Describe about the Impact of Cloud Based Erp in Business?
Business is defined as the organization which trades in goods and services to the consumers. The business enterprises are mainly owned privately and its objective is to maximize the profit for the producers. The business environment is dynamic in nature which means that the knowledge of the workers forms a crucial part of the business operations. The role of the Enterprise Resource Planning (ERP) is considered to be important and effective for an organization. The ERP forms the important infrastructure of the information systems of organization that will support them to perform well coping with the current economic conditions. The ERP helps the business to operate in a systematic way (A Cloud Computing-Based ERP System under The Cloud Manufacturing Environment, 2012). There is a high rate of the failure in the implementation of the ER in the business due to the lack of management approval, selection of ERP vendors and the inefficiency in the correct blend of software packages. The organizations are alarmingly adopting the cloud based ERP for the observation of the organizational activities by the ERP vendors. The ERP system helps the organizations to carry out the basic functions like buying raw materials, manufacturing, packaging, marketing, human resources, selling of goods and delivering customer service. The cloud based ERP saves time and money and has the ability to acquire increased number of users with the expansion in the business (A. Al-Johani and E. Youssef, 2013). The study is important to analyze the effect of the cloud based ERP on the businesses.
As discussed above, the implementation of the cloud based ERP system is not prevalent in most of the business enterprises. The cloud based ERP are gaining importance among the corporate users. Cloud based companies like the Salesforce.com are posing the threat to the largest software vendors like the Oracle Corp. and SAP SE are transforming the applications of the system so that the customers can access them online without the costly data centers. There are many large companies that have adopted the cloud based ERP in their business as they help them to manage human resources activities, managing inventories, billing process and several other business processes that will alter the profitability of the business (Andrzej Partyka, 2009). The companies who have embraced the technology are reluctant in using them as they consider the risk relate to the unreliable internet connections and the intervention of the third parties for the management of the computer servers. This research will help the companies to operate efficiently and accurately. On the other hand this research can also help to achieve the objective of the business in different industries. The purpose behind the section of this type of research is mainly due to the trepidation of different small as well as large industries towards the implementation of the cloud based ERP systems.
The aim of this research is to develop advanced understanding about the implementation of the cloud based ERP systems in the business of all types of sector. The study emphasizes the importance of the cloud based ERP system along with the evaluation of the significance of the implementation of the system (Metaxiotis et al., 2005). The cloud based ERP system could be proved to be the best information technology system that will smoothen the process of business operations. The aim of this research proposal is to enlighten the owners of the businesses about the positive as well as the negative impact of the cloud based ERP. Through this research the companies would be able to recognize the importance of the cloud based ERP system in business.
The objective of this research is to establish the importance of the cloud based ERP system in the business sector. The following are the objectives of the research:
To analyze the current status of the cloud based ERP system in the business environment
To compare and contrast the ERP system with the cloud based ERP system in the business sector
To identify the benefits of the cloud based ERP system in the business sector
To identify the challenges of the cloud based ERP system in the business sector
To recommend cloud based ERP solutions which are useful for the business sector
Following are the research questions that would help to address the objectives of the study:
What are current practices of the cloud based ERP systems in the business sector?
What are the differences that exist between the ERP system and the cloud based ERP system within the business sector?
What are the benefits and challenges of the clod based ERP system in the business environment?
What recommendations can be suggested so that the effectiveness of the cloud based ERP can be enhanced?
There are many large companies that have adopted the cloud based ERP in their business as they help them to manage human resources activities, managing inventories, billing process and several other business processes that will alter the profitability of the business (Andrzej Partyka, 2009). The companies who have embraced the technology are reluctant in using them as they consider the risk relate to the unreliable internet connections and the intervention of the third parties for the management of the computer servers. This research will help the companies to operate efficiently and accurately. On the other hand this research can also help to achieve the objective of the business in different industries.
Cloud based ERP has been gaining importance in the business environment especially in the field of customer relationship, human resources and finance. The Cloud based ERP is the enterprise resource planning (ERP) which is developed at the expense of the cloud computing services which in turn enables the business to engage in the transformation process flexibly. The ERP is a business oriented term which is supports the business to manage the important functions of the business like purchasing, managing the inventory, packaging and selling (Mozammel-Bin-Motalab and Al Mamun Shohag, 2011). ERP application also has the ability to manage the finance and human capital of the business. The cloud computing aspect commits to transform the business and its expectation from the information technology. The cloud based ERP application can eliminate the need to purchase the server and storage hardware. In this regard, the data and information would be stored on site which will decrease the operational expenditure (OPEX). Some industries have identified some of the defects in the system but the cloud computing ERP systems is beneficial for the business startups and new organizations.
