Methodological Approach of Integrating the Internet of Things with

Enterprise Resource Planning Systems

Danije

and Ruben Picek

Department of Information Systems Development, Faculty of Organization and Informatics,

Zagreb University, Varaždin, Croacia

Keywords: Enterprise Resource Planning Systems, Digital Transformation, Internet of Things, Integration, ERP

Implementation Methodologies.

Abstract:  analyzing this concept in the

industry today

technologies  Internet of Things (IoT) and if they would like to integrate it with the existing information

system or it should be mandatory with implementation of Enterprise Resource Planning (ERP) system. The

digital transformation surely put the ladder higher and the organizations are researching new options and

innovative ways of doing a business in order to survive in the global market. On the other side, the ERP

vendors offer methodologies for implementing their product packages. The digital transformation brought the

idea of integrating the IoT with ERP system. Studying these methodologies became obvious that no segments

are dedicated to integrating the IoT with ERP system. Therefore, we suggest a generic set of steps applicable



1 INTRODUCTION

Digital transformation now stands on the

technological scene. Enterprise resource planning

(ERP) systems are also affected by it and therefore

there are few ERP trends known nowadays  Cloud

ERP and IoT ERP. Two technologies important for

the ERP trends are the Internet of Things (IoT) and

Cloud computing technologies. ERP systems are

recognized as valuable software which are able to

improve and because of this maintain their higher

position on global  derboard. In their

article, Abdullah and Ambedkar list all issues that

may affect a company without an ERP system

(Abdullah and Ambedkar, 2018).

IoT is one of the  

technologies which requires Internet connection

therefore, Cloud services are mandatory to use the full

potential of IoT devices (e.g. Business intelligence,

Business analysis). The birth of Cloud ERP unearthed

new possibilities to operate IoT devices. The Cloud

ERP is an ERP run in the Cloud which lowers the

      (Raihana and

https://orcid.org/0000-0003-3962-8930

https://orcid.org/0000-0002-6784-7500

College, 2012). With the emergence of Cloud ERP, a

dilemma arise within the business world - whether to

use the Cloud ERP or Cloud services. Answers to this

question could not be found during the time of

writing. It is preferable to choose the option with

integrated IoT support, but this depends on current

needs and odds of the company.

Digital transformation offers innovative ways of

doing business. Various new technologies open new

possibilities and can give the company advantage in

the global market. IoT can automatize most of the

processes and it offers more data for monitoring,

making decisions and planning. ERP vendors

recognized the potential of the IoT technology and

began developing their product with integrated IoT

support. We are aware that IoT has a lot of potential

in ERP systems, therefore we began to look for a

methodology which could guide a company through

the process of IoT implementation.

The main motivations for the integration of IoT

with the ERP system are possibilities to collect useful

data for the company, to visualize gathered data, to

control the IoT device through the ERP system and to

312

Soka

c, D. and Picek, R.

Methodological Approach of Integrating the Internet of Things with Enterprise Resource Planning Systems.

DOI: 10.5220/0007749303120319

In Proceedings of the 21st International Conference on Enterprise Information Systems (ICEIS 2019), pages 312-319

ISBN: 978-989-758-372-8

use IoT potentials easily when the ERP system

supports it.

After conducting the analysis of the articles, it is

concluded lack of articles dealing with a subject

related to the methodological approach of integrating

IoT with the ERP system. Considering the need for a

standard in integrating IoT into the ERP system, these

are the research questions dealt with in this article: Is

there a methodology with defined steps for

integrating IoT with an information system? Do best

practices for integrating the IoT with an information

system exist? Do the existing implementation

methodologies (like Microsoft Sure Step, SAP

Activate, etc.) include steps for integrating IoT with

their products?

Exploring the state of the art of the subject will

clarify whether methodologies for integrating smart

devices with information system exist. Depending on

the outcome of the previous research, we will analyze

existing and/or propose a new framework.

Afterwards, existing implementation methodologies

will be analyzed and integrated with the proposed

framework.

