ABSTRACT
Enterprise resource planning (ERP) and cloud computing are beneficial to organizations both profit based organization and non-profit organizations. However, there are challenges and risks that arise from ERP and cloud computing. This research will investigate the challenges, risks and the level associated with the adoption of cloud ERP systems. The research will aim at finding out the challenges and risks associated with the adoption of cloud ERP systems. The research questions will aim at addressing the challenges and risks as well as the level of the risks associated with adoption of cloud ERP systems. An exploratory and descriptive research method will be applied throughout the research.
In any research, mode of data collection is vital; in this case data will be collected by use of questionnaires, interviews and observation. Data collected from the field of study will be analyzed by use of data analysis tools and computer software which will include SPSS and Ms.Excel. This will ensure the results obtained are precise and accurate.Introduction and significance
The ERP is an acronym that stands for integrated resource planning. ERP is management software that mostly focuses on business fields. The software enables the company or an organization to integrate all its operations such development, manufacturing, sales and marketing. At first, the ERP system was aimed at automating office operations but did not focus on the clients or customers. Later on ERP was developed when the communication through the internet came into being. As a result, organizations were able to interact with clients and customers. There are numerous benefits that companies and organizations can realize through adoption of ERP systems. Due to efficiency of ERP system, companies output is increased because there will be smooth follow of activities from manufacturing level to the consumer level.
In addition, ERP provides information to the management at all levels. If the top and lower levels of management receive vital information on the progress of various activities in the organization in time, they are at a better position when it comes to critical decision making. This will enhance smooth follow of activities hence leading to upward growth of the organization or business enterprise. In any organization, flexibility is vital especially when the organization needs to realize good results. ERP system provides flexibility, and it solves the problem of rigidity. If the organization structure is rigid the flow of activities will be difficult, and information delivery to various departments will be hindered.
On the contrary, there are a number of problems that may arise when ERP is adopted by companies or organizations. Every organization has a tradition that it has developed for years. If this tradition is interfered with, through installation of ERP system it may lead to loss of competitiveness and interruption of flow of activities. The cost of adopting ERP system is huge as compared to other non-integrated systems. In addition, the cost of maintaining and training the staff is huge. This will impact negatively to organizations in terms of operation cost. An ERP system enhances the flow of information in all departments ranging from the smallest department to the biggest department. This may result to problem especially when dealing with sensitive information. The top management may feel insecure sharing such sensitive information hence leading to a sense of imbalance between the upper and lower management levels. Large co operation may face a lot of challenges if it resolves to adopt ERP systems. Putting all the departments under ERP system for large co operation requires huge investment and it is time consuming (Plummer, 2008 p. 38)
Cloud computing is based on the internet system and it helps in managing information services and applications (Robert C, 2010 p. 5). Cloud computing necessitates users and organizations to remit as well as administer information and application without necessarily having to install software on their devices. Cloud computing requires only internet access. Cloud computing has been of benefit to businesses and organizations. It has lowered cost of data processing because there no need of purchasing software and hardware, the only thing that one requires is an internet connection. The employees can work anywhere as long as they can access the internet. Employees and other people involved in organization activities have freedom to carry out their duties even far from the physical office.
However, there are problems that may arise from cloud computing. In most cases, the user relies on the provider of the software if a problem arises the user can not use the application, till the provider resolves the problem. This may take time if the provider is reluctant to solve the problem (Robert C, 2010). If the provider encounters financial crises, the user has to look for an alternative provider which will result to increased operational cost. This may translate to the organization incurring loss due to increased expenses. By using cloud computing means that you are not the custodian of organizations information, the provider has access to the organization information which may be risky.
ERP through clouding means to move ERP into a cloud-based system. If ERP is incorporated to cloud computing, flexibility of the organization activities will be better than having just ERP. This will enable the top management to monitor the activities of the organization without necessarily moving from office to office. In line with this, the activities of each department can be monitored even if the Heads of departments are far from their usual offices. This means that if the activities are monitored and followed at any time and at any place, then the employees will be focused to achieve the set targets at all times. Similarly, the activities ranging from top management to lower management will be moving smoothly at all times. If every activity undertaken by the organization is carried out as planned and end results delivered at the right time, then it means that the organization will eventually realize maximum output.
