Table of Contents

Sr. No.


Page No.


Executive Summary



The Research Objective and Scope



Limitations of research



Literature Review



The Research






SWOT Analysis



PEST Analysis














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1. Executive Summary
Web-based Enterprise Resource Planning (ERP) Systems deployed through the
Software-as-a-Service (SaaS) model are a major disruptive technology in the
field of ERP systems. The defining features of the SaaS are that they are hosted
remotely and are completely used through the web; they are subscriptionpayment based and they operate on a multi-tenant fashion. This technological
innovation redefines traditional technical and economic ERP paradigms.
Since the technology of Cloud Computing is very new to India, it is important to
understand the terms and hidden properties of the same. This paper not only
discusses the cloude ERP in detail, but also it provides sufficient facts and
figures and areas under which it can be compared with the traditional ERPs. It
also aims through researching various academicals and professional publications
on the subject of Web-based (SaaS) ERPs to study these phenomena, and
produce a list of their benefits to SMEs. It also analyses their opportunities and
challenges via a number of interesting facts, thus allowing for thought-provoking
observations and spawning of stirring discussions.
The benefits of Cloud based ERPs were reported to be similar to the ones
characteristic for the On-premise ERPs. They furthermore included remote data
access, cost efficiency, flexibility, scalability, as well as the establishment of a
new customer driven relationship with the ERP vendor. The major disadvantages
of SaaS were considered to be security, cost (in the long run), and
customizability. These disadvantages, which were first reported years ago, are
continuously dismissed by the advancements and innovations made in Webbased solutions. Findings from previous studies and trends suggest that issues
of security, cost and customizability are gradually disappearing as technology
improves and industry dynamics becomes more customer-centric. Security,
which was a major issue in 2007 slowly faded and is not regarded as the concern
it used to be. From 2008 till now the issues of customizability and TCO have
been heavily disputed about Web-based ERP solutions. The problem of
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customizability has also been found to be diminishing due to technologically
advanced capabilities of these systems; new systems have emerged and old
systems have improved enough to provide this feature. Cost has never been a
transparent issue when it comes to IT investments and has been shown to be
higher in On-Premise solutions through the TVO approach which looks at other
hidden and non-financial costs. All of the above sheds new light into the once„static‟ benefits and drawbacks of Web-based solutions, and provides a fresh
insight into this developing phenomenon.

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2. The Research objective and scope
i) What are the main factors that should be considered by SMEs when
considering the strategic decision to adopt Cloud Computing, as an ICT solution?
ii) Why are these factors particularly relevant to the business processes of
As the research aims the possible impact of changing trends in ERP business on
SMEs in India, the scope of the study is limited towards Indian context. As the
technology is still taking baby steps to enter in to the Indian market, the data is
very limited.

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3. Limitations of the Research
SMEs have suffered of the lacks in opportunities to take advantages of some of
the most-helpful enterprise technologies and collaborative tools in the past two
decades, mainly due to the high complexity and costs of their implementation
and usage. Enterprise software vendors have devoted much more time and
efforts into developing solutions for large companies and enterprises, thus paying
less (or none) attention to the smaller players, which at the end represent high
portion of the whole market. Therefore, it is believed in the paper that large
organizations have had enough devotion from both the research and industrial
community, so they have been excluded from this research and mainly focus on
their smaller cousins. Fortunately, things have started to shift in the markets as
well, and more and more software vendors are developing enterprise solutions
for this type of users.
In those lines, while large organizations have been in focus of previous research
and development projects, so have traditional (or on-premise) ERPs been the
central focus in regards to enterprise software as such. This should justify
enough to choose the Cloud ERP for research instead, in order to provide room
for the less-observed segment of the ERP market.
Being such a fresh and under-discussed topic, it is fit to take a more theoretical
stand point. The analysis was mainly theory and secondary findings from other
research journals and articles; thus leaving out the practical points of view in
forms of case studies for future perspectives, when the subject has matured
enough and a sufficient number of study materials have been presented and
made available for detailed scrutiny. That‟s why the reader shouldn‟t expect to
find direct relations to practical cases, besides the comments from references to
material deriving from resource databases of various consultancies and other
relevant agencies present in the field.

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In the business world. Some small companies have embraced these changes because they have presented them with new opportunities and markets that they could not gain access to otherwise. transcend geographic limitations and other barriers that defined mainstream working methods became new opportunities and challenges. customers and competitors situated around the globe. These companies still have to deliver their goods and/or services to the satisfaction of their customers.1.4. However. when new business processes are devised and company strategies are formulated. manage more internal Page | 6 . These radical changes occur in this Internet Age where the evolution of the internet and other technologies redefined the way people connect to information. Literature Review 4. With technological developments and advances which enable companies to break free from traditional modes of working. and were only accessible to the major players in markets. policies and protocols to be followed which further increase the intricacy of running a business. link up and access resources and connect to each other. 2000). When operating in a global scale there are more regulations. smaller enterprises experience the greatest impact of these dramatic changes (Harvard Research Group. In this perspective all businesses operate in a global business setting whether they want to or not. Background Over the past decades the nature of trade and commerce has changed considerably. A case in point is the number of global logistics implications that must be taken into consideration. Smaller and medium-sized companies find themselves competing in a global environment with their suppliers. with these opportunities come new challenges to these small businesses like competing on par with the larger corporations and having to deal with several issues that intimidate even these corporate giants.

Assortments of ERP Systems that are easy to install and maintain are now made available to small companies.information and resources and logistics issues. These systems provide the functionality that these companies need without major strain of their financial and human resources. personnel and thereby making this type of investment too complex and not feasible for small businesses. while at the same time adhere to international trade laws. Corporate giants may have the necessary resources. SaaS deployed software applications have been gathering a lot of support and criticism from in the Page | 7 . Opportunely enough. In this approach. this has in the past been a difficult matter for small businesses to address. SaaS is a software distribution approach that separates the ownership and use of software and applications. it becomes more and more unavoidable that the company should decide whether or not they need an Enterprise Resource Planning (ERP) System in order to stay relevant and competitive. environmentally accepted practices and business standards. A concrete example in this context would be a Web-based ERP Systems which are essentially ERP Systems that are delivered in the same manner. With all these facets to contemplate. because traditionally RP Systems have always been coupled with large corporations with huge profit margins and millions of customers worldwide. structures and experience to tackle these challenges but this is not the case for small and medium enterprises. since ERPs provide all the support for operational and logistics functions at front end. on a rent (as opposed to purchase) basis. These are ERP Systems provided under the umbrella of the Software as a Service (SaaS) Approach. installing and maintaining this kind of ERP System comes at a high price in terms of money. by a provider through a network on a rent basis. the applications are hosted and delivered to customers by a provider or vendor over a network (usually the Internet) through a web-browser. technological advances have also revolutionized the very nature of ERP Systems. However. time. There is also a prevalent awareness that investing.

