Cloud ERP Systems – Definitions and Impact

By Professor / 17/12/2020 0 Comment

Cloud ERP Systems – Definitions and Impact

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INTRODUCTION

Enterprise Resource Planning (ERP) is structure which is used to manage and deliver solutions for the company. Enterprise Resource Planning (ERP) helps in the integration, implementation, management, planning, purchasing, marketing, sales and inventory of an Information system. The data of the ERP management software is basically stored in the database using database management system. The stored data should be distributed among the departments of the company as a part of the process. It facilitates the information transfer among the departments which includes a lot of manual work as the data should be managed and updated manually.

Cloud computing is a model for on-demand network access to a shared pool of resources like network, server, applications and storage which has a minimal management effort or a service provider. On using cloud computing the users can share or view the shared data without any external resources. This is achieved using the Software as a Service (SaaS) which provides the user to access the information given by the provider (Mell & Grance, 2011).

  1. SaaS (Software as a Service)

The applications can be accessible by the users on personal systems in their small network (Benlian & Hess, 2011). The cloud helps the user to access their system within their comfort zone and which acts as the Software as a Service (SaaS).

  1. PaaS (Platform as a Service)

The user can work on any platform or the applications using programming languages and different infrastructure, this is possible with the cloud and is known as Platform as a Service (PaaS) (Mell & Grance, 2011).

  1. IaaS (Infrastructure as a Service)

The cloud provides the user to store the data, work on the applications as well as manage the system with no installation of prior or excess software. This is called the Infrastructure as a Service (IaaS) (Mell & Grance, 2011).

Cloud computing plays a major role to reduce manual work in sharing the data. ERP which includes cloud is been introduced to overcome the problem. The data is shared among the departments of the company using Cloud (Internet) technology. The data of ERP is stored on cloud which can be shared and accessed by the members of the company who have access to the system. Further, the cloud based ERP definitions, Information System based definitions, key benefits of cloud ERP and taxonomies are discussed.

DEFINITION OF CLOUD BASED ERP or CLOUD ERP

  1. According to (Abd Elmonem, Nasr, & Geith, 2016), “the cloud based ERP systems are provided via Software as a Service (SaaS) which can be accessed via the user browser over the internet without installing or configuring the system at the user side”.
  1. According to (Peng & Gala, 2014), the traditional ERP (on-premises) which involves in managing, storing and sharing of the data using the internal servers or the servers hosted by the user organizations internally has few disadvantages like high initial investments, time consuming to upgrade the ERP system on different systems. Whereas, in the cloud environment the data is stored on the cloud and is managed by the third party who is the cloud service provider (CSP). The companies can use the data as on demand service as it is flexible and reliable. It is not time consuming as the software is not installed physically in every system or data stored in any local server it can be used online (or Internet).
  1. According to (Duan, Faker, Fesak, & Stuart, 2013), a true cloud ERP systems are those that implement the characteristics of clouds. These systems are typically accessed via a common browser over an Internet connection, allowing access that has little dependency on client configuration.
  1. According to (Kiadehi & Mohammadi, 2012), the cloud ERP is defined as the on-premises or the hosted ERP on cloud computing technology. It is mostly required or useful for small and medium enterprises (SMEs) for improvement of the business.
  1. According to (Shivam, C., Ned, & David, 2018), Cloud ERP helps the SME’s to benefit with the privileges of the ERP packages without installing an IT (Information Technology) software/hardware. Moreover, it has less maintenance and removes IT workforce. Based on the SME’s requirements the cloud service provider is rendered.  The cloud servicer provides a standard cloud ERP module on which a company can rely.

There are vast benefits of the cloud ERP system which include cost minimalization in the infrastructure of the company, the operating cost as the cloud service providers manage the operations of cloud and services, scalability, improves accessibility, mobility and usability. It also includes system availability and disaster recovery, security, integration, sales atomization, cost transparency and free trials. Few other advantages of cloud ERP are enhancement of system speed and performance and an effective system upgrade.

But, the views on cost minimalization of operating cost is differed. Few authors specified that the Minimalization of operating cost is an advantage, whereas, the others argued that the cloud can be used initially but as the organization is developing and the data is increasing the cost by small and medium enterprises is not affordable. Whereas, security plays a crucial in the cloud ERP. The main risk of cloud ERP system is the security of the database or the leakage of information.

All the definitions stated above are similar in case of cloud ERP system including the risk of database. The cloud ERP system is the cloud based rather than server infrastructure which is used to help the companies to share the data or the information across the departments of the company. It integrates few key functions financial management, inventory management, customer relationship management (CRM), human resource (HR) management to run a business.

CLOUD ERP – IS (Information Systems) DEFINITION

Business Information System (BIS) is the system which contain the information of various sectors of the company like customer relationship management (CRM), Enterprise Resource Planning (ERP), Human Resource Management (HRM), Financial Management, integration, implementation, purchasing, marketing, sales and inventory.