First, the state of the art is introduced in the

   The f 

section presents proposed steps and activities of our

framework. The framework is put into a context with

existing methodologies of the most popular ERP

system vendors in the following section called

  . Potentials for

future researches in this domain and the conclusion of

this article are mentioned in the section



2 RELATED WORK

Companies have certainly thought about the IoT since

the Industrial Internet of Things (IIoT) exists as a

term, which is the same as IoT but dedicated to

communication between machinery in the company

(Gierej, 2017). There are two perspectives in

literature: perspective of enterprise and perspective of

IoT. Bi et al have illustrated what the differences are.

Based on their explanation, the enterprise perspective

includes machines, devices   

technology capable of connecting to the internet (Bi

et al., 2014). The companies realize that IoT offers

following improvements: smarter analytics, enhanced

security (e.g. cameras, smart doorbells), increased

productivity, smart inventory, safer travel and real

time demand visibility (Singh and Singh, 2015).

Large Chinese organizations were very interested in

IoT and so they started exploring the provided

possibilities by smart devices (Bi et al., 2014).

With the integration of IoT and the ERP system,

some questions arise which are mentioned by

Kowalke P. in his article (Kowalke, 2017). Generally,

it is important for a company to adapt a new

technology gradually and simultaneously focus on its

priorities. Articles dealing with the question whether

an ERP or non-ERP solution is better for integration

with the IoT could not be found during the time of

writing. Regardless, it is easy to conclude that such a

decision is dependent on the company itself. The

company decides which options suit it well in the

current timeframe.

If we assume the company is ready for integrating

IoT with ERP, it is important to know how to

document the change of business processes. Meyer

S., Ruppen A. and Magerkurth C. emphasize that IoT

devices can work independently and they should be

in a separate line in the business process modelling

(BPM) tool (Meyer et al., 2013). Kowalke P. says that

companies should choose a less dangerous path of the

IoT integration even if that means using Cloud

technologies to realize it (Kowalke, 2017). Carlton R.

mentions few ways of integrating IoT with ERP

which consist of using radio-frequency identification

(RFID) or near-field communication (NFC) devices,

supporting finances and monitoring processes in real

time (Carlton, 2016).

The interest in adapting IoT was so high that

research and discussions were conducted on the

appropriate main goal of the IoT adaptation (Bi et al.,

2014). One of first ERP vendors offering the ERP

systems capable of working with IoT are: SAP and

Microsoft. SAP offers its new methodology SAP

Activate and the possibility to use IoT with their

product called SAP S/4HANA 

S4HANA, on-premise with SAP Activate -

Additional Topics - . On the other

hand, Microsoft offers its   Business

Central  supports working with Cloud

Computing and the IoT technology (Microsoft, n.d.).

However, they did not define the framework

specifically for integrating IoT. Increasing number of

discussions and researches is a clear sign that interest

in digital transformation is present. Even the demands

for modularized and semantic integration of the IoT

in the enterprise systems as well as its standardization

and development scream for new findings in this area

(Bi et al., 2014).

Conducting a research about methodologies for

integrating IoT with the ERP system was somewhat

successful. Cicibas H. and Demir K. A. explain socio-

technical issues and give advice on how to overcome

Methodological Approach of Integrating the Internet of Things with Enterprise Resource Planning Systems

313

each of them       . Being

unable to find articles which provide a methodology

of the integration, it was concluded that such articles

could not be found during the time of writing.

Therefore, the next section introduces a proposed

methodology framework of integrating IoT in the

information system and its fusion with existing ERP

.

3 FRAMEWORK PROPOSAL

We propose the framework for integration IoT in the

ERP systems beginning with three segments:

discovery, implementation and usage. Each segment

is decomposed into smaller parts, and each part

consist of activities. A schema of the proposed

framework is shown in Table 1. Each part has a label

next to its name simplifying the explanation of

integration with existing methodologies in section 4.

We assumed the company     

models to secure IoT platform from one of the

providers at the market. This is optional  i.e. smart

devices can be built and developed in-house.

Table 1: Schema of proposed framework.

Framework

Discovery

 Acceptance (A1)

 Integration (A2)

 Adjusting (A3)

Implementation

 Design (A4)

 Development (A5)

 Integration (A6)

 Testing (A7)

 Deployment (A8)

Usage

 Maintenance (A9)

 Decline (A10)

3.1 Discovery

Discovery represents a period when a company

realizes that IoT would be beneficial for its business.

