International Journal of Quality & Reliability Management

Identification of challenges and their ranking in the implementation of cloud ERP:

A comparative study for SMEs and large organizations
Shivam Gupta, Subhas C. Misra, Akash Singh, Vinod Kumar, Uma Kumar,
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Shivam Gupta, Subhas C. Misra, Akash Singh, Vinod Kumar, Uma Kumar, (2017) "Identification of
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IJQRM
34,7
1056
Received 3 September 2015
Revised 18 April 2016
Accepted 20 June 2016
Downloaded by Loughborough University At 06:07 13 February 2019 (PT)
International Journal of Quality &
Reliability Management
Vol. 34 No. 7, 2017
pp. 1056-1072
© Emerald Publishing Limited
0265-671X
DOI 10.1108/IJQRM-09-2015-0133
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/0265-671X.htm
QUALITY PAPER
Identification of challenges
and their ranking in the
implementation of cloud ERP
A comparative study for SMEs and
large organizations
Shivam Gupta, Subhas C. Misra and Akash Singh
Department of Industrial and Management Engineering,
Indian Institute of Technology Kanpur, Kanpur, India, and
Vinod Kumar and Uma Kumar
Eric Sprott School of Business, Carleton University, Ottawa, Canada
Abstract
Purpose – The purpose of this paper is to identify the critical challenges in the implementation of cloud
enterprise resource planning (ERP). The challenges identified were customization, organizational change,
long-term costs, business complexity, loss of information technology competencies, legal issues, integration,
data extraction, monitoring, migration, security, network dependency, limited functionality, awareness,
performance, integrity of provider, perception, and subscription costs. Here the small and medium enterprises
(SMEs) and large organizations were differentiated with respect to the challenges identified. This paper also
suggested ranked lists of challenges both for SMEs and large organizations.
Design/methodology/approach – An online survey was conducted and data of 93 respondents
were analyzed. Exploratory factor analysis and one-way analysis of variance (ANOVA) was used to
statistically test the data. Here the SMEs and large organizations were differentiated with respect to the
challenges identified.
Findings – This study shows that SMEs and large organizations differ from each other for most of the
challenges except business complexity, integration, monitoring, security, limited functionality, performance,
and integrity of provider. Also from the ranked list of challenges in cloud ERP, security was the top concern
for both SMEs and large organizations.
Originality/value – The findings may help organizations to get a broad idea about the challenges which are
critical for the implementation of cloud ERP.
Keywords SMEs, Challenges, Cloud computing, Large organizations, Cloud ERP
Paper type Research paper
Introduction
In today’s competitive market, companies are continuously looking for ways to operate
more efficiently and reduce costs. In order to attain these goals, information technology (IT)
can be a good option (Gurbaxani and Whang, 1991). Cloud enterprise resource planning
(ERP) is quite easy to deploy and does not require extensive IT infrastructure in terms of
hardware and software. Organizations do not have to pay for extra server and other
dependent costs. Cloud ERP vendor can assure the regulation of ERP on behalf of business
organizations. Cloud ERP depends on internet and it is quick and easy to implement than
the on-premise ERP solution for a business organization. A study done by students of
Lund University, Sweden (Alajbegovic et al., 2013), talked about the factors that affect cloud
ERP adoption. Qualitative analysis was done for their study by interviewing employees of
companies which possess knowledge about cloud ERP.
The size of the organization can be critical in terms of the ERP that can be implemented
which can act as single system for majority of the activities performed within the
 company. Small and medium enterprises (SMEs) prefer to use cloud-based ERP solution Implementation
which is not expensive and requires minimal investment in IT infrastructure. Also, SMEs of cloud ERP
at times prefer to use few of the services that the entire ERP module can offer them.
This makes them aptly suited for the cloud ERP solution as they can pay for what they
use and vendor takes care of the services provided. On the contrary, large companies
would prefer to maintain a stable and robust system that would not be entirely network or
internet dependent and at the same time they would prefer the consistency of the data 1057
(Buonanno et al., 2005).
The overall goal of this work was to improve the understanding of emerging cloud ERP
by attempting to address the following questions:
• What are the important challenges that an organization may encounter toward
adopting cloud ERP?
• Can we rank these challenges according to the level of their importance?
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We had conducted an online-based survey questionnaire of 93 respondents for our empirical

analysis. The response that we got from the respondents was overwhelming as they have
shown interest in the work as well as the results of the study.

