Comparative Analysis of ERP Deployment Options: Benefits and Risks

This report provides a comprehensive comparison of different ERP deployment options, including on-premise, hosted, and cloud solutions. It examines the benefits and risks associated with each approach, such as cost, customization options, security, and scalability. The report uses real-world examples of companies like Oracle, SAP, General Electric, and Emerson Electric to illustrate the practical implications of each deployment model. It highlights the advantages of on-premise systems, such as customization and control, while also acknowledging the higher upfront costs and maintenance requirements. Hosted ERP systems are presented as a hybrid solution, offering a balance between control and cost-effectiveness. Cloud ERP systems are explored for their cost efficiency and ease of implementation, while also considering limitations on customization. The report concludes by providing insights into how organizations can choose the most suitable deployment option based on their specific needs, business requirements, and internal IT capabilities.

ERP
NAME OF STUDENT
COURSE NAME

ERP
Introduction
With the increasing complexity of the business climate, ERPs systems have become
the need of the hour for the large multinational companies that are having suppliers,
customers and manufacturing plants globally. ERPs packages are complex integrated suite
whose implementation involves significant cost and time. Therefore, this is the reason that
small and large scale enterprises do not prefer to implement ERP systems but prefer to have
best of breeds solutions or commercial software. Examples of ERPs systems are Oracle Apps,
SAP, Microsoft dynamics while examples of commercial software suitable for small and
medium scale enterprises are MYOB, XERO, QuickBooks to name a few. ERPs vendors
were also very much familiar with the complexity of their product and its cost implications.
In order to expand their market and in current challenging business environment, they also
started offering cloud ERP system. These systems are significantly cheaper as compared to
their traditional model, implementation timeline is also few months and thus they become
attractive for the small and medium enterprises (Weng, & Hung, 2014). However, there is
downside also as Cloud systems do not allow the business organizations to customize the
ERP packages and organizations has to change their business processes to align with the ERP
standard processes even if their processes are source of competitive advantage for the
company (Nori, et al., 2016). Apart from no customization option, there are also common
functionalities but not specific business requirements that are found in ERP suites
(Ramasamy, & Singh, 2017). This makes the cloud options better for the small and medium
enterprises. Apart from this, there are lot of case studies available for different deployment
options. There are success stories of on-premise application, success stories of cloud ERP
system, success stories of Hosted ERP system, there were also examples of organizations
moving from traditional on-premise model to hosted or cloud system. Apart from this, there
were also numerous examples of failures of ERP implementation by big organizations.

ERP
The purpose of this report is compare the different ERP deployment options in details along
with their benefits and risks and also discusses which organizations should choose which
option and why. Apart from this, the report also uses examples of Oracle and SAP ERPs and
different organizations using different deployment options so as to give a clear perspective of
each option with real life examples. It also talks about the organizations that are changing
their deployment options along with the rationale.
Comparison of different ERP deployment options
For any organization that has decided to use ERP system, there are various options.
For example, organization can have on premise installation of ERP, or organization can use
cloud services. This is always a tough decision for organization to make. Therefore, it is
important that organization should be aware of the benefits and risks of different approaches
of ERP implementation. These approaches can be discussed in detail as:
Approach 1: On-Premise ERP implementation
On-premise ERP implementation is the traditional way of deployment ERP. It is also
one of the expensive option where an organization buys the licenses from the ERP vendor
and then take the service of implementation consultant Like Accenture and IBM to deploy
those licenses on the server which is owned by an organization and is also located in the
organization promises. The ownership of managing that server in terms of downtime, security
and backup lies with the IT department of the organization.
There are large number of companies that have implemented on-premise ERP
applications. General Electric, Philips, Siemens, Emerson electric, Cisco are examples of
companies running ERP on –premise successfully. All these are global players and thus
needed the comprehensive integrated suite of modules that can fulfil their needs. Air Liquid
and Cummins have also achieved greater benefits by implementing Oracle ERP on-premise

ERP
solutions (Oracle.com, 2018) but at the same time there are case studies that demonstrated the
failure of ERP implementation projects. There are reputed companies like Hershey, Nestle,
Waste Management Inc, FoxMeyer Drug that have very bad experienced in implementing
ERP and incur huge losses. FoxMeyer drug failed because the ERP systems were not capable
of handling their high order processing volume compared to traditional solutions (Chung, et
al., 2015). Other organizations have issues due to improper change management and lack of
testing and training issue. Thus, It can be said that each organization has its own needs and
has to analyse which deployment option will be most suitable for that organization.
Organization has to consider cost and benefit analysis, analyse if its business requirements
are standard and common or unique and required customization, internal IT capabilities to
take decision of selecting appropriate deployment options (Nowak, & Kurbel, 2016).
Pros of On-Premise systems
Although, these systems are expensive and it take significant time for break-even but
once the breakeven is achieved, these applications have lower long term cost because it don’t
have to pay the usage charges on monthly basis. Apart from this, On-premise systems allows
the organization to customize the ERP packages to suit their requirements though
customizations are not recommended and should be as minimal as possible (Caratasu, &
Caratasu, 2016). There is also total control over software changes and updates and internal IT
department has to manage the security. Organization provides accesses to various offices,
plants the access to ERP applications only if they are part of IT network. Thus, these systems
cannot be accessible from anywhere and thus are secure.
Cons of On-premise systems
There are higher upfront costs consisting of hardware, licensing cost and
implementation partner fees. Due to the complexity of such projects, consulting partner