Discovery focuses solely on the business domain of

IoT integration. The terrain for IoT usage is prepared,

new business models are used, and new diagrams are

made. A business domain is being transformed to

accept IoT technology. The idea of IoT integration

was presented to the company and this marks the

beginning of the process of accepting the idea.

3.1.1 Acceptance

Acceptance is the first step towards the whole process

of integration of IoT with ERP. The company is

informed about the benefits and effects of IoT in

business. The analysis of IoT integration is performed

and it is used as the basis for further steps. The focus

lies on two questions: Why is the IoT good? Is it good

for the company? This step consists of following

activities.

Presentation of the IoT's Effect in the Business

Context. The company gives some employee the task

to research the possibilities and benefits of IoT in the

business context. This presentation helps the

company understand whether it should consider

integrating the IoT.

Analysis of the Need to Implement the IoT.

Analysis of the whole business model and its

processes to see if IoT is applicable or not. Is there a

possibility to add IoT devices to enhance current

business? This is the question that should be

answered.

Analysis of IoT's Effects on the Business. After

implementation possibilities for IoT are found, the

attention switches to the following question: Is the

integration worth it? The company wants to know

how IoT will affect the business and what will

immediate and later improvements be. The focus is

on the costs and the returns of the investment.

3.1.2 Integration

What follows is listing any potentials of IoT. The

company creates a list of necessary IoT devices and

all use cases involving these IoT devices. The focus

is on deciding which IoT devices are needed, why

they fit into a business and where they will be used.

Locating the IoT Potentials. Inspecting the current

business process model reveals options where IoT

could be used. These options play an important role

in this activity. The company checks where IoT can

be used and what they want to achieve with IoT

implementation in that specific area. All processes are

analyzed and after finding all IoT potentials, the

company proceeds to the next step.

Creating the IoT Devices List. In the previous step,

all IoT potentials were found. Now, it is decided upon

which IoT device is appropriate for which area in

their business. A list of wanted IoT devices is then

created and will be used to order all devices.

Defining Correlations between the Devices. The

correlation between IoT devices is important for

knowing which devices will be interacting with one

another. This step shows the future connection

between new and existing business processes. In this

step it is assured that there is no redundancy between

the functional requirements of the new devices. (For

instance, one device may do the same as a

combination of two already present devices.)

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Defining all Possible use Cases Involving the

Devices. One use case is one task a device must

complete in the business context. Use cases make it

easier to understand the behavior of the thing (short

term for the IoT device). They also help to understand

the interaction between IoT devices and

application(s).

Ordering the IoT Devices. The organization chooses

the best IoT platform provider for IoT devices and

places an order containing needed  As

previously stated, smart devices can be developed in-

house. In this case, the company needs to order all

parts necessary for the development.

3.1.3 Adjusting

The company decides whether it should stay on the

old track or choose a disruptive business model. In

any case, business process reengineering takes place

and business process diagrams are being changed to

accept the new IoT technology. The old processes

may be changed, removed or simply moved in these

procedures. The focus is on business processes and

changing them to form gaps into which IoT can be

incorporated.

The Business Process Analysis. This step requires

the documentation in the form of a business process

diagram. If the company does not have such diagram,

it is created in this step. With a complete picture of

business processes, the company can easily proceed

with their adjustment.

The Business Process Reengineering. The business

process reengineering (BPR) is a mandatory step in

this undertaking. The company considers including

disruptive business process models simplify the BPR

procedure. IoT technology results in independent

business processes; therefore, the rest of the

 business processes should be revised. The

main goal is to adjust appropriate business processes

to be compatible with IoT devices, i.e. the process can

use and/or serve the smart device with data. These

steps result in a completely changed picture of

business processes.

The Business Process Optimization. The business

process model is inspected to avoid redundant use

cases. The focus of the revision is on the existing IoT

business processes and the processes which IoT

devices interact with.

3.2 Implementation

Implementation comprises of project preparation and

developing the behavior for IoT devices and

integrating them with the information system. The

implementation takes place after accepting IoT

technology.

