This report intends to discuss the topic ERP systems in the cloud. The traditional ERP systems is briefly discussed in this report. The benefits of implementing the conventional ERP systems is clearly stated in this report. The hosted ERP system, which is commonly known as IaaS is briefly stated in this report along with the risks and benefits of implementing such system is stated in this report. A brief discussion of the cloud ERP system along with the risks and the benefits of implementing such system is briefly discussed in this report. Lastly, this report concludes with an appropriate conclusion for this report.
The decision of choosing which technology to implement for the businesses that would help in the innovation combined with growth of the company. Whether the businesses is small or large, there are various benefits of implementing ERP software for the company to gain from (Nour and Mouakket 2013). The ERP is a combination of customisable applications that permits the integration and management of the most important business processes. The ERP systems consists of several advantages along with several disadvantages.
The On-premise ERP denotes to the decision of a company to source the software of ERP within the business and then maintain it from any physical office, instead of ordering it for any delivery over internet or use the hosted system of ERP that are supplied by vendors. The ERP system in the companies could involve several products, ranging from the items using which the payrolls of the employees are handled to the accounting, to the system that are used for analysing or simulating the processes or the functions that controls the inventory or the issues of supply chain (Powell, Riezebos and Strandhagen 2013).
Complete transparency: This is the major benefit of using the ERP systems. The ERP system offers complete access to each critical process in the business with creating the data from each department of the company easily accessible to anybody with proper access whenever required and the senior management also gets access to this data. The inventory level can be monitored on daily basis that includes the future consignments that would be undertaken by the company in the future and the present inventory in the transit (Almajali, Masa’deh and Tarhini 2016). With the knowledge of the present inventory levels the working capital can be controlled with increased precision.
Total customisation: The aspect of modular makeup is one of the major advantages of implementing the ERP systems in businesses. Several ERP vendors provides the applications which could be implemented combined according to the requirements of business. Barring some of the exceptions, the designing of every application is done for enabling to working independently or combine the larger suite. Using this method, the company can choose the components that works appropriately and eliminate the things that are not required. One more aspect of the customisation includes the method of how implementation of the software is done (Galy and Sauceda 2014). Using the on-premise systems, the physical software should be purchased and then installed on all the servers and computers of the company.
Enhanced planning and improving: Addition to the enhanced transparency, increased insight is provided, which is the major advantage of implementing ERP. Implementation of ERP suite all across the departments would lead to the sole, combined system of reporting for the organisation regarding each process. With the implementation of a single source of information, the ERP systems provides the ability of generating the essential results and the analytics simultaneously (Fakoya and van der Poll 2013). This software provides the ability of comparing and analysing various function across departments, deprived of the trouble of several emails and spreadsheets.
Dedicated IT costs: Even though the investment in ERP is significant, the costs of IT and the improvement of efficiency can be gained from implementing the on-premise ERP systems. Rather than spending huge resources on several systems that requires focused staff, support teams, licenses and infrastructure, all the costs of these functions can be unified into a ERP (Seethamraju 2015). In addition to this, if the company choses to spend significant resources on the dissimilar systems than spending on the centralised ERP, the complete costs of IT can be saved. The requirements of training the end-users is also reduced by exploiting any single system as these system only requires to learn a system instead of performing interaction with several independent applications.
Complexity of ERP systems: The solutions of ERP provides several capabilities, but it also denotes that the software would be complex and complicated to use. Sometimes the companies intend to deploy the software of ERP but the process of planning is not executed properly and the implementation fails negatively (Ziemba and Oblak 2013). Some of the business discover the complexity of the systems and the complication of the processes that leads to the poor ROI. It is particularly true when the adoption of the software is not properly done by the various teams of the company and the complexity makes the understanding of the ERP systems difficult.
