ERP Systems in the Cloud

This report discusses ERP systems in the cloud, including on-premise ERP systems, benefits and challenges, hosted ERP systems, and cloud ERP systems. It also provides a conclusion and references.

Running head: ERP SYSTEMS IN THE CLOUD
ERP SYSTEMS IN THE CLOUD
Name of student
Name of university
Author’s note:

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Table of Contents
Introduction....................................................................................................................2
Discussion......................................................................................................................2
On-premise ERP system............................................................................................2
Benefits of on-premise ERP systems.....................................................................3
Challenges of on-premise systems.........................................................................4
Hosted ERP systems..................................................................................................6
Cloud ERP systems....................................................................................................8
Benefits of Cloud hosted ERP systems......................................................................8
Risks of cloud ERP systems.....................................................................................10
Conclusion....................................................................................................................12
References....................................................................................................................14

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Introduction
This report intends to discuss the topic ERP systems in the cloud. The traditional ERP
systems is briefly discussed in this report. The benefits of implementing the conventional
ERP systems is clearly stated in this report. The hosted ERP system, which is commonly
known as IaaS is briefly stated in this report along with the risks and benefits of
implementing such system is stated in this report. A brief discussion of the cloud ERP system
along with the risks and the benefits of implementing such system is briefly discussed in this
report. Lastly, this report concludes with an appropriate conclusion for this report.
The decision of choosing which technology to implement for the businesses that
would help in the innovation combined with growth of the company. Whether the businesses
is small or large, there are various benefits of implementing ERP software for the company to
gain from (Nour and Mouakket 2013). The ERP is a combination of customisable
applications that permits the integration and management of the most important business
processes. The ERP systems consists of several advantages along with several disadvantages.
Discussion
On-premise ERP system
The On-premise ERP denotes to the decision of a company to source the software of
ERP within the business and then maintain it from any physical office, instead of ordering it
for any delivery over internet or use the hosted system of ERP that are supplied by vendors.
The ERP system in the companies could involve several products, ranging from the items
using which the payrolls of the employees are handled to the accounting, to the system that
are used for analysing or simulating the processes or the functions that controls the inventory
or the issues of supply chain (Powell, Riezebos and Strandhagen 2013).

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Benefits of on-premise ERP systems
Complete transparency: This is the major benefit of using the ERP systems. The ERP
system offers complete access to each critical process in the business with creating the data
from each department of the company easily accessible to anybody with proper access
whenever required and the senior management also gets access to this data. The inventory
level can be monitored on daily basis that includes the future consignments that would be
undertaken by the company in the future and the present inventory in the transit (Almajali,
Masa'deh and Tarhini 2016). With the knowledge of the present inventory levels the working
capital can be controlled with increased precision.
Total customisation: The aspect of modular makeup is one of the major advantages of
implementing the ERP systems in businesses. Several ERP vendors provides the applications
which could be implemented combined according to the requirements of business. Barring
some of the exceptions, the designing of every application is done for enabling to working
independently or combine the larger suite. Using this method, the company can choose the
components that works appropriately and eliminate the things that are not required. One more
aspect of the customisation includes the method of how implementation of the software is
done (Galy and Sauceda 2014). Using the on-premise systems, the physical software should
be purchased and then installed on all the servers and computers of the company.
Enhanced planning and improving: Addition to the enhanced transparency, increased
insight is provided, which is the major advantage of implementing ERP. Implementation of
ERP suite all across the departments would lead to the sole, combined system of reporting for
the organisation regarding each process. With the implementation of a single source of
information, the ERP systems provides the ability of generating the essential results and the
analytics simultaneously (Fakoya and van der Poll 2013). This software provides the ability

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of comparing and analysing various function across departments, deprived of the trouble of
several emails and spreadsheets.
Dedicated IT costs: Even though the investment in ERP is significant, the costs of IT
and the improvement of efficiency can be gained from implementing the on-premise ERP
systems. Rather than spending huge resources on several systems that requires focused staff,
support teams, licenses and infrastructure, all the costs of these functions can be unified into a
ERP (Seethamraju 2015). In addition to this, if the company choses to spend significant
resources on the dissimilar systems than spending on the centralised ERP, the complete costs
of IT can be saved. The requirements of training the end-users is also reduced by exploiting
any single system as these system only requires to learn a system instead of performing
interaction with several independent applications.
Challenges of on-premise systems
Complexity of ERP systems: The solutions of ERP provides several capabilities, but
it also denotes that the software would be complex and complicated to use. Sometimes the
companies intend to deploy the software of ERP but the process of planning is not executed
properly and the implementation fails negatively (Ziemba and Oblak 2013). Some of the
business discover the complexity of the systems and the complication of the processes that
leads to the poor ROI. It is particularly true when the adoption of the software is not properly
done by the various teams of the company and the complexity makes the understanding of the
ERP systems difficult.
Maintenance and implementation cost: Even though the software is one huge
investment, the process of implementation could cost almost four times higher than that. The
business commonly consider the workforce cost and the required time for any successful
deployment of the ERP systems (Choi, Chow and Liu 2013). Extra staff of IT, consultants of

