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In the contemporary business circles, cloud computing has rapidly turned into a buzzword as experienced over the last decade. The importance of cloud computing model to the organizations has received significant acceptance. In fact, the acceptance in business application as a tool occurred due to the availability of computing capability, software, and supportive infrastructure.
Recent study indicated that the revenue realized from cloud computing will surpass the $14 billion (Gartner, 2009). The rush to cloud computing is evident in highly synchronized industries including the financial sector.
In the information technology sector, cloud computing is the fastest developing concept as organizations seek to provide service to the rapidly rising clientele. The technology has numerous advantages but the issue of information security and privacy has raised concerns among the end users of the technology.
Many organizations are faced with the challenge of whether or not to embrace the technology. The move to cloud computing means that the management need to move the organizational and clients data to a cloud computing module to keep and manage the information and data (Gold, 2012).
It has been observed that organizations embrace cloud computing concepts due to the savings that such organizations realize from making the decision to move the available data and information. The client organization circumvents the costs of buying computers, software, as well as the cost of installing and maintaining the system (Gray & Patterson, 2013).
However, considering that the host organization has a complete control of information, the client company risks from the fact that information may be revealed and stolen by the unauthorized users or hackers.
Like any online venture, cloud computing entails a wide range of risks and advantages that are important for the organizations to consider before making the decision to move information to the host. (Rizwana & Sasikumar, 2012).
Despite the benefits associated with traditional ERP, clouding the system helps the organization to enjoy additional benefits. Irrespective of the challenges encountered when implementing ERP through clouding, the associated benefits of cloud computing are likely to impact on the future of enterprise resource planning.
The relation between traditional ERP and cloud computing
In the previous years, commercial institutions have embraced enterprise resource planning systems. In fact, the corporations use ERP systems in management and control of various commercial operations and processes including the production and management of HRM activities.
As a result, the relationship between the traditional ERP and cloud computing is made apparent. For instance, the traditional enterprise resource planning systems are anchored on the in-house servers where various information technologies supports are constructed nearby the solutions.
The traditional ERP solutions have broad IT set-ups, multifaceted procedures, and automation. These features make the corporations that espouse such solutions to struggle with the associated hitches and overheads of upholding enormous hardware and software systems (Dudin & Smetanin, 2011).
On the other hand, clouding an ERP solution has enabled corporations to store data in a single system that they can access anywhere. In fact, unlike the customary enterprise resource planning systems that are set up on-site, the clouded ERP systems are always mounted off the location.
Despite being positioned and accessed in different places, these systems serve similar functions of the organization. These systems are run and managed by the software and hardware that act as an infrastructure during the operations. However, the customary ERP solutions are hardly scalable and elastic.
Cloud computing reduces the cost of accessing and storing information while allowing clients to access data in time from whichever location. Cloud computing does not involve the use of expensive and multifaceted far-off access software. The SaaS model, which appears to be small, tends to offer the best, uncomplicated, and inexpensive services to the organizations.
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The enterprise resource planning solution suppliers however cloud the Software as a Service (SaaS) on the systems rather than situating the solutions in buying the corporation premises.
In both cloud computing and customary enterprise resource-planning systems, the clients’ data are stored and accessed whenever an organization covets. The only privilege absent in the traditional ERP is instant gratification and timely access (Jonathan, 2012).
How cloud is going to affect or change the future of ERP
Both the small and medium size enterprises tend to rely on the ERP systems. In fact, each conclusion drawn by such organizations appear to be largely founded on the data mined or extracted via the enterprise resource planning solutions.
Besides, every business field is bound to apply the ERP solutions to keep pace with the currently changing market environment. Corporations tend to mount the ERP systems on central servers that are monitored and managed by the experts who oversee the company setups and functionality.
Thus, the ERP solutions control data flow throughout the organization, mark workforce attendance, and generate actual reports. Despite the benefits, the enterprise resource planning necessitates various resources and care for its management. Given the increased overheads of maintaining the ERP systems, corporations have longed to embrace cloud computing (Jonathan, 2012).
Irrespective of the previous hiccups linked to clouding, it is now perceived to manage the ERP solutions better. First, clouding an ERP helps in the provision of additional features, which suit each kind of trade, increase the ease of usage, and enhance elasticity devoid of the augmenting installation overheads. Secondly, clouding an ERP helps in lowering the licensing fee.
Different from the customary ERP, corporations hardly buy licenses for all clients using this solution. In fact, everybody may use the ERP solution after a corporation has paid a fixed licensing fee. This makes the system to be an economical system for SMEs (Dudin & Smetanin, 2011).
Third, the OTA normally becomes updated by the ERP system. That is, clouding the ERP assist corporations to avoid updating the systems to obtain novel development and features. Updated OTA is usually obtained by a clouded enterprise resource planning thus saving the effort and time in comparison with updating the customary ERP. Fourth, clouding an ERP assists in proper management of information.
Specifically, it improves the scalability associated with clouded ERP that makes corporations to manage the information. Given that information is stored in the cloud, the corporations can easily move data everywhere devoid of mislaying them. Fifth, clouding an ERP system helps in enhancing corporate data concealment and safety.
The system provides stringent devices and procedures that develop the protection of information from hackers and impending threats. Finally, enterprise resource planning and cloud computing may jointly assist in bringing far-reaching changes and improvements in the affluence of any corporation. In fact, there is hardly various clouded enterprise resource planning solutions in the global marketplace (Jonathan, 2012).
