could be improved upon. There were benefits that were provided to the organization in terms of enhanced agility, better processing speed along with the enhanced collaboration levels [9]. The technology is experiencing several changes. Due to the changes in technology, the enterprise requirements from the ERP system may also change. There are also other factors that may be involved, such as the customer choices, market factors, and a lot more. These changing needs and requirements were efficiently managed and handled by the ERP systems.

SARMED, a Greek organization incepted in the year 1955 works in the field of supply chain activities and logistics. The company also made a decision to implement cloud ERP and implemented Nubis Cloud ERP system. There were several advantages that the organization experienced as an outcome. The release, management, and handling of the updates and enhancements are done by Nubis Cloud. These updates are released by the vendors and are also installed by the vendors. The organization is not involved in these processes and is also not required to bother about the upgrades to be installed. The timeframe selected by the vendor is also of minimal traffic so that the availability is not impacted [10]. The backing up of the data sets along with the development and maintenance of the disaster recovery plan is also done by the vendor.

Conclusion 

ERP systems have become essential for the organizations. It is because these systems integrate all of the functionalities that are carried out in the organization. There are different methods that can be used to implement the ERP systems. The first is the traditional approach of implementation in which on premise ERP systems are installed. In these systems, the license of the ERP system is purchased from the ERP vendor. The implementation is done at the enterprise site. The other two approaches include cloud computing as one of the technologies. These are hosted ERP systems and Cloud ERP systems. These follow the cloud Infrastructure as a Service (IaaS) and cloud Software as a Service (SaaS) models respectively. There are various costs that are associated with the ERP systems. In the case of on premise ERP systems, there is a higher initial cost that is involved. However, the other costs, such as cost of ownership are much lesser for these systems as compared to their cloud-based counterparts. Cloud ERP is very popular among the customers and as a result, there are a lot of vendors that are offering these packages at reasonable prices. The customers get to choose from a wide range of vendors in the market. The selection of the ERP system shall be done as per the requirement of the organization. The assessment of the needs must be done and the implementation mechanism shall be determined accordingly.

References

[1]K.  Mezghani, “From On-Premise ERP to Cloud ERP”, Encyclopedia of Information Science and Technology, Fourth Edition, pp. 2965-2974, 2017.

[2]T.  Boillat and C.  Legner, “From On-Premise Software to Cloud Services: The Impact of Cloud Computing on Enterprise Software Vendors´ Business Models”, 2013. [Online]. Available: https://dx.doi.org/10.4067/S0718-18762013000300004. [Accessed: 14- Sep- 2018].

[3]S.  Maguire, U.  Ojiako and A.  Said, “ERP implementation in Omantel: a case study”, Industrial Management & Data Systems, vol. 110, no. 1, pp. 78-92, 2010.

[4]A.  Boltena and J.  Gomez, “A Successful ERP Implementation in an Ethiopian Company: A case Study of ERP Implementation in Mesfine Industrial Engineering Pvt. Ltd”, Procedia Technology, vol. 5, pp. 40-49, 2012.

[5]Cdn, “Private investment firm improves disaster recovery, streamlines accounting with Acumatica”, Cdn.acumatica.com, 2016. [Online]. Available: https://cdn.acumatica.com/media/2016/04/Seaport-Capital-Acumatica-Case-Study.pdf. [Accessed: 14- Sep- 2018].

[6]Cdn, “Acumatica’s flexibility propels K9 manufacturer’s growth and strategy”, Cdn.acumatica.com, 2017. [Online]. Available: https://cdn.acumatica.com/media/2017/04/Acumatica-Case-Study-Ray-Allen-Manufacturing.pdf. [Accessed: 14- Sep- 2018].

[7]A.  Elragal and M.  El Kommos, “In-House versus In-Cloud ERP Systems: A Comparative Study”, Journal of Enterprise Resource Planning Studies, pp. 1-13, 2013.

[8]M.  Abd Elmonem, E.  Nasr and M.  Geith, “Benefits and challenges of cloud ERP systems – A systematic literature review”, Future Computing and Informatics Journal, vol. 1, no. 1-2, pp. 1-9, 2016.

[9]Acumatica, “Acumatica: Easy to Use, Affordable ERP for Small Businesses”, Cdn.acumatica.com, 2017. [Online]. Available: https://cdn.acumatica.com/media/2017/05/Acumatica-Case-Study-Bell-and-Company.pdf. [Accessed: 14- Sep- 2018].

[10]Nubis, “Cloud ERP”, Nubis.gr, 2018. [Online]. Available: https://www.nubis.gr/CmsImages/NubisInhouse/files/Case-Study-nubis.gr-SARMED.pdf. [Accessed: 14- Sep- 2018].