Indian SMEs Perspective for election of ERP in Cloud

INTRODUCTION In recent past, the business environment in which companies operated has undergone profound changes. Earlier companies competed in market place on basis of performance objectives like price or quality. However, market now demands customer satisfaction and service flexibility along with competitive price and quality (Yusuf et al., 2004). To meet these challenges, organizations are employing various measures such as improved processes, better supply chain management, automation, better customer service and deployment of information technology systems such as Enterprise Resource Planning (ERP). ERP is a comprehensive packaged software solution that integrates organizational processes like sales, finance, purchase, inventory management etc through shared information and data flows (Rosemann, 2001). The information/data flow and its integration results in complexity of an ERP package (Negi, 2009). It is generic in nature and need to be configured for specific organization, industry sector, and country. Current industry demand to implement ERP system is fast growing (Ho et al., 2004) despite the fact that ERP projects are the largest information technology projects in terms of project investment worldwide (Gattiker, 2005). Most of the large organizations in India like ONGC, Goodlass Nerolac, Tata Motors, Cadbury India, Sony, Siemens etc. have invested huge in ERP implementation (Mahara, 2013). With the saturation in ERP market for large organizations (Deep, 2008) and the fact that 95% of industrial units in India comprises of Small and Medium enterprises (SMEs), focus of leading ERP vendors has shifted to capture the SME market (Saini, 2012). For example, SAP, has launched All-In-One package for Asia -Pacific SMEs (Sharma 2007). The ERP market for SME is projected to be Rs. 728 crore ($160 million), 47% of the overall market (Munjal, 2006) of Rs. 1,550 crore ($341 million) as per the study conducted by IDC. The SMEs have also started to show deep interest in ERP implementation as this will standardize their business processes and integrate the data. This would help them in taking timely decisions by reducing the turn overtime. Also it will provide them the competitive advantage over their competitors (Sharma, 2010; Kale, 2010). Even though SMEs want to aggressively adopt ERP to efficiently manage their business, high software and license fees, and implementation complexity has created some resistance for traditional ERP packages (Davenport, 1998; Hadara, 2011). To add to this, lack of IT infrastructure and people to support implementation along with reduced IT spending by organizations due to slowing down of economies (Hofmann, 2008) has further strengthened their view of not opting for traditional ERP packages. With all these limitations, they still need to find a solution to implement ERP to keep them sustained in the global market. The alternate solution under consideration should be cost effective as compared to the traditional ERP solution. Cloud based ERP is one such technology that allows organizations, users or individuals to access and use ERP software installed on vendors site through internet access on demand (Saini, 2012). The main reasons to consider this option are the low entry cost, as no initial investment is required to set up IT infrastructure and pay-per-use model. This paper explores the option of ERP on cloud by finding out various factors that needs to be addressed while selecting ERP for SMEs. The study has been done by selecting 30 SMES in India and for this study; the Government of India definition of SMEs has been used (Sharma 2007). According to this definition, small enterprises are those that have an investment of not more than Rs. 50 million (approximately 0.6 million pounds) in plant and machinery (Ministry of Small-Scale Industries, 2004). CLOUD COMPUTING AND ERP--AN OVERVIEW Cloud Computing is a technological platform that allows users, organizations or individuals, to access and use computer resources via the internet on demand independent of device and location (Schubert, 2011; Marston, 2011). …