ERP Systems in the Cloud: Advantages and Limitations

This article discusses the advantages and limitations of using ERP systems in the cloud. It explains how cloud computing works and the different models of cloud computing. It also covers the scope of ERP systems in the cloud and the evaluation framework for choosing a cloud ERP vendor. The article includes a case study of a commercial cloud ERP system and provides insights into the advantages of using cloud-based ERP systems, such as cost savings, rapid deployment, and flexibility. It also highlights the limitations of the cloud, such as perceived data risk and organizational resistance.

ERP Systems in the Cloud
Student’s Name
Institution Affiliation(s)

Table of Contents
Introduction......................................................................................................................................3
Cloud computing.............................................................................................................................3
Models of Cloud Computing...........................................................................................................5
Cloud computing services............................................................................................................6
ERP Systems....................................................................................................................................6
Cloud-based ERP.............................................................................................................................7
Scope of ERP Systems in the Cloud................................................................................................8
Advantages of using ERP Systems in the Cloud.............................................................................8
Cost..............................................................................................................................................8
Rapid deployment........................................................................................................................9
Flexibility and scalability.............................................................................................................9
Limitations of the Cloud..................................................................................................................9
Perceived data risk.......................................................................................................................9
Organizational resistance...........................................................................................................10
Evaluation Framework...............................................................................................................10
Case study......................................................................................................................................10
Example of a commercial Cloud ERP system...............................................................................11
SAP ERP....................................................................................................................................11
Choosing a cloud ERP Vendor......................................................................................................12
References......................................................................................................................................14

Introduction
Global business is changing fast as far as enterprise systems, and unique parts require specific
arrangements. These endeavors are overshadowed by the fact that most economies are leaving
retreat and the companies are catching up on the development bend. Industrial arrangements are
sophisticated and regularly require colossal amounts of cash and exertion. There is proceeded
with the need to enhance the effectiveness of operations. The Enterprise Resource Planning
(ERP) platforms are creating to give answers for the rising needs of the global creativity. In the
last couple of years, the utilization of ERP has changed drastically (Chen, Liang, & Hsu, 2015).
At present, ERP can be applied to any company operating in any field. That is the reason cloud-
based ERP is rising as an answer to these issues. The organization of cloud computing is easy,
and its control is subject to the merchant's help. In this manner, it is easy to execute an ERP in an
organization because it depends on the web.
When many people hear the word “cloud”, I believe they think of a technology that’s new and
one that hasn’t been around for very long. However, cloud computing can mean many different
things and it’s a technology that’s really been around for a long time.
Cloud ERP helps the company to get the flavor in one sip. Leading club is a financial institution
that is providing the services in the areas of lending and borrowing, and their customer
bandwidth is very high. They are providing their services since 2007. To manage their complex
operations, they are using the cloud ERP system. It helps the company to reduce its cost and
make the decisions with more precisions (Ali, Moawad, & Hosni, 2016). It makes the workflow
of the company smoother and enhances the communication between the departments. It also
helps the company to integrate its system with other systems. It also helps to secure the sensitive
data of the company. It also transforms the customer’s experience of the company by providing
higher value to the teams and customers.
Cloud computing
Many people don’t realize this, but something as simple as email is considered to be cloud
computing. This is because many of us use Gmail, Yahoo or Hotmail as our email provider of
choice. All three of these providers, and many more, keep our emails on their servers. This

