On-Premise ERP Software System

Discuss About The Ambidexterity On Process Of Business Model.

The paper provides information on the three ERP software system- on-premise, hosted and cloud software. Along with this the risks and benefits of the three ERP software system are also discussed in this context. Among the three system, the most commonly used system is cloud ERP software so some examples of the industry which uses this software system are also discussed in this paper. Furthermore, a comparative study has been done in between the three software system that provides an idea of using the cloud ERP system that can help for the better growth of the business in the market.

The Enterprise Resource Planning system is a software by which an organization operates the functional part of a business.

For maintaining the supply chain issues and the business procedure of a company this on-premise ERP software system is used. The on-premise software system mainly defines as the traditional approach in which the company purchases the licenses from an ERP system and installs it within their system. The amount of the license key will depend mainly on the size of the company as well as the number of the users using this software (Al-Ghofaili, and Al-Mashari, 2014). The software system mainly runs in the company headquarters rather than in some remote places. Apart from this monthly installation has to pay for the upgrading the system and also to install other software’s. The IT team will then modify the system according to the needs which help to improve the function of the software system and for this proper training are given to them. This system is very flexible, easy to operates the function and highly secure from any other ERP system but nowadays it becomes outdated and less used by any company.

The on-premise ERP system gives several numbers of benefits to the organization. The total cost of tenure will be lower in using this on-premise software system this is because of the fact that one-time purchase will occur on buying the license from the ERP system. The on-premise software system can be installed locally by one purchase and it can be operated from the company headquarters. The main function of the system is to maintain the functional operation of the business and for this security is very important to this system provides a high level of security from any other ERP system (Dwivedi, and Sharma, 2016). The security of the employee, their accounts along with proper data of the supplier as well as customer and investor are safely secured by using this ERP system. Since the system is very flexible so it reduces the vendor dependency on the company. On using this software system the vendor does not have to depend on the upgradation of the system as the system is internally operated and hence it runs perfectly without any problem.

Benefits of On-Premise ERP System

Apart from this as the system is not connected with the internet so no external factor access the software system and thus by using this on-premise system one can complete the work on the stipulated period of time. As the software will be purchased for one time from the ERP software so for upgrading the software huge cost will be initiated but the maintenance cost will be lower (Erturk, and Arora, 2017). The IT team member of the organization easily upgraded or modifies the system and hence the maintenance cost will thus reduce for using this system in the organization. This system when combining with the cloud ERP system gives a better performance for the growth of the firm. Along with this customization will be easier on using this software system. Since it an offline based software system so the vendors made more inclusive software development procedure for this system. In other ERP system vendor have to depend on the upgradation process but in case of this software system no such upgradation will occur and thus the workers satisfy the needs of the customer.

Instead of such advantages, the on-premise software system has many disadvantages or risks that can make a huge effect on the company. The main problem arises in the infrastructure process as a proper hardware is needed for the software but due to the high cost, this cannot be afforded by the organization. Apart from this the after five years, the hardware should be changed so that the software should run properly but due to the high-cost lack of this purposes will occur in the organization (Fruth, and Neacsu, 2014). On the other hand, the cost of buying the license of the software is very high and along with this yearly payment have also to be given to the software company and hence it causes a huge problem to the company to run the system. Though the software system is very secure no regular backup and updating of the system are not provided which causes a big problem to run the machine and deliver appropriate services to the customers.

So if an employee leaves the work then the data on which he working will also be lost which create a big issue for the organization. Apart from this the IT member of the organization use soft coding language as security for upgrading the system and thus using of such coding language is not so much secured to pursue an organization and any hacker can hack the system and the data can be lost (Weng, and Hung, 2014). As it is the older version of ERP software so it does not become so much compatible with the new upgradation process and hence sometimes the software crashes that affected both the servers and the customer and due to this the company faces many problems on using this software system (Gupta et al., 2017). The delay of updating the software makes the system vulnerable as the working speed will reduce and it affects the company business to run smoothly in the market.  

Risks of On-Premise ERP System

This software system is also known as Infrastructure as a Service (IaaS) and this system purchases the license key from the ERP system and installs them on the infrastructure of the third party using the cloud (Haddara, 2018). It is also known as Platform as a service (PaaS) system. This system is mainly access to the internet and the cloud vendors mainly host the whole infrastructure of the system.  The software system provides hardware, software, servers and other IT product that are useful for the better growth of the organization. The system performs some operation like billing, backup, and recovery of the data so that any important data from the software cannot get lost. Since it is an internet based software so it can control easily all the function and operation of the organization using cloud services.