The large and multinational companies have extracted positive benefit from the implementation of the cloud based ERP systems in different fields of business. The small companies also have the benefit from ERP cloud computing systems as it helps to lower the barriers to the ERP systems usage. The small companies are now able to run the ERP systems within the organizations without the hiring of the IT consultants (Feng and Huang, 2009). According to the research commenced by LA Barge (2012), many advantages are identified by the organizations when the cloud computing ERP systems are implemented. One of the major advantage of the cloud based ERP is the flexibility in accessing this type of technology. The database of the ERP system can be easily accessed through the use of ID and passwords. The second advantage that can be derived from this advanced information technology is the relevance of the database management system. D’souza et al (2012) had defined that the services related to the ERP have to be maintained by the owners of the ERP and engage in provision of hardware, deployment, configuration updating and hosting under the ERP system. Magal and Word (2011) analyzed the concepts of the applicability of the ERP system in the real business world (Ha and Ahn, 2013). They found out that the tools of the cloud based ERP system consists of a common process and a data model which entails the end-to-end processes which includes finance, distribution, manufacturing, HR, supply chain and service (Newell, Huang and Tansley, 2006). The ERP success in organization had been examined by Chuck et al (2010) which states that there is a need for a full lifecycle perspective which must be embraced by the companies to adopt the cloud based ERP. Thus, the study identified the success of the implementation of the cloud based ERP in the business sector.
The different business process like the order fulfillment from the customers, shipping and billing is a part of the business process which is difficult to handle but with the implementation of the cloud based ERP the business process can be automated. When a customer service agent takes the order from the customers then they require all kinds of information available at the tip of their finger which is possible only through the ERP systems. The benefit of the ERP system is that each and everyone can access the customer database for new order and all other information about the customers (Dezdar and Ainin, 2011). The members of the organization can access the database through a single ID and password. The process of the registration doesn’t end, when the task of one department completes the task, the ERP systems automatically routes the task to the next department. The cloud based ERP systems also has the feature to track the order down in some steps. The problem of errors and delay in transferring the orders and the delivery of the orders to the customers have been minimized due to the implementation of the cloud based ERP systems within the organization. The benefit of the ERP systems is not only confined to the logistics department but the benefits can also be felt in the HR and finance department like the employees retention, employees benefits and employees information along with the financial accounting and reporting (Schniederjans and Yadav, 2013).
The basic requirement of the implementation of the cloud based ERP is the access to internet. The ERP systems include different kinds of software deployment models and other applications such as Software-as-a-service (SaaS). Cloud computing in this respect is described as access to the hardware, software and other resources through the usage of internet in order to perform the business activities (Chen, Liang and Hsu, 2015). The cloud based ERP are implemented through the virtualization and load corresponding technology which permits the application to record resources and deploy across various servers. The role of the cloud computing in the ERP system is to make the organizational activities and operations to be flexibly changed. The trading potentials of the businesses are released and realized through the implementation of this type of innovative cloud computing ERP systems. Among the functions of the cloud based ERP include employee empowerment, substantial control over the business and in the maintenance of strengths of the business. the implementation process is denoted by the following chart:
The implementation of the clod based ERP is a crucial step of any business that involves cost and risk factors (Chauhan and Jaiswal, 2015). There are other factors that impact the ERP implementation along with cloud computing are discussed below:
Planned goals- The organization must be focused about their goals so that the implementation of the ERP is directed towards the goals of the organization. Satisfying the users, empowerment of the employee, support to the suppliers and supporting the different business operations requires the implementation of the ERP.
Assistance and commitment from higher authorities- it is important for the top management to realize the need for the cloud based ERP within the organization. Once they are convinced, a management planning committee must be formed fro the proper implementation of the ERP .
The project on the implementation of the ERP within an organization must cover all the functional areas. The success of the ERP implementation depends on the effort and collaboration of the business and technical experts as well as the end users. The ERP projects must also include the mentors, vendors and the consultants who are also critical for the success of the implementation (Chen, Law and Yang, 2009). The project members must be the best people of the organization so that they can foster innovation and creativity in the implementation process of the clod based ERP. It is required for the project members to devote full time to project of ERP implementation till the completion of the project (Carroll, 2002). The project members must be empowered so that they can make swift decision and their compensation would depend on their performance. The team members of the project must be balanced and cross functional and they must engage in sharing information to build partnership trust (Sheldon, 2005).
