Enterprise Resource Planning Systems: Benefits, Critical Success Factors, And Future Trends

Cost Savings with ERP Systems

Discuss about the Identifying Critical Success Factors For the ERP.

The integration of business processes and data is made possible through Enterprise resource planning. A database is created by the system administrators that store the data. This database will function as the storehouse that can circulate the data to different business processes. Today, most of the organizations are adopting the Enterprise resource planning systems. One of the potential benefits of enterprise resource planning systems is cost savings. The business processes are in correspondence with the information stream. This can integrate the operational and technical business functions of an organization and streamlines the business functions. The firms are more competitive to the external market and they can respond easily. The firms try to achieve the enterprise competitiveness levels. This can be achieved through the implementation of ERP systems. The managers will be able to extract the reports from the ERP system and they can make strategic decisions. The management needs to utilize the ERP systems and implement training modules through which managers can learn ERP principles. The maximum potential can be realized for the merger and acquisition. These act as the drivers of maximum revenue and growth.

1. A comparative study on the on-premise, hosted ERP and cloud ERP system.
2. To understand how to manage the massive information through enterprise resource planning.
3. Critical success factors those are crucial for the implementation of ERP system in organization.

The start-up ventures are driven towards the adoption of enterprise resource planning systems. Enterprise resource planning systems can manage and utilize the massive information. Today, ERP systems are becoming the focus of research that is being adopted by the researchers.

A majority of theoretical studies and research has been conducted in ERP domain that clearly articulates the following factors necessary for the implementation of ERP in an organization. These include- cost, project management, upgrades, critical success factors and benefits.

From the perspective of a researcher there are multiple reasons to implement the ERP systems in an organization.

1. The sole focus is on “Going Live” and increasing the sales of products and services.
2. What are the risks associated with the implementation of ERP system.

The implementation of an ERP system must be planned and managed as it can impose high risks. There are studies which have proven that ERP high percentage of failure in multinational corporations.

The multinational organizations are presented with a diverse range of choices, when planning to implement the ERP system. An important decision that is required to be made by the top management is to select an On-Premise, Hosted ERP or Cloud ERP System. What are the differences between Cloud ERP and On-premise ERP? On-premise ERP software is locally installed on an organization’s server (Gupta and Misra, 2016). This is managed through the IT administrators and managers. Cloud ERP is also referred to as the SaaS or more commonly referred as Software as a service. This software is managed through the ERP vendor. The customers will be accessing the products and services through a web browser. However, the business organizations may often get confused on which ERP model must be selected? There are certain key factors that must be considered when making the selection between different types of ERP software (Gupta and Misra, 2016).

1. System Requirements- The business corporations can customize the On-Premise ERP. The customizations made cannot be re-implemented with the new versions and they are secured by the current software. The drawback of installing an on-site ERP is all the customization made are removed when an ERP provider has released new enhancements and updates in the product. The IT administrators will be required to re-install the ERP system and customization will have to be done from scratch again (Deshmukh, 2012). One of the main reasons that most of the business organizations do not settle for on-premise ERP and find that their businesses are having un-updated technology. According to a research, more than two-third of small scale businesses is running on this ERP software. To compare with Cloud ERP systems, these are upgraded on a continual basis by the version provider. The business organizations will be sure of using the modern and the latest advanced version of ERP software. No additional investment will be required to be made on the integrations that are automatically carried forward. For instance-SARMED logistics is a leading supply chain and Logistics Company that is using the cloud based ERP software. SARMED Logistics is based in Greece and has 155 employees. The company can handle the management of consumer goods. This includes handling the management of small objects and commercial vehicles. The Cloud ERP tools are robust and extremely helpful. The managers can create dashboards and perform analysis without any support from database or IT managers (Jones, 2005).
2. Costs of Ownership- On-site ERP systems require ongoing investments for the management of software. The company will be required to make additional investment in the management of related server, hardware that are necessary to run On-site ERP. Most of the organizations cannot afford the experienced IT managers; they need to invest more energy and time for training the personnel. The company needs to spend more budget and time for the maintenance of server rooms and hardware (Awad, 2014). In contrast with Cloud based ERP systems, the implementation costs are much lower. The implementation of the software can be done as per the requirements. The provider of Cloud ERP will maintain the IT devices and ensure that Cloud based ERP is always running. The businesses can grow more efficiently. The cloud ERP subscription model is economical and cash management can be done easily. For instance- The Company SARMED needs are growing every year with the increase in the number of its employees. The SARMED enterprise needs to integrate CRM and ERP systems for handling all its personnel functions, project documents and project management supplies. The company needs to do daily transactions with the transportation companies and therefore the implementation of Cloud ERP systems can handle salespeople effectively (Nubis.gr, n.d.).
3. Enhanced system accessibility- The overall performance of cloud ERP is better than on-site ERP System. Cloud software has been designed in a way that it delivers maximum performance when compared with conventional on-premise ERP software. This implies widen application availability when compared with on-site ERP projects (Albar and Hoque, 2017). Cloud based enterprise resource planning systems provide optimum performance that is tailored to the most business needs. The spike in businesses is handled by the Cloud ERP automatically and has inbuilt resources for handling the surge. The IT department can extract the reports from Cloud based ERP system and report the uptime results to the top management.