Supporters claim that this mode of software deployment is the future and presents many possibilities to organizations that implement it. Page | 8 . data control. A deeper look into the situation with regards to SMEs helps us look into specific facets of SaaS deployed software applications. Critics have stated that the SaaS is hyped up more than the actual benefits it delivers. Currently in the tug of war between On-Premise and SaaS (Cloud-based) ERP solutions. issues of market. security and price have been heavily debated and argued by both the sides. SaaS supporters and critics.

in general it is defined as “the infrastructure (servers. Multiple types of cloud computing services are evolving. Its use has expanded beyond IT and has become increasingly popular over the past few years throughout the business community.” Cloud computing is a growing trend that provides rapid access to dynamically scalable and/or virtualized IT resources. whereby shared resources.” However. Although many people believe that cloud computing means computing over the internet. there are actually multiple delivery networks:  Public clouds – via the internet  Private clouds – via private networks (in-house or hosted)  Hybrid clouds . Wikipedia defines it as “Web-based processing. desktops).2. network. internet). SaaS always includes everything to run the Page | 9 . and the industry leaders are becoming the darlings of Wall Street.hardly a day goes by when they aren‟t talking about this growing technology trend.via a combination of public and private networks Currently most companies utilize a hybrid approach. but few have a coherent strategy and architecture that defines their direction and associated controls for cloud computing. and/or data provided by a third party supplier and accessible by users via a private or public network (e. typically offered on a pay for usage basis.g.4. software.. application software. What is Cloud Computing (CC)? As with most emerging technologies. Just listen to the financial news shows . depending on the party defining it. Software-as-a-Service products provide a complete turnkey application. “cloud computing” is defined in numerous ways. via a public or private network. mostly taking on the somewhat overdone moniker “xxx as a Service”: SaaS. and information are provided to computers and other devices (such as smart phones) on demand over the Internet. storage.

. and Timesharing from the 60‟s and 70‟s.. Page | 10 .Data-as-a-Service products capture and process key data on an as-needed basis (e. In any event.application (e... outsourcing. Desktone. as will how it is defined. hosting) and is typically charged per‟s Force.  IaaS:.. per month – ( clouding computing services will continue to evolve over the next few years. it usually just augments traditional decision support environments.g. and it may include the hardware (e. even in collaboration with others (e.g. Nasstar) … or…  or Google apps). including Application Service Providers (ASP‟s) from the late 90‟s.Infrastructure-as-a-Service products deliver a full computer infrastructure via a public or private network. Salesforce. data warehousing).  PaaS:. Salesforce. The delivery vehicles and extent of offerings may have changed.g. the data center.  DaaS:. Kognitio). It is interesting to note that cloud computing is just the latest version of similar concepts that have preceded it.g. AT&T or Savvis).Desktop-as-a-Service products which utilize virtualization of desktop systems providing thin clients services (e. it can include full managed services (e.Platform-as-a-Service products offer a full or partial development environment that users can access and utilize online. but the basic concept of access over a network and pay for what you use is basically the same.g.. operations and DBA support). Google's AppEngine.g. but new offerings are rapidly increasing (e. Since this is a newer cloud offering..g.g..

with training and configuration averaging at less than three months.  „Pay-as-you-go‟ pricing model and terms that vary from months to years. support and troubleshooting provided by the solution provider.3. an established customized investment bank. implementation and integration costs. user pay per use of the functionality.  User investments that include software. and are designed and developed by the provider. policies and other application characteristics. The defining characteristics of the SaaS software deployment model include  A shift in the relationship between provider and client from product centred to service-based.  24/7/365 responsibility.  The applications are delivered over the Internet.4. Page | 11 . A number of fundamental differences between Enterprise Software (On-Premise) and SaaS were pointed out by Triple Tree and the summary can be seen in the figure below.  Deployment is rapid and simple. human resources like IT staff and consultants not needed.  No hardware installed as the solution is delivered remotely. in 2006 conducted an industry analysis on the evolution of SaaS and its disruptive impacts on the from a technology. Characteristics of SaaS and On-Premise Deployment Models Triple Tree. business and economic perspective. and not in the client‟s facilities and IT structure.  Customizable appearances.  Frequent updates made per year in addition to other application advancements that are implemented seamlessly. hardware.

one-time capital expenditure for a perpetual Pay-as-you-go. can be maintenance and periodic multiyear management upgrades  Software license and What are the components of the upgrades  Implementation & integration Upfront professional service deployment Periodic payments including expenditure  Maintenance subscription. recurring license with ongoing operating expenses. incurred by the  Hardware support. selling packaged software product Packaged software product SaaS Service model with applications created and designed for internet delivery and hosting by the provider Hosted software with services “On-premise” software Where is the application that is deployed Internet application service solution behind the customers firewall delivered and accessible over provider? and resides within the client‟s a standard web brawser own IT infrastructure What is the Client buys a software Client rents or leases software nature of the application. data hosting. etc. all lumped into client?  Training one payment  IT support What is the Packaged with customization if Application configurability and Page | 12 .On-premise Type of relationship & what is being delivered? What is being provided? Technology/product relationship. typically under a application with hosting client perpetual license with ongoing services all performed by the relationship? maintenance technology/services provider What is the type of expenditure for the client? Upfront.

WebEx.level of needed high customization flexibility? What is the targeted Fortune 1000 and mid-market market? Small and medium size business Who are the examples of companies fitting this Microsoft. SAP. Oracle. among others Salesforce. RightNow. among others description? Page | 13 .

Lower cost to implement. making configuration much simpler. and manage new solutions – cloud computing implementations enable rapid delivery of computing resources. More advanced functionality – many of the newer SaaS solutions provide increased functionality for the domain where they specialize. This is mainly because they are typically niche solutions that are less complex than a large ERP system. 4. Benefits of Cloud Computing (CC) The benefits of cloud computing are very compelling to many companies. and does not require heavy dependence on costly system integrators. providing a cost-efficient model for provisioning processes. Here are several benefits that have prompted many companies to move their systems to the cloud: 1. web-based user interface. 2. and increasingly so. applications and services while making IT management easier and more responsive to the needs of the business. 3. Ease of use is a key requirement for user acceptance and ensuring that the system is actually used as designed. Activities like data migration and integration remain the same as for any new system.4. A simple example is the automatic organization chart generation offered by SaaS HR solutions such as Success Factors. This is partially because many SaaS providers are companies who are expert in the application domain and design the solution for its primary user group. and easier to use. operate. Implementing a new SaaS solution usually takes very little effort compared to a large in-house package. Many of the vendors provide support at a very low cost because they will also be compensated by the ongoing operation fees.4. Reduced time to implement new solutions – implementing a new SaaS solution usually takes only a few weeks compared to several months for its inhouse counterpart. To get this functionality with Oracle or SAP requires a 3rd party add-on solution at additional cost to Page | 14 . Easier to use – newer SaaS systems are designed as web applications and take advantage of more familiar. giving it improved capabilities.