Motivation and background

After the financial crisis in 2008, companies were looking out for ways and means to reduce
their IT infrastructure cost and also increase their return on investment (OECD, 2013). ERP
helps to manage the various resources of the company by integrating the information of
various processes spread across the organization (Buonanno et al., 2005; Laukkanen et al.,
2007). There are benefits and drawbacks of on-premise ERP solution. A company risks by
investing heavily on the installation of on-premise ERP system and maintenance of the
requisite IT infrastructure required to support this system (Lenart, 2011). Cloud ERP makes
companies with limited budget to have access to technology that provides benefits of
on-premise ERP solution in a more affordable manner. This ERP solution is gaining
popularity and both the SMEs as well as large companies are making use of this
cloud-based ERP to reduce the cost and maintenance of IT infrastructure (Klaus et al., 2000;
Buonanno et al., 2005). There are studies that have suggested that cloud ERP will take over
the on-premise ERP model and cloud-based systems are going to be the backbone of
organizations in the future (Marston et al., 2010; Benlian and Hess, 2011; Lenart, 2011,
Aleem and Sprott, 2013; Arnesen, 2013). Cloud ERP is a relatively new area of research and
there is limited scientific literature related to cloud ERP adoption due to lack of academic
studies. Therefore, we have tried to build up the literature review on the related domains
such as studies conducted on adoption of new technologies, cloud ERP benefits, and
challenges in implementation of cloud ERP. The literature review conducted has led us to
develop a preliminary framework of challenges for implementation of cloud ERP.
Identifying challenges in the implementation of cloud ERP will contribute to the
academic knowledge as an important step toward the unexplored area of cloud ERP
adoption. Comparing these identified challenges from the perspective of SMEs and large
organizations will enhance our understanding about the way organizations perceive
these challenges.