On-Premise ERP vs Cloud ERP Systems

The real-time data is provided by the cloud based ERP system, which means users can access from anywhere. The staff members will be able to access the accurate information through smartphones, laptops and tablet devices, irrespective of the premise they are traveling or commuting. The Cloud based ERP system provides better performance and better security. It is because of the high competency levels, cloud based ERP software has been able to capture the high percentage of market share in mid-size industries. For instance- The Company SARMED follows rigorous data practices and disaster recovery methods, SAS standards and compliance certifications for ensuring efficiency in business processes.

1. Speed- Cloud ERP doesn’t require any additional system hardware. The businesses don’t need to waste time on the procurement and installation of IT infrastructure. Cloud ERP has many advantages over the On-site ERP and this can be used in multiple subsidiaries, regions and divisions. Cloud based ERP can help in cost savings and time saving. The deployment time of Cloud ERP is three to five months when compared with twelve months of time taken in On-premise software. Cloud based ERP systems provide the users with flexibility for the growth of business (Elragal and El Kommos, 2013). The on-premise ERP solutions will not provide you with much freedom. In order to provide more access to the employees, the additional hardware will be required. However, every business has different needs and therefore ERP deployment needs will be different. For instance- Ardent Leisure is one of the Australian companies that has complex business needs and requires speedy financial collaborations, order management, purchasing and management and inventory management. These are achievable by the successful implementation of ERP cloud. The core financial data can be extracted through the cloud computing software systems (Fusion5.com.au, 2017).

Cloud based ERP refers to a SaaS model-Software as a Service. This is a subscription based model and business organizations are required to pay the monthly or annual fee for using the software. In order to set up as SaaS software, business organizations don’t have to make many investments. The software will get updated automatically.

Hosted ERP software is a traditional on-premise model in many ways. Conventionally, the business organizations can purchase many software licenses for the installation of ERP system. The system is implemented on in-house servers and daily business can be carried forward. In hosted ERP software, the user’s needs to purchase an ERP software license and the system is implemented through cloud hosting vendor (Claffey and Brady, 2017).

The business units will be able to access the ERP system and business applications through a connected device. This is similar to Cloud based ERP System. The entry costs are higher. Users are expected to purchase the full license and this includes ongoing costs such as maintenance of IT infrastructure, firewall updating, data backup, server software updating. The ERP system can be customized and fit with the needs for the maintenance of data ownership.

Every business has its own specific needs and requirements.

The arguments supporting this purpose can be enumerated as follows-

1. The ERP implementation must be finished within budget and time. This is the most stringent definition when applied to the Enterprise resource planning implementation process (Zhao and Kirche, 2018).
2. The ERP implementation requires having field experience. Most of the researchers have concluded that implementations are successful when the business organizations look from a different perspective (Kratzer, 2005).
3. The cost-effective transition to a more efficient Cloud based ERP model is a valid option when IT servers are at the end of life. The businesses need to switch to a more compatible ERP model that can make all the business processes in order (Silk, 2015).
4. One of the major decisions is shifting to a cloud based ERP model is lower costs. The business organizations need to study the operational and financial pros and cons and switching cost variables for implementing the cloud based software.
5. The old server software is not compatible with the business processes and the organization is considering the business process re-engineering as a top most priority. In such a scenario, the cloud based ERP model is most favorable (Rutten, 2010).

A number of studies have been compiled for exploring the critical success factors that are crucial for ERP implementation. The CSF has a complete diverse range of rankings. These are studied with different context and culture. The ERP systems will induce a number of changes in the organizations. The critical success factors include-business process engineering, system configuration and software customization and change management. Another critical success factors include budgeting and planning (Mathiassen and Sandberg, 2014). The top most reasons behind the failure of ERP implementation is faulty cost estimation. The success of an ERP implementation in an organization is largely due to organization industry, size and complexity. In rare cases, the ERP failure may take place in an organization due to bankruptcy. The studies indicate that organizations have unrealistic budget anticipations and project deadlines. Most of the project failures are due to this reason (Engelstatter and Sarbu, 2011).

