Bco 6603 - Enterprise Resource Planning System

Enterprise Resource Planning System

BCO 6603

ERP Systems in the Cloud

Thuy Linh Nguyen (s4555887)
Tutorial time: Friday 7:30 PM - 8:30 PM
Tutor: Nathan Ekambareshwar

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1. Introduction

        An Enterprise Resource Planning (ERP)  System is a real-time tool integrate information from different sources supporting organizations’ functions, helping the firm to reduce data redundancy and increase value as a result (Hawking, 2005). Cloud computing, which is referred to as ‘the cloud’, continues to have a significant attention and hype from Internet users and especially from companies worldwide. There is no clear definition of the term but it can be understood as an on-demand computing resource providing access to a shared network, incapable to process the data and, as Hassan states it in his journal, manage it with a little effort (Hassan, 2011). First established its existence in the late 2000s, the cloud’s advantage has become a situation when companies consider applying to their ERP Systems.

        Since there are a couple of main choices, the decision is to select whether a cloud-based ERP or a traditional one. The cloud-based ERP has been proving itself as an effective tool on a short term basis with small to medium-sized enterprises (Hasheela, 2015). However, there are some remarkable weaknesses of both Hosted ERP Systems and Cloud ERP Systems concerning control and flexibility compared to On-premise ERP in a traditional way. This paper will provide an overview of ERP Systems, illustrate a get better perspective of 3 main options by investigating the potential as well as strengths and weaknesses of each. The methodology for this is conducting literature review from companies experiencing the situations. By doing so, enterprises can have their own decision for ERP Systems implementation based on recommendations given at the end of paperwork.

2. Cloud Computing

        Cloud Computing can be seen as one of the best revolutions in Information Communication Technology industry. Some people might not understand how Cloud Computing works, so take iCloud as an extremely obvious example of storing, managing and sharing data among users using The Internet instead of using a hard disk drive or USB to do the job. iCloud is a service provided by Apple Inc., developed based on the term ‘cloud computing’ which is increasingly growing at the moment. Since it is based on Internet service, Cloud Computing will help to avoid an upfront fee of infrastructure which is remarkable huge for hardware and software systems.

        The growth of Could Computing for over the past ten years proved that firms care about the quality of business instead of focusing on infrastructure. Along with the advantage of service-oriented architecture, low-cost storage devices, and high-capacity networks, Cloud Computing has become the first choice for companies (Gartner, 2010). Besides, its visualization allows users to manage and evaluate in a familiar environment, which is better for any IT departments within the companies. Marinescu illustrates Cloud Computing in 5 main categories as shown below:[pic 2][pic 3]

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Figure 1: Cloud computing aspects (Marinescu, 2013)

Having said that, deciding the options for ERP Systems can be understood as finding a suitable delivery model for the systems.

3. Options for ERP Systems

        To start with, ERP is a tool to manage and integrate data in computer software form. Klaus and Gable analyzed ERP as the most important aspect of the real-time processing and delivering within a business (Klaus et al., 2000). It is important to choose the cost-effective way to run the business, and we witness the significant transformation in the way ERP Systems are adopted especially for small and medium organizations. As mentioned above, there are three main options for ERP Systems: On-premise, Hosted ERP, and Cloud ERP systems. The main difference among three choices for ERP is that On-premise is a traditional way which is installed within the company after purchasing the licences while Cloud-based ERP is more about service - operate it ‘in the cloud’ and share data among users via The Internet usually by web browser. Each of the options has its own strengths and weaknesses as advocate states that there is no perfect choice for all.

3.1. On-Premise

        On-premise is a traditional model for ERP Systems implemented for a long time and be used by a majority of companies from the beginning of ERP history. With the traditional ERP, the licences are purchased by firms and be implemented within the companies. Shortly, the company needs to pay upfront for the hardware, software, licences and other IT services if necessary to have ownership for that (Grumman, 2011). Moreover, if the company does not have experienced IT staffs to manage the system, then they need to invest more in personal training to ensure that the system is running smoothly.

        More payment required to be made for on-premise ERP is the enhancement cost, for some instance when an updated version got released. If the company does not want to upgrade the system due to the high cost, they can avoid it but in return, the firm might not be received any support from the provider. Not to mention one of the reasons for denying the upgrade is once the organization update new version, all the modification that they have made is gone and the IT staffs need to redo it, which could cause redundancy and become a waste of time.

        Despite all of the disadvantages above, On-premise model is still a traditional method with high security and reliability. Since it is owned and managed by the company, the system can be customized the way they want. Having said that, on-premise seems suitable for large enterprises rather than small and medium ones. Hasheela points out the fact that large companies usually have their own in-house technical resources and a significant amount of investment while small and medium firms with less capital tend to rely on external resources (Hasheela, 2015). If a firm does not have enough resources to implement ERP as well as run business in a long term, then they should reconsider not to take a big risk. In contrast, when taking the risk, enterprises could gain a competitive advantage in the market if they invest efficiently.

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