The function and performances of the organization can easily be monitored using this cloud services. The hosted ERP system is mainly accessed by using a Virtual Private network, Citrix and Remote Terminal Services and along with this the client software can easily installed in this software system and can be accessed easily by using this hosted ERP system (Khazaeli et al., 2015). As for example, the hosted ERP system is used by a Greek company named Sarmed logistics.  As it is a logistic company so the software used to accomplish all the needs of the customer and thus this company has now spread their business in Northern Greece.

The hosted ERP system gives a wide range of benefits on using this system in the organization. Since it is an online software system thus the cost of updating the software will decrease. In case of the on-premise system the organization has to buy the software for upgradation purposes but in case of this ERP system, no such option will be needed as it is directly connected to the internet and hence no employee will be hired for completing the work (Kramer et al., 2016). Along with this, the software solves the security issues automatically after the upgradation process and thus the workers feel interested to work efficiently in the organization.

As the software is hosted so someone can use this software in any location and the only need for running the system is a computer having a good internet connection and thus a minimal infrastructure is needed for using this software system (Kumar et al., 2017). This software system runs very easily and can be used from any location and thus it makes a good access for the employee to use this software system. Due to this least number of technicians are needed for the maintenance of the operation and thus the system used by many companies nowadays. An organization can fulfill all the demands and needs of the customer or quality product by using this software and hence the system is very flexible and no degradation of performances will occur on using this software system. By using this system the organization can also add or remove a member easily without any issue. 

Hosted ERP Software System

Since this hosted ERP system is run with the help of the internet connection so some risks are present on using this type of software system. As the software is directly connected with the internet and it is automatically updated so a hacker can easily steal the data and thus it causes a high risk on the security option in using this system (Lee et al., 2017). This also affected the privacy of the organization and sometimes data will be also lost on using this software system. The system causes a huge problem to the small industries mainly. Since the system is totally dependent on the internet so any connectivity losses in the network can cause a huge problem on the system which affects the work and also some technical difficulties occur on having this issue. Using this software system the updating cost will be lower but the maintenance cost will be higher as a higher number of the technician are needed for operating the system. The hosted ERP system is totally dependent on the internet so hacking of the data by the hacker or malicious attack can also occur on using this system and for this reason, the personal data of the organization should be lost (Tracy, 2016).

The cloud ERP system is a computer-based ERP system which is hosted by a cloud computing platform and access mainly through the internet. This system is known as Software as a Service (SaaS) and the company mainly pays a certain amount of money to the software holder for using this software in their operating system (Link, and Back, 2015). This system is accessed through the internet and the different functional operations and data analysis can be maintained by using this system in the organization. Thus the system is mainly used by many of the organization instead of using the other two ERP system. The software can be operated through the internet from any location and also from the different department of the company. Apart from this the system also monitored the finance and the human resource management procedure of the organization.

Since it is an online based software so upfront costs will be lower as the software is continuously upgrading their function and thus the organization uses this software because it runs smoother than any other ERP system. Mainly the small and medium organization used this software system and apart from this it is also a good software system for new business or for a start-up business (López, and Ishizaka, 2017). Apart from this using this software system the company will gain a huge profit in the market locally and internationally. The company that uses this software system is Nestle that included both Nestle USA, Nestle UK and Nestle SA where the use of this new technology makes a huge profit in the company. Along with this the Cadbury Company also uses this software system for the better growth of their business as this system provides a high-security level to the data.

Benefits of Hosted ERP System

Nowadays the cloud ERP software system is mainly used by the organization. The cloud ERP system has many benefits over the other two ERP systems (Peng, and Gala, 2014). The cloud ERP system can be used in any location with the help of an internet connection. Thus the upgradation cost of the software, as well as the installation cost of the new program, are decreased and hence the total upfront cost of the organization will reduce. The software is very flexible and easy to use so it can fulfill all the needs of the customer which reduces the operational cost. Apart from this, the system provides high security of storing the data so that the information cannot be stolen or hacked by the hacker or some malicious attack will take place. Due to this the organization will hire the right person or operate this system so that the information regarding the business should be safe.

In the software, a tracking it will present that can help the user to know who is working on the system and thus the security of the system will sustain (Ramasamy, and Singh, 2017). The cloud ERP system, on the other hand, fulfills all the needs and services of the company so that the company will run easily without any problem. For this reason, the company can experience a huge growth in the market. Since this system is quite easy to use and is very flexible to the users so many small and medium industries used the ERP system for the better growth of their firm (Seethamraju, 2015). Another huge benefit of this system is that it can be used from anywhere in the world where internet connection is present.  Thus the employee access this software from everywhere in the world where proper internet connection is present. As it is a very flexible system and easy to use so from any location so it will fulfill all the needs of the customer as well as the employee and thus it can be used by the organization for the better growth of their firm.