it is easier to interoperate with trading partners. data. 8. enable an integrated best of breed approach. and support. combined with SOA for integration. More rapid recovery and restore capabilities . Some companies view this as virtually having “infinite computing resources”. 6. This improves overall business resiliency (e. Page | 15 . Facilitates mobile computing – since the primary computing platform resides in the cloud.. Facilitates application interoperability with trading partners – when a system that operates in the cloud and employs SOA as the integration approach. the ability to support mobile platforms is more straightforward. 9.acquire. Elimination of an up-front commitment – one of the key advantages of cloud computing.i.. benefit open enrollment) can be more economically provided by a service provider over the cloud than by in-house provisioning. especially SaaS.. In short you can work from your home. try before you buy. or hardware when using a hosting provider who has the backup and recovery resources and processes. implement/integrate. if you want.g. Additional computing resources to meet peak load processing (e. This is especially useful for new proof of concept is easier to restore an application. 7. Accessing a system that resides in the cloud is easy from any device that can connect to the internet.g. whose systems may reside inside their four walls or also on the cloud. You pay for use of computing resources on an as-needed basis. which is what most users actually want. SaaS solutions. 5. is the ability to try an application with very little upfront cost or commitment . e-mail and data on laptops and desktops). This is becoming increasingly important with the surge in the demand for mobile computing. Dynamic scalability – provides flexibility to expand and contract system resources as business demand varies.e.

Page | 16 . Ability to reach extended user communities – it is easier to connect or provide application services to anyone who can access the cloud (e.g. . consumers of new cloud services such as social networking).10..

SMEs are the fountain head of several innovations in manufacturing and service sectors. Food Processing. 40% of exports. Pharmaceutical. Precision Engineering Design.3 million jobs every year and produce more than 8000 quality products for the Indian and international markets. SME‟s Contribution towards GDP in 2011 was 17% which is expected to increase to 22% by 2012. By promoting SMEs.5. SMEs in India According to Small & Medium Business Development chamber of India SMEs play a vital role for the growth of Indian economy by contributing 45% of industrial output. the major link in the supply chain to corporate and the PSUs. Page | 17 . SMEs are now exposed to greater opportunities than ever for expansion and diversification across the sectors.4. IT and ITES. Textile & Garments. There are approximately 30 million MSME Units in India and 12 million persons are expected to join the workforce in the next 3 years. create 1. employing 60 million people. the rural areas of India will be developed. Indian market is growing rapidly and Indian entrepreneurs are making remarkable progress in various Industries like Manufacturing. Retail. Agro and Service sector.

5 Crores upto $ 1. 2 Crores & above $ 0.25 million above Rs. 10 Crores upto $ 2.5 million above Rs. 2 Crores Medium Enterprises 0. 25 Lakhs & above $ 62.000 Small Enterprises above Rs. 10Lakhs upto $ 25. 25Lakhs upto $ 62. 5 Crores & above $ 1.5 million & upto Rs. 5 Crores Medium Enterprises 1.500 & upto $ upto Rs.5 million Service Enterprises – Investment in Equipments Description INR USD($) Micro Enterprises upto Rs. 10 Lakhs & above $ 25.500 Small Enterprises above Rs.000 & upto $ upto Rs.5 million Page | 18 .25 million & upto Rs.Definition of SMEs in India Manufacturing Enterprises – Investment in Plant & Machinery Description INR USD($) Micro Enterprises upto Rs.

India also has a number of local cloud providers. remote infrastructure management will be a US$15 billion industry in India by 2013. Servion. Page | 19 . In November 2009. collaboration.6. Salesforce. Sify Technologies. These services are mainly targeted to SMEs. Polaris Software Labs. Kanpur and other academic institutions use the cloud (MacMillan‟s clients include big companies such as Bharti AXA General Insurance. Likewise. The Indian Institute of Technology (IIT). VMware opened a cloud center in Pune (eeherald. Parallels announced a plan to establish cloud operations in India. In July 2009). is focusing on cities such as Bangalore. Indian universities are banking on the cloud to develop innovative research and education activities. Raghu 2008). Gurgaon and Mumbai and is taking measures to create cloud awareness. conferencing and productivity starting US$2 per user per month (HT 2009). Lodha Group. Salesforce.4. Maytas Properties. eBay India. IBM opened a cloud center in Bangalore. The SaaS vendor. HCL. According to a study by India‟s National Association of Software and Services Companies (NASSCOM) and Mckinsey. Microsoft India announced commercial availability of cloud services such as e-mail. Sasken Communication Technologies. which targets midmarket vendors. universities. government bodies and microfinance and telecommunications companies (Channelworld 2008). In September 2008. the Indian SaaS market would experience a CAGR (compound annual growth rate) of 77% during 2006-2010 and will reach US$165 million in 2010 (IANS 2008). Cloud Computing in India Gartner estimated that SaaS market in India was US$27 million in 2007. which started its operations in 2005. According to a study by Springboard Research. and state owned National Research Development Corporation (NRDC) (Srikanth 2009).com. the U. Ocimum Biosolutions. Company.

Page | 20 .The Indian offshoring industry is probably the prime example of an industry that is likely to feel the impact of cloud computing. The demand for cloud related services is especially high in the offshoring industry and technology hubs such as Bangalore and Delhi (Economic Times 2009).

60% of SMEs are moving towards the technology based infrastructure to increase their productivity with the reduction in their input cost. 2009). As the traditional inhouse implementation of ERP solutions incurs high cost for the SMEs so it becomes a major constraint for them.E. SMEs of India are one of the most aggressive adopters of ERP Packages. SMEs sector is growing at a rate of 35% per annum and it will increase to 40% in the coming years (Assocham. According to a paper published by the Associated Chambers of Commerce and Industry of India. 2007). Online services are better suited for small industries whereas large enterprises face more problems in implementation because of their complex functionalities and data security concerns (Dubey and Wagle. As per the ASSOCHAM reports. In India 95% of the industrial units are SMEs which give over 50% of the industrial output (Popli and Rao.'S when it comes to traditional ERP implementation is that their requirements are limited while the product offered always exceeds their specifications in every way (including the costs). They are known to be the silent drivers of a nation‟s economy. It is not possible for the traditional ERP providers to bring down their standards for the sake of the S.7. SMEs are one of the growing sectors and lucrative market places for the implementation of enterprise solutions. Cloud Computing for the SMEs in India SMEs are said to be the lifeblood of any vibrant economy.E. 2009). The main problem faced by the S. Either of these if done leads to direct monetary losses for either one party or both.4.M. This gap between the SMEs Requirements and the traditional ERP‟s specifications needs to be analyzed by the companies (traditional ERP providers) and the SMEs. SMEs are leading the way for entering new global markets and for innovations in the emerging economic order.‟s neither is it feasible for the later to upgrade for the sake of the former. So our purposed cloud computing cost efficient model is based on leveraging the cloud web services as a substitute for ERP solution by paying only for what the SMEs Page | 21 . Small and Medium businesses have sufficient IT budgets to buy the bandwidth and pay as per their need and usage.M.Thus SMEs form the backbone of the Indian economy.

