The Importance of ERP Systems
Enterprise resource systems has been used so widely in the current technology and this has influenced so many people when it comes to defining the type of storage they want to. The urge to migrate from the traditional methods has made many organizations to shift their way of doing things in to the modern ones. ERP has been widely used by individuals and organizations. ERP are systems and software’s that are used as packages by many organizations in managing the day to day activities of the business such as procurement, accounting, project management and the process as manufacturing. Enterprise resource systems have tied together by defining the plethora of all the processes of the business by enabling the data to flow in between them. When using ERP, there is a collection of the organization transactional data that is shared from multiple sources and thus Enterprise resource systems has been used for eliminating data duplication and offering provision for data integrity. Enterprise Resource Planning systems in the current era, has been so critical when managing the small, large and the medium enterprises across all the industries in the business.
Enterprise resource Planning system can be defined as the business process which is kind of a management software that has allowed organization in using a system of applications which are integrated in managing their business, it has thus automated the many functions at the back office in relation to the technology, the services offered and the human resources (Beal, 2014). ERP has been considered as an application kind “Enterprise Application” which has been designed to be used in businesses which may be large or even small and thus may require teams which are dedicated in customizing, analyzing the data and handling of upgrades and deployments. ERP systems or software’s has consisted of multiple enterprise software’s modules which one must purchase one in particular on the basis of the specific needs to be met and technical capability of the respective organization (ERPs, 2017). There are so many modules that may exist in any given ERP system and thus they work as a team. Some of the modules of ERP are such as:
- Distributing the process management
- The management on the supply chain
- Servicing the knowledge base
- Configuration of prices
- Improving of accuracy on financial data
- Facilitation of better project planning
- Automating the employee lifecycles
- Standardizing the critical procedures in the business
- Reducing the redundant tasks
- Assessing the business needs
- Applications in the finance and accounting departments
- The Low cost of purchasing
- Managing the payrolls & the human resources
The business value of the ERP has impacted the world of business today. When an ERP systems is applied in the business the data of the enterprise and all the processes will be corralled in to the Enterprise Resource Planning system, thus making the business to be able to align separate departments and improving the flow of work which may result to increase in productivity (Oracle, 2017). Some of the general benefits a business may have when an ERP system is put in place are such as the following.
- There will be improved insight in the business.
- The cost of operational are relatively low
- Collaboration will be enhanced
- The efficiency will be improved greatly
- There will be consistency in the infrastructures used.
- The will be increased rates of user-adoption
- The risks will be decreased
- Relatively lower cost of operation and management
Overview of ERP Systems
The main reason for this report is to discuss the three Enterprise Resource Planning systems. The three are such as the On-premise, Hosted and the cloud ERP systems. The idea behind all these is to explain all the topics on each one of them , the associated benefits, risks and some of the challenges they face in cases where company may opt to use them. The idea here is on the basis of the case studies from the experience learnt from different companies as they interact with the ERP system. The other problem to be discussed with reference to these is explanation of the comparison, contrast and much more how they relate in general.
There are many ways through which Enterprise resource planning systems can be defined. According to the APICS ERP system can be defined as the accounting oriented IS used to identify and plan the enterprise wide resources used in shipping and accounting the customer orders. They are systems that always aims to integrate the functional units of the business in the way to become more cooperative. ERP systems has extended its services by including the functions of the outsiders. This has made it to be so reliable and much easier to interact with. The following example clearly shows the application of an ERP system according to APICS.
Figure 1 APICS figure explanation of ERP system
Source (AIPCS, 2011)
The use of ERP systems in the organization’s infrastructures has been a very key idea in delivering the solutions to major business functionalities that can be handled by a given organization. In defining ERP system comprehensively, it can be referred to as a kind of a package that has majored in integration of the complete ranges of all involved processes in any business and their functions in a manner that the general view of the given business premise of the single information and the IT architecture are presented. (Roselina, 2011).
Figure 2 overview of the ERP system
Source of image (Roselina, 2011).
The change and updates in technology nowadays has really influenced the way ERP has injected itself in to the businesses. This has greatly influenced the way employees interacts with the system each and every day. Some of the companies acting as vendors of the ERP systems are such as Microsoft, Amazon, Oracle and PeopleSoft, where each ERP application has its own specification depending on the module selected by the client or the customer with reference to the needs of the organization. The three ERP systems are discussed briefly below.
