On-Premise ERP Systems

Discuss About The Supply Chain And Manufacturing Challenges.

Enterprise resource planning (ERP) is a current business tool that enables the organization, operation, and planning of company resources. Many businesses currently implement the ERP system to help facilitate their processes management system. ERP come in size, shape, and type making the system to fit in any business setting. For instance, there are ERP for various industries such as banking, human resource management, customer service management and online business service. In addition, there are different types of ERP systems depending on the hosting system type. These include on-premise ERP, Hosted ERP System and Cloud ERP System. These ERP systems have their benefits and weaknesses that affect implementation in a business environment. The following report explores the three main ERP systems based on their benefits and weaknesses.

On-premise can be described as enterprise resource planning system that is hosted by the business or company. The company develops its data center that maintains the system. This ERP system is also called the traditional ERP system and is always attributed to owner’s data control benefits.  This IT system has several benefits and weakness or risk associated with the ERP system.

There are many benefits for the companies using on-premise implementation into the business.

The business has control over the business information since this information is treated as confident and sensitive. Some of the confidential information that the on-premise ERP has secure include social security numbers, accounting and expense information, business intelligence information and supply chain information. In addition, the on-premise offers the limited risk of data breaches that will help protect the company data from any unauthorized use. For instance, there has been much concern from data mining companies using company information for their own interest (Sbarski 2017). A recent example of these data mining has been expressed by Facebook over Cambridge Analytica.

On-premise ERP offers a solution for business to reduce dependence on software vendor especially in case of vendor company going out of business. Unlike other cloud-hosted ERP, the on-premise ERP reduce dependant on the vendor hence protect the company from failure in case of business hosting ERP fail to do business. Moreover, the ERP the business has the capability of changing their business preference (Adven 2017).

Limit on-going costs is another benefit of on-premise ERP since the ownership cost is lower due to reduced hosting subscriptions. The cost that is normally incurred under this hosting system mainly based on energy and information technology maintenance. For instance, the company with willing to implement ERP normally considers the cost of ownership and maintenance as compared to other plans that rely on cost benefits than other benefits of the ERP (Thakral 2017).

Benefits of On-Premise ERP Systems

The ERP has the capability to integrate with Cloud ERP System and other ERP in case of expansion. The scalability of the ERP system is easy within the on-premise ERP due to its easy incorporation with other hosted ERP systems. This makes it easy for hybrid ERP system that allows easy public accessibility. In addition, the ERP enables using both systems to reap all the benefits of other systems. The desire to fill the gap between the on-premise system and other system is satisfied through the ERP system that allows hybrid system (Kleyman 2016).

The Oracle database 12c solution enables on-premise installation of both hybrid and internal ERP system. The company uses this to provide a solution for a business willing to invest in both hosted and on-premise ERP system. In addition, the company allows the client company to purchase software and license to host their own ERP within their premises. This allows easy integration between local hosting and external hosting systems (Hildebrand 2018).

The on-premise ERP system is easy to customize the company that owns the system has full control over the system. On-premise system allows integration with third-party software that enables good working for the information. The company using this system can lead to the installation of desired software based on individual company specification. Modification of the information system is easy under on-premise ERP system due to easy customization (Almajali 2016, pp 549).

One of the most concern of the on-premise ERP is the high cost of starting the system as the system require high infrastructure to operate. The cost of starting on-premise ERP results for acquiring hardware, software and staffs to operate the system and this is expensive especially for small and medium businesses. In addition, most business willing to invest on the on-premise ERP normally cites hiring staffs as the main cause on opting for other ERP systems. Software that is required to start on-premise ERP is very costly and this hinders many businesses from using on-premise ERP (Osintsev 2016).

On-premise ERP requires software updates, staffs to maintain the whole system and this is very expensive for business. ERP system involves much different software that needs continuous updates that the business does continue. This software is purchased from vendors leading to high maintenance cost. Hiring IT professional staffs to maintain the information system has also proved to increase the cost of on-premise ERP. Another maintenance cost is upgrading hardware as the business grows and increases its capacity. This can make the business respond slowly in case there is not update. The upgrade is also required for the hardware systems and this is very expensive as compared to other ERP systems (Trapp Technology 2016).

Weaknesses of On-Premise ERP Systems

On-premise ERP presents another challenge on the security of the system as the business has to develop their own security system for their ERP. Cloud-based ERP has security provided by the service provider and this is different with the on-premise ERP that heavily depend on the business. The cost of security software is high given the capacity of the business using the system and sensitivity of the data. For instance, companies with accounting data or payment information require the high cost to instance security system as compared to those businesses with general operations (Meleegy 2017).