Challenges in implementation of cloud ERP

We have found out possible challenges for cloud ERP implementation in enterprises by
undertaking the literature review of various publications. There is difference in the
way an SME and a large organization works and thus the challenges identified are
tested to see the difference. Each identified challenge has been tested by formulating
 IJQRM hypothesis for the same. The following list of challenges will be used as preliminary
34,7 framework during the research work:
(1) Chal1 – customization: the needs and requirements of every enterprise vary and
thus customization becomes the need of the hour. For successful implementation of
cloud-based ERP, customization can play a critical role in the selection of cloud
vendor. There are standard cloud ERP applications that are used by every
1058 organization in the public cloud. But in private cloud, ERP can be customized
according to the need of organization. This is one of the prime challenges that an
organization faces in implementation of cloud ERP (Kim et al., 2009). A large-scale
company would want the operations to be customized to their needs whereas an
SME has to use the services offered by the cloud vendor and the room for
customization is less. Customization can increase the cost of the ERP package and
the SME would have to deal between the trade-off of cost and customization:
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H1. There is difference in SMEs and large organizations with respect to customization.
(2) Chal2 – organizational change: an organization’s determination to undergo
changes and to adapt themselves to the business requirements is important for the
successful ERP implementation (Somers and Nelson, 2001; Zhang et al., 2003). It is
very difficult for enterprises to adopt new system and abandon the current system.
New system changes the work profile which company employees are not
comfortable with. Cloud ERP-perceived operational benefits can be a reason for
companies to switch from their current system to a cloud-based solution.
The operational benefit of moving to another system is not the only reason for
enterprises to abandon their current ERP system (Olson, 2007). For IT specialists,
adoption and adjusting to a new system like cloud ERP can pose a challenge, as the
employees not only have to accommodate themselves to the new ways of working
but they also stand a chance to lose the job since a lot of work is outsourced to
third-party clients (Marston et al., 2010). In large companies, the reluctance to
shift to a new system can be high compared to SMEs. In SMEs, the number of
employees is less and thus can be trained in less time frame compared to
large organizations:
H2. There is difference in SMEs and large organizations with respect to organizational
change.
(3) Chal3 – long-term costs: long-term costs in cloud ERP add up over the time period.
Also annual subscription cost of SaaS or cloud ERP is higher than the maintenance
costs of on-premise ERP (Panorama Consulting Solutions, 2013). Companies should
be aware of the fact that their short-term running cost of business should not add up
more than the long-term operating cost for cloud ERP vis-à-vis on-premise ERP
module. The subscription cost lets the SMEs and large companies to pay for the
services they use and thus they do not have to deal with any IT infrastructure and
hardware costs. The companies should make the decision to shift to cloud ERP
keeping in consideration that their long-term operating cost should not be more than
the cost involved in running an on-premise ERP system:
H3. There is difference in SMEs and large organizations with respect to long-term costs.
(4) Chal4 – business complexity: cloud ERP can be challenging when expanded to
multiple departments in large organizations or expanding to new geographies or
new business lines. It can be more difficult for cloud ERP to keep up to these
changes and to have flexibility to allow the software to adjust to the changes made
in real-time basis (Panorama Consulting Solutions, 2013). The business complexity
 in large companies is more than the SMEs. The SMEs are more flexible to adjust to Implementation
changing business needs and demand: of cloud ERP
H4. There is difference in SMEs and large organizations with respect to business complexity.
(5) Chal5 – loss of IT competencies: as companies outsource major part of their IT
support, they may face the resistance of their IT department toward organizational
changes as well as they also lose some valuable IT competencies ( Jlelaty and 1059
Monzer, 2012). Using cloud-based ERP solution leads to loss of IT competency for
both SMEs and large enterprises. They are completely dependent on the cloud
vendor for the services and the existing IT domain in SMEs and large
companies may face problems and challenges to be in sync with IT capabilities of
the cloud vendor:
H5. There is difference in SMEs and large organizations with respect to loss of IT
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competencies.
(6) Chal6 – legal issues: different countries have various types of security and privacy
laws and regulations. These laws exist at various levels like the local, state, and
national level, making a conceivably complex issue for cloud computing (Hogan
et al., 2011). A responsible organization will function and operate within the rules,
regulations, standards, and specifications laid down by the governmental authority.
Cloud-based ERP concept is fairly new and therefore there is a need to have the
standards, procedures, and specifications in place. Rules and regulations can
facilitate security and integrity of the corporate data and information security
(Heiser and Nicolett, 2008). The risk involved for SME and large companies can be
varied. A large company has its own legal team which helps the company in
undertaking due diligence before getting into the contract with the cloud vendor.
They would try to enforce a more stringent service-level agreement (SLA) with the
cloud vendor. In the case of SMEs, having a detailed SLA with the cloud vendor
may not happen and this can leave the room for cloud vendor to put the business of
SMEs at risk:
H6. There is difference in SMEs and large organizations with respect to legal issues.
(7) Chal7 – integration: integration in cloud system is difficult and is one of the major
barriers in implementation of cloud-based ERP (Kamhawi, 2008). The cloud ERP
vendor offering is standardized and due to that users have less control on the
system. This can pose as a challenge while integrating other applications within the
cloud ERP system. This exercise can increase the cost of service and thus the users
feel that integration is difficult in the cloud environment (Saeed et al., 2011).
Large companies have many applications and large amount of data to be integrated
to the cloud vendor platform. Here, integration can pose as a challenge as all the
applications might not integrate in the same manner as expected by the company.
The large company can push the cloud vendor to incorporate all the existing
business applications in the cloud-based solution. SME rely heavily on the solution
provided by the cloud vendor. Since customization relates to higher subscription
costs, SMEs tend to comply with the offerings of the cloud vendor:
H7. There is difference in SMEs and large organizations with respect to integration.
(8) Chal8 – data extraction: multi-tenancy in the cloud makes the same resource as a
shared resource for all the companies using the service. The data available in cloud
can be retrieved by anyone using the application and these data can be accessed
only through internet connectivity having a good bandwidth speed. There are times
 IJQRM when data with common names and information are available in the cloud and user
34,7 is not sure of which data to select. This leads to a case of uncertainty in data
extraction. Thus data extraction can be a critical challenge in the implementation of
cloud ERP. Large companies have more data transfer and extraction compared to
SMEs. Reliable and secure network can help in better data extraction for both large
companies and SMEs. Large companies can have their own dedicated network
1060 solutions and thus they can have an edge over the SMEs:
H8. There is difference in SMEs and large organizations with respect to data extraction.
(9) Chal9 – monitoring: the management and monitoring of very important assets
(e.g. the data of suppliers, customers, processes, information of products, and
transactions conducted on a daily basis) are not controlled by the company using
cloud ERP module. This can lead to information loss or theft as the vendor has
access to the entire data of the company using its leased services. Companies which
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have been used to manage their assets on their own find it difficult to give the reigns
of their privy information to be managed by cloud provider (Suciu et al., 2012).
Leakage of business sensitive information and data can lead to financial loss as well
as losing business insights. This can be more critical for a large company as the loss
from any sensitive information can run into millions of dollars. Cloud vendor should
be able to demonstrate to their clients that their platform is secure and complies with
the legal norms set by the industry and the country. SMEs as compared to large
organizations would not have the requisite manpower to monitor the way the cloud
vendor provides the services to them:
H9. There is difference in SMEs and large organizations with respect to monitoring.
(10) Chal10 – migration: migrating from the on-premise ERP to cloud-based ERP
solution can be expensive as the data structure and the database of these two types
of ERP are different. This migration can also be time consuming as integration of
existing services used by the company, customization, and testing is crucial for
smooth transitioning. Unlike on-premise ERP module, cloud ERP does not require
many consultants which act as an advantage while migrating to cloud ERP
(Alajbegovic et al., 2013). Migration for SMEs can be easier as they are more flexible
to change and adapt themselves to the changing business needs. Money spent
during the migration as well as training of the user to the new system can be
compensated by the benefits of cloud ERP like no IT infrastructure cost and less
manpower requirement. Migration can be a challenge for large companies to shift to
cloud-based services as the cost involved to migrate is high. The existing IT
infrastructure of the large company will not yield much return to the company as it
is a depreciating asset. Also, time involved in migration here can be more for large
companies compared to SMEs:
H10. There is difference in SMEs and large organizations with respect to migration.
(11) Chal11 – security: confidentiality and security risks are amongst the most important
concerns impacting cloud-based ERP solution (Marston et al., 2010; Engebrethson,
2012). In on-premise ERP application deployment model, the sensitive data such as
financial and customer details of each enterprise are kept inside or under
the company’s controlled physical location, security, and access control policies.
On the contrary in the cloud ERP model, organizational data are stored in servers
which are located in the outside world (Subashini and Kavitha, 2011). Therefore,
data security is another key success factor for cloud ERP adoption. Encryption of
data while transmitting can be employed by cloud providers to mitigate this risk.
 Companies using cloud-based services can make the mistake of selecting a vendor Implementation
who pays little attention to these risks and this can lead to the leakage of discreet of cloud ERP
information of the companies. Large companies would emphasize heavily on
security of data and information. They will undergo the due diligence process of
selecting a vendor which will meet their requirements. This might cost the company
a higher subscription cost. SMEs are price sensitive and they are not well aware of
the security-related risks: 1061
H11. There is difference in SMEs and large organizations with respect to security.
(12) Chal12 – network dependency: cloud-based services need a constant internet
connection for real-time transactions to take place. Internet is required to connect to
both the documents and applications and a person cannot access his/her own
documents if he/she does not have an active internet connection (“The pros and cons
of cloud computing,” posted by Kathleen, 2011). Companies which rely on real-time
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transactions would be heavily dependent on the network speed and connectivity.

