ERP Systems in the Cloud
There has been significant media attention and hype about the potential of cloud technologies. Companies are investigating how these technologies can be applied to their ERP Systems requirements. Companies are presented with a number of options which they need to consider. These include:
Companies are faced with increasing pressure to investigate the potential of these different offerings and the strengths and weaknesses of each. Management have become aware that you are studying ERP Systems at Victoria University and have given you the task to prepare a research paper on the different ERP system offerings described above, their benefits and risks.
In the discussion you should use case study examples (from literature searches) to demonstrate different company’s experiences in reinforcing the different benefits and weaknesses.
1.1 Introduction of the topic: In an empirical tone, ERP stands for Enterprise Resource Planning and has become one of the most important business process management software for the contemporary business entities to thrive with their ultimate business objectives in the market. ERP mainly enables the entity to use a software system that is conditioned to integrate all the associated business applications in an exclusive domain while endowing the entity with greater operational ease. Furthermore, it also helps the organizations to manage the business effectively by automating all the associated back office functions such as services, human resource and auxiliary technological expertise.
As per some comprehensive studies conducted by Seethamraju (2015), the emerging as well as established business entities have faced tremendous challenges regarding the construction of a proper ERP system and to operate the business effectively. In the incipient phases of ERP systems, reputed business entities tends to purchase the license of available ERP software and subsequently install them within their business quarters, which, according to Al-Jabri and Roztocki (2015), is a traditional method of utilizing the software. However, it turns out to be a matter of high initial cost which is not affordable for the emerging business entities. This happens to facilitate the emergence of Infrastructure as Service (IaaS) software where the utility of the software is dependent upon the infrastructure of a host entity. Subsequent evolution of desired facilities coupled with rapid technological advancement and invention of cloud technologies happen to facilitate the birth of Software as a Service (SaaS) infrastructure where the entities are obliged to procure paid subscriptions in order to run their ERP software.
1.2 Statement of Purpose: In this Management Assignment, the current study aspires to embark on a comparative assessment of all the options available to the business entities which eventually lead them to install an ERP system. This comparative assessment consists of the detailed analysis of the strengths, benefits, weakness and risks associated to these options followed by feasible recommendations regarding the most effective infrastructure of installing the recommended ERP systems.
1.3 Structure of the study: The skeleton of this Management Assignment begins with a generic introduction of ERP systems along the evolution of technological expertise that facilitates the installation of these faculties. Afterwards, the study delves into a deeper analysis of the relationship between ERP systems and the available options of installation followed by a succinct summary of the major findings.
2.1 Introduction to cloud technologies and ERP systems:Enterprise Resource Planning have become an integral aspect of business management immediately after the invention of the fact that it endows the respective entities with better operational ease. In an elaborative tone, effective implementation of the software is supposed to enable the back office functions of any entity to be transformed into automated faculties. Apart from that, it has provided an integrated platform comprising of all the cardinal components of business operations. This aspect of an integrated domain, as apprehended by Galy and Sauceda (2014), embeds an urge for a consistent presence of technological competence which can enable the respective organization to scrutinize the operational status of the organization at any point of time. For instance, if a competent technological domain can be integrated with this necessity to overview the operational and management status of the company, it will be fruitful for the entity to cope up with the core operational practices of the organization. This aspect of the management being a control tower is, in accordance with Haddara and Elragal (2015), is cannonical to the curreent pursuit and reveals the ultimate aspect where cloud technologies and ERP system appears to be tied up.
In the incipient phase of installing the ERP systems in order to accomplish higher operational ease and visibility, the established entities happen to embrace the traditional method of installing the ERP systems. It has been known as the On-Premise option of ERP system installation where the entities appear to be obliged to purchase the license of the ERP system and install it in accordance with the infrastructural facility available to them (Bradford, 2014). In this phase,the contemporary trends of installation and associated practices exhibited that in the course of embarking into this purchase-based installation procedure, in most of the cases, is corresponded by a heavy operational cost and installation charge.
