ERP Systems in the Cloud: Types, Benefits, and Risks

This report explores the different types of ERP systems in the cloud, their benefits, strengths, weaknesses, and risks associated with adoption in businesses. It covers on-premise ERP, hosted ERP, and cloud ERP systems.

ERP systems in the cloud
“ERP SYSTEM IN THE CLOUD”
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ERP systems in the cloud
“ERP systems in the cloud”.
Introduction
Cloud technologies also termed as cloud computing has gained popularity over the past
few years. Cloud computing refers to offering computing services such as data storage, analysis,
provision of databases and software among other services over the internet. It is a powerful
technology to perform massive-scale and computing facilities (Hashem et al. 2015, p. 99). The
technology allows execution of the computing services and use of the application that has been
hosted in the cloud by the cloud computing providers. It has provided the users with means of
accessing services without worries for storage of their data. Cloud computing has facilitated the
secure storage and back up of data over the internet, this has provided security to sensitive
personal data and enhances easy recovery of the information whenever needed. It enables the
creation of applications and delivery of software within a short time. It has been attractive to
businesses since it allows them to analyze data and make predictions which enable them to make
decisions related to their activities (Fox et al. 2009, p. 2009). In businesses, this technology has
many advantages over the traditional business application.
The conventional business application is expensive since it is costly to purchase the wide
variety of hardware and software required for efficiency and effectiveness, a big team of experts
is neededto install the hardware and software, configure, run applications, update and secure the
systems lead to huge investments that act as liabilities to organizations. However, the cloud
computing eliminates the considerablecost of purchasing the hardware, recruiting the experts,
and the cost of purchasing applications and their maintenances frequently incurred in the
traditional business application. Apart from the cost reduction advantage, data accessibility from
the cloud is fast which is by just a click of a mouse. It has reduced the time spent by businesses
in retrieving information from files or other external storage devices. Organization information
isaccessible from any geographical position, and this provides theability to expand activities to
other locations hence creating a significant market coverage which is a substantial aspect to
businesses (Truong 2010, p.64). It has reduced IT chores like software updating, security
maintenance measuresdevelopment to protect the software and organization information and
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hence the team of experts can, therefore, focus on factors that promote productivity which
reflects high returns.
The cloud computing providers take the initiative of developing security measures for
their network and always ensure their applications are updated, and thus provide high
performance and hence an advantage to organizations which deals with extensive data that are
prone to hacking which compromises the existence of a business. The high security provided in
cloud computing makes it reliable for both large-scale and small-scale enterprises (Krutz and
Vines 2010). The purpose of this research report is to investigate the different types of cloud
computing to identify their benefits, strength, weaknesses, and risks associated with adoption in
businesses. The paper will cover the three types of cloud computing, recommendations and
provide a recap of the report.
Enterprise Resource Planning (ERP) systems in businesses.
Organizations have adopted the ERP system to promote decision making and planning
processes to facilitate success. ERP systemis an integrated business information system to
manage different business functions (Singh and Wesson 2009, p.89). The system combines
business operations such as product planning, development, manufacturing, sales, procurement,
and marketing for easy management. It promotes the efficient use of a company existing
resources and smoothens the audit process (Nettstrater, Geiben, Witthaut, Ebel, and Schoneboom
2015, p.10). The adoption of this traditional business application has contributed to the success
of the businesses. However, the tremendous development in technology has led to the invention
of the cloud computing that has brought progress in the business world. As Al-Ghofaaili and Al-
Mashari (2014), found that many small and medium enterprise is faced with the problem of
implementing ERP systems in their organization to the fact that traditional ERP system could be
unsuitable (p. 138). The fact that the ERP system is costly need a massive team of experts and
require a good storage space this has proven to be uneconomical to small businesses and a
significant liability to the large organization. Therefore, there is a necessity for shifting to the
cloud computing technology in the ERP system for maximum business profits and improve
efficiency in operations. Gangwar, Date, and Ramaswamy (2015), found in their study that
determinants such as compatibility, complexity, organizational readiness, advantages, top
management commitment, training, and education are important variables that determine cloud
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ERP systems in the cloud
computing adoption in organizations (p. 129). However, many organizations are reluctant to
adopt the cloud computing in their ERP systems (Oliveira, Thomas and Espadanal 2014, p. 509).
Cloud computing with ERP push businesses towards higher efficiency (Jain and Sharma
2016). The cloud computing providers deploy the cloud computing resources in three ways. That
is a public cloud, private cloud, and hybrid cloud. It implies that the clouds differ and therefore
this should be a crucial consideration when adopting this technology. In the public cloud, they
are operated and managed by the cloud service providers, and through web browsers, the users
can access the services and control their accounts. For example, the email services. In the private
cloud, an organization exclusively utilizes a cloud computing resource. That is the infrastructure
and services are controlled and managed in a private network. In some cases, a company may opt
to pay the cloud service providers to manage their private cloud. In the hybrid cloud, both the
public and private clouds combine. It allows sharing of data between the clouds. Hence, well
appreciated by businesses.
Types of ERP implementation clouds.
In cloud computing, there are three types of ERP implementations. That is, the on-
premise, hosted ERP system and cloud ERP system.