Both large companies and SMEs would want to maximize the benefits of
cloud-based services like real-time transactions and data transfer:
H12. There is difference in SMEs and large organizations with respect to network
dependency.
(13) Chal13 – limited functionality: traditional ERP is a mature system compared to
which cloud ERP does not have the same basis. This limits cloud ERP functionality
as it will not be extensive enough to cater to all the requirements in every type of
industry (Scavo et al., 2012). Furthermore, some cloud-based applications are
currently restricted to certain geographies because they cannot meet the financial
reporting requirements of every region in which a company might operate
(Utzig et al., 2013). Large companies which operate in different geographies may
face problems as they might not be able to fully utilize their capabilities using a
cloud-based system. SMEs are mostly restricted to a particular region and thus they
target using cloud services which can cater to their business needs:
H13. There is difference in SMEs and large organizations with respect to limited
functionality.
(14) Chal14 – awareness: in an organization, there is a lack of knowledge in decision
makers about cloud ERP as well as the lack of hands-on experience within the
employees in using cloud ERP-based systems. In reality, a decision maker might not
be equipped with the knowledge and experience of whether to migrate to
cloud-based ERP or not. Awareness among the SMEs as of now is low. This acts as a
barrier for the vendors when they offer the services of the cloud-based ERP to the
SMEs. SMEs are still not aware of the potential of cloud-based ERP solution and are
hesitant in migrating and even adopting at the very start of their business. Large
enterprises have more exposure and are better equipped to make an informed
decision to shift to cloud-based solution:
H14. There is difference in SMEs and large organizations with respect to awareness.
(15) Chal15 – performance: cloud-based ERP has performance risks that are related to
inconsistent bandwidth speed, reliability, and outage risks of network and
constraints on data transfer (Kim et al., 2009). Inadequate performance of
cloud-based systems can have an adverse impact on the real-time decision making
on important financial and operational decisions. Performance of cloud-based
system can be related to the subscription cost involved as the lower and basic
 IJQRM services offered through cloud ERP can only cater to some fundamental solutions.
34,7 Thus, increasing the subscription package can deliver better performance to the
company. Large companies have the financial capacity to pay for the premium
services offered by cloud vendor compared to a price sensitive SME. Cloud vendor
would reserve the best of the services for the select few clients who can pay for them:
H15. There is difference in SMEs and large organizations with respect to performance.
1062
(16) Chal16 – integrity of provider: vendors are responsible for maintaining both the
hardware and the software including all the upgrades and software patches.
They also provide the system monitoring, necessary backups, and user support.
This helps in reducing the size of the IT support and maintenance team in
organizations (Utzig et al., 2013). In many cases, it is rather hard to accurately define
SLAs negotiated between the organizations and the cloud vendor (Kuyoro et al.,
2011). The agreement drafted by the cloud service provider does not include certain
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aspects such as confidentiality and integrity and thereby giving an edge to the
vendor in cases of infringement ( Jaatun et al., 2012). Thus, it is recommended to
choose cloud vendor according to their position in the market. Also, the financial
background, reliability, prices, and user reviews should be considered before
selecting the vendor ( Jerkovic, 2011). Large companies are more aware
of these aspects compared to the SMEs. Large enterprises lay emphasis on aspect
like this as changing a vendor is not convenient and nor good for their business with
a long-term view:
H16. There is difference in SMEs and large organizations with respect to integrity of
provider.
(17) Chal17 – perception: there is a perception about the ERP that only large companies
use it and also that companies which have a large pool of capital can implement it.
Another perception is that cloud ERP would be complex to use and implement.
These perceptions can be overcome by making people aware of the differences
between on-premise ERP and cloud-based ERP. Large companies are well informed
about the cloud-based offerings compared to SMEs. SMEs consider cloud-based
ERP solution to be technologically advanced compared to their own IT competency
and thus they feel hesitant to move to this ERP offering:
H17. There is difference in SMEs and large organizations with respect to perception.
(18) Chal18 – subscription costs: cloud-based ERP employs periodic subscription fees
which can be paid on a regular interval of time with an understanding with the cloud
vendor (Bartolj et al., 2009). In this system, there is no IT infrastructure required like
hardware and a physical set-up where it can be hosted. This eliminates the need to
have a support system in place for this kind of ERP solution. All this translates to
financial cost cutting (Arnesen, 2013). For a lot of companies, financial budget plays
an important role in deciding which ERP to implement. SMEs are more budget
centric compared to large enterprises. For SMEs, subscription costs can be a major
factor during decision making for selection of cloud vendor:
H18. There is difference in SMEs and large organizations with respect to subscription costs.