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ERP, and the specialists of software training might be required to hire for maintaining the
ERP systems. The vendors who are providing the conventional system commonly charge the
companies a maintenance cost in addition to the fee of license. Furthermore, there is a
requirement of investing in the innovative hardware for providing appropriate support to the
ERP, like the servers and the compatible mobile devices.
Process of customisation: The process of customisation is the best aspect of ERP.
However it can get extensively difficult for the organisations to maintain this procedure at
regular intervals (Alaskari et al. 2013). The time taken to customise the software of ERP
requires significant time, money, expertise and effort. But it has been observed that the
businesses frequently undermine the resources that are required by the business and neither
finish the complete customisation and it gets over the allocated budget quickly. Several
companies might also lean on the process of customisation when the system they have chosen
does not fulfil the requirements of business. The customisation might lead to the diminishing
of the appropriate practices that is built into the system and then make it increasingly difficult
for upgrading in the future.
Software cost: When the companies choose to invest in the conventional ERP, the
cost of the licenses of ERP should be considered as it has been observed that the cost is
significantly high. The upfront software cost sole is immensely high particularly for the
businesses that are small-to-medium-sized. SMBs could avoid these upfront costs with the
solution of cloud, whose payment could be done on monthly basis. Moreover, this denotes
that the access to the systems is provided to the customers until they make regular make
payments for the services that also makes the solution of cloud ERP significantly costly over
the lifetime of the product.

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Hosted ERP systems
These are the systems that are implemented on any third party infrastructure of cloud
after purchasing the licenses for the ERP systems. This methods of ERP system is sometimes
called Infrastructure as a Service. This method comprises of the methods that is provided to
the organisations for procuring the storage, networking, hardware and any other services that
are required for executing their operations deprived of the worry of managing, maintaining or
buying equipment. Using this model, the renting of the equipment is done by the
organisations and they only pay for the space and capacity that is utilised by the
organisations. Any offsite service provider manages, owns and the maintenance of the
equipment is the duty of this offsite service provider and they provide sufficient capacity for
scaling down or up for fulfilling the requirements of the client organisations (Al-Jabri and
Roztocki 2015). The access to the resources is provided to the organisations using the web
browser. The organisations implement the ERP systems on any third party vendor system and
rent the infrastructure and the software. Some of the benefits of implementing hosted ERP
system are:
Assured uptime: The providers of IaaS assure the highest percentage of availability
with assured uptime. These terms are provided in the SLA.
Automation of the administrative tasks: The tasks of deployment and management of
the servers and virtual desktops are included in this responsibility for both the guests and
employees, management of the virtual server pools, and the monitoring of the present
activities like the utilisation of the disks, activity on the network, the jobs that are active and
the activities of the member and guest (Dietz 2014).
Dynamic scaling of infrastructure: The responsibility of the service provided is to
ensure the infrastructure needs of the customer are always fulfilled, even though it includes

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the highest requirements. Using this model infrastructure, it can be assured to the
organisations that they would have all the resources of IT that are required.
Customised images of machine: With the implementation of the model of IaaS, the
creation and deploying of the images of machine where the execution of the applications is
carried out, customisation and automated to any particular requirements of any organisation
is done (Powell 2013). The providers of IaaS offers any host of the machine images to the
customers but the organisations could build or import images from any existing environment
of operation.
Scalable load balancing: Based on the requirements at any particular time, the
balancing of the resources is done and then it is distributed automatically, efficiently and
appropriately among multiple virtual computers.
Services on policy basis: the function imposes the policies that are defined on the
services of the enterprise that can be accessed by particular user groups or users could access.
Depending on these policies, the decommissioning or provisioning of the resources becomes
an automated process.
Access to the newest technology: As the equipment are not completely owned by the
organisations, the updating and the customising of the equipment is the responsibility of the
service providers. They perform the task of maintaining of the hosted ERP of the companies
and provide them with the latest technologies regularly.
With the implementation of the hosted ERP solutions, the innovative product development
might require any environment of test and the development that can be implemented easily
and then it can be reduced when the phase of test and development comes to an end
(Seethamraju and Sundar 2013).