Hosted ERP system is another enterprise resource planning system that comprises of a data hosted system that is set up by client company within the cloud under license of the vendor. Most of the hosting services are provided by the vendor through the client business set up the system with the help of service provider. This ERP system is characterized by various benefits and weaknesses.

The ERP allows easy scalability based on its easy to use infrastructure that is mostly managed and maintained by the service providing company. The virtualization nature of the ERP is important for scaling the IT system requirement for the business and this is also enabled for reducing downtime. Furthermore, the business can access the information system at any time needed due to the flexible nature of the ERP system (Tigernix Pte Ltd 2018).

The ERP requires minimal hardware and maintenance and this enables the business to operate with minimal hardware. Most of the hardware that is used is acquired and maintained by the external company that provides services. This reduces the cost of purchasing hardware that would have used to set up the ERP system. In addition, the time that would have been invested in setting up the system is therefore used for other business activities. The hardware used by the IT system is based at various data centers that provide hosting services (Shacklett 2018).

The ERP offers flexibility that is required in current business since any failure in hardware is offset by other systems. The system is flexible and adaptable to changing business environment since the business needs to change minimal hardware for the business to adapt. For instance, failure of internal hardware does not affect the functions of business since the business can still acquire a new hardware system to continuo enjoying IT system. The minimal challenge on the flexibility of the system rests on the system used in operating the ERP (Kenandy 2016).

Hosted ERP Systems

Another benefit of the ERP has reduced downtime as the ERP does not depend on the internal infrastructure of the company. The system continues to work and carry out its business operations such as customer’s service despite any hardware or organizational system failure since the company IT system depends on other hosting information systems outside the business. In addition, the company does not need to maintain the system for the services to continue working as normal. This reduces the downtime when hardware fails or breakdown in the course of operation (Tigernix Pte Ltd 2018).

Oracle Database Cloud is hosting service provided by the Oracle and include many different ERP hosting solutions. The company hosting services come with many automatic software updates and security protection for client companies. The company has show various advantages of hosting ERP system through its many different client services. For instance, Oracle Database In-Memory solution makes the services flexible and easy to access by client companies (Hildebrand 2018).

Sharing of data is out of control of the company since the ERP full depend on external IT company. Despite flexibility of the system, the ERP system depends on external IT system that is also subject of laws and regulation governing such countries where the hosting company exists. Furthermore, compliance to certain data sharing regulations is complicated under this IT system since the company providing this services has to comply with laws of the country. Client or customer company, on the other hand, rely on the compliance of hosting company as they depend on hosting company infrastructure and regulations. Moreover, sharing of data is also limited based on the hosting company infrastructure and software specifications that can either share or deny sharing of information (SolutionDots Systems 2018).

Integration problems is another weakness associated with the hosted ERP system as the internal platform and external IT require high software integrations. To start ERP system in the business, there is need for the business using this system to install another IT system within their company that will uses the external system which is expensive. In addition, in order to integrate internal and external systems the company has to hire expert and this is expensive. Without proper integration, the business may lose data or compromise data making every information at risk of data breaches. Moreover, changing software may be accompanied with incompatibility leading to data loss and this is detrimental to the company (Sitalakshmi & Kiran 2016).

Benefits of Hosted ERP Systems

Managing changes in the organization especially hosting plan is another risk associated with hosted ERP since the data may be lost when company decides to changes its hosting company. Sometimes the business may decide to change its hosting plan or hosting company, the data fate remains a mystery since the data that may be hosted by current company will not be transferred to another company. Moreover, the data may be sensitive yet business willing change its hosting company leading to loss of data. Software changes is another problem that may result in data loss more so when software are from different vendors leading to incompatibility. Therefore, the fate of the data remains a challenge when using hosted ERP system in the business. Expansion of the company may also lead to changing hosting system from one system to another system; this is coupled with challenge of data loss (Yang 2016, pp 13–53).

As the company expands its business operational processes, there is need to have more ERP system that present complexity challenges. One of the challenges of maintaining this multiple system is on the cost of hiring IT staffs to maintain this system. Many companies using hosted ERP system expands on faster rate with the flexibility of the system yet using more system is very difficult. Integrating these multiple systems is another challenge that is facing companies with multiple systems. For instance, reconciling data from more than one system has proved to be technical leading to inaccurate data system (Invoicera 2016).

Cloud ERP System is another ERP system that fully depends on the cloud hosting of a vendor company. The hosting service provider offers the company hosting company that also includes software that allows customer company to access this services. In order to understand Cloud ERP System, some benefits and weaknesses have been observed while using this ERP system.

Cloud ERP System offers lower cost for purchasing and maintaining the system for the business. Some cost such as purchase, maintaining cost, deploy, configure, and maintain software are some other cost that makes the cloud ERP system benefit. In addition, the business requires the limited cost to maintain the ERP especially on staff that needs to maintain the information system. This implies that the hosting provider incurs the cost of maintenance, software updates and other costs (Osintsev 2016).