The critical review has been conducted in which several empirical studies emphasized the role of the ERP on the value of the business. In this regard, Poston & Grabski (2001) evaluated the effect of the ERP systems on the performance of the firms over 3 years time period by establishing a comparison between the financial performance of 50 ERP adopters before and after the implementation of the ERP systems. The results of the study proved that there was only a significantly decline in the ratio of the cost of goods sold to revenues. This result was obtained only after three years of the implementation of the ERP whereas there was no significant decrease in the ratio for the first two years of the ERP implementation. The study also revealed that there was no significant increase in the ratio of selling, general and administrative expenses to the revenues as well as no increase in the residual income. There was also a decline in the employee to revenues for the three consecutive years after the implementation of the ERP. Hence there is a clear contradiction in the theory and the practice. The ERP systems are generally regarded as the efficiency gains in some fields and affect negatively in other fields. Another study by Hunton et al (2003) was conducted by comparing 62 firms that have adopted ERP systems with peers who have not adopted (Chen and Techakittiroj, 2011). The outcome of the study was such that there was a significant increase in the return on assets, asset turnover and the return on investment over the three year period for the firms that adopted the ERP system as compared to the non-adopters (Vimalkumar, 2012).
Researchers have been investigating the pre- and post- implementation of the cloud based ERP in the organization with minimum costs. The researcher had included several studies on the factors affecting the ERP implementation, the success and failure of the ERP implementation, conditions for the implementation of ERP and the steps that are related to the implementation of the ERP in the business (Chofreh, Goni and Jofreh, 2011). The evaluation of the ERP systems regarding the organizational performance depends upon the financial conditions of the organization. The studies critically failed to analyze the ERP impact on the overall organizational performance rather than just the financial performance.
Empirical evidence disclose that there is limited research on the impact of the cloud based ERP on the most of the crucial business sector like the agro based industries. Thus the background of the goal of the study is to develop the impact of the cloud based ERP on the business sector and evaluate the organizational performance of the different sectors of business.
The research methodology is defined as the process through which the research is conducted by emphasizing the problem statement of the study. The methods for the research selected are in compliance with the research aims and objectives so that the conclusion of the research matches the objectives of the research. The researcher also focused on the validity of the research so that the readers are able to interpret and connect the outcomes of the study with the research objectives. Each of the components that are included in the research is equally important for the commencement of the research so that the impact of the cloud based ERP in the business sector.
The research design is a time-based planning activity that is important for any research as stated by Cooper and Schindler (2003). The research design is based on the research questions, source selection and the information that are obtained about the research aim. It also depends on the framework for identification of the relationship among the variables of the research. The research design are of three types; exploratory, explanatory and descriptive. The exploratory design is related to background information in order to address the problem statement. The explanatory design refers to identify the reason behind the problem within the research (Jha, 2008). Lastly, the descriptive design is related to the objectives of the research to obtain the outcomes of the study. Thus, the research design is like the blueprint of the study that will guide the researcher at all the stages of the research.
The researcher will incorporate the descriptive research design and employ case study analysis along with interviews of the members of the organization. This type of research design is chosen because the study requires in-depth understanding of the impact of the cloud based ERP on the business sector.
There are two types of investigation for conducting the research. The first is the casual study in which the researcher delineates the cause of the problem related to the research. The second type of investigation is the correlational study in which the researcher delineates the variables that are associated with the problem. The researcher here commences the casual study in which he outlines the impact of the cloud based ERP system on the business.
There are two types of data collection methods in research which is the primary and secondary data collection methods. The researcher had emphasized on the primary data collection method for the present study. The topic is to evaluate the impact of the cloud based ERP in the business sector. This type of research requires the involvement of the employees of the organization for the purpose of data analysis. The employees are the ones who will be able to describe how the business operation in their organization has been impacted on the implementation of the cloud based ERP systems. The primary data is collected through the research instrument which is through the questionnaires. The questionnaires would be distributed to the respondents who are the managers, the employees of the procurement and logistics department, customer service and information technology. The questionnaires are of two types close ended as well as open ended responses made by the respondents. The purpose of the close ended questions is to be focus in the data analysis (Kumar, 2005). The open ended questions will enable the researcher to obtain in-depth understanding of the research aims.