Traditional ERP Systems
Traditional ERP System have been known to be categorized in to two namely the on premise and the Hosted ERP. On premise ERP systems are the loaded and running systems in the enterprise such as the servers, Computers, Network devices and any other devices used in building up the system. There must exist a license for the software to help in running the enterprise, operations and management of the ERP systems. The running cost, operation cost and maintenance cost is in the hands of the owner of the enterprise and incase of the disaster recovery it is the enterprise that will cater for such costs. Hosted ERP systems are not entirely traditional ERP systems but it has been surpassed by the technology advancements. Hosted ERP is the situation where the services are offered to a specific organization or to an individual by the vendors other who have servers in remote areas (Peddoju, 2014). There are in many situations that such facility in most cases it is offered in situation where there is a network throughout and that is directly connected and running via the internet.
This type of ERP system is known for offering the control and much more the security. This types of software’s are known as they run in the in-house servers at any given location of the company which is always controlled by the company. On premise has been known for offering high security and much more enough control of the specific company. The major reason for the above satisfying security and control is it using the IT infrastructures in the organization to connect to people. The On Premise ERP systems have extended and thus adapting to the requirement changes. Some of the changes experienced in the when using the On Premise ERP systems are such as:
- It is applicable when in need of supervision and security of ERP systems and the deployment of the data controlled by the company.
- When the company may be in need of specializing its integration within the systems in their industries when dealing with the daily functions and the operations.
- When the company has dedicated all the resources it owns to the onsite thus handling the services and the maintenance of the applications installed.
- The confidentiality of the data will remain secure on the onsite application
- The company will have full control of all the data that is processed from within the premises.
- There is robust integration which may be an option in other options.
- There are options for robust customization(Computing, 2018).
There are so many comparisons with regards to the two when it comes to checking how they are operated. Cloud ERP systems are the modern known type of ERP systems which have made their services to be entirely on the cloud. They possess the full control of your information. The client is only given the login credentials and thus this make the vendors the controller of everything as they act as the admin on both sides. These will be tackled basing the argument on the cost, Security, scalability and deployment and the user access. The following tables is used to discuss such in details.
Comparison in terms of Pros
|
Pros |
|
Cloud |
On-Premises |
|
Cost |
There is a lower upfront cost. This means that costs of cloud SaaS may be classified as OPEX which has been known for reducing the approved need of the large CAPEX during any given year. Storage cost of the cloud has continued to be very low as there is no extra cost for the purchase of equipment’s. The cost of maintenance is omitted though it is sometimes included in the cost monthly and it is not considered as an additional fee and thus it may make the budget to be very easy when preparing it. |
There is a lower long term cost. In the long term the company is given a one-time license. There are no monthly costs where the on-premises deployments will be are always structured annually by elimination need for the costs monthly. There is virtualization as the owned servers are virtualized and always shared for the needs internally at their won discretion. |
|
|
Security |
The environment is secure as the many vendors offering services such as security being high and much more sophisticated. Many vendors of SaaS have leveraged those platforms when they are delivering their own services
|
There is customization of the security as the individuals can process all the requirements and all their regulatory requirements. The in house is another key thing here. The data knowledge resides solely in the in-house. This is preferred by the companies whose security is so crucial and that they don’t need their data to be shuffled across the internet and thus restricting the access of the internet, DBs or the entire application. |
|
|
Scalability and Deployment |
It is on-demand. Many services in the cloud are scalable. This has made it simple and easy when requesting for storage and more seats and thus attaining it rapidly. There is IT involvement. The services in the cloud will need less involvement of IT and also less in-house in terms of the skills for deploying, updating and changing. The software updates and backups are achieved by normal vendors and updates being done on the on premise often and frequently. |
There is control. The on-premises have imparted deployments the higher degree in controlling the customer in terms of the given timeline and the rollout. When the deployment timeframe is longer then it will add more knowledge when transferring the in-house personnel. |
|
|
|
The mobile workers. Service in the cloud will always require connectivity of internet. With easy access to the wired and wireless broadband and thus becoming cheaper thus this has made it to be available everywhere. It is known for offering provisions of easy access for all the remote workers via many devices. |
Internet connectivity. The on premises are known as they can also run without the internet. This has been very useful in keeping the mission to be critical apps running. |
|
Cons |
|
Cloud ERP System |
On-Premise ERP systems |
|
Cost |
This may end up spending more amount of money as the lifecycle of the system keeps going on |
The upfront investment sometimes is seen as the riskier. One must pay all the costs associated with the hardware itself as well as the cost of IT infrastructures |
|
|
Security |
Some vendors may lack data security and integrity and thus lacking the total peace in terms of the way the data is supposed to be arranged. |
Many are times that data is considered to be the organization hands and thus some organizations may not adapt such practices for the proper data security protocols. |
|
|
Customizable |
It is less customizable. It lacks such options for customizing. |
Options of customizations may make this to take longer. It may be difficult to the client especially when the software is updated by the vendor |
|
|
Implementation |
The implementation time is short as it requires less customization |
The process of implementation will always take longer |
Cloud-Based ERP Systems
This are systems which are developed for operating purely in the cloud environment (Sharma, 2014). The individual or the organization are supposed to pay as subscription fee for them to access the enterprise resource systems and sharing it with other companies which is simply referred to as Software as a Service (Rohde, 2015). Cloud ERP systems can be divided in to three service models explained here below.