ERP
services are utilized which is quite expensive (Erturk, & Arora, 2017). Internal team must be
competent to manage the security, regular backup, Database administrator activities for a
server. Also, Sometimes ERP vendors stops the support of their existing products and asks
everyone to switch to their latest version. For example, Oracle ERP has stopped the support
for its 11i systems and ask the organizations to switch to their R12 system or fusion system.
In this case, upgrade will again be a big activity and also the customizations will not be
supported by the upgrade and the organization has to spend money again in building the
customized code again (Uppstrom, et al., 2015). Another con of these deployment models is
their difficulty to scale up if new group is acquired as part of merger and acquisition strategy.
Approach 2: Hosted ERP system
This is the middle path between the on-premise ERP solutions and cloud ERP
solutions. As they are a mix of these 2 approaches, they are often called as Hybrid solutions.
There are organizations that do want to maintain the server and manage the internal IT team
for security and backup purposes. Apart from these, when there are specialists available for
this hosted ERP system, it can be a cost effective solution for the large businesses. Today,
there are reputed technology companies like Amazon, Goole and Microsoft that provide
infrastructure as a service (IAAS) where ERP packages can be deployed. In this model,
license procurement cost will be shared by the company and then those licenses will be
deployed on the server provided by the IAAS vendor. American Commercial Lines (ACL) is
one of the biggest shipping companies in US that has successfully deployed their Oracle ERP
on Amazon web services (Casestudies.appsassociates.com, 2018). This helps the company to
focus on its core competency, remove expenses on maintaining servers and backup servers
and also the systems were not available for 24 hours. With Amazon web services, there is no
downtime and ERPs application can be accesses from anywhere. Apart from this, it offers
large number of benefits that benefit the company.

ERP
Pros of Hosted ERP system
Amazon web services, Google, Microsoft, VMware are top 4 vendors in cloud
computing space and each of these companies is specialist and provide IAAS service. These
companies have resources for continuous performance tuning, providing greater reliability,
increased security and robust performance. Thus, instead of managing the server in-house,
this option provides greater flexibility to organizations in terms of costs, maintenance. Apart
from these, IAAS vendors do not have multi-year contracts but charge flat fees every month
and this frees the company from any legal obligations and it can anytime restore the storage
and server solution in-house if it not satisfied with the services of IAAS vendors. These
vendors also provide unlimited cloning solutions, recovery process, firewall deployment to
name a few.
Cons of Hosted ERP system
All the parameters and debates boils down to few factors like cost, customization,
security, and control when it comes to select the appropriate deployment option for the
organization (Jain & Sharma, 2016). Cons of hosted ERP systems are that the control and
security will be owned by the vendor who is managing the data of other clients as well. Apart
from it, there is no network security and the applications can be accessed from anywhere by
using web browser. Not only this, There should be a clear contract with the vendor providing
IAAS services about the security of the data. It is because recently many technologies
companies have come under a scan for storing the confidential data of the users which was
hacked by some other company. Facebook has data of billions of users and this data was
hacked by Cambridge Analytica for selling it to various political parties. This risk will always
be there and thus clear contract mentioning the terms and conditions and penalties should be
clearly signed with the IAAS vendor.