3.2.1 Design

The focus is on preparing for a development process.

Functional requirements, technical specification, a

project plan and project teams are being created. This

is the step in which all the requirements for the

development process are being met and consequently

the development step can continue without any issue.

If the company develops smart devices in-house, the

documentation will include wiring diagrams and

functional requirements specific for the devices, an

additional project team will be in charge of

developing smart devices and the hardware

development team must begin to develop devices

before the next step.

The Functional Requirements Specification.

Functional requirements specify what the devices

should do and all the operations related to them. If IoT

devices are integrated in a web application or an ERP

system, that means the functional requirements will

contain the functionalities related to the system or the

web application. The functional specification

describes the behavior of smart devices and all

systems in interaction with them.

The Software Architecture Definition. The

definition makes it clear how the whole system and

its components should look like. It shows the

information flow between the components for the

development phase.

The Project Team Allocation. The company should

allocate the project team to realize the

implementation.      is

developing new features and modules for integration

of IoT with the business. A project manager must be

assigned to the team in order to coordinate the 

actions.

The Project Plan Definition. As the final step, the

project plan should be created. The project plan

should contain information on the 

budget, team, timeline, schedule, and owner. The files

attached to the project will be all documentation

created until now: use cases specifications, functional

requirement specifications and the technical

documentation (the software architecture definition).

When the document is ready and authorized, next step

will take a place.

3.2.2 Development

IoT devices have defined behavior from previous

steps. The project team is creating all required layers

of the architecture  from the technical specification

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315

for a minimal setup to the start of behavior

development. The Cloud services for the IoT may be

used to ensure a smooth development process and to

ensure everything is working properly in this early

stage.

The Project Backlog Specification. The input

document is the project plan. Based on the functional

requirements and the use cases for IoT devices, the

project backlog is created. The project backlog

contains all functionalities for IoT devices and for the

systems which are in interaction with them.

The Initial Project Teams’ Meeting. The tasks are

assigned to the teams. The project manager informs

the teams about the deadlines. They come to an

agreement regarding the procedure and the flow of

the development in the form of weekly meetings and

presentations of finished parts.

The Software Development. The software

development team is dedicated to developing

modules for existing systems or applications to

support IoT devices. During this step, light testing is

required to ensure the hardware and the software

work correctly. Testing IoT devices is conducted in

order to prove the devices are accurately functioning

according to their documentation.

3.2.3 Integration

The IoT devices with behaviors need to be integrated

into the system. The things are being set in the place,

the Cloud services are being used (the accounts are

created and added to the things). The integration with

the system is incomplete unless the things are

integrated into the ERP system or any other system

the company uses. The integration with the system

begins with a question: Does the system support IoT

or not? If not, then additional modules are required to

use IoT to its full potential.

Exploring the Integration Possibilities. There is no

definitive integration that can occur. IoT devices can

be integrated with an ERP system, a web application,

a single web page or some commercial or free

business software. It is important to detect the

possibilities of integration depending on the place of

their occurrence.

Preparing the System to Accept IoT Devices. Some

systems do not support IoT devices initially and

additional development is required to create IoT

modules. It is essential to create such modules before

proceeding.

Integration of IoT Devices with the Information

System(s). IoT devices need Cloud services to offer

a complete IoT experience. Some accounts for Cloud

services from the development phase can be found

here; however, these should not be used in the official

deployment of IoT devices. It is mandatory to create

accounts for the official versions and note down all

the credentials for future use. IoT devices usually

have an identification value and these values are used

to connect IoT devices with the business information

system. When data starts to gather, the integration is

completed successfully.

3.2.4 Testing

With the IoT devices in place and running, all

integrations should be tested for possible bugs or

errors. The testing is a process and not a phase  the

process comprises of multiple steps or phases and

extends over a longer period of time. Smaller part of

the implementation segment are tested in order to

check if new integrations function correctly. During

the development and integration, there must be some

light testing and its documentation. Moreover, test

requirements and test cases are created. In order to

continue, the test execution must be successful.

Creating the Test Requirements. The test

requirements are needed to define the domain of the

test process.

