Significant Media Attention And Hype About Cloud Technologies

Purpose of the report

Disucuss about the significant media attention and hype about the potential of cloud technologies.

ERP or Enterprise Resource planning system comprises id several management tools based on strategic business processing and has the capability to manage information efficiently. Most of the companies nowadays face the impending threat of competition and how they can access and store their information in a dependable way (Developing 2013). Thus technology changes the way that enterprises work by bringing together l aspects of the business environment under a comprehensive system which can be accessed by the entire organization.

In the following report, a number of ERP systems have been mentioned that are used in industries currently. Their advantages and disadvantages have been assessed so that companies can assess which one will be best to implement in their business processes. A number of case studies have been proposed which reinforces the pros and cons of the ERP systems.

The purpose of the report is to comprehend the different types of ERP systems by different enterprises who are planning on implementing the mentioned technology.

The report has been divided into three sections. The introduction carries a brief definition of the ERP system. The discussion section takes into account the different types of ERP systems and their advantages and disadvantages. In the next section, four case studies have been proposed which has either failed to take advantage of the ERP systems or has failed the system indirectly.

In the next section, three types of ERP system have been investigated with respect to their benefits and risks that they can have on prospective companies:-

On premise ERP system

These systems are normally present under the authority of the company under their control and runs from backend office within the office. It provides the company to use its own IT infrastructure for provide control and security to systems, processes and people.  The on premise system provides the service physically form the server rather than the opting for a vendor supplied option.  The system allows the company to secure and supervise the ERP stem under their control. The system is suitable for those companies which plan on integrating the daily business functions in a specialized way.  Moreover, if the company has a dedicated IT service management crew on site, then it is suitable for that company to adopt the on premise ERP systems.

There are several benefits of using an on premise ERP system. The confidential data remains safe. The control over the data processes are retained. It has a strong integration with other applications.

Report Structure

The only weakness of the on premise ERO system is the long process in implementing the system and the additional hardware costs. Moreover, certain companies may not be afford the high cost of implementing the system despite its advantages

Moreover, it provides other advantages like control over accounting expenses, distribution chain management, security numbers and business intelligence. The company do not have to depend on the vendors much for running processes properly (Peng and Gala 2014). Also, it give the company with the advantage to change particular elements of the ERP system which give sits advanced customizability. Although the on premise ERPN system is financially heavy during the implementation phases, but uncertain cases, the cost gets justified after a few years.

Hosted ERP system

The Hosted ERP systems came to the business scenario in the 1990s and has to normally purchase from a vendor. It features softwares which are web enabled that are managed by the service provider on a remote server. The ERP solution can be accessed by anybody who are using the ERP system. The company’s physical servers are then installed with the data hosting centre. The vendor then charges the company an upfront payment and rental fees for hosting services. .

There are several benefits of adopting this ERP technology. Instead of maintain physical servers, the company has to only rent servers. It can be customized as well but not like on premise ERPS. The control of the data lies with the administrator. Limited number of IT systems need it be present on site. The security issues such as threats from anti viruses are managed by the ERP vendor. Even the data backups are maintained by the vendor. Other advantages include data redundancy and scalability. Only a certain amount fees need to be paid for the maintenance costs (17%).Moreover, software can be used by the company due to the licensing agreements

But the hosted ERP system has some drawbacks due to the uncertain variables that may cross the monthly budget. The system entirely shuts down when it is cut from the internet connection. Moreover, sometimes the systems are difficult to integrate with the existing applications. It needs to be hosted for a remote centre which needs to have a high bandwidth,

Cloud ERP system

Instead of hosting the system from a data centre, their cloud ERP system hosts its system within cloud environment. The cloud ecosystem helps to aggregate all the information from different departments of the same company in real to enhance their accessibility. The system consists of separate modules that have various business functions like HRM and finance management system.

Discussion

The advantages of a cloud ERP system are that the infrastructural costs are significantly lower. It comes as subscription based and has the capability to accept advanced technologies in the future. Moreover, it is easily scalable and the hardware as well as the software is managed by the vendor (Zhong and Rohde 2014). It prevents the dilution of enterprise objectives. It also provides extra mobility for the business to run globally. The company also gains form the moving from capital expenses to operational costs. It helps the business to expand dynamically due to the low initial resource planning (Saini, Khanna and Peddoju 2014).  The investment cost on technical staff is significantly reduced. The IT service provider is also easier to handle as the central server manages all the services.

There are some drawbacks to the cloud based ERP systems as well. The company loses the governance of its business function and the vendor dependability also increases. The cloud bases system also strips the company from its core business applications. Moreover, the implementation cost can also include some hidden charges (Johansson et al. 2014). The legacy systems sometimes do   not integrate well with the cloud based ERP system, other drawbacks include the scalability, lack of customised function development and cyber-attacks.