means that whenever we access our email via a web browser, we’re actually accessing and
viewing our email that’s kept in the cloud.
Aside from cloud based email, there are many other forms of cloud computing. Apple’s iCloud is
a well renowned form of cloud computing that many people first think of when they see the or
think of the term “cloud.” iCloud is a service that Apple offers to any customer that owns an
Apple product. It is a simple and secure way of keeping all of your information such as contacts,
photos, documents, apps, and much more on Apple’s servers. By using and backing up all
information to iCloud, if you were to upgrade to the latest generation of the iPhone, all that’s
required to retain information on your old iPhone is to sign in to iCloud and you now have all of
your content just as you left it on your old phone.
Microsoft also has their own approach to cloud computing. They call it “SkyDrive.” Although
SkyDrive is similar to iCloud in some ways, Microsoft has a bit different use for their cloud
servers. If you’ve ever heard of Drop Box, SkyDrive is very similar. SkyDrive integrates with
Microsoft’s Office so you can keep all of your documents in one place that you can access from
any computer. This also acts as a very useful way to backup important documents to you
wouldn’t ever want to lose.
Cloud computing is a technology that has a very bright future. I believe that one day we will be
keeping all of our information in the cloud. Instead of keeping information on a hard drive that
can only be accessed on that specific computer, we will be keeping everything in the cloud
where we can access all information at anytime and anywhere.
Cloud computing is a technology that entails several interconnected computers to deliver
computing services via a communication network such as the internet. Today, many companies
provide these services such as Google, Apple, Amazon, and Microsoft Azure among others
(Kiadehi & Mohammadi, 2012). These companies pose as cloud services vendors. Cloud
computing cannot be deemed a new concept in the realm of information technology. Instead, it is
a more excellent alternative for data processing administration authorities that existed years ago.
Cloud computing comes with the choice of specification and can help all sizes of businesses. It is
also deemed an economical alternative for business data processing (Ray, 2016).
Cloud computing offers numerous advantages, which makes it a preference for many businesses.
Besides, it provides flexibility, improved reliability, collaboration, security, unlimited file access

and storage among others. Nevertheless, there have been concerns regarding cloud computing
among users. Key among them include the preservation of the confidentiality and integrity users’
data to enhance data security (Kiadehi & Mohammadi, 2012). However, despite the concerns
facing cloud computing today, it has numerous applications that help firms to cut on IT-related
costs and improve their business capabilities.
Therefore, cloud computing is a technology and an approach that handles the force of servers by
separating the single servers into several virtual machines. As more IT services move online to
cloud platforms, more organizations are considering whether to move their ERP systems online
to cloud services as well. Although some companies have successfully moved a portion of their
ERP systems to the cloud, many others remain skeptical of taking that step. This is because there
is a range of factors to put into consideration before deciding to use cloud-based ERP systems
(Raihana, 2012). Some of these factors include the size of the company, type of industry, the
complexity of the solution, security needs of the organization and other issues that the
organization may deem fit to consider.
Models of Cloud Computing
Cloud computing can be characterized as private, public or hybrid. Openly cloud computing, the
cloud infrastructure is possessed by a single organization, which avails it to people in general or
a gathering of firms in a large industry. In private cloud computing, the cloud infrastructure is
given to a solitary organization (Raihana, 2012). The organization itself or a third party may do
management of the cloud. The cloud is regularly set inside the organization's condition;
consequently, it is possessed and managed privately. Half breed cloud computing is a
combination of at least two clouds, for example, private and open. This means that the
constituents of mixture block remain remarkable elements yet are joined by a standardized
innovation that facilitates the portability of data and applications.

Cloud computing services
Fig 1: Cloud service model (Abd Elmonem, Nasr, & Geith, 2016)
In IaaS, clients purchase their desired infrastructures. They also purchase the software, which
they own and hence they have the virtual authority to perform different functionalities. This
service entails operating a virtual server in a virtual environment (Raihana, 2012). The client
only pays for usage, which reduces the requirement for colossal interests in hardware, for
example, organizing gadgets and servers among others. This service is charged on a utility basis
and the number of resources used. In this manner, the cost mirrors the level of activity.
Platform as a service relies upon the integration of operating systems, application software,
middleware or nature, which packs service through an API manner (Raihana, 2012). What the
capability gave to the clients is to convey their acquired applications. The client does not manage
the basic cloud infrastructure. In this service pack, the users only manage the applications
deployed and the environment for hosting them.
In SaaS, vendors provide software to clients as a service via the web. This eliminates the
requirement for running and installing the application on the clients' PCs, hence rearranging
maintenance operations and support (Raihana, 2012).
ERP Systems
ERP covers an organization’s entire product line. It is an integrated PC based application that is
utilized in the management of internal and external resources, for example, tangible assets,
human resources, stock and financial resources (Singh & Nagpal, 2014). Any business can
benefit from adopting the ERP system because it is customizable to meet the unique needs of the