ERP
Approach 3: Cloud ERP system
In this deployment option, client has to pay the monthly subscription fees based on
the number of users to an ERP vendor and ERP vendor is responsible for everything from
hardware, software, releases, patches, upgrades, Database administration, security, backup
and everything. These are cost effective solutions as compared to the expensive on-premise
solutions and becoming popular with the advent of large number of technology players in this
space. Today, the business climate is quite dynamic and organizations do not have time and
patience to implement the on-premise solutions and wait for the benefits. Cloud systems
provides the instant benefits and as per Gartner, IDC and Forrestrer reports, Cloud is the
future of tomorrow and by 2023, more than 90% of the organizations have moved to cloud
IAAS (Singh, 2017). As per the Bain and the company, Cloud will become the 390 billion
USD Industry by the end of 2020 attaining a growth of 17% and also the 70% of the IT
spending will be in the area of Cloud (Stefan, & Paunica, 2015) Not only this, while
traditional players are providing the option of their clients to switch to cloud version from the
on-premise solutions, there is new set of technology companies that are designing ERPs
solutions as purely cloud solutions. For example, Salesforce is one of the fastest growing
company which is entirely cloud based. Similarly, XERO accounting package is also purely
cloud based and thus growing very fast as compared to MYOB, SAASU, INFOR to name a
few.
There are large number of organizations that have implemented cloud solution
recently and have achieved a lot of benefits. Vodafone, RSD Espanyol, Trek, Crestron,
Engie, Suite box are some of the big corporates that have implemented Oracle cloud fusion
ERP and achieved a competitive advantage (Oracle.com, 2018). Apart from it, there are also
organization that are switching to Oracle cloud solutions from Oracle On-premise solution.
Emerson electric is a manufacturing company that has replaced its HCM on-premise Oracle

ERP
apps to HCM cloud solutions (Oracle.com, 2018). It has implemented Goal Management,
Benefit management, payroll, Core HR, Talent review modules however the other Supply
chain, manufacturing and Finance modules are still in E-business suite in on-premise
solutions. Apart from this, Oracle HCM cloud seamlessly integrate with its Oracle E-business
suite on premise. As per Emerson Management, on-premises solution was unable to provide
insights and requirements of its global employee base and all these issues are solved by
implementing HCM cloud solution. CMC Marine also implemented Oracle cloud solutions
and says that the biggest benefit of using oracle cloud fusion solution is no downtime and
thus perfect environment for globalized company that have users located across different time
zones.
Thus, Cloud has not only become the buzz word but organizations are actually using
Cloud for running their IT systems and driving cost savings and efficiency by solely focusing
on their core competency.
Pros of Cloud ERP systems
The biggest benefit of cloud solutions is the ease of the entire process of entering into
contract with a single vendor for providing all the services related to hardware, licensing,
database administrator. They are like one stop solutions as compared to on-premise solutions
where contracts needs to be signed with ERP vendor, consultant organizations and many
other obstacles (Al-ghofaili, Al-Maheswari, 2014). Thus, there is lower upfront costs because
ERP vendor is already having infrastructure and it is just a matter of enabling them for your
organization and Cloud vendors charges monthly fees based on the number of users. Apart
from this, Cloud ERP solutions do not offer the flexibility for customization and as a result
the time to implement is very quick (Peng, & Gala, 2014). It is highly scalable and users can
be increased or decreased with acquisitions or divestments very easily unlike traditional

ERP
systems where the entire server needs to be procured for accommodating additional users.
Cloud solutions are the winner when it comes to ease of managing technology and costs.
Apart from this, cloud solutions are very suitable for start-up companies and middle and
small enterprises who do not have the much budget to invest on technology and also like to
get started fast due to the competition. Cloud time to market is quite fast.
Cons of Cloud ERP systems
Though, Cost aspects of the cloud solutions definitely makes it a winner but there are
other aspects that puts the cloud solutions at a back seat. For instance, there are some larger
organizations whose businesses requirements are quite unique and thus ERP packages often
do not support them. Now, these companies have options of building custom software or
buying the ERP package and customize it. Buying and customizing is a better options as cost
will be comparatively less and there is no point in reinventing the wheel by doing everything
from a scratch. Cloud solutions are not at all suitable for such organizations that often uses
customized solutions. Apart from this, there is also loss of control in cloud applications and
the clients will automatically be upgraded to new software or releases as soon as it is
released. The downside of this is that it is possible that upgrade may involve improving some
functionality which again requires user training. Apart from it, upgrade and releases will
frequently changes the system and thus organization may have to change some of its
processes to accommodate the latest changes. At the same time, cloud systems are highly
vulnerable since they can be accesses from anywhere using web browser. Cloud related
security breaches are rising and as per the Identity Theft Resource Center, number of data
breaches in US has hit a high of 791 in June 2017, which is massive 29% rise in such cases
from the same period in 2016. Data breach of credit rating agency, Equifax, has put millions
of user’s data like Social security numbers, birth date, and credit card information to risk.