Creating the Test Cases. The test cases are required

to identify which activities or actions should be

tested. Usually, there is a limited number of steps

which lead to a specific outcome. It is important to

define the test cases for easier test execution.

Running the Test Cases. Running the test cases

confirms success or failure where the developer is

meant to fix issues and confirm successful

executions. Running test cases speeds up the code

checking process.

Confirming the Tests or Fixing the Failed Tests.

After running tests, there can be two outcomes:

success or failure. A successful outcome is

confirmed, and a failed outcome should be fixed.

After the issue is fixed, the test is run again to confirm

the changes and the problem.

3.2.5 Deployment

When all tests are successful, it is time to begin the

deployment step. The deployment is divided into two

subcategories: the beta deployment and the

production deployment (the official deployment).

The beta deployment is used to observe how the

integrated devices interact with the system. It is also

used to detect issues and bugs which were somehow

missed during the testing step. When the beta

deployment finishes, the production deployment

takes place. And during this phase, less attention is

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316

directed towards active searching for bugs and more

attention to the regular usage and monitoring.

The System Acceptance. The top management

accepts the newly developed system and agrees to

integrate it in the business information system.

The User Training. This implementation project

consists of hardware and software parts. The

hardware part is usually not maintained by the

company, consequently IoT device maintenance

training is not relevant if the project team is internal

and devices are bought from a chosen supplier. If that

is not the case, the hardware is handled by the team

which built it. The software part should be introduced

to employees who will use the new features. The

training will clarify the new software modules or

features and offer first steps of working with such

modules or features.

The Database Cleanup. The existing databases may

be filled with data from the development and the

testing stage. Such data is not welcome in the official

environment, so a cleanup is performed.

Assigning the Official Cloud Service Accounts.

Cloud services, mentioned in the previous phases,

may also store test and development data. Such data

should be removed and new official Cloud service

accounts should be assigned to the appropriate

components.

The System Installation. The necessary downloads,

upgrades and system customizations are performed.

The System Goes Live. Occasional training sessions

are occurring in this step. The documentation and all

used accounts are passed to the system administrator

of the company and the system goes live.

3.3 Usage

     u   a post

implementation segment and it is focused on the

maintenance and the usage of the new system. An

analysis is run to identify whether the system is still

beneficial for a company or it became a burden. This

segment lasts until the new system is ready to be

replaced with a new innovative technology.

3.3.1 Maintenance

The system maintenance is a mandatory process in

post implementation. The maintenance includes

monitoring, measurement, evaluation and

improvements. The main goal is to keep the system

updated and optimal, and to fix all occurring errors to

ensure maximal availability.

Monitoring and Measuring the System

Performance. It is mandatory to keep an eye on the

new sys    The new

system is still untrustworthy and needs to be

supervised. Monitored metrics are important for the



of possible bugs and/or errors which can cause the

 lability. The monitoring is mostly

connected with dashboard and graph visualizations

which can make the monitoring process easier. The

metric that could be monitored is the system

availability (the whole system or its module). These

measurements help in understanding how well their

system performs, while monitoring is just a way of

showing how the system performs. The results of the

measurement process are used in the next step  the

evaluation. The data is collected to perform

aggregations and calculations which will be used in

the next step. The collected metrics for every

component could be: a fault rate, peak periods, power

usage, cost of the device/system, earnings (or

participation in earnings) of the device/system.

Evaluating the System’s Performance. This step is

important for deciding whether to continue using the

system or its component. The decision is made after

considering the whole business picture and data

collected from the previous step. It is discussed here

if the system or its components still have a supportive

role in improving the business or if it became a burden

and needs to be removed from the business to ensure

better results. In general, monitoring, measurement

and evaluation form a repetitive process sequence.

When the decision for removing the system or its

component is made, that component or system moves

to the  step.

Improving the System’s Performance. The

evaluation and the measurements are inputs for this

step. At this point, one decides to update, upgrade or

fix issues that occurred during the working period.

The goal of this step is to keep the system optimal and

updated. The domain of applied upgrades or fixes

varies from a single component to the whole system.