actually use. software. Page | 22 . SaaS will provide an opportunity for the SMBs to automate their business by reducing their investment in IT infrastructure. The biggest advantage of a hosted model (cloud computing) is that it eradicates the need to purchase the software licenses and also eliminates the cost associated with developing and operating in-house applications. SMB global head (TCS). With the changing needs and increase of customer base there is requirement of CRM and ERP solutions. In order to operate in limited budget a less complicated and simplified offering is required. Cloud based services helps the industries to reduce their cost that are involved in on-premise ERP solutions such as hardware. According to V Ramaswamy. upgradation. The promoter of „The India Cloud Initiative‟ Vijay Mukhi said that there is a huge saving of money by using cloud technology as the industries have to pay only for the operating cost. In the cloud computing environment the SMEs will not have to own the infrastructure so they can abstain from any capital expenditure and instead they can utilize the resources as a service and pay as per their usage of the resources provided by the cloud. the capital investment. SMBs are in need of easy to use technology (Business standard. security. Such models help the SMEs to uplift their business in an effective and cost efficient manner. backup and server maintenance costs are all the provider‟s responsibilities. Cloud computing is providing huge opportunities for the Indian IT company that is helping them to develop cost effective business models. Moreover long implementation cycles with regular maintenance costs adds to the total cost of traditional ERP. As technology changes companies requires upgradation in their software this poses obstacles for the SMEs to scale up. Jan 2010). By using and accessing services through the cloud. In a hosted model. the companies can buy components relevant to their business on pay per basis instead of buying whole ERP suite. At present most of the Indian and Foreign IT companies are focusing on SMEs for their cloud computing offerings. training and licensing costs.

quality cloud vendors provide high grade security for their customer‟s data. but include:  Concern about risk – any new technology will carry some risk. Industries with very high security requirements can always opt to access the cloud over a secure private network. But in many cases they can operate and manage the system better than your internal staff is equipped to do. Potential obstacles to cloud computing Like any new technology wave there will always be obstacles that need to be overcome before the new technology becomes dominant. under your direct control. including the cloud vendors. and its risks can be managed. which always accompanies something new.8.  Perceived lack of control – when all the components of the system are not within your four walls. This is a classical organizational change management problem that can also be managed. Internal obstacles The actual internal obstacles may vary based a company‟s IT maturity and capacity for change. 2007. even though some processes and components will require less support than an in-house system. So you must ask yourself if the real obstacle is fear of change. and they remedied it very quickly). However.4. but at this point cloud computing is no longer considered as leading was over three years ago in October. Page | 23 . There have been very few data security breaches by the major cloud computing companies (the last one that I could find for Salesforce. Below are the typical obstacles that have been grouped as internal and external. it is easy to feel like you have given up control to the cloud vendors.  Security concern for sensitive data – similar to the lack of control concern is the security of key company data. Internal IT functions can and should still manage all facets of the system. This is the primary concern of business management. especially the internal auditors and corporate controller.

Few companies ever tailor the package. there will be need for new capabilities and support staff for managing integration. enterprise architectures. They offer on-demand versions. The key missing application. but it is no more a challenge than with any packaged solution. there will be reduced need for internal IT staff to manage infrastructure and applications.  Incompatibility with existing architectures – since most of your existing systems operate in your data center. your existing architectures are normally focused on systems within your company‟s four walls. social networks. Fear of losing staff – as systems move to the cloud. mobile computing. and cloud computing provides a good solution. your architectures must be revised to accommodate this shift. but that may not be required. and trading partner interoperability. the cornerstone of all ERP systems. However. component-based extensions that they then integrate with the package. However. Vendors like NetSuite are starting to deliver financial systems and limited ERP functionality over the cloud. is a robust financial system.  Difficulty in tailoring the solution to your needs – this limitation is primarily with SaaS applications. This can also be done with SaaS solutions. and the cloud suppliers. albeit this requires a different and more significant skill set. Page | 24 . with the growth of the internet. but smart companies have learned how to enhance the package by developing custom bolt-on. So the main obstacle is that there are still no robust SaaS ERP solutions. External obstacles Key external obstacles include:  Resistance by the leading ERP vendors – the remaining dominant ERP vendors (Oracle and SAP) have yet to define their position on a total SaaS solution. but the licensing and maintenance fees are the same as their traditional pricing.

additional storage must be contracted for and made available. a company can employ its own private network for the application services and data that are of highest concern.  Performance unpredictability – multiple virtual machines can share processing and main memory surprisingly well in cloud computing. System Lock-in – the API‟s for cloud computing itself are still essentially proprietary. Many companies are offloading historical data to keep costs low and for historical analysis via Business Intelligence solutions. and this is not an instant process. One example is to offload extremely intensive I/O processes to a dedicated environment. However. this exposes a system to potentially more attacks. open SOA and XML based API standards are emerging to eliminate this obstacle. which can result in locking in a customer. strategies are emerging for solving this potential issue. But most of the cloud vendors have invested heavily in developing highly secure access to their systems and data.  Lack of scalable storage – most cloud vendors allocate a fixed amount of storage for each client. Page | 25 . at least until virtualization technology successfully addresses I/O performance. and when a client‟s needs grow beyond that amount. Although this has not been an issue for most companies operating cloud based systems.  Data confidentiality – since many cloud offerings operate primarily on the public internet. but Input/Output (I/O) sharing is more problematic. When confidentially is still a concern.