Decision making will be very fast, and information dissemination will be very fast (Timm S, 2010 p. 22). ERP through cloud becomes operational when Software as a Service (SaaS) is used. Technical know-how and practicability is essential in any technology-related discipline at all times. This is because if the technology proves to be difficult for employees to understand on its functionality then it is of no significance to the organization. If the technology is adopted it means that the organization will undergo an extra cost when trying to keep its employees at a position that they will be able to use the new technology., The SaaS software is easy to use hence reducing training cost for the organization.
However, the software is highly standardized, and this may result to problems when it comes to customization. Most of the organization’s decision makers, ranging from large co operations to small and mid-sized enterprises (SMES), are concerned whether SaaS ERP software will be customizable to their needs. This may bring the organization to a standstill when making such decision because they are not guaranteed on the functionality of the system once it is customized. In line with this, the organization may find it expensive to customize its existing technology in order to adopt cloud.
Many providers focus on the advantages of their software, but they fail to inform their clients the disadvantages associated with the adoption of cloud ERP. In order to address this problem, a research has to be conducted to identify the challenges and risks facing adoption of cloud ERP system. This will provide the users of the technology with adequate information concerning the risks and challenges that may arise when an organization resolves to adopt the technology.
In addition, through this research nonprofit organizations that rely on funding may not have a problem in making decisions concerning the adoption of the technology. Large co-operations will be able to carry out cost benefit analysis and decide whether the adoption of the technology will be cost effective or not. Making the right decision at the right time is vital to any organization and the findings from this research will be of great help when making such decisions.
The findings of the research will contribute to the existing knowledge base of cloud ERP systems. This will eliminate knowledge gap that arise from the risks and challenges associated with the adoption of cloud ERP systems. Some institutions may have identified some challenges and risks, but they are not able to explain why such challenges are normally faced when an organization adopts cloud ERP system. In addition, they can not specify the level of the risks especially in large co operations. This research will not only provide adequate information concerning the risks and challenges, but also provide information concerning the extent to which these risks are prevalent to large co operations.
Therefore, the research will be of significance at all levels, small and big co operations. It does not mean that the information will only be beneficial to the large co operations, but even small co operations can use the information as the move to the next level. Small co operation will have better background information on cloud ERP system, the positive side as well as the negative side of the technology. This will be important to such co operations because their decisions determine whether they will be moving to the next level or remain as small co operations.
Background and literature review
“In 1990 Gartner Group used an extension of material requirements planning (MRP), later manufacturing resource planning and computer integrated manufacturing to try and have an extension of ERP” (Bruce, 2009 p.33). This shows that initially companies focused on automating manufacturing departments only without take into consideration other departments of the organizations. The urge to automate organizations in mid-1990s lead to adoption of ERP systems, which automated all the core functions of most organizations in the corporate world. Adoption of ERP was dominant to business organizations, but it gradually spread to other sectors such as governments and non- profit organizations (Bruce, 2009).
Cloud computing benefits cuts across three categories: economic, architectural and strategic. Cloud computing cuts cost of IT, and helps the organization to address their shortcoming in time (Ismael, 2010 p. 5). When the organization results to adopt cloud computing then it is able to cut cost incurred as a result of employing IT staff. This means that the organization’s economics of scale will be realized at all times.
The benefits of adopting ERP through cloud computing are numerous as indicated earlier, and a number of organizations are aware of the benefits. However, those organizations are not aware of risks and challenges that may arise when they adopt the technology. The organizations have to be made aware of those risks and challenges. Pin pointing those risks and challenges can be only through thorough research. Research will make the underlying problem of adopting ERP through computing a thing of the past.
