The Benefits of Cloud ERP Systems in Small
and Medium Enterprises
Hasan Nur Arifin
School of Electrical Engineering and Informatics
Bandung Institute of Technology
Bandung, Indonesia
asanazam@gmail.com
Abstract— Enterprise Resource Planning (ERP) systems
provide benefits and facilities to the whole enterprise.
Sharing and transfering data and information across all
functions units inside and outside can happened with ERP
Systems. Cloud Computing ERP (Cloud ERP Systems) will
provide benefits for many enterprises especially for Small
and Medium Enterprises [SMEs], because it can reduce the
large investment costs for the use of ERP systems in general.
SMEs can have full access to the ERP systems that matches
the company's business processes without the need to
purchase the entire ERP application and hire an expensive
IT consultants. The great advantages and benefits from
different aspects using cloud ERP systems in Small and
Medium Enterprises will be represented in this paper.
Keywords— ERP Systems, Cloud Computing, Cloud ERP
Systems, Small and Medium Enterprises.
I. INTRODUCTION
All enterprises have become highly dependent on
Information Technology. It enables access to the various
resources in a scalable and flexible manner [1]. One of the
significant factors in decision making of new technology
implementation is cost effectiveness, and it is related with
Cloud Technology. Significant factors can be a significant input
for making decisions on the adoption Cloud Computing.
Many enterprises estimate the cost of an project as only the
cost of the software license. Practically there are many issues to
consider the budget of implementation ERP system, for
example, software license fees, hardware, implementation
services and maintenance fees and training fees. The
implementation of ERP systems is a costly [2].
Small and Medium Enterprises (SMEs) need to expand their
business, grow rapidly, and win market share against their
competitors. Unfortunately, there are various reasons other than
Information Technology (IT) such as lack of finance, technical
difficulties and poor managementof available resources which
may hold back an SME from growing [3]. Several problems
faced by SMEs in using conventional ERP systems are
addressed due to the developments in cloud computing services
based ERP systems as they provide IT resources at reasonable
cost with elasticity [4].
The central vision of cloud computing is to reduce the cost
of computing by acquiring computing resources on demand on
rent, increase reliability and flexibility by having a large
number of resources [5]. Various people can benefit from this
cloud computing service either as a technology solution or get
the economic benefits from it. While the ERP systems is a
supporter of core processes in an enterprise and should reflect
the organization of corporate structures that come in different
sizes and specialties.
The research in this field needs to be encouraged so that
more issues related to the use of cloud computing in SMEs
canbe analyzed properly. Therefore more SME’s would be able
to avail this opportunity and benefit from it. There is a need to
look for SME’s which have opted for clouds or moved from
traditional systems to clouds and analyze their returns of
investments made into the technology. Cloud based ERP
systems allow users to pay according their uses. While in
traditional ERP systems there is an extra cost of having
infrastructure and user subscriptions.
II. RESEARCH METHODOLOGY
The methodology of this research is understanding on Cloud
Computing and Enterprise Resource Planning (ERP) as well as
and the benefits of Cloud ERP systems from three papers; first
from the real date researchers, second from Opportunity with
Cloud ERP systems and third Cloud ERP systems compare with
traditional ERP, the table and graphics will show the benefits of
Cloud ERP systems for Small and Medium Enterprises more
clearly.
III. ERP
ERP (Enterprise Resource Planning) is an information
system structure used to integrate business processes within a
manufacturing / service company that includes the operation
and distribution of the resulting product. ERP system is a
system that integrates and automates company activities such as
manufacturing, finance, and supply chain management [6]. In
other references ERP is a software system aims to integrate all
functional units of the enterprise in a cooperative way. It may
also extends to include parties outside the enterprise for
example supplie and customer to involve them in the integration
process as shown in Fig. 1. According to Ref. [7] ERP is a key
element of an infrastructure that delivers a solution to the
business.
In Ref. [8] ERP defined as a comprehensive software
packaged that seeks to integrate the complete range of a
business's processes and functions in order to present a holistic
view of the business from a single information and IT
architecture. With time passing ERP systems faced a lot of
evolution and upgrade processes to enhance its functionality and
increase the integration capabilities.
