ERP Systems in the Cloud: Advantages and Disadvantages

This report discusses the different methods of implementing ERP systems in an organization, including traditional and cloud-based approaches. It covers the advantages and disadvantages of on-premise ERP, hosted ERP, and cloud ERP systems, with case studies to support each method. The report also highlights the benefits of ERP systems, such as better collaboration of services, enhanced security of data sets, improved flexibility and scalability levels, and faster processing of operations.

ERP Systems in the Cloud
Research Report
9/13/2018

ERP Systems in the Cloud
Table of Contents
Introduction: ERP Systems....................................................................................................................2
Statement of Purpose of the Report...................................................................................................2
Structure............................................................................................................................................2
ERP Systems in the Cloud.....................................................................................................................3
On-Premise ERP (Traditional ERP)..................................................................................................3
Definition & Set of Advantages.....................................................................................................3
Set of Disadvantages.....................................................................................................................4
Case Studies of Successful On-Premise ERP Implementation.......................................................4
Hosted ERP System...........................................................................................................................5
Definition & Set of Advantages.....................................................................................................5
Set of Disadvantages.....................................................................................................................6
Case Studies..................................................................................................................................6
Cloud ERP System............................................................................................................................7
Definition & Set of Advantages.....................................................................................................7
Drawbacks.....................................................................................................................................8
Case Studies..................................................................................................................................9
Conclusion.............................................................................................................................................9
References...........................................................................................................................................11
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ERP Systems in the Cloud
Introduction: ERP Systems
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.
Statement of Purpose of the Report
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.
Structure
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.
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ERP Systems in the Cloud
ERP Systems in the Cloud
On-Premise ERP (Traditional ERP)
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].
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ERP Systems in the Cloud
Set of Disadvantages
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.
Case Studies of Successful On-Premise ERP Implementation
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.
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
17th March 2008 and the end date of the process was 20th October 2008 which resulted in
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ERP Systems in the Cloud
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.
Hosted ERP System
Definition & Set of Advantages
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.
Set of Disadvantages
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.
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ERP Systems in the Cloud
 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.
Case Studies
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
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ERP Systems in the Cloud
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.
Cloud ERP System
Definition & Set of Advantages
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.
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ERP Systems in the Cloud
 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.
Drawbacks
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.
Case Studies
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
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ERP Systems in the Cloud
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.
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ERP Systems in the Cloud
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: http://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].
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[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].
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