business. The motivation behind Enterprise Resource Planning is to facilitate information stream
among all business capacities inside an organization while managing the connections to outside
parties. ERP systems are built on centralized databases that utilize standard computing platforms
(Singh & Nagpal, 2014). They are, therefore, able to consolidate business operations into an even
and vast condition.
Fig 2: ERP System overview (Abd Elmonem et al., 2016)
This framework allows business to gather units from different vendors without the need to place
many copies of sophisticated and costly computer systems in areas that will not exploit their
capacities fully (Singh & Nagpal, 2014). ERP is characterized by a large software that backings
the streaming and dissemination of enterprise information from various locations to all the
functional units of the business. This gives the officials an exhaustive review of the entire
business execution that positively affects their decisions.
Cloud-based ERP
When an enterprise resource planning software is set up in the cloud environment, it is referred
to as cloud ERP Software. Cloud ERP occurs as a revolutionary approach for the deployment of
ERP solutions. It offers adaptable, flexible, scalable, affordable, and efficient solutions (Raihana,
2012). Cloud ERP as a business management apparatus has given tremendous achievement in the
conveyance of business-critical data. Cloud ERP is frequently offered as a service, particularly to
clients who want to acquire ERP without managing software and upgrades to diminish direct
costs. Software as a Service (SaaS) regularly alluded to as facilitated applications can be utilized
in cloud based-enterprise resource planning systems. SaaS sellers bear the duty regarding the

deployment and management of IT infrastructures such as OS software, servers, network access
and databases among others, and processes such as infrastructure and process upgrades and
backups among others that are necessary for the running and management of the system
(Raihana, 2012). SaaS is characterized by a total application that is offered as a service on
demand. A solitary instance of the software keeps running on the cloud and serves many end
clients or customer organizations.
The SaaS service may be characterized as the procedure through which an Application Service
Provider (API) gives diverse software applications over the web leveraging cloud infrastructure.
This makes the customer eradicate the need to install and operate the application on their PC. It
also eliminates a huge load of software maintenance and overhauling and bolster. The most
notable advantage of the SaaS is its ability to utilize the latest variant of the application(Chou,
Chang, Lin, & Chou, 2014).
Scope of ERP Systems in the Cloud
The future of ERP systems in cloud holds more because more vendors and more users will be
transitioning to this way of managing their data, and consequently, many existing systems are
likely to become obsolete (Hahn, 2016). Software applications operating on old platforms are
highly likely to disappear. This is because they cannot be compared to cloud ERP whose updates
and version control happens regularly and fast. This will eliminate the need for discs and
eradicate downtime to users when testing, loading or upgrading updates. The users will have the
opportunity to validate and approve that the new system fits their business models and purposes.
The history of cloud-based ERP has been marked by both significant achievements and
failures(Sudhaman & Thangavel, 2015). Nevertheless, this is not a surprise considering the cost
and complexity of the implementation. The cloud holds great potential in addressing many
challenges associated with ERP.
Advantages of using ERP Systems in the Cloud
Cost
Cloud-based ERPs are paid for through a membership show that includes the software,
facilitating and support costs. Therefore, this lowers the initial cost for implementation
significantly when compared to the cost incurred in the implementation of traditional systems.
For this reason, cloud-based service providers can efficiently scale up their services with relative

ease given the organizations’ needs to grow (Jolly, 2016). Vendors are mandated to maintain
both hardware and software including upgrades. The vendors should also offer back-ups, system
monitoring, and support to the users. The shift of all these functions to the vendors has allowed
companies to scale-down their IT departments to free up resources to other areas where services
cannot be outsourced, thus saving them money (Matende & Ogao, 2013).
Rapid deployment
The implementation of in-house and hosted ERP systems depend on the integration of existing
templates by customizing and configuring them to match the practices and processes of a
company. This slows down the implementation processes, which take months or years (Costa,
Ferreira, Bento, & Aparicio, 2016). However, cloud-based ERP systems offer simple
configurations with a restricted range of alternatives planned to address the issues of general
organizations. This approach significantly diminishes the time taken for arrangement while
giving answers for the critical business needs of the organizations. According to Jolly (2016), the
time taken to roll out a cloud-based ERP system relies upon the time required to update any
affected business forms. Cloud-based ERP systems are planned to allow companies to add new
business functionalities fast.
Flexibility and scalability
Software vendors have been trying to come up with new ways of enabling companies to add new
software and functions by following a more straightforward delivery process. This makes cloud-
based ERP systems the most appropriate for companies that are evolving rapidly to fit in the fast-
changing business environment (Jolly, 2016).
Limitations of the Cloud
Given the fact that cloud-based ERP systems are new in the market, some companies are
skeptical about their deployment. The primary concerns include restricted functionality and
customization and perceived risk of users’ data (Nwankpa, 2015).
Perceived data risk
Companies settling for the implementation of cloud-based ERP systems have to be willing to
trust an outsider with sensitive company information such as financial data and orders placed by
customers. This information may be mingled with that of other companies causing loss or
distortion. Nevertheless, cloud-based ERP providers have invested heavily in security solutions
to safeguard their clients’ data. In the same way, many human resource software vendors host