3.3.2 Decline

Decline takes place when the company decides to

replace the existing system with new and innovative

technologies because the system or its components do

      

earnings anymore. This is the last step 

segment and leads to the end of the 

life cycle or that of its components. There are no

activities here and it is assumed that all activities

regarding researching better options and replacing the

existing system take place in this step.

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317



Oracle OUM

SAP Activate

Microsoft Sure Step

Discovery

Implementation

Usage

A10

4 INTEGRATION WITH

METHODOLOGIES

One of the goal of this article is to see how to integrate

proposed steps with the existing methodologies. The

methodologies, which will be observed, are:

Microsoft Sure Step, SAP Activate and Oracle

Unified Method (OUM). These methodologies were

chosen because they are standards of the most popular

and influential ERP vendors  

. Their steps

were summarized in one table. The steps were

extracted and the appropriate steps from previous

section are added to this picture. For the sake of easier

understanding, each step in Table 2 is replaced with a

       (including

steps from Table 1).

The proposed segments can fit in the existing

methodologies nicely. Oracle Unified Method

(OUM) offers the following steps: inception (O1),

elaboration (O2), construction (O3), transition (O4)

and production (O5) (Nagpal et al., 2015, p. 6). SAP

Activate contains these steps: discover (S1), prepare

(S2) and explore (S3). Microsoft Sure Step

introduced the following steps: diagnostic (M1),

analysis (M2), design (M3), development (M4),

deployment (M5) and operation (M6) (Nagpal et al.,

2015, p. 7).

Table 2 contains the letter  in some

intersections of columns and rows   

means that a step from the proposed framework fits

in the    Table 2 shows

how proposed steps can be integrated nicely in

existing methodologies while only some steps from

  segment are being distributed

among the existing ven

the goal of the steps. The proposed framework is

independent and can be used with other

methodologies. It is not strictly limited to the ERP

system and it can be used in other information

systems. The general nature of the proposed

framework enables its application in other technology

where the activities should be mapped to fit the needs.

5 CONCLUSIONS

The new industrial revolution brings out new ways of

using already known technology. The IoT potentials

were recognized. It can transform the existing

business and offer a new innovative way to run a

business. The transition between the old ways and the

new ways alerted companies and they are willing to

adopt the digital transformation for the sake of their

businesses. The main problem is that options for a

change towards new ways are not well documented

yet. IoT technology was recognized as immensely

helpful in measuring and monitoring which occur in

the business. Even the ERP vendors began working

on ways to integrate the option of using IoT in their

products (e.g. Microsoft and SAP).

Since lack of articles with this subject were

identify, a methodology framework is proposed to

make the process of integrating IoT in the ERP

system easier. The framework consists of segments

and steps beginning with discovery, through

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318

implementation and all the way to usage and

declining at the very end. The discovery is focused on

preparing the field for the development of the IoT

devices and the mandatory applications. After the

development is finished, monitoring the new system

and ensuring its efficient and correct workings is the

     segment. Even though

specifically the ERP system is taken as an example,

the work flow can also be applied to a web application

which supports the IoT devices. Since this article

began by mentioning the ERP system, it was taken as

the basis for showing how the new proposed steps can

fit in the existing methodologies to unify the process

of implementing the ERP system and integrating IoT

devices into one single flow. This may start a new

avalanche of ideas on how to offer ready-to-use IoT

ERP systems.

The proposed framework provides steps which

will make the integration process easier. The

framework is still based on theory and its practical

usage needs to be tested in collaboration with the

company willing to dive in such an implementation

process.

Right now, this is the first step towards

developing the best practice for integrating IoT with

an information system. Some interesting points for

future researches would be: How to integrate other

technologies of digital transformation in the business

context? How to integrate customer-specific

processes which support IoT? How does integration

of IoT into business affect business results? The

framework is still based on theory and its practical

usage needs to be tested in collaboration with the

company willing to dive in such an implementation

process. Consequently, this would provide qualitative

results to evaluate frameworks in the form of a

research paper. It may be interesting to see ERP

vendors updating methodologies which implement

steps similar to those in our proposal. Additionally, it

would be useful to provide information on

opportunities offered by IoT integration  controlling

smart devices, influence of smart devices on the ERP

 IoT represents the beginning of

innovative ways of doing business.

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