This has caused problems to an unbelievably high number of companies that failed to implement correctly or at all. human resources such as consultants. The implementation of this type of system requires a high financial budget. „left off‟ in competitiveness and internal business process automation and sophistication. The research 5. intangible and strategic benefits to a company when correctly implemented and used. improved maintenance and helps set up the platform for e-business and others. 2001). Even though ERP systems deliver high value to a company they also come at a price and have their disadvantages. over 60% of the Fortune 1000 businesses had adopted or where in the process of implementing (On-Premise or traditional) ERP systems to support their business processes and activities.5. These systems contribute to the business value chain in various ways. the SME ERP market had become a niche that vendors have tried to serve with simpler. In 2001. they present reliable information access through the inclusion of a common database management system (DBMS) which ensures data consistency and accuracy. Problem Discussion Enterprise Resource Planning Systems can deliver tangible. easy to install. cheaper and less time consuming solutions.1. due to the resource demands for this type of system. For this reason. time consuming and complex to implement. cost reduction through time saving due to the automation of business processes. These ERP solutions implemented by the Fortune 1000 companies were well over the budgets and resources of most SMEs (Kraft. and time. project team and implementation team. IT infrastructure. The major disadvantages of adopting this type of ERP system (On-Premise) are that it is very expensive. SMEs were. Some of these vendors exploited other software deployment methods Page | 26 .

the main differences between there 2 deployment models is that: Page | 27 . which is based on three major requirements. 2. Software applications are owned. Research Director at Gartner addressed the fundamental differences between the SaaS deployment model and the On-Premise software deployment model (Otter. One of these deployment models was the SaaS (Software-as-a-Service) model. pay-as-you-go basis. SaaS Software Deployment Model Thomas Otter. Following Gartner‟s definition of SaaS. Clearing Up the Confusion About SaaS (2006) According to Gartner (2006). 1. 2006). Process Scope of the process with On-premise SaaS Inputs Client Client Process Client Client Outputs Client Client Responsibility for Client Provider Client Provider No Yes Maybe Yes technology/ Support Location of technology Single code line supports Multiple customers Subscription model Difference between On-Premise and SaaS Deployment Models Source: Jim Holincheck.that could even allow these SMEs to access the system and data from anywhere. The software is based on a single common code and is delivered via a multitenant model. delivered and managed remotely by the software provider or providers. The software applications are delivered on a subscription. and 3.

SMEs face questions when it comes to ERPs.SaaS: In this approach. the code and data definitions are common and delivered on a one-to-many approach. the questions that interest us are:  Should the company implement an ERP system?  What type of ERP system fits the company best? In addition to this. The software applications are based on the client‟s facilities.. almost exclusively adopted by large companies. In addition to this. Even though these systems supposedly deliver great benefits at lesser costs and resources. On top of that. 2009). but the solution provider is responsible for the technology and support behind these processes. Page | 28 . run and manage (Velte et al. Due to the emergence of this technology. On-Premise: This is the traditional software deployment approach in w which the client is responsible for the business processes including the support and technology behind these. given their financial and resource build-up. SMEs found themselves able to compete and exploit benefits that were previously delivered by On-Premise solutions. it does not mean that their adoption by SMEs is a given. The SaaS model ERP supposedly offers similar applications and benefits at a lower price than the On-Premise model and require considerably less resources to adopt. the client is responsible for his internal business processes. the possibility of SaaS deployed ERP solutions is highly viable for SMEs. these services are delivered on a subscription-based model. the applications are run at the provider‟s site. and customers get „unique‟ codes. Typically a pay-as-you-go model is not used (with the exception of special cases) and the software is delivered on a longer contracts and licenses.

Hence the report does not contain any data collected through primary data collection method. One of the major challenges was to get the financial data of some SMEs and another was to understand which data to choose for analyzing the scope. which has used this technology in its backyard. 5. Also Page | 29 . So. Hence it is very hard to find an Indian organization. Research Methodology The Main purpose of this paper is to examine and analyze the Scope of cloud computing for the SMEs in India. Factor rating method was used to test the other hypothesis that traditional ERP systems involve higher level of difficulty in terms of adaptability than the Cloud computing services.5. this research paper aims to develop a research model which would justify this papers affinity towards the use of cloud computing for Indian SMEs. However. it certainly uses references of some secondary sources of data from various blogs and articles acquired across the grid. The data was collected from the internet. which has collected the primary data from various sources such as personal interviews and questionnaire. magazines and journals. T.. The paper questions the same situation.2. news papers. The research methodology used for the paper was kept very simple.3 Data Collection As the technology itself is very new to India Inc. To critically examine the pros and cons of CC it was vital to do PEST analysis of the technology to check its feasibility and adaptability in the Indian context. it is found that this concept of Cloud Computing (CC) is still not able to penetrate into the general day-to-day life of Indian people.Test was applied on the collected data to test one of the hypothesis of this paper that using cloud computing based ERP software would cost the SMEs lesser than the traditional ERP software does. This research paper adopts a “DESCRIPTIVE TYPE” of research.

a T. Factor rating method was used to test the other hypothesis that traditional ERP systems involve higher level of difficulty in terms of adaptability than the Cloud computing services. Page | 30 .Test was applied on the collected data to test one of the hypothesis of this paper that using cloud computing based ERP software would cost the SMEs lesser than the traditional ERP software does.

796 which is not in the acceptance region and thus H0 is rejected at 1 percent level of significance and it can be concluded that the sample data indicates that traditional on-premise ERP has lesser scalability as compared to cloud computing services. a survey of 25 samples was conducted. Analysis Based on various factors for comparison. The results are as follows. t-test was applied to know whether cloud computing has low or high scalability than on-premise ERP.711 T-Test 2.1 Hypothesis Development – Scalability H0 : Cloud computing service has lesser scalability than traditional ERP system. 6. Depending upon the data. H1 : Cloud computing service has higher scalability than traditional ERP system. The results for each factor were hypothesized and tested using various test. On applying the test we get the following result: Hypothesis H0 MeanOP 2. as given in annexure.94 MeanCE 1.46 DF 24 SL 1% R:t >1.711 The observed value of t is 2. Page | 31 .6. Paired t-test is applied at 1 percent level of significance using table of t-distribution for 24 degree of freedom we get the value: R: t>1.796 Result Rejected To determine the rejection region or acceptance region.

98 DF 24 SL 1% R:t >1.02 MeanCE 2.711 The observed value of t is 2.711 T-Test 2. Page | 32 .2 Hypothesis Development – Flexibility H0 : Cloud computing service has lesser flexibility than traditional ERP system.6. as given in annexure.787 Result Rejected To determine the rejection region or acceptance region. H1 : Cloud computing service has higher flexibility than traditional ERP system.787 which is not in the acceptance region and thus H0 is rejected at 1 percent level of significance and it can be concluded that the sample data indicates that traditional on-premise ERP has lesser flexibility as compared to cloud computing services. t-test was applied to know whether cloud computing has low or high flexibility than on-premise ERP. Paired t-test is applied at 1 percent level of significance using table of t-distribution for 24 degree of freedom we get the value: R: t>1. On applying the test we get the following result: Hypothesis H1 MeanOP 1. Depending upon the data.