The benefits of cloud based ERP system
In order to facilitate the execution of the ERP solution, cloud-computing services assist the SME’s in decreasing the capital expenditure. In fact, training, customization, execution, user interface, and hardware outlays are some of the lessened upfront costs. Cloud computing is of great importance to enterprises since it reduces the costs of operation.
For instance, it tends to lower the costs of employee efforts and overheads, upgrading, configuration, repairs, and power. Compared to the customary ERP, cloud fosters speedy implementation. In some dealings, cloud services help in lessening the periods of presenting fresh market products. Besides, it proffers simpler and adequate adjustments required by the freelancers.
Under cloud computing, the capacity of infrastructure becomes extremely flexible. The flexibility augments due to the hurried resource suppleness and pooling. The scalability is a competitive advantage to the SME’s that employ cloud based ERP. The scalability advances competitiveness, elasticity that is tactical, and facilitates faster marketplace time.
Conversely, cloud-based system trims down the demands of each sector of interior IT through emphasizing on the core competences. Similarly, the SME’s exercising cloud-based ERP benefits from more advanced technologies. The organizations possess the right of entry into the superior computing assets and proficient technical knowledge.
The company upgrades and updates enable the system to allow faster accessibility to the new-fangled services than in premise systems. The cloud-based system also heightens the functions of an organization by developing the usability, mobility, and conveniences of the user interface. Moreover, the ERP system service allows for a trouble-free incorporation with other cloud services.
The shared infrastructure is beneficial to the organizations using cloud-based ERP system in that it reduces the costs of integration. In the main, the system perks up the recuperation of disaster and accessibility of systems in an organization. It guarantees high quality of power condition, recovery processes, emergency, and habitual support measures certain than the premise ERP.
The drawbacks of cloud-based ERP system
Even though the system is advantageous, it also has a number of negative aspects. The system’s periodical charges for subscription keep appreciating thus high expenditure on subscription. The cloud-based ERP system users experience contentious privacy and safety hazards. Equally, there is limited data transmission, danger of outage, as well as peril of network dependability and velocity.
Complex integration and extensive customization with other cloud services is not possible with this system due to certain limitations. Other drawbacks grow form the factors of SLA (Service Level Agreement), hybrid operation-stratagem restrictions, functionality precincts and competencies, besides the conformity and tactical jeopardy.
Challenges of implementing the ERP through cloud computing
The implementation of ERP through cloud computing has never been an easy task for the suppliers and organizations that adopts the updated solutions. In fact, amongst the most apparent challenges during the implementation of cloud-based ERP is the fact that the solution is perceived to be a limited mechanism.
However, the biggest challenge is customization, which is common when implementing clouded ERP (Dudin & Smetanin, 2011). Other implementation challenges are listed below:
- Budgeting issues tend to emanate given that organizations are hardly aware of the benefits of cloud-based ERP.
- The implementation experiences certain provisioning and mobility concerns.
- It is difficult to build trust when analyzing and supervising the cloud based ERP execution.
- The implementation of clouded ERP encounters performance and consistency issues that are never realized at the initial stages.
- The complexity and elasticity as well as testing and installation aspects pose significant technical challenges.
- The implementation phase also encounters various liabilities and legal issues.
- During the implementation of clouded ERP, parties involved usually have limited confidence arising from data security.
- At times, it becomes very tricky to extract information from clouds.
It is apparent that cloud computing has received an increasing popularity due to the associated cost reduction benefits. Many organizations are continuously embracing the concept in managing business intelligence. However, proper care needs to be taken to mitigate data information and security risks associated with sensitive data stored in remote systems.
When appropriate measures are implemented, the risks associated with cloud computing is significantly diminished. However, it is important for the security developers to ensure that hackers do not overtake them in terms of technology guarding against data privacy and security.
Cloud providers should ensure that the purchaser keeps data ownership rights. The client whose information is not stored in cloud should ensure that data and information is secure prior to transferring it to the cloud. The accessibility of such information should be restricted to the appropriate personnel.
The provider should ensure that clients are supplied with sufficient detail concerning their data. The providers ought to agree to the rational provisions that address the competency, capacity, policies, and processes related to the availed service. Similarly, they should guarantee reasonable protection against privacy and security susceptibility.
The users should ensure that information backup is available within the organization’s system and arrange with the provider to be availed with the same. Despite the security concerns and challenges encountered when implementing clouded ERP, cloud computing has become part of ERP solution.
It enables organizations to access their data from a centralized place. Besides, the cost of installing such a system has been drastically lowered compared to the customary ERP. Thus, organization derive various benefits from cloud based ERP compared to the customary ERP.
Dudin, E. & Smetanin, Y. (2011). A review of cloud computing. Journal of Scientific and Technical Information Processing, 38(4): 280 –284.
Gartner, I. (2009). Gartner highlights five attributes of cloud computing. Web.
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Gray, J. & Patterson, D. (2013). A conversation with Jimmy Gray. ACM Queue Journal, 1(4), 8–17.
Jonathan, G. (2012). To cloud or not to cloud: That is the question for ERP. MHD Supply Chain Solutions, 42(1), 36-37.
Rizwana, S. & Sasikumar, M. (2012). Security issues in cloud computing: A survey. International Journal of Computer Applications, 44(19), 4-10.