Cloud ERP System offers the company easy software update as the business receives an automatic update from the service provider. Since the hosting service is provided by another company, the Cloud ERP System reduces software update since the company’s ERP is maintained by hosting company. In addition, the changing software is very costly and requires huge amount cost to maintain that software especially the firewall software that protects the system. These services are offered by hosting company and require a continuous update to maintain the integrity of the system (Kenandy 2016).

Weaknesses of Hosted ERP Systems

The Cloud ERP System is flexible and easy to expand the hosting company can automatically update the system to high capacity. Changing business capacity can slowly adapt to continuous business upgrades and capacity. The user of the business can be added or removed with flexibility due to the capacity of the hosting company that is always large. The scalability of the ERP system is easy on the Cloud ERP System to make the ERP popular in the current business environment with many businesses switching due to its flexibility (Trapp Technology 2016).

Cloud ERP System reduces dependence on internal IT system with more emphasis on low maintenance cost required in the Cloud ERP System. Cloud ERP System does not fully depend on the internal IT system as the company system is maintained by the system providers. Moreover, the business has limited infrastructure required to set up an ERP system for their business. Unlike other ERP that requires IT staff with the capability to manage and maintain the information system, Cloud ERP System does not depend on internal IT system maintained by hired staffs (Kleyman 2016).

Cloud ERP System ensures that the company receives a return on investment faster as compared to other ERP systems. The cloud ERP take a short time to set and operate as compared to other ERP systems that can take months to set up. This is based on the limited work done by the company as compared to on-premise ERP systems that are set up by company IT staffs and therefore take a long time and costly. Most work and cost is done or covered by the service provider and this makes the return on investment realized once the system becomes operational. Moreover, the system can start generating income in case it forms a core part of e-commerce business (Roh 2016).

Limited customization is a weakness for the Cloud ERP System since the system offers the limited capability to customize the system according to the business desire. Most companies offering Cloud ERP System services define standards of the system that cannot be customized despite the specific requirement of the business purchasing such services. This makes it difficult to realize the full potential of the system as most of the action is limited. Moreover, some configurations such as security need updates that are only done by the service provider and this can be problematic for internal errors within the system (Meleegy 2017).

Cloud ERP Systems

Security of the data is one of the cited concerns that face Cloud ERP System as many companies fear compromised data of the business. Most business has sensitive data and high-value information that need not be left in the hand of other companies. This has been the center of many perceived data breaches mostly from the hosting company. Moreover, the hosting company is subject to the laws of that country hence can be subjected to scrutiny by the host country. This compromise the data that may be in used by another company, the client company in another different country with different data laws. The data security is the highest concern that many companies have over current Cloud ERP Systems. For instance, accounting information is sensitive information that need not be left in another company within another different country (Fruhlinger & Wailgum 2017).

Cloud ERP System requires continuous subscription and maintenance fee that is paid to the service provider. This makes the system expensive as the business has to continuously pay to enjoy service as compared to on-premise ERP that only involves initial cost. In long term the cost of maintaining use of the ERP becomes high and business needs to periodically pay for services. Furthermore, several companies that offer Cloud ERP System services often charge a high fee for the company to start using their services and this is a very huge cost in long-term (Logan Consulting 2017).

Woolworth company has been a customer of SAP company and experienced some data related problems. The first problem was to transform the data from in-house to SAP ERP which is cloud based ERP system. The profit and loss data for various stores has a sharp problem following migration to the cloud ERP system (Fruhlinger & Wailgum 2017). This case many issues that some being security issues, integration issues and understanding processes. The security issues on this system are exposed through widen the gap between SAP security system and customers company security. This integration issue has to lead to many data exposure and security risk leading to some losses for many companies that have been using the system. A study conducted by Onapsis Research Labs on SAP data security issues indicate that data system of client companies using SAP ERP are at risk of being accessed by some other unauthorized individuals due to a technical security problem (Owens 2018). The SAP case is also attributed to incompatibility between internal security and the hosting company security leading to a gap between these two systems.

Benefits of Cloud ERP Systems

Conclusion

In conclusion, enterprise resource planning is an important aspect current business environment. There are many different types of ERPs that are used in business today and some of these include On-premise, Hosted ERP System, and Cloud ERP System. Each ERP system has benefits and weaknesses or risk associated with that system. Some of the major cited benefits of On-premise include total control of data and data security. Hosted ERP system and cloud ERP system has benefits that are flexibility and accessibility. Some of the cited risks include data breaches risk and the high cost of setting and maintaining.

References

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