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Cloud ERP systems
The cloud ERP systems are also known as the SaaS. This platform is also known as
the hosted or on-demand applications that can be used in the ERP systems and the importance
of this service is significant in the ERP. The designing of the SaaS can be done for adapting
to the implantation in the applications of software like the ERP systems. And the scalability
of this platform is extensive as it can change the methods by which the organisations could
make the payment for the services, implement the services and then execute the applications
of software. The software model of SaaS has established the operative and financial
advantages over the other services comparing to the on-premise software models (Ha and
Ahn 2014). The cost of operation is significantly low and the cost of subscription of is also
minimal as the operating of the system is done by the service provider that can provide the
services. The SaaS provides with minimal initial cost that is mostly based on the cost of
subscription and the extra costs of operation as the operating of the system is done by the
service provider. The aspect of ERP refers to the methods by which any large organisation
planned the use of the wide resources of the organisation. Initially, the ERP systems were
exploited in wider aspects and increased industrial types of the companies. Moreover, the
utilisation of the ERP systems has altered immensely over these years (Duan et al. 2013).
Presently, the application of the ERP is extensive in several companies that are operating in
any of the fields. With the hosted solution on the cloud based software of ERP, the companies
gain the ability of adding or removing any user easily and the cost of hardware or software
setup is not extensive in the cloud hosted ERP system.
Benefits of Cloud hosted ERP systems
The ERP on cloud is designed for addressing the inflexibility of the prevailing ERP
software by providing the companies with the ability of choosing the correct option of
deployment that suits the requirements of the companies (Rajnoha et al. 2014). The flexibility

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of ERP is extensive and the option of high cost-effective for the medium and small sized
businesses and it also offers these extensive benefits for the expansion and growth:
Swift deployment: the major drawback of the on-premise and the hosted ERP systems
lies in the fact that the system integrators and the vendors often utilise the prevailing
templates that should be configured and customised for matching the particular processes and
practises of the companies. The implementation processes commonly undertakes years or
sometimes even months. The solutions that are based on cloud offers an extensive simple
configuration along with restricted options range that are particularly designed for fulfilling
all the requirements of the companies and businesses, which is an approach, which has the
ability of reducing the time of deployment while addressing the critical requirements of the
organisations (Bradford, Earp and Grabski 2014). The time taken for implementing the ERP
system that are cloud based is not determined by the time that is required for the designing of
the system but the time that is required for the updating of any affected processes of business
and then convert it into useful data.
Provides enhanced performance: With the cloud ERP, the application of the
computing resources can be done centrally that allows the increasing of the performance for
minimal cost (Lin, Zhao and Wei 2014). The systems constantly performs effectively than the
on-premise deployments of the Microsoft dynamics. The faster, larger servers provides the
improvements in performance.
Cost: instead of having purchased outright, the payment of the cloud based
implementation of ERP systems is done through the process of a subscription model that
specifically includes not only the software but also all the costs of hosting and support.
Therefore, the foremost expenditure of the capital of the organisation that is required for the
implementation process is significantly lower than any other conventional systems, and even

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the costs of operation could be lower (Ahmad and Cuenca 2013). The providers of cloud
based can perform the scaling of the offerings with significant ease as the requirements of the
organisations evolves.
Interoperability by the third party users: The ERP systems of Microsoft dynamics
provides the solution for connecting the several locations and the various suppliers using only
one system. The maintenance of the interoperability among the external and internal systems
could be an extensive task (Haddara and Elragal 2015). Using the cloud ERP, it can be
ensured that the interconnection of the system is achieved for functioning all through the
system life. The advantage of reliable interoperability reduces the friction among the supply
by assisting the ensuring of the smooth operations of business.
Access to information from anywhere, anytime: With any cloud based ERP systems,
the access to the system is significantly improved from any approved location or computer
(Poba-Nzaou et al. 2014). The only thing that is required for the connecting of the computers
is the availability of an enhanced internet connection.
Risks of cloud ERP systems
As the introduction of the ERP services that are based on the cloud are new to the
markers, it is of great concern to the management bodies of the companies and some
companies hesitate in the implementation of these services. Primary concerns includes the
limited customisation and functionality and the supposed risk to the data:
Reduced integration and customisation: in comparison with the conventional hosted
and on-premise applications, the solutions of cloud based ERP commonly offers a restricted
options of configuration. This creates the options of cloud most suitable for the companies
that utilise the hugely standardised processes of business in the areas such as the sales,
accounts receivable, and purchasing (Uçaktürk and Villard 2013). The ERP that are based on