Research methodology
An online-based questionnaire technique for data collection was employed. The data
gathered through questionnaire were statistically evaluated using data analysis software
and techniques. The survey was carried out using web-based questionnaire and was sent to
 all the sectors (IT, telecommunications, government, legal services, etc.) that are practicing Implementation
cloud ERP-based services. Respondents were asked to complete the questionnaire by filling of cloud ERP
it with their answers and it consisted of multiple choice questions which made it easier and
quicker for respondents to answer. The focus of this study was to gather the experience of
cloud ERP users, providers, and consultants. Their perceptions helped in knowing about the
challenges faced in implementation of cloud ERP. Number of employees and the annual
revenue of the companies were used to differentiate between an SME and a large-scale 1063
company. Overall 93 responses were obtained and most of them were from India. Totally,
45 of the responses were for SMEs and 48 were for large companies. The challenges in the
implementation of cloud ERP were measured on a Likert scale with the following
parameters: strongly disagree, disagree, neutral, agree, and strongly agree. For the data
analysis, responses were coded into the numerical values.
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Data analysis
The data analysis approach for this study was quantitative in nature. The data for the
closed-ended questions which were collected underwent various statistical tests. Since there
were 18 factors, exploratory factor analysis was used and five main factors were identified.
To know whether factor analysis can be used, KMO and Bartlett’s test was done. Ideally, KMO
value ranges between 0 and 1 and should be larger than 0.6. For this study, KMO value was
0.714 which means factor analysis can be applied to the study. Bartlett’s test of sphericity must
be less than 0.05 and in this study it was 0. SPSS version 20.0 was used for this analysis.

One-way ANOVA
ANOVA technique was used to differentiate among SMEs and large organizations.
Relationships of sampled data can be observed by using ANOVA (Clarke and Cooke, 1998).
This method helps in analyzing the difference between two or more sample means.
Significance value and the values of correlation coefficients form the basis to either
accept or not accept our 18 hypotheses. If the significance value is lower than 0.05, the
hypothesis is accepted and vice versa. The empirical findings can be seen in Table I:
• H1 is accepted.
• H2 is accepted.
• H3 is accepted.
• H4 is not accepted.
• H5 is accepted.
• H6 is accepted.
• H7 is not accepted.
• H8 is accepted.
• H9 is not accepted.
• H10 is accepted.
• H11 is not accepted.
• H12 is accepted.
• H13 is not accepted.
• H14 is accepted.
• H15 is not accepted.
 IJQRM Sum of squares df Mean square F Sig.
34,7
(i) Customization
Between groups 4.032 1 4.032 7.102 0.009
Within groups 51.667 91 0.568
Total 55.699 92

1064 (ii) Organizational change

Between groups 32.905 1 32.905 29.388 0
Within groups 101.89 91 1.12
Total 134.796 92
(iii) Long-term costs
Between groups 21.331 1 21.331 19.046 0
Within groups 101.917 91 1.12
Total 123.247 92
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(iv) Business complexity