- Infrastructure as a Service- in the IaaS the provider is responsible for offering their clients the pay as you go access in the storage, servers and the networking with other resources associated in the cloud.
Figure 3 IaaS image
Source of image (https://www.ssh.com/cloud/computing/models)
In this case the organizations always use their own platforms and the applications within the providers of such service in the available infrastructure. Some of the key features of IaaS are such as the following.
- Users pays the IaaS on demand
- There is scalability of the infrastructure on the dependence of the processing and needs in terms of storage
- Saves the cost of purchasing and maintaining own hardware.
- There is no single point of failure
- Enables virtualization
Platform as a Service (PaaS)-this is a model of cloud computing that provides the users of the cloud an environment where they can do development, management and deliver applications (Singh, 2014). The users can be able to suite all the prebuilt tools for the development, customization and thus testing their own applications.
Figure 4 Platform as a Service (PaaS)
Source of image (https://www.ssh.com/cloud/computing/models)
- Provides tool for testing, developing and hosting applications
- There is no worry of the infrastructure set by the company in need of the cloud services
- There is good management of the security, Operating systems, software’s used by the servers and doing backups.
- Software as a Service (SaaS) -is another model of cloud computing that offers the users with access to all vendors’ software’s which are cloud based. The users will not be required to install the applications in their devices (Parthasarathy, 2013).. The applications will remain hosted on a remote place and thus it can be accessed through the WEB or maybe in an API (Awad, 2015).
Figure 5Software as a Service (SaaS)
Source of image (https://www.ssh.com/cloud/computing/models)
- They provide users with software’s via the model subscribed
- The user will not need to manage, install or even upgrade anything as the SaaS vendor will manage for them.
- Data is very secure in the cloud and in case the equipment fails then it will not result to loss of data.
- There is high scalability of the resources to be used depending on their needs
- All applications can be accessed from anywhere as far as there is some internet connection.
- There is some subscription expenses that must be made periodically.
- There are some security risks associated
- Risks of the performance
- There is a lot of limitations when it comes to customize and integrate
- There will be loss of IT competencies
- There are some hidden costs in the contract.
This is where a company may purchase the license for the enterprise resource planning systems and thus include a third party to be used for the installation of the infrastructure in the cloud (business, 2016). It is most cases referred to as the infrastructure as a Service (IaaS) (Alexopoulos, 2014). There are some reasons to as why we may adopt a hosted solution.
- There is need of the maintenance support
- There is need for an easy shift to On-premise
- When there is need of enough security
The following are some of the benefits of Hosted ERP systems.
- They are very flexible
- There is software ownership
- There are some security and disaster options for recovery
- There are managed information Technology Services(Peng, 2015).
Cadbury company is an institution that deals with chocolate products much more sweets. Cadbury has adopted all the three ERP systems from the moment it was started to current. There existed so many problems when they were dealing with on premise ERP systems due to a lot of information. Retrieval of information was a problem and this sometimes could result to them taking a lot of time. Another weakness that they experienced was that they used to spend a lot of money to pay the staff who were using the in house systems installed in the company offices. Cadbury being an international company did find it hard in managing its distribution globally. The need to be stable in terms of IT infrastructure led to them adopting the Hosted ERP system for the reason it was more flexible, they were to become the owner of the software, and they could be able to manage their security issues. Cadbury became successful and they have used that for over 10 years until of late they have started migrating their different modules one by one to cloud ERP solutions.