The vendors of ERP like Oracle, SAPPeopleSoft, J. D
Edward, etc. developed different modules to cover and support
all functional units of the enterprise. According to Ref. [8],
traditional ERP systems can be classified into two categorizes
on-premise ERP and hosted ERP. On premise ERP, the system
loaded and run over the enterprise infrastructure such as servers,
network, platforms, computers, etc.
Fig 1. ERP System Overview [9]
The enterprise runs, operates and manages the ERP sys- tem
according to software license model. Running cost, operational
cost and maintenance cost are covered by the enterprise as well
as disaster recovery. Hosted ERP can be defined as a service
offered to an individual or an organization by a provider that
hosts the physical servers and running that service somewhere
else. The service is most of the time offered through a direct
network connection that may or may not run via the internet
[10].
IV. CLOUD COMPUTING
Cloud computing is a very promising trend of computing
which left the attention in the academic researches and awell as
in the software industry. Cloud computing is computing
environment which provides availability, scalability, and
flexibility of computer reassures at a deferent level of
abstraction with low running cost. Cloud computing can be
defined as a computing method to provide computing as the
utility to meet the everyday needs of the general business
community. Cloud Computing refers to the applications, the
hardware and software delivered as services over the Internet
[11]. The cloud computing services provided in three models
[12], Software as a Service (SaaS), Platform as a Service
(PaaS), and Infrastructure as a Service (IaaS).
Fig 2. Level Model for Cloud Computing [9]
Fig. 2 shows the cloud service models. Software as a
Service (SaaS), targets the end user or business. It concerns the
delivery of a software application over the internet to multiple
users. Cloud ERP systems belong to this category and our work
will be focused in this category. Platform as a Service (PaaS) is
the delivery of middleware which contains tools, services and
platforms targeted the software developers, to allow them to
build SaaS application. Infrastructure as a Service (IaaS) is the
delivery of computing power hardware and software targeted
towards administrators. The enterprise pays as it needs and
upgrades its usage according to the growth of its business.
V. CLOUD ERP
Cloud ERP solutions are provided via the Software as a
Service model. Different ERP systems offered in the market as
a cloud-based ERP systems [13]. ERP system considered as a
cloud-based when it influenced by the characteristic of cloud
computing. The cloud based ERP system should be accessed via
the user browser over the internet without installing or
configuring the system at the user side. One of the most famous
cloud ERP in the software market is SAP Business By Design.
A. Factors that Encourage Cloud Computing for ERP Systems
There are several factors that drive the adoption of cloud
computing services, between cost, flexibility and scalability [1].
Identifying consumer preferences for cloud service attributes is
important including revealing the relative importance of
different attributes of cloud services. Likewise the importance
of identifying the benefits and risks of the user's perspective
[14]. SaaS adoption can be seen from three theoretical
perspectives namely transaction cost theory, resource theory,
and theory about all behaviors that have previously been applied
to study IT outsourcing decisions including adoption of
corporate behavior [15]. C. ERP as a Profitable SaaS Effort
Small Medium SaaS promoted by IT providers becomes
relevant for SMEs (Small and Medium Enterprises) that still
lack IT capabilities and resources. Cloud computing allows
SMEs to use ERP systems because of the flexibility that SMEs
simply pay for the services they need just so as to help
overcome their economic difficulties for large IT investments
[16].
B. The Cloud Computing Service Challenge for ERP System
There are some challenges that still need to be addressed
before cloud computing will become a leading paradigm in IT
consumption. A major obstacle to cloud computing adoption is
the interoperability between different cloud providers and the
lack of an industry platform [20].
One distinct difference in cloud computing with traditional
IT services is the lack of long-term commitment on the
consumer side, enabling them to switch to another cloud service
provider for less or no expense. In practice, users may be
reluctantly bound and exposed to high switching costs by
providers who use proprietary formats to store their data.