Between groups 0.769 1 0.769 0.957 0.331
Within groups 73.124 91 0.804
Total 73.892 92
(v) Loss of IT competencies
Between groups 10.845 1 10.845 10.023 0.002
Within groups 98.467 91 1.082
Total 109.312 92
(vi) Legal issues
Between groups 16.726 1 16.726 16.462 0
Within groups 92.457 91 1.016
Total 109.183 92
(vii) Integration
Between groups 0 1 0 0 0.988
Within groups 73.161 91 0.804
Total 73.161 92
(viii) Data extraction
Between groups 25.269 1 25.269 24.826 0
Within groups 92.624 91 1.018
Total 117.892 92
(ix) Monitoring
Between groups 1.372 1 1.372 1.428 0.235
Within groups 87.424 91 0.961
Total 88.796 92
(x) Migration
Between groups 0.542 1 0.542 0.571 0.002
Within groups 86.361 91 0.949
Total 86.903 92
(xi) Security
Between groups 1.133 1 1.133 1.39 0.242
Within groups 74.179 91 0.815
Total 75.312 92
(xii) Network dependency
Between groups 61.751 1 61.751 68.897 0
Within groups 81.561 91 0.896
Table I. Total 143.312 92
ANOVA-based
findings
(continued )
 Sum of squares df Mean square F Sig.
Implementation
of cloud ERP
(xiii) Limited functionality
Between groups 0.804 1 0.804 0.905 0.344
Within groups 80.894 91 0.889
Total 81.699 92
1065
(xiv) Awareness
Between groups 49.301 1 49.301 46.272 0
Within groups 96.957 91 1.065
Total 146.258 92
(xv) Performance
Between groups 3.364 1 3.364 3.693 0.058
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Within groups 82.894 91 0.911

Total 86.258 92
(xvi) Integrity of provider
Between groups 2.667 1 2.667 3.571 0.062
Within groups 67.978 91 0.747
Total 70.645 92
(xvii) Perception
Between groups 56.201 1 56.201 51.601 0
Within groups 99.111 91 1.089
Total 155.312 92
(xviii) Subscription costs
Between groups 35.091 1 35.091 42.874 0
Within groups 74.479 91 0.818
Total 109.57 92 Table I.

• H16 is not accepted.

• H17 is accepted.
• H18 is accepted.

Ranking of challenges
From the perspective of SMEs
Based on the mean values listed in Tables II and III we have ranked the importance of
challenges for SMEs. Rank 1 being the most critical challenge for SMEs as per data collected.

From the perspective of large organizations

Based on the mean values listed in Tables IV and V we have ranked the importance of
challenges for large organizations. Rank 1 being the number 1 challenge for large
organizations as per data collected.

Discussion
Customization
In cloud ERP, customization is difficult to achieve as there are standard cloud ERP
applications for all users. This study aims to check whether the organizations differ from
each other with respect to customization. Since the p-value came out to be lesser than 0.05,
the null hypothesis was rejected and thus it shows that SMEs and large organizations differ
 IJQRM Variable No. of responses Mean SD
34,7
Chal11 45 4.13 0.968
Cha12 45 4.09 0.733
Chal18 45 4 0.798
Chal14 45 3.98 0.839
Chal17 45 3.89 1.005
1066 Chal8 45 3.69 0.973
Chal1 45 3.67 0.826
Chal3 45 3.67 0.877
Chal15 45 3.58 1.033
Chal7 45 3.29 0.869
Chal4 45 3.24 0.857
Chal16 45 3.24 0.933
Chal9 45 3.11 0.935
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Chal6 45 3.09 1.083

Chal13 45 3.02 0.988
Table II. Chal2 45 2.96 1.167
Descriptive statistics Chal10 45 2.89 1.005
for SMEs Chal5 45 2.73 1.009

Rank 1: Rank 2: network Rank 3: Rank 4: Rank 5: Rank 6:

security dependencies subscription awareness perception integration
costs
Rank 7: Rank 8: long- Rank 9: Rank 10: data Rank 11: Rank 12: integrity
customization term costs performance extraction business of provider
complexities
Table III. Rank 13: Rank 14: legal Rank 15: limited Rank 16: Rank 17: Rank 18: loss of
Ranking of monitoring issues functionality organizational migration IT competencies
challenges for SMEs change

Variable No. of responses Mean SD

Chal11 48 4.35 0.838

Chal2 48 4.15 0.945
Chal1 48 4.08 0.679
Chal15 48 3.96 0.874
Chal6 48 3.94 0.932
Chal16 48 3.58 0.794
Chal5 48 3.42 1.069
Chal9 48 3.35 1.021
Chal7 48 3.29 0.922
Chal13 48 3.21 0.898
Chal4 48 3.06 0.932
Chal10 48 3.04 0.944
Chal18 48 2.77 0.994
Chal8 48 2.65 1.041
Chal14 48 2.52 1.185
Table IV. Chal12 48 2.46 1.11
Descriptive statistics Chal17 48 2.33 1.078
for large organizations Chal3 48 2.17 1.129
 from each other with respect to customization. Now the question arises why do Implementation
organizations differ with respect to customization? Large organizations generally have very of cloud ERP
complex systems and require customization from time to time. On the other hand, SMEs do
not require much customization as they have limited modules. Thus, SMEs and large
organizations differ from each other with regards to customization.

Organizational change 1067

Adopting a cloud ERP system brings a lot of changes in the functioning of the organization.
Employees are used to the traditional on-premise systems and when a change is brought in
the organization, they are not comfortable in accepting the changes. The employees have to
start over again, learn new things, and handle data in a comparatively different manner.
Based on the analysis of the responses, SMEs and large enterprises differ from each other.
The reason for this is that in a large organization it is very challenging and also time taking
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to impart training to large number of employees. For small organizations this might not be
the issue as managing a small group of employees is easier and personalized attention can
be given to the employees. This makes SMEs and large organizations different from each
other with respect to organizational change.