Critical Success Factors for ERP Implementation

The studies have concluded that ERP can be a failure due to misfit between the organization and ERP system. This is mainly due to the selection of a wrong ERP system. More than 20 percent of the ERP failure is due to improper training and improper project planning. The organizations those want to realize the benefits will spend huge amounts of money on the implementation of enterprise resource planning systems. The ERP (SAP) vendors promise to return returns to business organizations (Parthasarathy and Sharma, 2016). These advantages can be realized in the long run. The benefits realized are different from one organization to another. Most of the organizations expect that business process re-engineering efforts must be targeted at improvisation and enhancement of the different business processes. This aims at the reduction of costs (Chen and Wu, 2010).

The organizations can cut the large paperwork, working hours, labor costs through automated ERP systems. This helps in saving costs to a large extent. The employees require training modules for capital budgeting and projecting direct costs and indirect costs ERP implementations. One of the most complex tasks is to estimate the costs and realize benefits. Most of the ERP vendors claim that business organizations are ready to spend five to ten percent extra on the implementation process than on licensing costs (Czibula and Czibula, 2014). This is mainly due to the hidden costs. Most of the organizations overlook the human resource fee that is incurred during the enterprise resource planning implementation process. However, there are numerous communication technologies that have been induced to ERP systems. The government has introduced infrastructural changes. These include- cloud computing. Web enablement, SOA processes. ERP systems must cope up with the changing technology trends. For instance- Cloud processes, social networks and SOA. The future of these systems cannot be predicted over a period of time (Linthicum, 2018).

The future of ERP systems- The benefits of ERP systems and wider use of social networks can be explained as-

1. Social Networking- Today, there is wide and extensive use of social networks and people have faster accessibility to them. The dream is to integrate the ERP systems with social networks. This indicates shorter life cycles, fewer investments, and increased return on investments. The success that has been achieved by major virtual portals is mainly due to ERP systems replication (Bansal, 2013).
2. Cloud Computing- The recent years have seen the exponential growth of cloud computing. This has the potential to reshape the overall structure of IT services. Cloud computing can be defined as applications delivered in services in data centers. These are referred to as SasS- software as a service (McGaughey and Gunasekaran, 2007). There are many organizations that use the following terms- IaaS as well as PaaS for describing the products and services. The ERP vendors are moving the offerings to the cloud that are SAD through Design. Moreover, a lot of things are required to be achieved for moving to cloud computing. Therefore, a lot of knowledge is required for the Enterprise 2.0.

This is defined as applications and tools that can perform content creation, better collaboration and provide better performance. This web 2.0 technologies has been seen the social software that enables the users to collaborate and meet through different communication channels and online communities. Enterprise 2.0 act as the digital environment that offers users to interact they are visible to everyone in the organization unless deleted. The organization need to use the workforce knowledge and ability for solving the niche problems. These are cross-functional systems and allow lower flexibility (Cadili and Whitley, 2005). The enterprise 2.0 follows a completely different approach. They do not predefine the workflow and therefor the emphasis is on more integration. ERP systems must have focus on the key business units. However, the businesses must focus on the decision processes and consequences. This have an impact on overall business aspects. There are numerous decision models. One of them is Simon decision model that have following stages-

1. Intelligence stage
2. Design stage
3. Choice phase
4. Implementation phase

Benefits of ERP Systems

The implementation of decision model is considered successful when the problem gets solved and all the objectives are fulfilled. On an average, 50 percent of decisions are taken by decision makers. A new trend that involves crowd achieving is referred to as crowd sourcing. This acts as an enhancement of intelligence as well as choice. The implementation of Enterprise resource planning has a change on the overall processes and business life cycle. The new lifecycle will get change with the social networks as well as cloud computing. This is mainly achieved because of social networks have remained outside the scope of lifecycle. The cloud computing will lower the business lifecycle. The critical success factors will reflect the communication between people and technical forces that have an impact over them. This can reshape the communication facilities and resistance to change (Baldus, 2012). The project management team will require members for training and providing technical education to members of the organization. On the cost cutting aspects, the cloud computing will potentially cut the costs. The integration and utilization of social networks and ERP will provide new packages to the organization and implemented ERP systems. The research has focused on critical success factors, implementation, upgrades, project management and others.

Conclusion

The future research must be carried out for exploring the ERP potentials and this has been linked to enterprise 2.0 and social networks. This will help in the expansion of ERP systems beyond the organizational functions and different business processes. The Enterprise resource planning vendors need to adapt to organizational changes for delivering the value to potential customers. The companies need to decide on how to deploy the ERP for a single-tenant. It can also be used for the multi-tenant. There are many recent enhancements on how the company uses it for different functionality and offer compliance features. There are recent enhancements that include the regional functionalities. Most of the organizations have adopted two tier strategies for ERP platform. Today, businesses are searching for ERP systems tradeoffs. There is an emergent need for bridging the on-premises and cloud computing companies to redesign and re-evaluate the enterprise workloads. This is mainly done for leveraging the ubiquity of ERP platforms. With the technology advancements, more companies have started asking about the implementation of cloud ERP system. The new release of the ERP cloud system permits financial management, customer views, entry of accounts data, and reconciliation of built-in automated features. With the help of ERP cloud, document management processes can be achieved easily. Whenever any manufacturing batch is flagged, the ERP integration facilitates the immediate interaction with manufacturers, customers and retailers for expediting the processes.