Cloud computing can rise to industry-level platforms if
cloud providers are willing to open their technology to other
industry players, including complementor's and potential
competitors. Cloud provider companies not only use the web as
an alternative service and want to fund the mechanism used to
become a software product package [17].
VI. THE BENEFITS OF CLOUD ERP SYSTEM
A. Data primary Investigated Research
From paper [18], the researcher extracted data from the
primary studies according to the SLR questions. As an answer
to the research question RQ1 the following section presents the
benefits and challenges that addressed by all investigated
researches and this is the result details one by one :
Benefits of cloud ERP [18] : Table 1.
Discovered benefit from 2011 - 2016 :
1. Lower upfront costs: Due to the separation of computing
recourses from enterprise location, the enterprises do not
need to pay for building the computing environment it just
pays for accesses the environment over the internet.
2. Lower operating costs: The cloud service providers (CSP)
are responsible for operating and providing the cloud
services that will lead to isolating the operation processes
from the enterprise as well as the operation costs.
3. Rapid implementation: CSPs offer wide range of ERP
solutions, these solutions can satisfy most of the enterprise
needs. Choosing between different solutions and product
takes place according to the enterprise business needs. The
implementation process accelerated due to this selection
process.
4. Scalability: Cloud services are high elastic; the enterprises
can scale up or scale down the used resources according to
its current needs.
5. Focus on core competencies: Cloud ERP systems help the
enterprise to manage their business more efficiently and
give the enterprise a chance to focus on other concerns
related to their core activities.
In grapichs show in below :
6. Using advanced technology: Working over the cloud
allows the enterprise to access and use specialized
technology and advanced computing resources that
available over the cloud.
7. Rapid updates and upgrades: Update or upgrade cloud
solutions accomplished faster than traditional ERP
application. The CSPs perform all upgrade processes
according to the enterprise requests.
8. Improved accessibility, mobility, and usability:
Applications over the cloud work in an open environment,
which increase the accessibility options. The increases
accessibility, in turn, increases the usability of the cloud
ERP inside and outside the enterprise.
9. Easier integration with cloud services: There is a huge
number of cloud application offered to satisfy the Fig 3. Graphics Discoverege Total from 2011- 2016
enterprise's needs. Due to the nature of ERP systems
which connects different parties inside and outside the The key identified benefits Cloud ERP systems in Small and
enterprise, the inte-gration with other services becomes Medium Enterprise [SMEs] TOP Six are : lower cost,
easier at the cloud. scalability, fast and rapid implementation, improved
10. Improved system availability and disaster recovery: CSPs accessibility, high availability and easier update.
provide well-defined policies and plans for backup,
restore, recovery and all other functions that concerned B. Compare Cloud ERP with Traditional ERP
with the availability and disaster recovery.
11. Cost transparency: Pay-per-use or subscription models The Other References the benefits of Cloud ERP Systems.
according to enterprise plan. The enterprises pay only for Traditional ERP systems and cloud-based ERP systems have
what they use; there is no need for paying what they don't been compared, for example if we took the deployment as a
use or what don't cover the enterprise's needs. factor, we can see that the traditional ERP systems will be
12. Sales automation: Due to the geographical separation implemented on local server.
between clients and CSPs, the sales issues could be
accomplished automatically over the cloud. On the other hand cloud-based ERP systems will be
13. Using security standards: Some of CSPs implement implemented on cloud server, this factor will affect data security
standards for encryption and decryption, that lead to for cloudbased ERP systems because unlike traditional ERP
moving the security issues and effort from clients to CSPs. systems, data will be stored and supported through a third party
14. Free trials: Many cloud ERP providers allow the potential organization (cloud provider or CSP), the privacy issues will be
clients to try the ERP systems before buying it. These added to cloud-based ERP systems security problems that some
trails increase the certainty of the cloud ERP usability. organizations may have a huge concern about.
 We can see another example in the traditional ERP systems
where organization need extra costs for servers, network,
backup systems and other IT infrastructures to implements the
traditional ERP systems inside the organization. However
unlike traditional ERP system, the cloud-based ERP systems all
these requirements will be provided by cloud provider with
lower cost than the traditional ERP systems.