Maintenance and implementation cost: Even though the software is one huge investment, the process of implementation could cost almost four times higher than that. The business commonly consider the workforce cost and the required time for any successful deployment of the ERP systems (Choi, Chow and Liu 2013). Extra staff of IT, consultants of ERP, and the specialists of software training might be required to hire for maintaining the ERP systems. The vendors who are providing the conventional system commonly charge the companies a maintenance cost in addition to the fee of license. Furthermore, there is a requirement of investing in the innovative hardware for providing appropriate support to the ERP, like the servers and the compatible mobile devices.
Process of customisation: The process of customisation is the best aspect of ERP. However it can get extensively difficult for the organisations to maintain this procedure at regular intervals (Alaskari et al. 2013). The time taken to customise the software of ERP requires significant time, money, expertise and effort. But it has been observed that the businesses frequently undermine the resources that are required by the business and neither finish the complete customisation and it gets over the allocated budget quickly. Several companies might also lean on the process of customisation when the system they have chosen does not fulfil the requirements of business. The customisation might lead to the diminishing of the appropriate practices that is built into the system and then make it increasingly difficult for upgrading in the future.
Software cost: When the companies choose to invest in the conventional ERP, the cost of the licenses of ERP should be considered as it has been observed that the cost is significantly high. The upfront software cost sole is immensely high particularly for the businesses that are small-to-medium-sized. SMBs could avoid these upfront costs with the solution of cloud, whose payment could be done on monthly basis. Moreover, this denotes that the access to the systems is provided to the customers until they make regular make payments for the services that also makes the solution of cloud ERP significantly costly over the lifetime of the product.
These are the systems that are implemented on any third party infrastructure of cloud after purchasing the licenses for the ERP systems. This methods of ERP system is sometimes called Infrastructure as a Service. This method comprises of the methods that is provided to the organisations for procuring the storage, networking, hardware and any other services that are required for executing their operations deprived of the worry of managing, maintaining or buying equipment. Using this model, the renting of the equipment is done by the organisations and they only pay for the space and capacity that is utilised by the organisations. Any offsite service provider manages, owns and the maintenance of the equipment is the duty of this offsite service provider and they provide sufficient capacity for scaling down or up for fulfilling the requirements of the client organisations (Al-Jabri and Roztocki 2015). The access to the resources is provided to the organisations using the web browser. The organisations implement the ERP systems on any third party vendor system and rent the infrastructure and the software. Some of the benefits of implementing hosted ERP system are:
Assured uptime: The providers of IaaS assure the highest percentage of availability with assured uptime. These terms are provided in the SLA.
Automation of the administrative tasks: The tasks of deployment and management of the servers and virtual desktops are included in this responsibility for both the guests and employees, management of the virtual server pools, and the monitoring of the present activities like the utilisation of the disks, activity on the network, the jobs that are active and the activities of the member and guest (Dietz 2014).
Dynamic scaling of infrastructure: The responsibility of the service provided is to ensure the infrastructure needs of the customer are always fulfilled, even though it includes the highest requirements. Using this model infrastructure, it can be assured to the organisations that they would have all the resources of IT that are required.
Customised images of machine: With the implementation of the model of IaaS, the creation and deploying of the images of machine where the execution of the applications is carried out, customisation and automated to any particular requirements of any organisation is done (Powell 2013). The providers of IaaS offers any host of the machine images to the customers but the organisations could build or import images from any existing environment of operation.
Scalable load balancing: Based on the requirements at any particular time, the balancing of the resources is done and then it is distributed automatically, efficiently and appropriately among multiple virtual computers.
Services on policy basis: the function imposes the policies that are defined on the services of the enterprise that can be accessed by particular user groups or users could access. Depending on these policies, the decommissioning or provisioning of the resources becomes an automated process.
Access to the newest technology: As the equipment are not completely owned by the organisations, the updating and the customising of the equipment is the responsibility of the service providers. They perform the task of maintaining of the hosted ERP of the companies and provide them with the latest technologies regularly.
With the implementation of the hosted ERP solutions, the innovative product development might require any environment of test and the development that can be implemented easily and then it can be reduced when the phase of test and development comes to an end (Seethamraju and Sundar 2013).