Long-term costs
Long-term costs usually add up with the time in cloud ERP. If there is large amount of data
that gets processed in an organization, in that case the organization has to buy extra server
space. In the long run, the company will have to pay more on a regular basis as opposed to
one-time investment in on-premise ERP system. SMEs and large organizations differ from
each other with respect to long-term costs. There can be two prospects which explain the
difference. First, large organizations generally do not have budget issues and they can pay
for extra bandwidth and storage. Second, large organizations have very bright chances that
they might require extra storage. SMEs may not require much incremental storage space in
future and this is a reason that large and small organizations differ from each other with
respect to long-term costs.

Business complexity
According to this study, SMEs and large organizations are same with respect to business
complexity. Large organizations have various complexities like restriction in data access,
handling high volume of data, high load on bandwidth, encryption and decryption of data,
and large number of data storage server space. Handling large data is a concern for both
SMEs and large organizations. Small organizations do not have access to a very-high-speed
internet connection to handle large data which makes their system lag and puts pressure on
other activities which are under parallel processing.

Rank 1: security Rank 2: Rank 3: Rank 4: Rank 5: legal Rank 6:

organizational customization performance issues integrity of
change provider
Rank 7: loss of IT Rank 8: Rank 9: Rank 10: limited Rank 11: Rank 12:
competencies monitoring integration functionality business migration
complexities Table V.
Rank 13: Rank 14: data Rank 15: Rank 16: network Rank 17: Rank 18: long- Ranking of challenges
subscription costs extraction awareness dependencies perception term costs for large organizations
 IJQRM Loss of IT competencies
34,7 In cloud-based ERP system, most of the IT resources are outsourced. This causes
organizational resistance toward the change and also loss of IT competencies. Here data
suggest that SMEs and large enterprises are different with respect to loss of IT competencies.
Most of the IT infrastructure and maintenance work is handled by the cloud provider and this
leads to a very lean team and can lead to loss of jobs for the employees as well. Transition of
1068 large organizations to cloud ERP faces resistance from the employees as they have been used
to working on a traditional ERP platform. Also, the users have to learn the new ways of
working on a cloud-based system. SMEs do not face such problems as they start with cloud
computing system as they do not have the budget to invest in on-premise systems.

Legal issues
Cloud ERP user organizations should follow their country- and location-based rules and
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regulations as well as established laws. Based on data analysis, SMEs and large
organizations differ from each other on legal issues. For SMEs, legal issues are not that
challenging as the volume of data as compared to large organizations is less. The data can
be stored within the operational boundaries in terms of SMEs. But in large organizations
data are in large volume and have to be stored in data centers which can be anywhere in the
world. Chances of large companies facing legal issues are more than the SMEs.

Integration
SMEs and large organizations do not differ from each other on integration. Integration acts
as one of the major barrier in adoption of cloud ERP. Data integration causes
implementation delays for both small and large enterprises. Integration with the on-premise
ERP may lead to high costs of integration. Also, many applications cannot be operated with
the on-premise applications. This holds true for both SMEs and large companies.

Data extraction
SMEs and large organizations differ from each other on data extraction. There are instances
when data with common names and information are available in cloud and the user is not
sure of which data to select. This leads to ambiguity in data extraction. Also a very good
connectivity is required to access data. Large organizations have access to high-speed
connectivity and can have their own private cloud which can make the entire process
of data extraction smoother. SMEs mostly work on public cloud and this can lead to
mismatch of data.

Monitoring
SMEs and large organizations do not differ from each other on monitoring. Cloud ERP
reduces the cost of ownership and also frees organization from the maintenance of the
system by outsourcing the business to the cloud. Since the maintenance and development of
application are entirely in the hands of the cloud vendor, organizations cannot monitor the
complexity of software. Organizations have critical assets such as customer’s information
and finance-related matters, and these data are in hands of the vendor. Thus, monitoring is a
concern for both SMEs and large organizations.

Migration
Migration from on-premise ERP solution is considered as a major concern for large
companies. SMEs and large organizations differ on migration. Large organizations have
complex and large infrastructure, due to which moving from on-premise to cloud ERP is
very costly and lengthy. Employee training and regular workshops can help the large
 enterprises overcome this problem. SMEs have less complex structure and they Implementation
remain unaffected with this challenge as most of them do not have the budget to use an of cloud ERP
on-premise ERP solution.