Thus, it is true that the on premise ERP systems are not affordable for the emerging businss entities and SMEs. Furthermore, apart from the installation charge, the license of the software is also very expensive which enhances the necessity for a software system with more availability. In this regard, it is evident that in most of the cases, the lack of affordability have been served as the major weakness for the respective ERP system to be universal. The next phase in the path of evoution is to overcome this additional expenditure prior to license purchase and installation charge. This can be considered as the advent of hosted ERP systems where the liability to bear the expenses of the associated infrastructure has been given to a third party which is known as the host. Thus, these third parties are supposed to bear the infrastructural expenses and that is why it became known as IaaS which stands for Infrastructure as a Service. Entities began to emerge who can provide the requisite expenditure for the installation of the ERP systems which diluted the switching cost considerably. However, it snatches the command of the management systems from their operational procedures. This intensifies the advent of the cloud based companies with a merger with the ERP systems software since it, instead of snatching the command of the operation systems from the management, ensures the effective installation of the ERP systems through paid subscription. Furthermore Bradford (2014) suggested that it is affordable to the emerging entities or SMEs as well since there are various ranges of software available with different subscription fees.
2.2 On-Premise ERP systems: As it was feebly mentioned earlier, the on premise ERP systems are subject to purchase the associated license of using the software completely. As it is the first software infrastructure in the domain of installing the software in accordance with its associated needs. As opined by Dietz (2014), it enables the management of the respective entity to exercise the complete autonomy of the back office functions as well as the cardinal criteria of the ERP systems to be installed in the certain domain of application. However, the emerging business entities began to face certain problems regarding the expected expenditure along with the infrastructural facilities available to incorporate that.
2.2.1 Strengths &Weakness: The major strengths of the on premise ERP systems can be categorized as follows;
Relative ease of installation: Apart from the relative ease that on premise ERP systems are supposed to provide to the management regarding data integration, it is also true that the installation facilities are also quite easy in case of on premise ERP systems. The ease is typically based on the fact that after buying the software in accordance with the available infrastructural facilities, the installation and corresponding service are extremely effective (Antoniadis et al. 2015).
Simple software infrastructure: The infrastruture of the software is based upon easy and simple algorithms which helps the respective management to accomplish the desired goals with minimum efforts.
Complete command over the ERP systems: Since purchase of the license means complete command over the available enterprise, it facilitates the respective entity to be transformed into a control tower of the operation procedure of the entity with high precision (Antoniadis et al. 2015).
The major weaknesses of the current ERP system can be categorized as follows;
High installation charge: Since an aspect of buying the entire license is associated with it, it is true that it is a matter of heavy expenditure. Thus, the affordability of the on premise ERP systems is not universal.
Not suitable for the SMEs: It is challenging for the small and medium enterprises along with the emerging business entities to cope with the expenditure and maintenance cost of this particular ERP system.
2.2.2 Benefits and Risks: The major benefits of the on premise ERP Systems can be easily derived from the strengths of using it. The major benifit that it has to offer is based upon the ease of installation. Regarding that, it has been able to cope with all the associated aspects of integration (Bradford et al. 2014). It has been able to provide a smooth and seamless operation procedure of the respective entities, the major risk associated with its istallation is its high installment expenditure coupled with maintenance cost.
2.2.3 Practical Example: One of the major proponents of the on premise ERP systems are Daikin which is a lauded refrigeration and Air conditioner provider. In the initial phase, Daikin seems to face immense challenges regarding the aspects of installation and using the proposed ERP systems in a seamless manner. However, the main challenges that they have highlighted is associated with the heavy initial expenditure coupled with it along with the maintenance charge. However, they have exercised the ERP systems and proclaimed that it is beneficial since it puts the entire command of the operations to the management solely.
2.3 Hosted ERP systems: In an empirical tone, the hosted ERP systems are associated with the urge to forward the liability of the infrastructural expenditure to a third entity which has been known as the host. In this regard, it needs to remembered that whenever the management are forwarding the responsibilities to the host entity, it comes with a colateral hazard to cope with operational systems as it was not remaining completely in the management's hand.
2.3.1 Strengths & Weakness: As it was mentioned earlier, the hosted entities are known as the third parties which are supposed to provide the installation prior to the requisite infrastructure. This is why it is known as infrastructure as a Service.Thus, it is evident that the main advantage of this that infrastructural expenditure has not to be beared by the management itself (Antoniadis et al. 2015). several infrastructure providers appear to emerge which dilutes the switching costs in favour of the business entities. This is the major strength of installing the software.