Though the cloud ERP system has many benefits some risks are also present in using this software system. When a software is running through an internet then a security risk is always present and this cloud ERP system runs through the internet. Due to this factor sometimes stealing of the data by the hacker or corrupting of the data occur that can damage the whole system, as well as the company, gets also affected by this problem (Saa et al., 2017). Sometimes the malicious attack can also ruin the system so security problem is the main factor of not using this system. When doing any business meeting or strategies in this software with an international client if the network failure occurs then it causes a huge damage to the business procedure. As the software upgraded automatically so it makes a huge problem to the management team as they cannot easily adapt the software function and hence the working procedure will thus affect (Sedera et al., 2015). Apart from this the main risks of the system are that if wrong information is inputted in the system then it gives the wrong result which is not so fruitful for the organization and due to this problem nowadays proper training is given to the employee for using the system correctly without any problem.

Risks of Hosted ERP System

Among the three nowadays mainly the cloud ERP system is used. According to Fan et al., 2015, the upfront cost for maintenance and upgradation process of the on-premise system is much higher than the cloud ERP system because this system run online only and upgradation occur automatically. On the other hand, the client can modify the on-premise software but in case of cloud ERP, no such kind of modification should be slowed by the software. As per the view of Johansson et al., 2015 of the time of completing the task is much less in cloud system rather than any other two systems. Since hosted and cloud ERP system is directly connected to the internet so upgradation process in both the system is much easier than that of the on-premise system. In the on-premise system, the IT technician will modify the system so large number of technicians are needed in this system than the other two. According to the author Nowak, and Kurbel, 2016 the cloud and the hosted ERP system are more easy to use and hence more flexible than the on-premise software and hence nowadays it is considered as the outdated system. In the words of Scholtz, and Atukwase, 2016, the on-premise software is only operated by the employees present in the head office while the hosted system is operated by the vendors through the internet. The only differences between the hosted and the cloud ERP system are that the hosted software is operated through private network and services and thus client installation is needed for running the system but in case of cloud ERP system, no such installation is needed for running the software. Thus in between the three software system mainly the cloud ERP software system are used in many small and medium business.

Conclusion

The paper gives a proper view on on-premise, hosted and cloud ERP system on which the cloud ERP system is considered as the best and hence it is used in the market nowadays apart from the other two systems.  On the hand, the on-premise ERP system is considered as an obsolete system as this is controlled by company office only and thus they are less used in the present market. On the other hand, the hosted and the cloud software are connected directly to the internet so their graduation process is much easier than the on-premise software. Thus the on-premise software is not mainly used by the company and instead of its cloud and hosted software are used. Both the hosted and cloud ERP software are mainly used because it can be operated from any part of the world where internet connection is present and thus the business can run locally and internationally. Although in between the two system mainly the cloud software is used because it has a high-security level and lowers risk factor than that of the hosted system. Apart from thus benefits some risk factor are also present in the cloud software and thus the medium and some large industry uses this kind of system.

Cloud ERP Software System

References

Al-Ghofaili, A.A., and Al-Mashari, M.A., 2014, August. ERP system adoption traditional ERP systems vs. cloud-based ERP systems. In Innovative Computing Technology (INTECH), 2014 Fourth International Conference on (pp. 135-139). IEEE.

Dwivedi, K. and Sharma, M., 2016. Virtual Investigation of Grouping of on Premise and Cloud ERP. International Journal of Research and Development in Applied Science and Engineering, 9(1).

Erturk, E. and Arora, J.K., 2017. An Exploratory Study on the Implementation and Adoption of ERP Solutions for Businesses. arXiv preprint arXiv:1701.08329.

Fan, Y.W., Chen, C.D., Wu, C.C. and Fang, Y.H., 2015. The effect of status quo bias on cloud system adoption. Journal of Computer Information Systems, 55(3), pp.55-64.

Fruth, A. and Neacsu, M.N., 2014. Aspects Regarding ERP Information Systems, Cloud-Based or on-Premise, with Influence upon Elaboration of Appropriate Marketing Strategies. Calitatea, 15(S2), p.186.