Enterprise Resource Planning (ERP) is a module which helps in managing and giving solutions to run the company with different aspects like managing, planning, modifying, integrating, implementing and marketing. The cloud based ERP is nothing but the ability of the service providers and the end users like Information Technology/Information Systems and clients to share the data among their business or the company.

When the process of sharing and managing the information is successful the decision made to run a process will be accurate resulting in the profits of the company.  While using the cloud based ERP, the time taken for the upgrade of the system is enhanced and works effectively. The process speeds up when the company has an accurate and an effective cloud ERP system which is an added advantage.

Meanwhile, when the decisions are made accurately within the time limit the productivity of the organization is enhanced and it leads to the growth of the company. The company gains profits as it has an effective system. Accordingly, as there is a growth in the business it leads to the competitive edge, which leads to compete with other companies.

The organization productivity and competitiveness increases including the increase of knowledge on the new technologies and software with minimal human work. On the other hand, if the company has a bad system the time taken to upgrade of the system is more and leads to an ineffective result. The ineffective result again leads to an inappropriate decision which drops the company’s productivity. As the productivity of the company is let down the company has no competitors and results in loss. When poor integration occurs, it results in unsatisfactory results. As there is loss in the company it impacts on the Business Information System (BIS).

A good Business Information System aims to integrate on successful end users like IT, People and business which helps in making an accurate decision on time. The accurate and effective decision leads in a good productivity of the organization. The organization benefits with reduce of cost, profit maximization and a good decision support. The competitors of the against the organization increases which helps in enhancing knowledge on all the new technologies and software’s.

BENEFITS OF CLOUD ERP SYSTEM

Cloud ERP system has many benefits which include

  1. Cost Minimization
  2. Scalability
  3. Mobility
  4. Usability
  5. Efficiency
  6. Cost Transparency
  7. Accessibility
  8. Disaster Recovery
  9. Speed Enhancement of the system

The predominant benefits of cloud ERP system are

  1. Scalability
  2. Accessibility and Usability
  3. Mobility
  4. Security

Scalability

The ability of the computing process in resource pooling and rapid resource elasticity of the cloud based ERP system leads to an high elastic infrastructure capacity (Duan et al., 2013). The high level strategic flexibility and enhanced competitiveness in the SME’s results in scalability (Benlian & Hess, 2011). The enterprises can adjust according to the requirements, they can move their scale up or down flexibly.

Accessibility and Usability

As the cloud ERP is on- demand and it works using the internet it has number of options to access. The applications over the cloud are on open environment (Abd Elmonem et al., 2016) which leads to an easy access. An increase in accessibility steps forward on increase in usability which includes the usability of cloud ERP inside and outside of the enterprise(Johansson & Ruivo, 2013).

Mobility

According to (Peng & Gala, 2014), the enhanced ERP mobility took over the existing or the old system of working at the office. When cloud came into place, the data or the whole information of the system is stored on the cloud and can be viewed or accessed from any place through web browsers. For example, the manager used to work on the project in the office as there is no cloud ERP available. Later, when the cloud based ERP is discovered and implemented, the manager can work from anywhere just by using a secure web browser. This helped the end users to enhance their knowledge by saving time.

Security

The ERP consists of data of the system or the business, connecting the data to cloud draws the main attention of security. The cloud ERP which hold the information of the complete system should be secure enough to rely (Mezghani, 2014). Since, the data is controlled by the third party (Cloud Service Provider), it is not to be relied on. Whereas, when there is an effective and an enhanced system there is no problem with the security of the system as it is safe. But, if the system is ineffective then there is a loss of data or leakage of data. If the system has the disaster recovery option then it is easy for the data to obtain when lost. Security plays a major role in the Cloud ERP system.

Data Privacy and Data Security seems to be similar but indeed they are different from each other. Data Privacy refers to the privacy of the company or the manager and the workers to access data. Whereas, data security relates to the protection of the data to avoid data loss or data leakage. More often, data is leaked by the human, rather than the technology defect(Peng & Gala, 2014).

Cost Minimalization

A system always needed a high maintenance and implementation cost especially in on-premises ERP systems (Peng & Gala, 2014). Generally, on-premises ERP system requires the investments on user as well as client system as they should install the software and hardware for running the system. This leads to management, maintenance, implementation and investments. Cloud ERP system has overcome all these problems as there is requirement of installing the systems on user PC’s and the data can be viewed, accessed and stored on the cloud. This reduced the investments, maintenance which leads to cost minimalization or in short cost reduction. It also maximized the profits of the company with low maintenance and low cost.

Similarly, the other benefits of cloud ERP are equally important for the development of the system. Cost transparency and enhancement of speed while upgrading the system leads to the enhancement of the perfection of the system. The system cannot run slow while upgrading as it leads to time loss, so, the system should upgrade fast enough to avoid any time gap. When the system upgrades the performance level increases as the system is more effective.