On applying the test we get the following result: Hypothesis H0 MeanOP 1.6.3 Hypothesis Development – Implementation H0 : Cloud computing service is difficult to implement than traditional ERP system.711 The observed value of t is 2.736 which is not in the acceptance region and thus H0 is rejected at 1 percent level of significance and it can be concluded that the sample data indicates that traditional on-premise ERP has lesser flexibility as compared to cloud computing services. t-test was applied to know whether cloud computing easy or difficult to implement than on-premise ERP.736 Result Rejected To determine the rejection region or acceptance region.02 MeanCE 3 DF 24 SL 1% R:t >1. Depending upon the above information. H1 : Cloud computing service is easier to implement than traditional ERP system. Page | 33 . Paired t-test is applied at 1 percent level of significance using table of t-distribution for 24 degree of freedom we get the value: R: t>1.711 T-Test 2.

414 After analyzing the different cost structures of various companies offering cloud computing services it was found that charges were less than Rs. t-test was applied to know whether using cloud computing has low or high cost than on-premise ERP cost.6.22 1. As the users are paying on hourly basis and in some cases on monthly basis. Depending upon this information.28 1.44 1. cloud computing will result in a substantial cost saving and it will leverage the benefits of ERP Unlimited ($75/User/Month) 0. H1 : Cloud computing service provide lower per user annual cost than traditional ERP system. On applying the test we get the following result: Page | 34 .33 1.05 1.15 1. Hence we hypothesize:H0 : Cloud computing service provide higher per user annual cost than traditional ERP system. Cloud Computing Model provides IT based services and capabilities online with data shared on a third party server.358 0.822 Salesforce Enterprice ($125/User/Month) 0.69 Professional ($65/User/Month) Force.4 Hypothesis Development – Per user cost Cloud Computing is web based subscription model enabling the users to pay as per their need and usage. Cloud ERP On-premise ERP Software ORACAL FINANCE SAP RAMCO PEOPLE SOFT NAVISION BAAN PRIORITY COST/USER (in Laks) 1.2 Software COST/USER (in Laks) SAP Business By Design ($149/User/Month) 0.83000 per user per year approximately.

833 T-Test 3.23 MeanCC 0.221 DF 9 SL 5% R:t >1.126 SDCC 0.833 The observed value of t is 3.144 Result Rejected To determine the rejection region or acceptance region.571 SDOP 0. Unpaired t-test is applied at 5 percent level of significance using table of t-distribution for 9 degree of freedom we get the value: R: t>1.144 which is not in the acceptance region and thus H0 is rejected at 5 percent level of significance and it can be concluded that the sample data indicates that traditional on-premise ERP incurred higher cost as compared to cloud computing services.Hypothesis H0 MeanOP 1. Page | 35 .

H1 : Cloud computing services are less adaptable than traditional ERP systems. 1= Low difficulty 2= Moderate difficulty 3= High difficulty Page | 36 .5 Factor rating method In addition to the cost there are certain more factors based on which decision has to be made while implementing the cloud computing services for SMEs. To test this hypothesis factor rating method was used and the factors were analyzed on a scale of 3 in terms of difficulties faced by ERP and cloud computing customers. Based on the responses of the survey.6. To analyze these factor a survey was conducted. which is scaled to 74 responses. hypothesis H0 and H1 are analyzed: H0 : Cloud computing services are more adaptable than traditional ERP systems.

5 139 30 25 20 15 ERP Weighted Score 10 5 Cloud Computing Weighted Score Scalability Availability Maintainability Accessibility Mobility Performance Implementation Security Integration Deployment Flexibility Transparency Installation Upgradation 0 Page | 37 .5 15 22.5 7.5 22.5 8.5 6 7.5 7.5 8 5 5.5 7.5 8.5 17 21 13 22.5 100 22.5 7.5 7.5 7 6.5 7.5 12 22.5 8 15 16. Parameter Scalability Availability Maintainability Accessibility Mobility Performance Implementation Security Integration Deployment Flexibility Transparency Installation Upgradation Sum ERP Score 3 2 3 2 3 2 3 1 1 3 3 2 3 3 Cloud Cloud ERP Computing Computing Weights Weighted Weighted Score Score Score 1 1 1 1 1 1 1 3 3 1 1 2 1 1 7.5 25.5 24 5 5.5 7 6.5 12 7.Table below presents the different factors of adoption with their score and weighted score.5 238.5 7.5 7.5 7.5 8.5 8.

The graph shows that ERP has high weighted score in terms of every factor cited in table except for security and integration. So it indicates that cloud computing has more factors that are less difficult for adaptation than traditional ERP and hence hypothesis 0 is accepted whereas hypothesis 1 is rejected. Page | 38 . The value of Cloud Computing Weighted Score comes out to be 139 which is less as compared to traditional ERP weighted score as shown below in figure 3.

7. SWOT analysis The SaaS business model has many advantages but also disadvantages. The software that is used as a service is functional on every standard computer with internet connection. So there is no need for a high IT knowledge or high investments to expensive IT hardware because the software is installed on the hardware infrastructure of the service provider. 7. In addition there are no royalty-payments for the software. B) Reduced costs Only the standard software that is really needed will be in usage in the company. The following SWOT analysis describes the strengths. So there is a double transfer of cost risk from the customer to the provider. Strengths of SaaS A) Reduced effort In compare with the classical software license model there is no complex providing of the software in the company anymore.1. But the market researcher from IDC think that the cost advantages in the beginning will be over after three till five years because a software that is bought Page | 39 . The included services lead to a lower tie of important human resources of the IT department because the service provider cares for everything that has to deal with the provided software.or over-licensing and with it a lower capital tie because of the high starting investments for the software license. He cares for the right hardware environment and services to keep the software running which simplifies the software management so that the companies can keep concentrating on their core businesses. weaknesses. opportunities and threats that come with SaaS. This avoids the problem of an under. So there will only be paid a calculable monthly rent that depends on the amount of usage of the software.

A professional external IT service supporter has got this experience so he can better care for the security so that nobody else than the customer himself can reach his data. rented software costs will run month for moth. The service provider will always offer the newest version of the software product. C) Always up to date The SaaS customers will always be up to date with its software products. This is because SaaS is used in a internet browser as a web service so that there is only one standardized web Page | 40 . But in this calculation is missing the hidden costs of all the service activities like maintenance that will be a huge part of the costs. Market researchers from Gartner found out that with SaaS there is a saving potential up to 30% in comparison to an on-premise software solution. D) Higher security The service provider cares for the highest security of the personal data that were given to him from the customer. This can lead to a strategic advantage towards the market competitors because of a possible improvement of the business processes. E) Fast implementation The rented software could be implemented and used in a very shorter time period that a classical in-house solution.will be decreased anytime. Normally the customers are not very high experienced concerning data security because it is not their core business. The danger of losing data is also lower because of a professional backup solution that is a part of the integrated service level agreement.