Weakness is that the operational procedure will not be entirely in the management's command. This might cause manipulations prior to some major operational activities.
2.3.2 Benefits and Risks: The major benefit of installing this is that the respective mmanagement is free from the burden of infrastructural expenditure which makr them invest their residual amount in the purpose of maintenance (Lu et al. 2015). On the other hand, another one of the benefits is to cope with the emerging business trends.
One of the major risks is the fact that the operational procedure of the management would not lie entirely on the managements hand. Thus, any manipulation of the desired resource planning has to be considered as the colateral hazard of the respected entities.
2.3.3 Practical Example: Most of the retail market sectors are associated with the installation of the host based ERP systems since it is inherently difficult for the entities to cope with the emerging planets of resource planning. In this regard, major players such as Tesco appears to be in the infrastructural domain and tends to employ a bunch of associates to go after the governing aspects of resource planning while scrutinizing elements of manipulation available in the infrastructural domain (Nowak and Kurbel, 2016).
2.4 Cloud ERP systems: The enterprise resource planning that is developed on a cloud computing platform is regarded to be the Cloud ERP system which is an ERP system that would not operate within the enterprise's own data centre (Al-Ghofaili and Al-Mashari, 2014). By the use of the cloud ERP system, the transfer of data could easily take place across the departments of the firm internally as well as externally. In the understated discussion, a precise illustration of its major strengths and weakness would be done in an elaborated fashion
2.4.1 Strength & Weakness: There are certain attributes of the Cloud ERP system that acts as the major strengths of the software. The strengths are as follows:
Accessibility of Features: For any software, it is critically important that an updated version is used in order to keep pace with the changing needs of the technology. In a similar context to this, the cloud ERP system comes with characteristics feature of implementing features with every update. Therefore this helps in enhancing the performance of the concerned ERP system (López and Ishizaka, 2017). The ability to make crucial updates at a regular pace increases the functionality of the Cloud ERP system and this thereby develops as a major strength of the system
Data and Integration Enhancement: Accuracy and integration of data are considered to be an essential criterion for an ERP system. In concern to this, the cloud-based ERP system provides web orientation that makes the process of integration and data accuracy significantly upgraded and improved.
Non-Physical Servers: Another major strength of the cloud-based ERP system is that that there is no need for any kind of hardware and therefore the aspect of m, containing the physical assets does not come into view (Helo et al. 2014). Therefore, the firm implementing it no longer have to constantly maintain the hardware and instead could focus on the areas that have the production ability
Equivalent to the strengths there is some weakness related to the Cloud-based ERP system which is as follows:
Integration complexities: This one of the major weakness of this software as the enterprise grows and develops the requirements of the firm also gets evolved. Therefore owing to this it is quite certain that the firm has to integrate into other additional modules as well. In such a scenario there are string chances of failure of alignment of the newly purchased model with the existing Cloud-based ERP system (Wibowo et al. 2016). Therefore, this develops as a gap for the ERP System.
Customization Limitation: Often some organisation has found utilization of the cloud-based ERP system as unsuitable for some of their specific operations. This has developed as a major weakness for the concerned system as there is a limitation associated with the customisation factor. Specifically, in concern to the manufacturing operations, the cloud-based ERP has been determined to be inefficient
Price Contemplation : The cost factor is one of the major concerns that are associated with the cloud-based ERP system. It tries to inculcate into more money expenditure over the course of the system’s lifecycle (Mital et al.2015).
2.4.2 Benefits & Risks: In this section of the research paper, an initial understanding of the kind of benefits and risks that are associated with the cloud-based ERP system would be exemplified in a detailed manner. this would help in understanding the advantages and disadvantages that are associated with the implementation of the cloud-based ERP system in an organisation's operational activities (Ali et al. 2016).