Comparison of Traditional and Cloud-Based ERP Systems
Hershey is also a chocolate company which was established in the year 1894. The sales were roughly chocolate (Roy, 2014). This company failed in implementing the system in the Hosted ERP in that it impacted the following. The issues that came up were such.
- There were problem pertaining the order fulfillment as the rise of process and shipping started to rise and thus failing to deliver within time.
- Could not supply the ordered products to retailers and thus losing credibility in the market.
- Its announcement due to adoption of the new technology led to their stock price to be plunged by about 8% each day.
The following are some of the failures that were caused by the system.
- Implementation schedules were over-squeezed
- The application of big bang approach other than the phased approach led to Hershey failing
In summarizing the above study, the report has concentrated much of this study in discussing the three ERP systems namely the Cloud and the Traditional ERP Systems (Hosted and On Premise ERP systems). The study has defined them indicating their characteristics as well as their pros and cons considering their comparison and the contrast. The idea of cloud ERP systems growing so faster has made many to adopt its services as they are cheaper and requires less man power and thus saving on cost.
Conclusion
In conclusion, the topic has covered deeply on the three ERP systems namely the On Premise, Hosted and the cloud ERP systems. On premise and Hosted Enterprise Resource Systems are said to be traditional while the cloud ERP systems is the modern one. Cloud ERP has been considered to be the best depending on the cost and expertise as the in house cost has been eliminated and there is no need for hiring the people as the SaaS vendors will manage all the applications if the need arises to do such. This has made it to be the ERP System when the three are compared though it has no customization options.
List of References
AIPCS, E., 2011. STOCK CONTROL ERP. 3rd ed. Los Angeles: Press uno.
Alexopoulos, A., 2014. Cloud ERP adoption opportunities and concerns: a comparison between SMES and large companies. New York, Pre-ECIS 2014 Workshop” IT Operations Management”(ITOM2014).
Awad, 2015. Int J Innov Appl Stud. Cloud computing as an operational model for ERP services: definitions and challenges, 4(2), p. 399.
Beal, V., 2014. Enterprise Resource Planning. 2 ed. New York: UniPress Works.
business, P., 2016. Hosted. [Online]
Available at: https://www.precisebusiness.com.au/for-your-business/hosted/
[Accessed 14 September 2018].
Computing, C., 2018. On Premise ERP Offers Security and Control. [Online]
Available at: On Premise ERP Offers Security and Control
[Accessed 14 September 2018].
ERPs, O., 2017. ERP Fundamentals. [Online]
Available at: https://www.oracle.com/applications/erp/what-is-erp.html
[Accessed 14 September 2018].
Oracle, 2017. ERP systems Applications. The Business Value of ERP, 2(3), pp. 23-29.
Parthasarathy, 2013. ERP systems. Potential concerns and common benefits of cloud-based enterprise resource planning (ERP), 34(1), pp. 2860-2867.
Peddoju, K., 2014. Cloud and traditional ERP systems in small and medium enterprises. Los angelas, International Conference on Information Systems and Computer Network.
Peng, C. G., 2015. Journal Computer Information System. Cloud ERP: a new dilemma to modern organisations?, 54(3), pp. 22-47.
Rohde, Z., 2015. Cloud computing and ERP: a framework of promises and challenges. Cairo: s.n.
Roselina, K., 2011. Information System Frontism. What is the meaning ERP?, 5(0), pp. 143-164.
Roy, C., 2014. case study on ERP success(cadbury) and failure(hershey’s). [Online]
Available at: https://www.slideshare.net/ChitrangadaRoy1/case-study-on-erp-successcadbury-and-failurehersheys
[Accessed 15 September 2018].
Sharma, k., 2014. International Journal Mechatron Electrical Computer Technology. Study& analysis of cloud based ERP services, 2(17), pp. 375-396.
Singh, N., 2014. Int J Sci Technol Res. Implementation of ERP in cloud computing, 3(1), p. 7.
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