This makes the work much more flexible and avoids the problem of redundant data on several computers that regularly have to be synchronized.interface whereat the SaaS application is connected with the existing IT infrastructure. If there is a server breakdown there will be no possibility to run the software Page | 41 . SaaS is dependent of the internet availability. The SaaS product runs in the data center of the provider with all data that is central stored. That is why many customers customize the used software or enlarge it with the help of add-ons. So the user is able to connect to the software and his data from every computer or mobile terminal with an internet access. This limitation of customizing could be the biggest danger for the distribution of SaaS but it avoids repeating the same mistake that was made with ASP. F) Worldwide use on the way SaaS products can be used worldwide and not only on the computer where the software is installed. 7. But the most of these specialized add-ons and other customizations are not integrable into SaaS because the formula for its success lies in the simplicity for a general usage which stands in contrast to an ample customizing. B) Data availability The advantage of using SaaS over the internet line is one of its biggest disadvantages at the same time.2 Weaknesses of SaaS A) Customizing restrictions One single software product that is perfectly suitable for everybody will hardly be to realize.

C) Data security If a corporate decides to use SaaS they save all their data that is used with the application in an external data center that is run by the service provider. Otherwise it would be possible to intercept the data on the line.anymore in the company. So there must be a huge mutual trust between the customer and the provider that must be arranged by the provider with a convincing security concept against third-party access and data losses. This could mean a huge loss because of a possible production or service default. told that they had an excellent uptime in 2006 with an availability of 99. But also if there is just no possibility to connect to the internet there is no chance to use the software or to get to the needed data because the software and the data are not offline usable like a local installed software product with local saved data. Projectplace. D) Performance The performance of the provided software product is always dependent and limited to the performance of the available internet connection. This could become dangerously for a company if the internet connection is not or just slowly responding and so critical business processes cannot be done. But it must be also guaranteed that the internet line is secure. Europes leading SaaS provider. That meant that they were only 11 minutes offline in the whole year.998%. This means that there will never be a real time access to the data. Page | 42 .

This leads often to an over-functionality or an under-functionality for the most of the users affiliated with payments for unused functions. F) Over-/ under-functionality SaaS is a standardized product that is offered in one form for many different users. That means that they are mostly not high experienced concerning IT services.3 Opportunities of SaaS A) Better service quality IT services are not the core business of companies. 7. A specialized professional IT service provider is high experienced and therewith able to offer a much better IT service quality to the customers. Specific requirements cannot be mapped because of the one-to-many principle.E) Business process support SaaS is a kind of standard software. It is more a must for them. This could mean an important strategic advantage towards the market competitors Page | 43 . That could denote that a company could loose its strategic advantage in the market because their special business processes will not be perfectly supported with the SaaS application. That means that the specific organization of a company will not be reflected in the software. The possibility of a perfect fitting SaaS product is quite low. B) Always the newest software version The SaaS customer normally gets the newest software versions at first without extra payments for the updates because they are a part of the service agreements of the SaaS providers that are included in the monthly rent.

C) Free cash flows Using software as a service means that the customer only pays a monthly rent. This aspect is supported by the easier integration in running systems so it needs less time to implement a new SaaS product because of the standardized web interface. D) More flexibility The customer has got only low starting investments for the purchasing of the software so there is less fixed capital. at least until it is depreciated.because the SaaS customer has access to newer functions that could advance his business processes. There are no expensive investments for a software license. Page | 44 . With a short running SaaS contract the customer is able to change the applications and the software provider in a short period unlike with an on-premise software solution where the purchased software must be used over a long period. for the own IT service department or for a new hardware infrastructure. So the software can be selected because of its economic functionality and not because of its integrability into the running systems. So there are scalable payments that are not as high especially at the beginning of the software introduction as in the classical license model. These free cash flows can be used for improving the core business processes.

The provider is doing good to do everything to win the customers confidence. Like in the case of data losses there must be a huge mutual trust between the service provider and the customer. The customer is doing good to check the service provider well before responding a contract with him. That is why the security level with the amount of backups and the recovery time must be detailed fixed in the SLA‟s. so it could become very difficult to clarify the question of guilt. So in legal questions there could be another law in charge than the home law. C) Data synchronization In a case of a change of the software provider to another it must be ensured that all the data that is stored in the data center of the provider will be at first synchronized to the server of the new provider and that there will be no readable data left on the old server. Page | 45 .4 Threats of SaaS A) Border-crossing data storage Every company that uses SaaS must make itself sure that the stored data possibly will not be saved in the same country where the company is founded. B) Data losses All the user data are saved on an external server in the data center of the software provider. If some data were lost the corporate is not able to take the recovery of the data in its own hands.7. It is dependent of the service provider. otherwise the customer could change the provider.

especially in an emergency case when every second is important. Page | 46 . In addition they are nearby their customers and therewith able to offer their physical IT service in a very shorter time than an external IT supporter. E) Dependency to the provider If the SaaS provider goes suddenly bankrupt or is not able to provide its software products anymore for any other reason it must be ensured that the customer will still be able to run his business normally. Otherwise could be a total dependency to the service provider in such cases which could lead to the death of a company if the data have been important for running the business. F) Long contract terms One huge advantage of SaaS is the flexibility that SaaS offers to the customers.D) Missing local IT support The in-house IT department knows its internal customers and supported IT normally as the best. In the SaaS business model the IT services will be outsourced to an external IT service supporter that will often not be nearby the company. Long running contracts with the software provider will take the flexibility out of the SaaS concept.

without the need for customers to own the IT infrastructure or software applications required ECONOMIC for the business needs (SaaS. recognizing that the unregulated infrastructure has lead to new kinds of monopolies. Allows flexible payment (e. an analysis of PEST framework was performed. political and fiscal environment. the SMEs can rely on the cloud service provider that can easily scale up and down through assigning and re-assigning physical and virtual resources in order to meet the actual need. Page | 47 . The headings in the four quadrants in PEST analysis also gives a framework for reviewing the situation and describing why these factors are particularly relevant to the business processes of SMEs.8.g. pay-per-use).Software as a service). Policy initiatives to accelerate SMEs use of broadband could include favorable tax treatment. do not need to maintain and upgrade servers. more legislative requirements are needed. in a supportive legal. Pest Analysis To address the first question of this paper and discover some of the main factors that should be considered by SMEs when considering the strategic decision to adopt Cloud Computing. legal definition of personal POLITICAL information privacy and management. The main results of the PEST analysis are shown in table below PEST FACTORS Continuous data protection is provided. the different applications (the software) and the security. controlled by the strongest service providers. Instead. This means that the SMEs. particularly those concerning the conditions under which data can be stored and processed. Contributes to significantly reducing carbon emissions. thus addressing the second research question. Politicians are looking for regulatory models as alternatives to the past monopolies.