Future Trends in ERP Systems

References

Albar, A. and Hoque, M. (2017). Factors affecting cloud ERP adoption in Saudi Arabia. Information Development, p.026666691773567.

Awad, H. (2014). Investigating Cloud ERP Challenges in Public Universities in the Middle East “Field Study”. Internet of Things and Cloud Computing, 2(3), p.12.

Baldus, C. (2012). Rezension zu Sjef van Erp/Arthur Salomons/Bram Akkermans (eds.), The Future of European Property Law. Zeitschrift für Gemeinschaftsprivatrecht, 9(5).

Bansal, V. (2013). Identifying Critical Success Factors for ERP in SMEs through a Case Study. International Journal of Future Computer and Communication, pp.471-475.

Cadili, S. and Whitley, E. (2005). On the interpretative flexibility of hosted ERP systems. The Journal of Strategic Information Systems, 14(2), pp.167-195.

Chen, X. and Wu, Z. (2010). Architecture of software services based on SaaS model supporting multi-terminals and service customization. Journal of Computer Applications, 30(10), pp.2754-2757.

Claffey, E. and Brady, M. (2017). Examining Consumers’ Motivations to Engage in Firm-Hosted Virtual Communities. Psychology & Marketing, 34(4), pp.356-375.

Czibula, G. and Czibula, I. (2014). Software systems performance improvement by intelligent data structures customization. Information Sciences, 274, pp.249-260.

Deshmukh, P. (2012). Implementing Cloud ERP systems in Higher Educational Institutes and Universities. Paripex – Indian Journal Of Research, 3(2), pp.199-201.

Engelstätter, B. and Sarbu, M. (2011). Enterprise Software and Service Innovation: Standardization Versus Customization. SSRN Electronic Journal.

Elragal, A. and El Kommos, M. (2013). In-House versus In-Cloud ERP Systems: A Comparative Study. Journal of Enterprise Resource Planning Studies, pp.1-13.

Fusion5.com.au. (2017). Ardent Leisure. [online] Available at: https://fusion5.com.au/case-studies/ardent-leisure/ [Accessed 15 May 2018].

Ganesh, L. and Mehta, A. (2016). Understanding Cloud Based ERP Implementation in Light of Conventional ERP Implementation at Indian SMEs: A Case Study. SSRN Electronic Journal.

Gupta, S. and Misra, S. (2016). Compliance, network, security and the people related factors in cloud ERP implementation. International Journal of Communication Systems, 29(8), pp.1395-1419.

Jones, M. (2005). Tacit Knowledge Sharing During ERP Implementation. Information Resources Management Journal, 18(2), pp.1-23.

Kratzer, A. (2005). Constraining Premise Sets for Counterfactuals. Journal of Semantics, 22(2), pp.153-158.

Linthicum, D. (2018). Approaching Cloud Computing Performance. IEEE Cloud Computing, 5(2), pp.33-36.

Mathiassen, L. and Sandberg, A. (2014). Process Mass Customization in a Global Software Firm. IEEE Software, 31(6), pp.62-69.

McGaughey, R. and Gunasekaran, A. (2007). Enterprise Resource Planning (ERP). International Journal of Enterprise Information Systems, 3(3), pp.23-35.

Nubis.gr. (n.d.). Cloud ERP- Sarmed, leading company in logistics and supply chain services, automates its business processes, adopts Nubis Cloud ERP. [online] Available at: https://www.nubis.gr/CmsImages/NubisInhouse/files/Case-Study-nubis.gr-SARMED.pdf [Accessed 15 May 2018].

Parthasarathy, S. and Sharma, S. (2016). Impact of customization over software quality in ERP projects: an empirical study. Software Quality Journal, 25(2), pp.581-598.

Rutten, G. (2010). On Cuneo’s Defence of the Parity Premise. SSRN Electronic Journal.

Silk, A. (2015). Modality, Weights, and Inconsistent Premise Sets. Semantics and Linguistic Theory, p.43.

Zhao, F. and Kirche, E. (2018). ERP On-Premise or On-Demand. International Journal of Business Analytics, 5(2), pp.1-16.

Order an Essay Now & Get These Features For Free:

Turnitin Report

Formatting

Title Page

Citation

Outline

Place an Order