Enterprise Resource Planning (ERP)

in Cloud

Few years back, cloud did not have many takers. It was considered as marketing propaganda. Top management had big
doubts about it- particularly performing key business applications like Enterprise Resource Planning (ERP). Now, despite the
fact that cloud has made significant presence into IT industry, many organizations do not prefer it mainly for complicated
ERP tasks. Data security, business continuity & control, and privacy are few major concerns for enterprises. Low cost,
scalability and flexibility are important advantages of cloud-based ERP.

Introduction
Gartner created the abbreviation ERP in 1990, which conventionally has been a complicated software containing several
incorporated applications to run multifaceted business procedures. ERPs requisite thorough preparation and substantial
means to execute, therefore accompanying expenditure and efforts are extraordinary.
ERPs plays important role in organizations key business processes such as:

Sales

Dispatch

Production
planning

Payroll
processing

Invoicing

ERP also stores vital and confidential information such as finance, revenue etc. Therefore enterprises have been managing
them with extreme planning, care, rheostat and safety. ERPs are normally recognized for substantial license price,
maintenance fee and hard work require for upgrade. The ERP industry being huge comprises substantial work and expense
to keep moving. Cloud based ERP suppliers are putting effort to hit into this zone to offer low cost solution. A cloud based
ERP supplier provides ERP as a service. It is given through internet, maintained by service provider and fee paid on the basis
of subscription.
Other cloud based services are accomplishing extraordinary growth. ERP services have still not got acceptance as it has
concerns for information security and privacy. But, to decrease the always increasing ERP operation expense, organizations
have initiated thinking about cloud based ERP.
Though the cloud based offerings are achieving a high growth, ERP offerings are yet to gain that much acceptance due to
issues related to data security, privacy and control in cloud. However, in order to reduce the ever increasing cost of ERP
operations, companies have started considering cloud as an option to run their ERPs.

Benefits of Cloud ERP

Cloud based solutions possibly carry fear of unknown". Companies themselves would like to control physical servers. They
still want to have look and feel of physical devices. They do not want to hand over to someone else who will store their
important and confidential information somewhere in cloud. Though, cloud based solutions provides several advantages in
the form of expense, control on cash outflow, rapid implementation, enhanced internal IT processes etc.

Be Updated

ERPs might have touched prime of life in the form of qualities, features andfunctionalities. Therefore organizations might
not be thinking to get new features immediately. This thought process might be restricting cash outflow for them, but later
on expense of any functional advancement will be considerably greater. All application has several supports in the form of:

Hardware

Operating
system

Middleware

Database

Front end
applications

All of above mentioned supports has their own life span for scalability and usability. Therefore advancement of applications
is essential to be sustained and viable in business. Postponing the advancement in fact increases the expenditure. Cloud
based services are able to keep up-gradation cost at lower side. Shifting to cloud based ERP allows organizations to be
updated with cutting edge technologies. It also takes away burden of up-gradation and other day to day IT concerns such
as bugs, patches etc.
2

Rationalized Cash Flow

Enterprises do not have to make investment for licences, technical support and feature advancement with payment on the
basis of number of users. Subscription based model offers higher suppleness of fine-tuning the expense as per usage.
A subscription based method can be chosen which would be invoiced on monthly basis depending on usage.

Low Capital Expenditure

With cloud based services, organizations are choosing pay-per-use

business model. With this model enterprise does not have to buy
licenses in wholesale. They can shift to subscription based business
model. Companies do not have to make any capital expenditure to
buy server, space, rack, licences, data storage etc. to run their
business. Therefore, implementing a cloud based service is much
quicker and economical than an on-premise infrastructure set-up.
Additionally, with latest technical revolutions, the means, particularly
hardware, become outdated sooner and requisite to be substituted
or improved with new technologies to accomplish necessary
proficiency. This needs regular funding. Cloud removes the requisite
for such investment.
In most of the cases, on-premise set-up is never utilize to its full capacity as companies keeps additional capability to take
care of future requirement. Low utilization increases the operational expenditure. A cloud service provider uses one
common resource to serve various clients that creates win-win situation for both service provider and client. It also reduces
load on internal IT operation which leads to cost saving and keeping IT budget intact.

Flexibility

Cloud provides flexibility, options and control while picking the

services on need basis. Enterprises can choose the best available
application that is not dependent of platform and does not have any
concern about compatibility. It also gives flexibility to keep using the
software or change on the basis of change in business requirement.
During peak time such as year-end, when additional resources are
require to finish the job like balance sheet, inventory appeasement,
organizations can avail more resources and means allocated to get
additional computing for quicker processing.
5

Quick Implementation

ERP systems are recognized for complication and time taken for execution. This needs a correct planning and excellent
project management. Usually, companies keep good amount of lead time to buy hardware and network set-up. This
concern multiplies if implementation needs to be done in more than one country or region. A cloud based service execution
happens quickly and fastens implementation that leads to quicker roll-out. Also in multi country implementation cloud based
service gets rolled out faster as it saves time on license and hardware procurement.
6

Enhance Business Performance

A cloud service normally offers everything which internal IT department provides to company to manage business continuity.
They can be such as:

Test/development instances

Applying hotfix and patches

Disaster recovery plan

VPN access

Access to latest features

System admin activities

Single sign-on

Maintenance

Measured SLAs

Emails

24X7 support

Security compliance

Regular backup
With cloud, IT can now devote additional time, energy and concentration on more tactical jobs driving business welfares like
inventions, observing KPIs, BI reporting etc. It becomes simpler to prepare for next implementation, adding new features as
execution turn-around time is reduced to a greater extent. It accelerates testing, authentication and training activities.