and manage sensitive employee data from companies that compete with each other. In light of
the above, it is essential to note that there are regulatory requirements that touch on the storage of
highly confidential information and business needs on the storage of intellectual property. Such
requirements may impose strictness on cloud-based ERP systems. Given the steps were taken by
vendors to ensure the security of data, the perception of high risk seems to be founded on the
lack of acquaintance with its emerging options and functionalities (Johansson & Ruivo, 2013).
Organizational resistance
IT departments in most companies have assembled qualified teams to operate their ERP systems
including functions such as application development, support, maintenance, and data-center
hosting among others.
Evaluation Framework
Given the odds involved in either adopting or failing to adopt cloud-based ERP systems, firms
must cautiously evaluate whether the cloud-based ERP solution is good or not. For that reason,
two major factors must be carefully assessed to weight the trade-offs involved in the adoption of
cloud-based ERP solutions. These factors are system complexity and implementation size.
Limited functionality and availability, reduced customization and integration, implementation
size and system complexity are also among major limitations for the adoption of ERP systems in
the cloud (Salem & Abdo, 2016).
Case study
Sarmed is a significant company in logistics and supply chain services in Greece. The company
employ 155 employees and automates its business processes using Nubis Cloud ERP (NUBIS,
2012). The company handles a range of operations involving the management of consumer
goods. It has invested in innovation and technology in a bid to improve its efficiency and
productivity. Before the adoption of the Nubis Cloud ERP, the company used a WMS system
that offered a limited accounting and financial functionality. Upon its adoption, the cloud
solution enabled the company in enhancing its workflow processes in the documentation,
processing, analysis, and reporting of its accounting, services and sales activities (NUBIS, 2012).
The system in the accounting division is intended to support fast importing of huge volumes of
incoming transport-related documents. In the sales and supplies division, the company uses full
CRM functionality as provided by the Nubis Cloud ERP to create offers to clients and follow up
the procedure (NUBIS, 2012). Therefore, the system has significantly improved monitoring and

adding value to the company’s existing processes. Since its adoption, the company has attained
the following benefits:
(i) Maximized efficiency
(ii) Improved document processing time
(iii) Enhanced CRM functionality and customer support
(iv)Enhanced scalability of the business
(v) Optimized data exchange
Example of a commercial Cloud ERP system
SAP ERP
The field of business has been revolutionized by the intervention of computer technology.
Solution providers keep on offering their clients effective and reliable products that manage their
business processes and provide basis for strategic analysis. Enterprise Resource Planning (ERP)
systems are among the most common software solutions adopted by companies around the
world. (Badawy, El-Aziz, Idress, Hefny, & Hossam, 2016) stated that ERP solutions were
originally developed to support the manufacturing companies but they have grown to support
numerous other industries, like medicine, financial institutions etc. The product that has been
chosen for analysis, SAP ERP, also offers the services to manage one’s business and provide a
structured form to the business operations. (Kanellou & Spathis, 2013), explained that SAP ERP
has a diverse range of services related to it; self-services for managers and employees, sales-
order management, corporate performance management etc.
The module of self-services (for manager and employees) enables the employees to apply for
leaves, in accordance with the number of leaves that have been unconsumed by them. The leaves
are instantly sent to the manager in an automated manner for his approval. This system can be
useful to create efficiency and productivity in the human resources operations since all the
operations are automated.(Rajan & Baral, 2015), stated that the availability of data, such as on-
going projects and previous leave applications, facilitates effective decision making from the
manager.
The module of sales order management offers access control to sales data, order processing and
basis for the analysis of relevant data. (Parhizkar & Comuzzi, 2017) agreed that the automation
of operations reduces the need for constant administration; therefore administration costs can be
reduced significantly. The sales executives can handle the sales orders and quotations (on the