Table 2.
Comparison between The Traditional ERP Systems and Cloud
Based ERP Systems [21].

Traditional ERP Cloud Bases ERP Fig 4. Opportunities relevance with cloud ERP in the context
No Factors
System System
of company size
1 Deployment Local Server Cloud Server
2 IT Staff reduction None High The analysis results showed clearly that small and mid-
3 Impementation cost High Low market companies can exploit in a significantly greater extent
4 Customization Easy Hard than large companies the opportunities that cloud ERP adoption
5 Support costs High Low raises Simultaneously, SMEs are related to a lesserdegree to the
6 Integration Easy Hard existing concerns of moving core enterprise applications to the
7 Licensing costs High Low cloud than large corporations do Our analysis showed that it is
8 Data Availibility Low High the small and midsized companies that are most well-suited to
9 Attacks Low High benefit from a cloud ERP implementation.
10 Web security Issues low High
11 Privacy Low High We found that SMEs and especially start-ups and small
companies, which typically lack the financial resources to build
Many enterprises do not feel secure to store their sensitive a comprehensive on-premise ERP, highly appreciate the modest
data over the cloud and allow cloud ERP provider to control it. capital investment required upfront for theimplementation of a
The enterprise's data considered as a private property for the cloud-based system. In addition, long term costs of a cloud ERP
enterprise, exposing this property to risks make the moving to are considered to be quite lower for SMEs, allowing them to
cloud decision more default. For the large enterprises that have reduce their overall IT expenditure.
their own infrastructures and implementing high-security
standards, they prefer to stay working with in-house ERP On the contrary, the pay-peruse model of the cloud may be
systems. However, today many cloud ERP providers offer high- proved detrimental for large companies in the long run, due to
security levels for their cloud solutions that Small and Medium expensivefees paid, as a result of their large ERP user-base and
Enterprises (SMEs) cannot implement themselves and therefore number of ERP modules used. Moreover, the opportunity of
SMEs could take advantage of this high-security levels [17]. scalability was discussed both as an economic and a strategic
benefit for SMEs, which enables them to adapt rapidly and with
Cloud ERP systems rely on many advanced technologies, by minimal cost to the dynamically changing needs of the market
subscribing to cloud ERP system the enterprise will be able to and thus to compete more efficiently with other organizations.
take the benefits of these technologies. Dealing with these In the meantime, and in other paper, the result show ini below :
advanced technologies require improving the technical
knowledge of the enterprise team. The cost transparency is of VII. CONCLUSION
the main benefits of cloud ERP solutions, enterprise pays for
what it use and for the actual number of users. However, the The Benefits from different aspect ; first from the real data
hiding costs are one of the challenges that face the cloud ERP researchers from Jun 2011 to Jul 2016, second from
clients which could be discovered at the contracts or later at run Opportunity with Cloud ERP systems and third comparing
time. Cloud ERP systems with traditional ERP system, the key
identified benefits Cloud ERP Systems in Small and Medium
Enterprises are lower cost, scalability, fast and rapid
C. The Opportunities Cloud ERP in SMEs implementation, improved accessibility, high availability and
easier update. The other benefits reported from different re-
Figure 5 demonstrates the findings of our analysis of searches are using advanced technology, rapid updates &
empirical findings with respect to the relevant literature. It upgrades,improved accessibility, improved mobility, improved
represents a framework that depicts how SMEs and large usability, easier integration with cloud services, cost
companies relate to the opportunities identified in the interviews transparency,sales automation, using security standards and free
that cloud ERP adoption raises [23]. trials.

Cloud ERP systems will bring benefit for small and medium
enterprises because it can lower the common barriers especially
related to the large investment costs for the use of ERP systems
in general. Small and Medium Enterprises (SMEs) can have full
access to an ERP system that suits the company's business
processes without the need to buy an entire ERP application or
hire an expensive IT consultant.
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