Many large corporations focus on realizing huge profits. In order to realize huge profits, the corporations look for means of increasing service delivery and optimization of their operations. This will reciprocate to maximum profits. Lon contrary, they forget that there are risks and challenges that may arise by adopting cloud ERP systems. This risks and challenges may lead to difficulties when the companies face them. They may lead to companies incurring huge losses hence failing to realize the expected profits. This problem will be addressed once a research is conducted on risks and challenges associated with the adoption of cloud ERP systems.
The existing knowledge has focused on the benefits and some of the challenges but little has been done on the risks. The providers of cloud computing and ERP software focus on selling their products, but they do little on revealing the disadvantages of their products.
Research questions and objecitives
Research objectives
Research questions
- What are the risks associated with the adoption of cloud ERP systems?
- Which challenges are associated with the adoption of cloud ERP systems?
- What is the level of risks associated with the adoption of cloud ERP systems?
The above research questions and objectives will fully address the problem of the knowledge gap that exists among the organizations that opt to adopt cloud ERP system. These organizations may range from large co operations such as Coca cola company to small and mid- sized enterprises (SMES). Research findings will reveal the challenges, risks and the level of risks associated with the adoption of cloud ERP system.
Research methodology
- Research design
The objectives of this research are to find out risks and challenges associated with the adoption of cloud ERP systems. This will require an exploratory and descriptive method (Shari, 2012 p. 9). The researcher will try to structure questions that will lead to the users giving information that will help the researcher find out the risks and challenges that are associated with the adoption of cloud ERP systems. In line with this, from the responses gathered from the structured questions will give the level of the risks associated with the adoption of cloud ERP system. The research thus tries to find out the risks and challenges as well as the level of risks associated with the adoption of the technology.
- Data collection
The main subject of this research, risks and challenges, focuses on organizations that have embraced the technology. For this reason, the presence of the researcher is vital during the data collection process. This is because the structured questions may pose challenges to the respondents. The researcher will use a questionnaire as a tool of collecting data on the subject under investigation. Questionnaires will be distributed to the pre-identified large co operations and small and mid-size enterprises which will be sampled using simple random sampling. Sampling based on randomization will ensure minimization of errors that may arise during the study. The sample size will be twenty large co operations and twenty small mid-sized enterprises within the locality. Random numbers will be generated by use of a computer software and the random numbers generated will be used to pick the samples from the population.
Apart from the use of questionnaires, interviews and observation will be conducted, and the researcher will prepare an interview schedule in order to guide the researcher on the key issues concerning the problem under study. Data that will be collected will mainly focus on the risks and challenges associated with the adoption of cloud ERP systems.
- Data analysis
The research will apply Eisenhardt’s (1989) suggested key points in analyzing the data (James, 2011 p. 67). In order to have precise results analysis will involve three- level iterative data analysis. This will ensure all the responses are analysed and avoid replication of results. Data analysis will be based on appropriate choice of data analysis tools and computer programs and softwares such as SPSS and Ms excel. With appropriate choice of data analysis tools, the researcher will be assured of getting unbiased findings. This will make researcher’s findings and interpretation more reliable.
Having chosen the appropriate research methods and research design, the researcher is assured of addressing the underlying problem. The researcher is also assured of getting a solution to the stated research questions and eventually this will lead to achievement of research objectives.
WORK PLAN
BUDGET
REFERENCES
Bruce, R., 2009. Origin of ERP. Grounded in practice , pp.33-35.
Ismael, C. G., 2010. Benifits of cloud computing. Information sytems ,pp. 5-9.
James, H. G., 2011. Research Methodology. Approaches to research ,pp. 60-69.
Plummer, D., 2008. The business landscape of cloud computing. Cloud computing , pp.34-40.
Robert C, W. J., 2010. Cloud computing , pp.5-7.
S, T. , 2010. SAP ERP in the cloud. Oracle white paper , pp.21-22.
Shari, s. E., 2012. Enterprise systems benefits. Dynamics of infomation systems ,pp. 8-9.