There are innumerable number of benefits in concern to the cloud-based ERP system. A discussion of which are as follows:
Low Entry barrier : In comparison to other software as a service program is recognised to have low barriers to entry, therefore, this develops as an advantage for the concerned software system. This is because the software is hosted by another company; therefore, the form does not integrate with any kind of staff, servers or equipment. This thereby reduces the chances of development of any kind of barriers on an overall scale. The adaptation to this kind of ERP solution gets well merged with the operations of the enterprise.
Easily scalable: With the benefit of low entry barriers, the cloud ERP allows the enterprise to scale without any kind of challenges or barriers. Since the infrastructure is managed by the vendor, therefore, the business could move onto using the concerned ERP system without any kind additional aspects.
Geographical mobility: This is one of the major benefits that are associated with the concept of the Cloud-based ERP. Since, it provides the opportunity to access the software from anywhere only with a simple connection of internet. Global companies do not have integrated into multiple systems that would reduce the business or the data sharing ability.
There are certain risk factors that are associated with the cloud-based ERP system as well that develop a barrier for the software solution. A precise explanation of some of the risk factors is as follows:
Data Security: This risk factor develops as concerning issues for the cloud-based ERP System. With information being strictly web accessible there are high chances of the data being breached. The data breaching becomes a legitimate concern for the overall production facilities.
Management Challenges: With the implementation of the cloud-based ERP system often the admin loses control over the enterprise as the providers take most of the responsibilities. Therefore, this develops as a risk for the business of the enterprise.
2.4.3 Practical Example: Bell and Company have been recognised as one of the leading marine parts distributors. The firm had a positive experience by the implementation of the cloud-based ERP system .in accordance to the management of the said firm they were able to compete with larger distributors by the implementation of the cloud-based ERP system (Ali, 2016). Since the form got a greater insight into its business operations and productivity. Moreover, the firm determined that the concerned ERP system was easy to implement and use and it even helped in improving the employee's productivity and efficiency. While in concern to the organisation of Nike the implementation of the concerned ERP system had not turned out be pleasant since the form was not able to integrate into its system, which eventually led the development of lack of supply chain management and a huge loss to the company. The ERP software used required customisation which has always been a limiting factor for the cloud-based ERP system (Wibowo et al. 2016). This eventually caused the company to lose its prominent market share
2.5 Comparative Assessment:
On-Premise ERP systems
Hosted ERP systems
Cloud ERP systems
It is installed locally
It is owned as an asset
It is hosted on the vendor's servers
One-time perpetual license fee is required
On time license fees is required
Priced under a monthly or annual subscription basis
Data security issues
Implementation has barriers
Implementation has limited barriers
Low entry barriers
Based on the above stated comparative assessment and critical review of the advantages and disadvantages related to the different types of ERP system the cloud ERP system is considerably more favourable. There are certain aspects that make it more accessible and affordable in comparison to other two ERP system. Moreover Ali (2016), suggested the cloud-based ERP system has the ability to become the future of the ERP system owing to the benefits it provides to the organisation in terms of information sharing and efficiency. In addition to this, it would be ably recommended that although there are some data privacy issues related to Cloud-based ERP the concerned risks could be managed effects provide the company with a greater scope of opportunities
3.0 Summary & Conclusion
3.1 Summary of the main findings: In summarising the above-stated aspects it could be stated that the ERP system has developed as one of the essential requirements for effective operational functioning. The above-stated study has tried to reflect upon a number of ERP types that are currently being used in the organisation and the kind of impact they have on the work functions. Each of the ERP systems has been described significantly illustrating their major features such as their, weakness, benefits and risk. In addition to this, some practical examples have also been mp[divided determining the impacts of their implementation. In this way, the study has been developed in order to provide an in detail information about the extent to which the organisation could adapt to the ERP system and the kind of benefits that could be gained by it (Mital et al.2015).
In light of the above-stated discussions in this Management Assignment, it could be stated that Enterprise Resources planning is one of the core activities of business management. Therefore, it significantly important that the firm adapts to strategies that help in their management. In concern to this, the concept of ERP system has developed as a boon to the management of the organisation especially in concern to enterprise resource planning. The discussions in tis Management Assignment have provided a deep insight regarding the technologies in relation to the different types of ERP systems. Management assignments are being prepared by our management assignment help experts from top universities which let us to provide you a reliable assignment help online service.
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