Gupta, S., Misra, S.C., Singh, A., Kumar, V. and Kumar, U., 2017. Identification of challenges and their ranking in the implementation of cloud ERP: A comparative study for SMEs and large organizations. International Journal of Quality & Reliability Management, 34(7), pp.1056-1072.

Haddara, M., 2018. ERP systems selection in multinational enterprises: a practical guide. Determinants of analytics-based managerial decision-making.

Johansson, B., Alajbegovic, A., Alexopoulo, V. and Desalermos, A., 2015, January. Cloud ERP adoption opportunities and concerns: the role of organizational size. In System Sciences (HICSS), 2015 48th Hawaii International Conference on (pp. 4211-4219). IEEE.

Khazaeli, M., Javadpour, L., and Knapp, G.M., 2015, January. ERP adoption in enterprises with emerging Big Data. In IIE Annual Conference. Proceedings (p. 1664). Institute of Industrial and Systems Engineers (IISE).

Kramer, F., Rehn, T., Schneider, M., and Turowski, K., 2016. ERP-adoption within SME—challenging the existing body of knowledge with a recent case. In Multidimensional Views on Enterprise Information Systems (pp. 41-54). Springer, Cham.

Kranz, J.J., Hanelt, A. and Kolbe, L.M., 2016. Understanding the influence of absorptive capacity and ambidexterity on the process of business model change–the case of on?premise and cloud?computing software. Information Systems Journal, 26(5), pp.477-517.

Kumar, D., Desai, A.M., Basu, A., Yu, Y.P., and Swaminathan, M., Microsoft Technology Licensing, LLC, 2017. AUTOMATIC CONFIGURATION OF A COMPUTER SYSTEM BASED ON PROCESS MODELING OF AN IMPLEMENTED PROCESS. U.S. Patent Application 15/403,666.

Lee, M.J., Wong, W.Y. and Hoo, M.H., 2017, December. Next era of enterprise resource planning system review on traditional on-premise ERP versus cloud-based ERP: Factors influence decision on migration to cloud-based ERP for Malaysian SMEs/SMIs. In Systems, Process, and Control (ICSPC), 2017 IEEE Conference on (pp. 48-53). IEEE.

Link, B., and Back, A., 2015. Classifying systemic differences between software as a service-and on-premise-enterprise resource planning. Journal of Enterprise Information Management, 28(6), pp.808-837.

López, C. and Ishizaka, A., 2017. GAHPSort: A new group multi-criteria decision method for sorting a large number of the cloud-based ERP solutions. Computers in Industry, 92, pp.12-24.

Nowak, D. and Kurbel, K., 2016, November. Understanding the Flexibility of Cloud ERP Software. In International Conference on Enterprise Resource Planning Systems (pp. 135-146). Springer, Cham.

Peng, G.C.A. and Gala, C., 2014. Cloud ERP: a new dilemma to modern organizations?. Journal of Computer Information Systems, 54(4), pp.22-30.

Ramasamy, M. and Singh, R.P., 2017. BENEFITS, CHALLENGES, AND SELECTION OF CLOUD ERP SYSTEMS USED IN SMEs.

Saa, P., Moscoso-Zea, O., Costales, A.C. and Luján-Mora, S., 2017, June. Data security issues in cloud-based Software-as-a-Service ERP. In Information Systems and Technologies (CISTI), 2017 12th Iberian Conference on (pp. 1-7). IEEE.

Scholtz, B. and Atukwase, D., 2016. An Analysis of the Perceived Benefits and Drawbacks of Cloud ERP Systems: A South African Study. In Information Technology in Environmental Engineering (pp. 75-87). Springer, Cham.

Sedera, D., Gronau, N. and Sumner, M. eds., 2015. Enterprise Systems. Strategic, Organizational, and Technological Dimensions: International Workshops, Pre-ICIS 2010, St. Louis, MO, USA, December 12, 2010, Pre-ICIS 2011, Shanghai, China, December 4, 2011, and Pre-ICIS 2012, Orlando, FL, USA, December 16, 2012, Revised Selected Papers (Vol. 198). Springer.

Seethamraju, R., 2015. Adoption of software as a service (SaaS) enterprise resource planning (ERP) systems in small and medium sized enterprises (SMEs). Information systems frontiers, 17(3), pp.475-492.

Tracy, K.W., 2016. Cloud Application Sprawl in Enterprise Applications. IEEE Potentials, 35(2), pp.26-29.

Weng, F. and Hung, M.C., 2014. Competition and challenge on adopting cloud ERP. International Journal of Innovation, Management, and Technology, 5(4), p.309.