The cloud ERP systems are also known as the SaaS. This platform is also known as the hosted or on-demand applications that can be used in the ERP systems and the importance of this service is significant in the ERP. The designing of the SaaS can be done for adapting to the implantation in the applications of software like the ERP systems. And the scalability of this platform is extensive as it can change the methods by which the organisations could make the payment for the services, implement the services and then execute the applications of software. The software model of SaaS has established the operative and financial advantages over the other services comparing to the on-premise software models (Ha and Ahn 2014). The cost of operation is significantly low and the cost of subscription of is also minimal as the operating of the system is done by the service provider that can provide the services. The SaaS provides with minimal initial cost that is mostly based on the cost of subscription and the extra costs of operation as the operating of the system is done by the service provider. The aspect of ERP refers to the methods by which any large organisation planned the use of the wide resources of the organisation. Initially, the ERP systems were exploited in wider aspects and increased industrial types of the companies. Moreover, the utilisation of the ERP systems has altered immensely over these years (Duan et al. 2013). Presently, the application of the ERP is extensive in several companies that are operating in any of the fields. With the hosted solution on the cloud based software of ERP, the companies gain the ability of adding or removing any user easily and the cost of hardware or software setup is not extensive in the cloud hosted ERP system.
The ERP on cloud is designed for addressing the inflexibility of the prevailing ERP software by providing the companies with the ability of choosing the correct option of deployment that suits the requirements of the companies (Rajnoha et al. 2014). The flexibility of ERP is extensive and the option of high cost-effective for the medium and small sized businesses and it also offers these extensive benefits for the expansion and growth:
Swift deployment: the major drawback of the on-premise and the hosted ERP systems lies in the fact that the system integrators and the vendors often utilise the prevailing templates that should be configured and customised for matching the particular processes and practises of the companies. The implementation processes commonly undertakes years or sometimes even months. The solutions that are based on cloud offers an extensive simple configuration along with restricted options range that are particularly designed for fulfilling all the requirements of the companies and businesses, which is an approach, which has the ability of reducing the time of deployment while addressing the critical requirements of the organisations (Bradford, Earp and Grabski 2014). The time taken for implementing the ERP system that are cloud based is not determined by the time that is required for the designing of the system but the time that is required for the updating of any affected processes of business and then convert it into useful data.
Provides enhanced performance: With the cloud ERP, the application of the computing resources can be done centrally that allows the increasing of the performance for minimal cost (Lin, Zhao and Wei 2014). The systems constantly performs effectively than the on-premise deployments of the Microsoft dynamics. The faster, larger servers provides the improvements in performance.
Cost: instead of having purchased outright, the payment of the cloud based implementation of ERP systems is done through the process of a subscription model that specifically includes not only the software but also all the costs of hosting and support. Therefore, the foremost expenditure of the capital of the organisation that is required for the implementation process is significantly lower than any other conventional systems, and even the costs of operation could be lower (Ahmad and Cuenca 2013). The providers of cloud based can perform the scaling of the offerings with significant ease as the requirements of the organisations evolves.
Interoperability by the third party users: The ERP systems of Microsoft dynamics provides the solution for connecting the several locations and the various suppliers using only one system. The maintenance of the interoperability among the external and internal systems could be an extensive task (Haddara and Elragal 2015). Using the cloud ERP, it can be ensured that the interconnection of the system is achieved for functioning all through the system life. The advantage of reliable interoperability reduces the friction among the supply by assisting the ensuring of the smooth operations of business.
Access to information from anywhere, anytime: With any cloud based ERP systems, the access to the system is significantly improved from any approved location or computer (Poba-Nzaou et al. 2014). The only thing that is required for the connecting of the computers is the availability of an enhanced internet connection.