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the cloud might not able to the handle all the requirements of the companies with both the
higher tailored processes of business or higher customised architectures of applications like
the tasks that involved the several points of the integration among varieties of legacy of the
IT systems, hugely customised software, or the packaged software.
Resistance of organisations: The IT organisations and several companies have already
implemented the teams and then advanced the skills that are required for operating the
environment of ERP that includes the hosting of data center, development of ongoing
development of applications, maintenance and support (Antoniadis, Tsiakiris and Tsopogloy
2015). Like several decision of outsourcing, the migration to the ERP to the cloud based
solutions could produce important disruptions among the organisations with robust ownership
authority of the solutions of the technology, or the solutions that are innovative to the
application and the outsourcing of the infrastructure are more likely in feeling threatened by
the migration of the applications of ERP to the cloud. The future of the cloud ERP is
intending to be immensely innovative.
Perceived risks of data: the companies that are choosing the ERP systems that are
based on the cloud facilities should be determined to trust any third-party provider with the
sensitive information of the company like the financial data or the customer orders, and
where it should be combined with any other company (Ononiwu 2013). But the cloud
providers, that includes SAP and Oracle, have made investment in the best security measures
that can be exceeded than what can be provided by any hosted solution, or even any on-
premises solution. Majority of the service providers are willing to ensure that restriction of
the data on similar jurisdiction or any particular centre of data. However, several providers of
the human resources have been hosting and managing the sensitive data of the employees for
the companies that are competition with one another. It is vital to note that some of the
regulatory requirements requires the storing of immensely confidential property might be

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increasingly too stringent for any system that is based on cloud services. With the provided
measures that the providers of cloud have undertaken for ensuring security, moreover, the
vision of increased risks leads to be more based on the lack of familiarity with the developing
options that on the authentic security risks.
Restricted availability and functionality: Up until now, the focus of the vendors of the
cloud based ERP systems is on the delivery of the basic functionalities of ERP like the
common accounting, accounts payable and receivable, and purchasing (Al-Ghofaili and Al-
Mashari 2014). It is being continuously found that the investment is done on the development
of the innovative functions like the planning that is based on constraints, management of the
production, statistical forecasting, and social media but it has been observed that these
offerings have not been able to keep up to all the advanced functionality of the conventional
offerings of on-premises and the hosted ERP. Moreover, the applications of cloud based are
presently restricted to the particular companies, due to the inability of supporting the
requirements of financial reporting of each region where the operation of the companies are
extensive (Nettsträter et al. 2015).
Conclusion
Therefore, it can be concluded that the implementation of the ERP systems on the
cloud provides the major benefits to the companies and businesses. The decision of choosing
which technology to implement for the businesses that would help in the innovation
combined with growth of the company. Whether the businesses is small or large, there are
various benefits of implementing ERP software for the company to gain from. The On-
premise ERP denotes to the decision of a company to source the software of ERP within the
business and then maintain it from any physical office, instead of ordering it for any delivery
over internet or use the hosted system of ERP that are supplied by vendors. Dedicated IT

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ERP SYSTEMS IN THE CLOUD
costs means that Even though the investment in ERP is significant, the costs of IT and the
improvement of efficiency can be gained from implementing the on-premise ERP systems.
Rather than spending huge resources on several systems that requires focused staff. Complete
transparency means that this is the major benefit of using the ERP systems. These are the
systems that are implemented on any third party infrastructure of cloud after purchasing the
licenses for the ERP systems. This methods of ERP system is sometimes called Infrastructure
as a Service. The cloud ERP systems are also known as the SaaS. This platform is also
known as the hosted or on-demand applications that can be used in the ERP systems and the
importance of this service is significant in the ERP. The ERP on cloud is designed for
addressing the inflexibility of the prevailing ERP software by providing the companies with
the ability of choosing the correct option of deployment that suits the requirements of the
companies.

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ERP SYSTEMS IN THE CLOUD
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