basis of their status) in an effective manner to avoid any late deliveries to the customers. The
solution provides functions to view the on-going sales orders and effective search options to find
specific orders to resolve any prevailing issues. (Parhizkar & Comuzzi, 2017) pointed out that
the availability of updated information can highlight the level of performance of the company,
alongside the identification of the areas where improvement might be required to ensure
customer satisfaction. Orders can be processed and commitment can be given to the customers
according to the availability of the inventory to avoid any delay in deliveries.
Sales reports can be effectively generated to facilitate the evaluation of the current and previous
statistics. Strengths and weaknesses of different products can be identified and strategic
decisions can be taken in an according manner. The reports can be viewed in different graphical
forms to facilitate analysis of different types. The analysis of sales, market and customer service
data enables the company to perform predictive analysis and alter the business processes
according to the changing needs. Key performing areas can be monitored for their effectiveness
and thus be changed according to the varying needs of the customers (Kadir, Ismail, & Yatin,
2015).
Overall, SAP ERP can be considered as an effective management tool for any company since it
provides timely and updated information about different aspects of the business. The automation
of business operations reduces entry times and administration. As stated earlier, it can be used by
any form of business in any industry to increase their productivity and strategic analysis.
Choosing a cloud ERP Vendor
The ERP market has developed to make the products provide the fundamental needs of a typical
business. For instance, the big players have general ledgers as well as purchase and sales ledgers
than they can offer to financial departments of several companies. However, these standardized
systems create confusion among buyers. This is why a vendor’s reputation plays a vital role in
the selection of a system to be implemented in a company. There are helpful criteria that aid in
addressing the major issues in evaluating which vendor to buy from. First, the vendor should be
able to offer live demonstrations (Ağaoğlu, Yurtkoru, & Ekmekçi, 2015). A previous survey
showed that a good demo is seen as the most useful criteria in choosing the correct ERP system
for the company. Vendor policies should also be given consideration, particularly regarding
version upgrades or system updates. Vendors should also be able to present a list of solid
references that will vouch for the excellent performance of their proposed system. On this part

however, buyers should request for information on failed implementations by the vendors. Areas
of failure may be more worthy to evaluate compared to areas of successes, which most vendors
will flaunt. Credibility also plays a vital role in choosing the appropriate system for a company.
For example, SAP is considered one of the market leaders in the ERP industry. SAP has over 10
million users worldwide and is able to provide solutions for every industry. Therefore, SAP can
be considered a credible vendor. On the other hand, PeopleSoft/Oracle boasts of catering to most
of the companies in the Fortune 100 list. This gives it a solid reference as evidence of their
performance.
The vendor must know if their company provides 24/7 assistance to existing clients, and if yes,
how efficient their helpdesk team is. Procedures for changes and response time should also be
addressed. Vendors should also be able to provide data on the different levels or plans of
maintenance and support to which a user can subscribe. Product upgrades and the forecasted
timeframe for these upgrades should also be provided to the client. Additionally, vendors must
also inform clients if they have an online support portal for assistance, or if they offer support in
particular regions of locations (Elragal & Haddara, 2012).
In the ERP industry, the percentage of failed implementation is high, having an average of 50%.
Vendors, therefore, should know that adverse effects on business operations, budget overruns by
excessive conflicts, unwarranted delays in the schedule of implementation, and failure to
generate the promised ROI causes client dissatisfaction. In large organizations, ERP
implementation fails due to several factors. Some examples are: poor project administration,
inaccurate customization, incorrect schedule estimates, and inferior ERP system selection
Therefore, since the crucial stages of planning are based on the purchasing company’s
management, the only influence a vendor should have in a company’s purchase of an ERP
system should be almost zero. Save for price negotiations and vendor credibility, the full
evaluation of the business need and financial capacity should be determined by the purchasing
company. In almost all cases, proper planning by the purchasing company coupled with a
credible system from a reliable vendor has a higher probability of a successful ERP
implementation (Madapusi & D’Souza, 2012).

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