Apprehensions With Cloud Services

Although there are several advantages which can be gained from a cloud based services, there are several worries as
well - particularly for ERP. ERPs have conventionally been executed on-premise and cloud carries various doubts in the form
of data safety, control, privacy and continuity. Although cloud services are getting matured and vendors are putting effort to
take care of issues but still issues are there remains and not all advantage looks so profitable.

Data security

Service providers are offering multi-level safety such as

Operating System level
Firewalls
Virtualization
Instance isolation
Multifactor authentication
Federate identity management
Traffic screening
Network access control
Although data safety measurement would differ based on vendor, precaution should be taken to make sure that legal
necessities for data safety are not dishonoured. There are many data security standards that vendor should certify prior to
offering the service. In several nations, as an addition to data safety, data confidentiality is administrated by local government
policies. Vendor should follow those nation specific guidelines.

Business Continuity

As several important business functions uses ERP, business continuity and disaster recovery turns out to be the most vital
aspect of business. So, in the first place, many senior IT executives may not approve to outsource the most important aspect
of business. But the truth is that dependable and trustworthy vendors have addressed these issues to a greater degree. They
are implementing excellent processes like using experts, redundancy and segregation to solve these issues. There are
instances where vendors are providing much more reliable service than internal IT department. In addition to this vendor
also manages various day-to-day issues such as anti-viruses, software authentication or unauthorized physical access.
3

Amplified Operational Expenditure In Long Run

It seems rewarding in starting; expense can become expensive in long run, due to constant subscription based pricing.
Maximum subscriptions are dependent on number of users. Therefore for enterprises with large number of users,
on-premise set-up is much more cost effective. Enterprises should find out the business model which offers some freedom
for higher number of users.
Also, enterprise has to pay continuously in pay-per-use model. Whereas in an on-premise set-up, primary expenditure
would be big, but subsequent expense will be lesser than cloud. Typically, on-premise set-up cost is same as subscription
based payment for 4 years in case of 100 users. But for cloud based service, organization has to keep paying even after
4 years.

Localization Restriction

A cloud based services may not offer extreme customization possibilities and suppleness as delivered by an on-premise
deployment. Normally cloud applications would have limitation to provide extreme tailor made service. Big enterprises have
substantial customization needs in ERPs. It could be a constraining, where application customization is mostly needed to
fulfil business needs. It may not affect small companies because they can modify their process easily as per available ERP
functions.
5

Integration With Legacy Systems

Particularly in big enterprises, ERP incorporated with several legacy systems. These technologies and functions are exclusive
to companies, and in several situations, these are outdated and don't maintain new standards. Incorporation of ERP with
these systems comes with technical difficulties and also information safety concerns, as companies have to expose their
firewall and ports so that cloud service vendor can access the system.

On Premise Vs Cloud
Cloud industry is growing, with all ERP service providers provisioning cloud based service. Important business function runs
on ERP therefore it would be always in business and organization will keep spending money on ERP maintenance and
enhancement. Bearing in mind these complications, to make a conclusion to shift to a cloud based ERP is always going to
be a tough task. It will need a thorough evaluation and possibility analysis.
Influences

On-premise

Cloud

Capex

High

Low

Opex

Medium

High

Long run expenditure

Medium

High

Data safety

High

Medium

Physical and environmental safety

High

High

Continuity

High

High

Control

High

Low

Latest practices execution

Medium

High

Innovation possibilities

Medium

High

Up-to-date

Low

High

Turn-around time

Low

High

Up-gradation

Low

High

Internal reliance

Low

High

External reliance

High

Low

Localization potentials

High

Low

Internal IT staff availability

Medium

High

Conclusion
Cloud brings advantages but also comes with concerns. Big enterprises would have more issues in comparison of SME in
implementing cloud based ERP service. Shifting from a previously executed on-premise set-up to cloud will be more
complex and costly as pre-set expense on hardware and software cannot be recovered and invested again.
Therefore, SME and new set-up can consider implementation of cloud-based ERP. It offers low total cost of ownership and
flexibility to scale up and down. It would be more beneficial for SME.
Organizations should also find out vendors who can provide flexibility to come back to on- premise set-up to reduce the
business risk. Another option could be hybrid model to begin with where organization can have combination of cloud and
on-premise. It can be divided into two parts, important data and function can run on on-premise set-up while other functions
can be operated through cloud. Also they should run a thorough check on vendors credential and have a partnership with
an organization that can provide all required services.

About Orchestrate
Orchestrate is a US based business process management organization with Headquarter in Dallas, USA. Orchestrate
satisfies to the diverse outsourcing requirements of clients in an extensive range of businesses, including IT, finance,
mortgage, utilities and healthcare. Orchestrate is continuously motivated to add significance to clients businesses through
efficient back office practices and noteworthy cost savings.

Solutions for higher performance!

1330, Capital Parkway, Carrollton, Texas 75006

sales@orchestrate.com | Toll Free: 800-232-5130

www.orchestrate.com