CASE STUDY 1

The Shaw Industries was privately founded by Bershire Hathaway in 1945. The company dealt with the manufacturing of building materials, carpeting and flooring. More than 2000 employees is currently working in the organization. The total revenue of the company is  over 6 billion dollars. It has its headquarters in Georgia (Flooring from Carpet to Hardwood Floors 2018).

The company decided to adopt an ERP system known as NetSuite. The system also supported the two tier system (Gupta and Misra 2016).

Rather than on premise ERP system, the mentioned company will benefit from the Cloud ERP system.  The initial investment of the ERP technology will be cheaper for Shaw Industries and will provide the company will more flexibility. The company will benefit from the subscription services provided the ERP system (NetSuite) instead of the yearly payments. This will allow Shaw Industries to spread the annual payment like an amount which is tax deductible.

Shaw industries can use the new ERP system to increase its business flexibility. The new system allows Shaw industries to access all the information from a single platform. The collaboration of the business functions were increased due t the implementation and the mismanagement of data was considerably reduced. The cloud ERP system also allows Shaw industries to use business intelligence (Johansson et al. 2015).  The flexibility of the cloud ERP system allows the company to choose its own dashboards which was suitable for the business environment.

On premise ERP system

The analysis proves that Shaw industries successfully managed to reinforce the benefits of the cloud ERP system to provide its business processes with extra agility for expanding its business globally (Sharma and Keswani 2013). Shaw industries managed to save millions of dollars as it avoided investing on a central server that is used in on premise solutions.

The cloud ERP system has a lot of benefits that was utilized proactively by Shaw Industries. The deployment quality decreased due to the fast ERP implementation.  Moreover, the company benefitted from the yearly updates that came as a service during the deployment. Some agile providers even provide the updates monthly. The system also decreases the upgrading problems. Also, the rich flexibility and user experience allowed Shaw Industries to adopt NetSuite.

The company managed to reinforce the advantages of the cloud based ERP system and managed to save millions during the deployment phase of the system. It helped to enhance the agility of the system processes (Flooring from Carpet to Hardwood Floors 2018). The new system finally allowed Shaw Industries to reach the international marks. It also helped the company to reduce the operational costs of its personnel working in the workforce. The cost of marinating a huge technical team was also reduced due to the maintenance services provided by NetSuite.

CASE STUDY 2

The next case study is based on a company which provides civil as well as engineering services. The company is named VINSUN Infra engineering and was founded in 2000. Sunil Satav was the managing director of the company at that time and he managed to find a serious problem in the business (Vinsun Infra Engineering Pvt. Ltd 2018). He understood that the company lacked a proper storage and data compilation system.  The result was that the company faced a lot of data misplacement which resulted n a lot of system inefficiencies. Ruchira Kulkarni was the CIO of the company and she suggested to implement an ERP system (Vinsun Infra Engineering Pvt. Ltd 2018). She gave a choice of either implementing a cloud based ERP system or an on premise ERP system. This decision was not taken lightly by the other managers in the Board and they argued that the staff will not accept the new system so easily. Moreover, the implementation can change a lot of business processes.

The mentioned organisation had to face a lot of initial challenges before the implementation. The old methods of collecting data was not working for the company. Data mismanagement occurred daily due to information overloading. To transfer the data manually from the Ms Excel file was a difficult time consuming work. Data security was non-existent due to no backup systems (Alajbegovic, Alexopoulos and Desalermos 2013). Moreover, even data analysis was not possible as there as a limited number of historical data.

Hosted ERP system

Also, as VINUN infra organization was a small scale company, it was logical to implement cloud based ERP system due to the low cost of implementation.

The company was particularly interested in on premise ERP systems as it had some benefits that VINSUN organization can use.  First of all, the data security was a major concern for the industry. On premise ERP system provides complex data security as the firewall is run by the company itself. The system even works properly even when the internet connection is not there which was a bug plus point for VINSUN (Parthasarathy 2013).  As the system works on intranet connection, ti does not get affected by the speed as well as connectivity issues. VINSUN will also have capability to change some aspects of the ERP system as per its business requirements as the access controls are passed on to the buyer from the vendor.

The disadvantages of the on premise ERP systems were also considered such as high initial and maintenance costs. Moreover, the testing and training process can easily disrupt the business functions (Mezghani, K., 2014).

VINSUN infra engineering organization even considered several advantages and disadvantages of the cloud based ERP technology. The tried and tested features, more accessibility, low initial cost, less disruption of business processes and no maintenance crew were better prospective for VINSUN to consider. To test both the system effectively, the company decided to make a cost benefit analysis over the next 20 years.