The sampling method is the selection of the respondents for the purpose of the data collection of the study using the appropriate data collection method. In this study the data collection method is the primary type so the respondents are selected for the purpose of the commencement of the survey. There are two sampling methods which is the probability and non-probability method of sampling (Metaxiotis, Psarras and Ergazakis, 2003). The researcher has considered the non-probability sampling method and to be more specific the researcher used the convenient sampling method. The convenience sampling method is used y the researcher to reduce the impact of deviation in the responses of the respondents which is crucial for the purpose of data collection in the study. The researcher had initially collected 100 respondents from a agro based company where the scope of the cloud based ERP is limited. About 90% of the respondents which is 90 respondents participated in the survey. Since the size of the sample is large, the convenient sampling is used to reduce the deviation in response. The data collected through this sampling method is desirable and fulfils the purpose of the researcher (Welman et al., 2005).
Shuy (2012) described that the collection of primary data from the field survey is very difficult part of the research and is considered to be the time consuming part of the research. In this research, the researcher faced the problem of accessibility to data that is required for the research process. The researcher had selected 100 respondents from the agro based company but 90 of them participated in the survey out of which responses of only 72 respondents could be considered for the purpose of the research (Kim, Lee and Gosain, 2005). The 10 respondents who did not participate in the survey were because they did not have any time for the survey and was in a hurry (Zhang and Li, 2006). Among the 18 respondents who did participate in the survey but their responses could not be considered as either they did not answer all of the questions or they had skipped some of the relevant questions and some of them did not return back the questionnaire. Thus, out of 100 respondents only 72 of them literally participated in the survey and provided relevant data and information.
In order to conduct the survey in a systematic way the researcher must consider the ethical issues. The researcher had explained the nature and the purpose of the research to the respondents and had provided them with the consent form. The consent form is used to provide approval for the participation of the respondents in the survey. The consent form is necessary to avoid any problem related to the survey by the respondents. The questionnaires that are provided by the researcher do not have any personal questions related to the managers, employees and the customer service. The absence of the personal questions would prevent the deviation of the response from the desired outcome. The ethical consideration of the respondents implies that the data so collected are reliable and valid for the purpose of the research. It is the duty of the researcher to maintain the confidentiality of the data of the respondents. Referencing style has increased the validity and reliability of the readers (Zhao, Shi and Sun, 2014).
After the completion of the data collection through the filled up and returned questionnaires, the collected information will be further considered for editing purpose. The editing will imply that the survey is completed and the code and the entries can be made into the Statistical package (SPSS) for the purpose of data analysis. The coding is defined as the process through which raw data is changed and transformed into tabulated format which will be helpful for the purpose of data analysis. This transformation of the data into different categories will serve the purpose of data analysis. The data set would then be sent for the verification of the correlation of the captured data with the estimated data obtained through the statistical software package SPSS. In this research the researcher will be able to analyze the data using both descriptive and inferential statistics. The descriptive analysis will be commenced by the researcher to collect the primary data. The researcher will also use the mean and standard deviation to calculate the central tendencies and dispersion of the data collected. The data will be presented using the frequency distribution table and the appropriate explanations of the results obtained would be provided by the researcher.
There are few limitations of the study which is crucial for the researcher may consider as challenges when he conducted the survey and the interview. The first limitation of the study is the dependency of the research on the primary data. The emphasis of the study is on the primary data and the focus is lost from the secondary data collection as well as the case study survey. There are very study on the ERP implementation and the benefit of the organization. The authenticity of the data is compromised in this section as the different employees have different perception about the ERP system which might influence the opinion of the other employees. The major limitation of the study is the collection of data is not so large, which pose as a constraint on the research.
The Cloud based ERP systems are being adopted by most of the small scale business whereas some of the large scale businesses are being skeptical about the benefit of this type of system. Limited studies o the success of the implementation of cloud based ERP systems within the organizations to speed up the operations of the business. On the other hand there are several studies that have been discussed in this study which reveals that ERP have led to the decline in the performance of the organization. The studies that were commenced on the ERP had emphasized only on the financial performance of the companies. Therefore it is recommended that more studies be initiated which would evaluate the entire organizational performance pre- and post- implementation of the cloud based ERP systems in different sectors of business.
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