As the introduction of the ERP services that are based on the cloud are new to the markers, it is of great concern to the management bodies of the companies and some companies hesitate in the implementation of these services. Primary concerns includes the limited customisation and functionality and the supposed risk to the data:
Reduced integration and customisation: in comparison with the conventional hosted and on-premise applications, the solutions of cloud based ERP commonly offers a restricted options of configuration. This creates the options of cloud most suitable for the companies that utilise the hugely standardised processes of business in the areas such as the sales, accounts receivable, and purchasing (Uçaktürk and Villard 2013). The ERP that are based on the cloud might not able to the handle all the requirements of the companies with both the higher tailored processes of business or higher customised architectures of applications like the tasks that involved the several points of the integration among varieties of legacy of the IT systems, hugely customised software, or the packaged software.
Resistance of organisations: The IT organisations and several companies have already implemented the teams and then advanced the skills that are required for operating the environment of ERP that includes the hosting of data center, development of ongoing development of applications, maintenance and support (Antoniadis, Tsiakiris and Tsopogloy 2015). Like several decision of outsourcing, the migration to the ERP to the cloud based solutions could produce important disruptions among the organisations with robust ownership authority of the solutions of the technology, or the solutions that are innovative to the application and the outsourcing of the infrastructure are more likely in feeling threatened by the migration of the applications of ERP to the cloud. The future of the cloud ERP is intending to be immensely innovative.
Perceived risks of data: the companies that are choosing the ERP systems that are based on the cloud facilities should be determined to trust any third-party provider with the sensitive information of the company like the financial data or the customer orders, and where it should be combined with any other company (Ononiwu 2013). But the cloud providers, that includes SAP and Oracle, have made investment in the best security measures that can be exceeded than what can be provided by any hosted solution, or even any on-premises solution. Majority of the service providers are willing to ensure that restriction of the data on similar jurisdiction or any particular centre of data. However, several providers of the human resources have been hosting and managing the sensitive data of the employees for the companies that are competition with one another. It is vital to note that some of the regulatory requirements requires the storing of immensely confidential property might be increasingly too stringent for any system that is based on cloud services. With the provided measures that the providers of cloud have undertaken for ensuring security, moreover, the vision of increased risks leads to be more based on the lack of familiarity with the developing options that on the authentic security risks.
Restricted availability and functionality: Up until now, the focus of the vendors of the cloud based ERP systems is on the delivery of the basic functionalities of ERP like the common accounting, accounts payable and receivable, and purchasing (Al-Ghofaili and Al-Mashari 2014). It is being continuously found that the investment is done on the development of the innovative functions like the planning that is based on constraints, management of the production, statistical forecasting, and social media but it has been observed that these offerings have not been able to keep up to all the advanced functionality of the conventional offerings of on-premises and the hosted ERP. Moreover, the applications of cloud based are presently restricted to the particular companies, due to the inability of supporting the requirements of financial reporting of each region where the operation of the companies are extensive (Nettsträter et al. 2015).
Conclusion
Therefore, it can be concluded that the implementation of the ERP systems on the cloud provides the major benefits to the companies and businesses. The decision of choosing which technology to implement for the businesses that would help in the innovation combined with growth of the company. Whether the businesses is small or large, there are various benefits of implementing ERP software for the company to gain from. The On-premise ERP denotes to the decision of a company to source the software of ERP within the business and then maintain it from any physical office, instead of ordering it for any delivery over internet or use the hosted system of ERP that are supplied by vendors. Dedicated IT costs means that Even though the investment in ERP is significant, the costs of IT and the improvement of efficiency can be gained from implementing the on-premise ERP systems. Rather than spending huge resources on several systems that requires focused staff. Complete transparency means that this is the major benefit of using the ERP systems. These are the systems that are implemented on any third party infrastructure of cloud after purchasing the licenses for the ERP systems. This methods of ERP system is sometimes called Infrastructure as a Service. The cloud ERP systems are also known as the SaaS. This platform is also known as the hosted or on-demand applications that can be used in the ERP systems and the importance of this service is significant in the ERP. The ERP on cloud is designed for addressing the inflexibility of the prevailing ERP software by providing the companies with the ability of choosing the correct option of deployment that suits the requirements of the companies.
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