BENEFITS OF CLOUD ERP – TAXANOMIES

The key benefits of cloud ERP systems in terms of ERP benefits Taxonomies according to Shang and Seddon are

  1. Operational
  2. Managerial
  3. Strategic
  4. IT Infrastructural and
  5. Organizational

Operational

The predominant operational benefit is the cost reduction or the cost minimalization.  Rather than traditional ERP, Cloud ERP has the subscription method of payments which not only includes software cost but also the management and support cost. This is the key benefit of the Cloud ERP as the cost reduction, it also includes less work force and helps to travel less. As the Cloud Service Provider (CSP) takes over the management of the system there is a drastic improvement in the profit maximization and functioning of the system (Raihana, 2012).

Managerial

Cloud ERP system helps in taking an accurate decision which effectively works on the system. This leads to easy access of the system as the third party (Cloud Service Provider) provides a good ERP system. Managerial benefit of cloud ERP system gives fast and accurate output which is time saving with low cost. When the data is stored on cloud every person inside the system can easily access and can modify the data if they have access to the system (Raihana, 2012).

Strategic

Rapid development of the system is possible as the system is more effective and accurate, it allows the users to have a fast and reliable result which leads to the growth of the company. Using Cloud ERP system, the users can enhance their knowledge towards software and the structure which drives through new innovations and creativity. Competitive edge of the company increases and there will be maximization of profits (Raihana, 2012).

IT Infrastructural

As mentioned above, cloud ERP system helps to enhance knowledge on software as well as the modules of the system. The IT knowledge helps the end user to develop the business with great IT infrastructure which will easy to operate by the end users (Raihana, 2012).

Organizational

The cloud ERP system helps to support the organization and with the changes in an organization because of its flexibility and scalability. Now a day, the technology is enhancing and new technologies are coming into the system, cloud ERP is flexible to adapt the new technology (Raihana, 2012). The end users can learn the strategies of business easily as the cloud ERP helps to share the information with no installing of software’s on to the end user’s system.

These five taxonomies are in the perspective of a stakeholder and senior manager which help in the development of the company which includes the enhancement of user’s knowledge towards software system and the business strategies or the business rules. The end user’s will have an easy access to the system as the information is stored on cloud with no prior installment of software.

CONCLUSION

Cloud ERP system is an effective and predominant system which is used for the storage and modification of data using cloud as the main component. The future aspects may include in the development of a better system which high security standards which helps in rescuing the data of the system. The Small and Medium Enterprises (SME’s) have many advantages using this cloud based ERP system like cost minimalization, enhancement of knowledge on new software and increase of competition. The accessibility, usability and mobility plays a major role in the Information Technology/Information Systems (IT/IS) for the enhancement of the business. The taxonomies according to Shang and Seddon gives a brief understanding about the cloud ERP system in IT field.

REFERENCES

Abd Elmonem, M. A., Nasr, E. S., & Geith, M. H. (2016). Benefits and challenges of cloud ERP systems – A systematic literature review. Future Computing and Informatics Journal, 1(1), 1-9. doi:https://doi.org/10.1016/j.fcij.2017.03.003

Benlian, A., & Hess, T. (2011). Opportunities and risks of software-as-a-service: Findings from a survey of IT executives. Decis. Support Syst., 52(1), 232-246. doi:10.1016/j.dss.2011.07.007

Duan, J., Faker, P., Fesak, A., & Stuart, T. (2013). Benefits and drawbacks of cloud-based versus traditional ERP systems. Proceedings of the 2012-13 course on Advanced Resource Planning.

Johansson, B., & Ruivo, P. (2013). Exploring Factors for Adopting ERP as SaaS. Procedia Technology, 9, 94-99. doi:https://doi.org/10.1016/j.protcy.2013.12.010

Kiadehi, E. F., & Mohammadi, S. (2012). Cloud ERP: Implementation of enterprise resource planning using cloud computing technology. Journal of Basic and Applied Scientific Research, 2(11), 11422-11427.

Mell, P., & Grance, T. (2011). The NIST definition of cloud computing.

Mezghani, K. (2014). Switching toward cloud ERP: a research model to explain intentions. International Journal of Enterprise Information Systems, 10, 46+.

Peng, G. C. A., & Gala, C. (2014). Cloud Erp: A New Dilemma to Modern Organisations? Journal of Computer Information Systems, 54(4), 22-30. doi:10.1080/08874417.2014.11645719

Raihana, G. F. H. (2012). Cloud ERP–a solution model. International Journal of Computer Science and Information Technology & Security, 2(1), 76-79.

Shivam, G., C., M. S., Ned, K., & David, R. (2018). Organizational, technological and extrinsic factors in the implementation of cloud ERP in SMEs. Journal of Organizational Change Management, 31(1), 83-102. doi:doi:10.1108/JOCM-06-2017-0230

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