it estimates a 50-75% reduction in the time and effort it takes to add new products. making any decision dependent upon outside IT vendor organisations. the cost factor seems to be even more relevant to the SMEs (they have a technical and financial lack of resources when compared with large companies). software (SW) and maintenance. cloud-computing services provide an open business platform for everyone. Page | 48 . New opportunities for collaboration and social networking between business partners by enabling access to sources of information that are time and distance independent.Allows efficient operation with a significant cost reduction/savings. for every organization and for every kind of business. As result SMEs should invest in smart infrastructure and green technology. In terms of ongoing cost/productivity of companies„ improvements. Strategy and competitive advantage does not seem to be as relevant to the SMEs as it may be to the larger organization. everywhere. Greater security is possible due to economies of scale and the ability to afford better security experts. SOCIAL User friendliness. for every country. for every company. Many SMEs do not have the knowledge of IS and IT and all its ‗topics„. The ongoing economic crisis has prompted responses by governments to limit economic effects of the credit crunch. the crisis should not damage the drivers of long-term growth. Due to the limited financial power of SMEs in comparison with large organizations. The need for regular new software purchases is reduced or eliminated. because their strategy is life-time rather than short-time. cloud computing solutions will minimize the SMEs investment in own hardware (HW). CC encourages innovation and enhances business competitiveness In general.

A community of local players. Service with high quality. TECHNOLOGICAL Capacity scaling is done in the cloud. sales and marketing staff to develop new skills. customer relationship management. and not at the customer premises. together with distributed virtual communities. flexible license management models. which may lead to career progression and increased job satisfaction. applications (the software) and security. for certification and trust. Scalability is offered through dynamic provisioning of resources. The launch requires minimal effort due to the easy migration of code to the new environment. Provides a certain level of customization and allows an efficient operation. engineers. at any device (mobile and fixed). Opportunity for support managers. Reliability is improved through the use of redundant sites. Provides flexible response to change. Page | 49 . contributes to the development of strategies. Cooperation in information technology. always accessible anytime. at any connection (via fixed and wireless connections) and from any place. Governance of network and IT state. e-procurement. SMEs do not need to maintain and upgrade servers. digital services and business models. working with new and potentially prestigious technology. technological solutions. understanding of how operations perform according to Service Level Agreements (SLA) Basic generic services include systems for electronic payment. enterprise resource planning.

So there are no hardware. However. and lack of technical resources. Others are more willing to test broadband or Cloud applications. 37000 per user per year if they had preferred the SaaS Solution provided by “SAP Business ByDesign” over traditional ERP systems. From t-test it is inferred that cloud computing incurs lower cost than traditional ERP Systems. fear of complexity. should provide additional evidence concerning patterns of adoption. software or implementation costs. such as Cloud Computing. So it is clearly evident that Cloud Computing services are more adaptable than traditional ERP systems. such as opportunities to test new software. which essentially are responsible for the unprecedented high cost of using a traditional ERP system. or consider the possible advantages of Cloud Computing. but do not see it as part of a larger strategy. It becomes obvious from the PEST analysis that the emerging systems of Cloud Computing have the potential to multiply the productivity. Findings The experiences of SMEs investing in innovative technologies. No capital investment for software infrastructure is required for any SaaS based ERP solution. There are many opportunities and advantages for SMEs in using Cloud Computing. Consequently. some SMEs remain reluctant to avail themselves of broadband services. due to perceptions (or misconceptions) regarding possible capital investment. evaluate third party applications. increase resources on demand to satisfy seasonal or temporary Page | 50 .9. efficiency and profitability of small scale enterprises. Evidence is also emerging to suggest that even large companies (contrary to conventional wisdom) are actually embracing Cloud services. lack of understanding of the potential benefits. Based on the factor rating method it can be easily deduced that traditional ERP systems involve higher level of difficulty when analyzed in terms of adaptability than the Cloud computing services. an increasing number of companies (small and large) are beginning to see some real value in using the Cloud. Based on the financial data of the Indian SMEs that are analyzed above it is deduced that on an average these Indian SMEs would have saved approximately Rs.

demand and offer software to customers as SaaS. by enabling access to sources of information that are time and distance independent. Conversely. v) Having a variety of options to choose from. vii) Availability of staff to work with and maintain the system. Cloud Computing fits specific SMEs needs as follows: i) Being available off the shelf. iv) Low price. Nevertheless. Many of the same functions can be performed faster and more efficiently by using modern IT infrastructure and software than traditional in-place data centers.of Government/tax regulation and policies that support IT projects based on Cloud computing. viii) Strategic impact. for every organization and for every kind of business and new opportunities for collaboration and social networking between business partners. Cloud Computing services provide an open business platform for everyone. allowing staff to focus on core competencies. iii) Ubiquitous systems. for every country. x) Existence – at least in some countries . particularly in the current global economic crisis. In the specific case of SMEs. this methodology addresses only external factors and their Page | 51 . access to Cloud services is becoming a critical element for their competitiveness and efficiency. due to its flexible cost structure and scalability. can be viewed as a combination of both opportunities and threats. vi) Customer support/communication. In general. As a result. ix) Software already existing to implement customizable Enterprise Resource Planning (ERP). combined with external micro-environmental factors and internal drivers. The PEST factors. Cloud computing is likely to be an attractive option for many SMEs. everywhere. for every company. Other benefits include time saved dealing with technology issues. ii) User friendliness. lack of access would imply that the SME sector will not achieve its full potential.

influence on organization‟s behavior not taking into account the role that internal variables can play in this context. In this sense and for future research. a SWOT analysis is recommended. when studying the mix of internal and external factors concerning the adoption of Cloud Computing by SMEs. Page | 52 .

So our hypothesis (H3) that Cloud Computing services are more adaptable than traditional ERP systems is also accepted. So our hypothesis (H1) that Cloud computing service provides lower per user annual cost than traditional ERP systems is accepted. Page | 53 . Traditional ERP systems involve higher level of difficulty in terms of adaptability than the Cloud computing services. For this purpose the paper analyzes per user annual cost as a parameter to compare the cost of using the traditional ERP solution and the cloud computing modeled SaaS based ERP systems. The paper also compares the difficulty level for adaptability of the traditional ERP systems and the SaaS based ERP solution. Conclusions The objective of this research paper was to analyze the scope of cloud computing for the SMEs in India.10. After the analysis following conclusions are drawn: The average amount saved by using the SaaS based ERP instead of the traditional ERP is about 37000 per user per year for the SMEs under consideration.

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Data on Scalability factor Cloud ERP 1 1 1 1 1.Annexure 1.5 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 On-premise ERP 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 Page | 56 .

2.5 1 1 1 Page | 57 . Data on Flexibility factor Cloud ERP 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 2.5 3 3 3 3 3 3 3 3 On-premise ERP 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1.

Data on Implementation factor Cloud ERP 1 1 1 1 1.3.5 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 On-premise ERP 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 Page | 58 .