VINSUN organization decided on choosing the following ERP solutions from different vendors:-

• Cloud based ERP system from Codeautomations
• On premise ERP system from Bluechip
• Cloud based ERP system from Codeautomations

After the cost benefit analysis was done, the company conducted an initial and recurring cost comparison. The implementation of the on premise system by Codeautomations proved to be more cost effective in the long run than the other two systems. VINSUN also decided that the customization provided by the on premise systems will be beneficial for their company. It did not opt for the cloud based ERP system as it found out that the maintenance cost of the cloud ERP system increased considerably in the long run.

In spite of several advantages of the ERP systems, several companies have faced some negative experience due to the weaknesses of the mentioned technology.

CASE STUDY 3

The next study reinforces a disadvantage of an ERP system that costed a company millions of dollars. Nike sells sports apparels and shoes and was founded in 1957 (Nike. Just Do It. Nike.com 2018). To understand the impending market conditions, the company decided on implementing an IT technology. Due to the forecasting advantages provided by SAP ERP, the company decided to implement it in their business functions. But initially due to incoherent data from the SAP ERP system, the company decided on adopting a second ERP system named I2.

Cloud ERP system

Nike failed to assess the drawbacks cloud based ERP systems like lack of proper resources and proper training among the users. Moreover, it failed to check the proper ERP system for the company as it was in a hurry to adopt a second ERP system (Weng and Hung 2014).

Due to improper statistics provided by SAP ERP, the existing system was integrated with the new I2 system. Due to the less number of product suites, the implementation proved to be a huge failure. The company faced other issues such as complex processes, additional costs and lack of business functionalities. Lack of careful analysis and improper training deteriorated the situation.

Due to the failure of the marketers in determining the market conditions after six year, the failure of the ERP system was evident. The lack of customization also deteriorated the situation. The cloud systems are only configurable after every updates. Nowadays, system functionality as well as customizability are deemed as organizational benchmarks. Nike is a company that deals with a huge number of requests for customized products (Navaneethakrishnan 2013). The company could have considered the implementation of a cloud based ERP system in this context. Due to the lack of customization, the I2 system failed to properly map the manufactured products and provided an inconclusive statistics. Moreover, the I2 software was not integrated with the company’s back end processes. The company was planning on decreasing the number of raw materials such as rubber by decreasing the number of extra products that are generated in the peak demand seasons.

The company has a unique supply chain management system where it took orders in an advance of six months. During the implementation phase of the ERP, as the employees were untrained it proved to be a big disadvantages. The wrong statistics costed Nike more than 100 billion dollars in damage. Even after investing more than 400 million dollars for the ERP system, the lack of training was finally led to the failure of the ERP system.

Nike had to face a lot of technical issues as well as the SaaS software did not integrate properly with the existing software. The system was slowed down and it accepted wrong integration due to a software glitch. The demand planning engine ordered Air Garnetts instead of Air Jordans. Thousands of shoes were created as excess products which costed the company a lot of money.

Nowadays Nike has adopted all three SCM, CRM and ERP technologies for its system processes. I has reverted back to the Sap ERP system due to its advanced analytics. With advanced personnel training and collaboration with other industries and back end processes, the I2 software was improved as well.

Experience of Companies in reinforcing the advantages

CASE STUDY 4

Another case study of a company has been mentioned here that reinforces the weaknesses of the ERP system. Hershey is world famous manufacturer of chocolate and was founded in 1894 by Miton Hershey (HERSHEY’S Candy & Recipes – Introducing HERSHEY’S GOLD, 2018). The products were priced marginally ad hence the company decided to reach the target sale of five billion dollars. It planned on doing this by selling a huge amount of products through an advanced supply chain management system which was only possible with n IT system.

Hershey ran the traditional legacy system and was under direct pressure from the stakeholders due to the Y2K issue (Carutasu and Carutasu 2016). The company decided to adopt the SAP ERP system to aid in transportation scheduling and advanced forecasting.

But during the implementation phase, the company failed to take it account one disadvantages of the cloud based ERP systems. Integration of the existing data collecting applications are very difficult with the SaaS. This can result in unwanted bugs and data misinterpretation during the implementation phase (Sahin 2013).

Other non-related factor to the ERP weaknesses were the wrong timing of launching the new system and the big bang approach of implementing the software. Also, there was inadequate training among the personnel.

The failure of the ERP implementation resulted in delays in the shipping orders and the stock prices fell by 30%.

Conclusion

To conclude the report, it can be stated that ERP system has a lot of advantages as well as its fair share of disadvantages. Three types of ERP system has been discussed in the above report. The advantages and disadvantages of the ERP systems have been conclusively discussed. Two different experiences of companies who have successfully reinforced the benefits of ERP systems have been mentioned in the first half of the report. In the second half, two negative experiences of companies have been mentioned conclusively that reinforces the disadvantages of the ERP systems. The implications of the ERP system on the proposed companies have been mentioned and the reasons for the failures have been discussed. Despite the weaknesses that ERP system has, with proper analysis and decision making processes, organizations can use this technology to enhance the agility of their business processes

References

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Case Study 1

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