On-premise ERP
The on-premise ERP involves the installation of the ERP software in a company’s
hardware, and the IT staff can maintain it within the company premises. The on-premise ERP
solutions are deployed within the company’s device and servers and then controlled by the IT
staffs (Ramasamy and Periasamy 2017). Therefore, it is not possible to access the on-premise
enterprise resource planning via the internet but instead within the institution. Once its
implementation occurs, the company has total ownership of the resource. The IT staff can
customize the system to fit the business needs. Manufacturing industries highly utilize the on-
premise ERP systems (Peng and Gala 2014, p.29).
The strength of on-premise ERP
The on-premise ERP solutions allow a company to have more control over their data. A
company can, therefore, determine the data to go in and out of the system and those to access the
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information. The company, thus, takes the responsibility of maintaining and updating the user’s
data and hence reduces the risk of information loss. The closeness of the software to the
company premises creates a sense of security since the company develops its security measures
to protect their data from internal and external attack. The system offers natural customization
advantages. The company’s IT staff can modify the system to fit the purposes of the company.
The on-premise ERP viewed as a cheap investment. Hence, once there is the installation of the
system, no further payments required for the service vendor as compared to the other ERP types.
The only factor that may cost the company is only the training of the staffs and the software
updates. Thus, makes this solution economical especially for small enterprises. The software also
does not need the continuous assessment by the service vendor. It also reduces the cost which the
company incurs in the maintenance.
Weaknesses of the on-premise ERP
The on-premise ERP solution lack flexibilities. That is, it is difficult to access
information or use data when out of the company premises. It limits the staffs from operating
from out of the premises even when it is urgent. The installation process is long and costly. The
process involves identifying the service provider, purchasing the necessary hardware and training
the relevant staffs that will operate the system. Therefore, might be expensive for the company
and at the same time, it is time-consuming. Since full control of the system is in the company,
the company may fail to update their software hence posing a risk to operating on outdated
software and thus reducing the efficiency of the system.
Risks associated with on-premise ERP
Though the solution is cheap and allows the company to customize it to its particular
issue, the software may lead to loss of data or information if not updated to the latest software.
The company data is prone to manipulation by the IT staffs, and this may have a significant
effect on the company.
The hosted ERP systems.
The user owns the hosted ERP systems, and installation is on a remote server. However,
the one accesses the services through a virtual private network (VPN). For one to use this
software the userinstallsa link in a workstation. The facilitiesdo not connect to the internet.
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The strength of the hosted ERP
Shifting from a hosted ERP to on-premise ERP is relatively easy since in both software
the company owns the system, and the infrastructure is similar. In case the company does not
choose to be advanced to cloud ERP, the company can have a server that provides support
whenever necessary.
Weaknesses of the hosted ERP
It is expensive to install and maintain. In case the workstation link is hacked, the use of
VPN poses a security risk to a company's information.
Cloud ERP system
Cloud ERP system allows a company or users to obtain the enterprise resource planning
services over the internet. A company does not maintain or manage the software from its premise
but rather the service providers do the system upgrading and maintaining. However, the user has
to pay for the services.The cloud ERP solutions are multiplying in use due to its flexibility and
efficiency (Raihana 2012, p. 77). For instance, there is a high increase in the use of this
technology in higher education institutions (Tashkandi and Al-Jabri 2015, p. 1530). The cloud
computing providers offer the storage, data back-up, security and updating services, and hence
companies release the burden of worrying about these factors (Kiadehi and Mohammadi). The
vendors have ownership of the system.
The strength of the cloud ERP
Using the cloud ERP software is economical since there is no purchasing of hardware and
need for experts to install and run the software. The data stored in the cloud is secure since the
service providers always work to ensure high-security measures implementation. Using this
solution guarantees high performance and therefore helps to save time for the company. Data
retrieval is fast and accurate. Users have access to support from the vendors on planning the
packages that fit them well.
Weaknesses of the cloud ERP
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The user or the company has fewer management abilities when using this solution. As the
company develops, it may have new demands and need improvement on the Cloud ERP.
However, the company may be forced to purchase other modules from other vendors who could
eventually be compatible with the current one. The security assurance is the priority. However,
sometimes the security is compromised which may lead to the loss of a company’s information
(Lenart 2011, p. 48).
Risks associated with cloud ERP
The cloud ERP puts companies and personal information at risk of cyber-attack.
Accessibility of this information by criminals who may use the data for illegal actions may lead
to jail-term or massive loss to companies (Hausken 2017, p.23).
Conclusion
Summarily, the cloud computing is a technology that ought to be adopted by businesses
for the maximum and efficient provision of service and secure management of the operations.
However, it is essential to consider factors such as deployment method that is either by public
cloud, private cloud or hybrid cloud. The compatibility of the chosen type of software with the
company’s requirement is essential in realizing benefits from the technology. However, every
kind of software has a risk attached to it. Risk determination is vital before one installs an ERP
system clouding software.
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References
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Stoica, I., 2009. Above the clouds: A berkeley view of cloud computing. Dept. Electrical Eng.
and Comput. Sciences, University of California, Berkeley, Rep. UCB/EECS, 28(13), p.2009.
Gangwar, H., Date, H. and Ramaswamy, R., 2015. Understanding determinants of cloud
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