ERP
Conclusion
ERP solutions offers 3 deployment options on-premise which is also called
traditional, cloud solution and Hybrid which is mix of traditional and cloud. There are several
parameters like Cost Vs benefit analysis, time to implement, customizations support, security,
control and back up aspects which influences various deployment options. As per the major
researchers of future trends like Gartner, IDC, Forrester, Cloud will going to be the future of
the technology business in next few years. Apart from the cost saving reasons, there are
arguments that cloud is the starting point for supporting more advanced technologies like
Artificial intelligence, Big data, Robotics and Automation, Internet of things. Thus, Cloud is
the basis of all these advanced technologies. Though organizations are slowly migrating their
systems to cloud but still it will take a long time for all the on-premise solutions users who
have over customized their ERP systems. It will be a challenge for them to move to the Cloud
that supports only standard processes. One of the alternative in such scenarios will be the
development of apps that provides specialized functionality missing in the cloud system and
these apps should be seamlessly integrated with cloud systems. There are already large
number of companies that are developing apps to provide solutions and functionalities
missing in the cloud. Cloud ERP vendors like SAP and Oracle have already partnered with
technologists companies to develop specialized apps. For instance, the three biggest ERPS
i.e. SAP, Microsoft Dynamics and Oracle Apps have the Customer relationship management
(CRM) suite integrated but still most of the clients who are using these ERPs have switched
to Salesforce for CRM systems because Salesforce offers better functionalities and easy to
use. Thus, Salesforce has integrations and thus pushing companies to buy their systems.
Likewise, this will be the future and the way how the lack of customizations in Cloud
solutions will be fulfilled by specialised software that are easy to integrate with the main
system.

ERP
References
Al-Ghofaili, A.A. and Al-Mashari, M.A., 2014, August. ERP system adoption traditional
ERP systems vs. cloud-based ERP systems. In Innovative Computing Technology (INTECH),
2014 Fourth International Conference on (pp. 135-139). IEEE.
Carutasu, N. and Carutasu, G., 2016. Cloud ERP implementation. FAIMA Business &
Management Journal, 4(1), p.31.
Casestudies.appsassociates.com. (2018). Oracle EBS on AWS | Oracle EBS Migration to
AWS Cloud. [online] Available at: http://casestudies.appsassociates.com/Hosts-Oracle-EBS-
in-AWS-Cloud/ [Accessed 17 May 2018].
Chung, S.H., Ahmad, S.I. and Tang, H.L., 2015. Symptoms, causes and remedies for failures
in enterprise systems implementation. International Journal of Business Information
Systems, 19(1), pp.103-118.
Erturk, E. and Arora, J.K., 2017. An Exploratory Study on the Implementation and Adoption
of ERP Solutions for Businesses. arXiv preprint arXiv:1701.08329.
Jain, D. and Sharma, Y., 2016. Cloud computing with ERP-A push business towards higher
efficiency.
Nori, A. K., Shukla, D., Christensen, Y., Krishnaprasad, M., and Sedukhin, I. 2016. U.S.
Patent No. 9,336,060. Washington, DC: U.S. Patent and Trademark Office.
Nowak, D. and Kurbel, K., 2016, November. Understanding the Flexibility of Cloud ERP
Software. In International Conference on Enterprise Resource Planning Systems (pp. 135-
146). Springer, Cham.

ERP
Oracle.com. (2018). Air Liquide Welding Simplifies Sales Tools and Quote Creation with
Oracle. [online] Available at: https://www.oracle.com/customers/air-liquide-5-cpq-cl.html
[Accessed 17 May 2018].
Oracle.com. (2018). Cloud Customer Successes | Oracle. [online] Available at:
https://www.oracle.com/in/customers/index.html [Accessed 17 May 2018].
Oracle.com. (2018). Emerson Adopts Oracle HCM Cloud Suite to Unify its Global
Workforce. [online] Available at: https://www.oracle.com/corporate/pressrelease/emerson-
adopts-oracle-051117.html [Accessed 17 May 2018].
Peng, G.C.A. and Gala, C., 2014. Cloud ERP: a new dilemma to modern
organisations?. Journal of Computer Information Systems, 54(4), pp.22-30.
Ramasamy, M. and Singh, R.P., 2017. BENEFITS, CHALLENGES AND SELECTION OF
CLOUD ERP SYSTEMS USED IN SMEs.
Singh, J., 2017. Study on Challenges, Opportunities and Predictions in Cloud
Computing. International Journal of Modern Education and Computer Science, 9(3), p.17.
STEFAN, L. and PĂUNICĂ, M., 2015. TRANSITION FROM ENTERPRISE RESOURCE
PLANNING (ERP) TO CLOUD COMPUTING PERFORMANCE MONITORING. AMIS
2015, p.66.
Uppström, E., Lönn, C.M., Hoffsten, M. and Thorström, J., 2015, January. New implications
for customization of ERP systems. In System Sciences (HICSS), 2015 48th Hawaii
International Conference on (pp. 4220-4229). IEEE.
Weng, F. and Hung, M.C., 2014. Competition and challenge on adopting cloud
ERP. International Journal of Innovation, Management and Technology, 5(4), p.309.