Security
SMEs and large organizations do not differ from each other on security. Security of data and
information is the top-most concern in cloud-based ERP. In a traditional on-premise ERP 1069
module, the sensitive data such as financial information, customer details, etc. of each
enterprise are stored within the organization. While choosing a cloud-based ERP system,
companies agree to trust a third-party provider with sensitive business information where it
may be mingled with that of other companies. Both types of organizations do not want to
share their privy information and other important data with others. Security is a challenge
for both SMEs and the large organizations.
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Network dependency
SMEs and large organizations differ from each other with respect to network dependency.
SMEs do not have a budget to get very-high-speed internet connectivity while on the other
hand large organizations can afford to have high-speed internet connectivity.

Limited functionality
SMEs and large enterprises do not differ from each other. Functionality of cloud ERP plays
an important role in the successful implementation. So far, cloud ERP vendors have been
providing limited applications to the organizations which causes problem in the
implementation. They focus on the core area of ERP applications and this gives access to
only certain number of modules. However, vendors are developing more applications to
handle all the departments of organizations.

Awareness
Awareness is also a challenge while adopting cloud ERP. But this challenge is majorly faced
by the SMEs as large organizations may have the experience of using on-premise ERP.
Cloud ERP is fairly a new concept to the SMEs. This study shows that respondents from
SMEs and large enterprises differ from each other on awareness. Thus, more awareness
programs, workshops, and training sessions should be run in the organizations to make it
easier for the companies to adopt cloud ERP.

Performance
SMEs and large enterprises do not differ from each other. Performance of cloud ERP
depends on the network connectivity. The transfer of data over internet causes delay if the
internet connection is slow or erratic. In cloud ERP, multi-tenancy can increase the load on
the server and this can add to the delay in uploading or downloading of data.

Integrity of provider
SMEs and large organizations do not differ from each other on integrity of cloud provider.
Selection of vendor is an important factor for implementation of cloud-based ERP. Proper
choice of cloud vendor with long-standing position in the market and strong background in
cloud computing has been always the matter of concern with cloud user. Vendors have all
the data under their control and they should be able to build trust in cloud user. Also, it can
be difficult to change the vendor as all the data and information of an organization is with
the cloud vendor. In such cases SLAs are signed before the adoption of cloud ERP.
 IJQRM Perception
34,7 In this analysis, respondents from SMEs agreed that it is a challenge for them while for large
organizations it is of less importance. Perception is majorly a challenge for the SMEs as they
perceive that cloud ERP is meant for the large organizations. They think that they would
not need an ERP solution without even knowing its benefits.

1070 Subscription costs

SMEs and large organizations differ from each other on subscription costs. Unlike high
capital investments in traditional ERP software, cloud-based ERP works on regular periodic
subscription fees. The reason could be that large organizations do not have financial budget
problems but SMEs can base their decision to select a cloud ERP system on the basis of
financial implications.
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Conclusion
The main objective of this study was identifying challenges in adoption of cloud ERP
implementation and to rank them for SMEs and large organizations. The findings may help
organizations to get a broad idea about the challenges which are critical for the
implementation of cloud ERP. First, a hypothetical framework was developed. An online
survey was conducted to compare the differences in SMEs and large enterprises on
the challenges identified. Personnel in various organizations having experience with the
cloud ERP and cloud-based services were approached with closed-ended type survey
questions. The respondents belonged to SMEs and large-sized organizations, holding
different designations and type of the ERP user.
Overall, 18 challenges were identified through the available literature present in the
cloud ERP domain. These challenges were analyzed to differentiate SMEs and large
organizations. For most of the challenges, SMEs and large organizations were different.
They have different perception about a particular challenge and the challenges which do not
differ, which shows that they have the same perception about the concerned challenge.
The respondents of SMEs and large organization agree that the challenges they both find
similar were business complexity, integration, monitoring, security, limited functionality,
performance, and integrity of provider.
Based on mean squares from descriptive statistics, we have given ranking for the
challenges for both SMEs and large organizations. According to the respondents, most
critical challenge was security for both the SMEs and large organizations.
In this study, data were collected from the respondents in India. With the results
obtained and existing literature, we can conclude that cloud ERP is more beneficial to SMEs.
In addition, large organizations can also benefit from cloud ERP by moving few ERP
applications to the cloud.

Research limitations and future research directions

There have been limitations in this study with regards to the coverage of data points.
This study was performed in India and thus this does not capture the view of respondents
from other parts of the world. Also, the data collection was done by capturing the
perspective of respondents from various states in India and thus the outcome of the study
would not represent any particular geographical area within the country. A more detailed
study that encompasses the various business sectors can be covered for future studies.
This study can be considered as a reference study to analyze the success of
adoption, adaptation, and implementation of cloud-based ERP solution. Information
security was the most important concern that has been brought out in this study by both
the SMEs and large organizations. Companies embracing cloud ERP services would want
 to conduct business transactions in real-time basis in a secure manner. A future study can Implementation
be considered that further elaborates on the various aspects of information security. of cloud ERP
This study will not only benefit the cloud user but also cloud service provider in
enhancing the user experience.

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Corresponding author
Subhas C. Misra can be contacted at: subhasm@iitk.ac.in

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