Software suppliers are increasingly making products available as software-as-a-service. But which applications are most suitable for the technology and can a shared service handle the data requirements?
We want to provide any deployment model that customers want. Andrew SpenceSoftware-as-a-service is the way to go, according to a new report “CFO Insights, a global survey of consumer markets executives” by KPMG. It surveyed some 300 senior finance executives in the retail, food, drink and consumer goods sectors around the world and concluded that companies are most likely to improve supply chain efficiency by taking incremental steps with new technology, inventory management and supplier consolidation.
And it argued that one path to success is to develop a demand-driven supply chain in which robust information on customer demand is tightly integrated with the supply chain of the business in real time.
“In our experience, the right combination of cloud-based solutions and on-premises technology can provide the information companies need quickly and cost-effectively,” the report said.
But where can SaaS make the biggest difference? Increasingly, in RFQs, software suppliers are being asked if they can offer software-as-a-service or on-demand solutions, says Andrew Spence, business development director at Oracle. However, he points out that not everyone that inquires about SaaS chooses to go down that route in the end.
There are a number of areas where SaaS has become particularly important, he says, notably procurement and transport management a point taken up by Keith Sherry, general manager at BT Supply Chain Solutions. “SaaS makes most sense in areas which require collaboration and interaction between customers and suppliers are seeing the biggest uptakes, for example product procurement, product lifecycle management, tracking and tracing. More collaboration between major logistics companies, ie 3PLs where there is a need to share information on visibility of goods and load sharing.”
And Ronald de Vries, head of customs products for Kewill, says: “We saw at least 12 years ago that customs software was an ideal environment to operate on a hosted platform. As the internet became more reliable, and a more viable tool, we quickly moved from local client server based solutions to SaaS based platforms.
Brian Bolam, president and founder of OmPrompt, says: “Carrier management has taken on new importance in these times of capacity constraint and increased cost. Finding and transacting with the best carriers is a dynamic necessity, those who cannot react will suffer. The supply chain has never had to be more concerned about connectivity. Equally, the supply chain has never had a better opportunity to overcome those concerns. The question is not, why SaaS? The question is, why not SaaS?”
The key is to be able to pull all elements of the supply chain together to give management at all levels the ability to manage and react to events wherever they occur in the chain, says Deltion managing director Denis O’Sullivan. “This means the complete cycle from receipt of order, manufacturing confirmation, warehousing, primary transport, secondary transport, fulfilment, PoD, reconciliation and both vendor and SC services is self-billing.”
A key factor in deciding whether SaaS is right for your business, is to look at where you expect to be in three years’ time. Andrew Spence of Oracle points out that this is the point at which the cost of software-as-a-service tends to overtake the cost of a conventionally licensed product.
In some core areas there might well be little or no change to the IT requirement in three years, says Spence. In other areas the business might need to move to a different technology platform.
The Oracle strategy is to offer customers the same functionality across a range of platforms, says Spence. So a customer might choose to start with SaaS then move to a managed service or on-premises software licence. “It’s not a case of one size fits all,” he says.
“We want to provide any deployment model that customers want,” he says.
Kelly Thomas, senior vice president, manufacturing at JDA Software, says: “SaaS system models offer the advantage of being non-intrusive and offering faster time-to-value. Another advantage is cost as they are typically funded with opex budgets, therefore avoiding capex. This is of huge benefit as businesses remain under pressure to improve overall IT efficiency without increasing capex.”
And, Thomas argues, overall, supply chain performance is improved with cloud-based supply chain solutions offering more robust supply chain and master planning capabilities.
Clay Perry, SVP of Global Markets, Integration Point, which produces trade compliance software, says: “Companies need to look at how they are planning to use the system and if their global trade activities will increase. If a company is looking to improve visibility of the entire supply chain, share information more easily across various business locations, divisions or with global supply chain partners then a SaaS system is what they will need. The informed choice comes down to choosing the right system for the current and future needs of a company. Find a solution that will grow with you and not confine you to doing business within their processes.”
Software delivered as a service is shared with other users so it is important to understand exactly what the service is being offered in the service level agreement. Andrew Spence points out that upgrades will happen when the provider chooses and there will be less customisation available. On the other hand, the service provider takes away a lot of the headaches associated with managing an IT system it’s the provider’s responsibility to ensure that the system does not go down.
Software provider AEB sees hybrid systems combining on-premises software with SaaS as a potential new trend in the market. General manager Mark Brannan says: “Hybrid where cloud computing applications are used alongside more traditional solutions is likely to be the new trend in complex supply chain and warehousing processes. Hybrid solutions are driven by the necessity to connect the relevant SaaS functionality as seamlessly as possible to the existing IT infrastructure so that these applications aren’t just isolated add-ons, but become easily activated plug-ins with all their benefits. This will be a welcome solution for managers and CEOs that like the idea of transparent and predictable IT costs but expect flexible and adaptable solutions without increased hardware and IT support.
“It seems the ideal approach is to pair existing, conventional systems with the latest SaaS functionalities in order to keep investment costs low and at the same time drive continuous improvement. However, companies need to ensure that they select vendors with experience in both IT worlds the old and the new so that a seamless integration of new solutions into existing system landscapes and workflows is achieved and future system growth accommodated,” says Brannan.
Metapack’s head of channel development, Shiran Liyanage, says: “SaaS needs internet access to function, so technology may need to be implemented in areas where traditionally it was not required. However, because SaaS is a relatively new concept, SaaS suppliers are geared towards proactively ensuring their systems can integrate into legacy systems, saving the client effort and, sometimes, costs associated with implementation.”
SaaS solves one of the biggest challenges, which is how to fund multi-enterprise solutions for supply chain applications, argues Steve Keifer of GXS. “SaaS provides an excellent model for equitably distributing licensing costs among a community of trading partners.
“The SaaS vendor can register each trading partner, monitor end user activity and then invoice based upon usage. As a neutral third party, the SaaS vendor facilitates the distribution of cost within the trading partner community in a manner that avoids unpleasant negotiations between buyer and supplier,” says Keifer.
Ultimately, says O’Sullivan, “Companies are looking for feature and functionality-rich, robust service solutions which are highly flexible and future proof. They are more interested in solutions which are most successful at driving their operating costs down.”
Experts split on concerns over putting your data in the cloud
One of the most divisive questions in the debate on SaaS is on the handling of highly data intensive applications.
Lance Bennett, operations director of DeltaWMS.co.uk, warns: “SaaS should not in my view be used in business critical transaction processing supply chain environments.
The risks are simply too high, and too numerous. With warehouse management supply chain systems for example, for SaaS you typically load up one enormous, multi-tenanted database, spread across the cloud; a scenario in which the users have no control over the upgrade process. They may not want or need a given upgrade, and it may go wrong, costing valuable supply chain time.
In a SaaS-based supply chain, while your server and the cloud may be highly resilient (one would expect that) the weakest link is often the piece of copper or fibre that enters your building. If an event or crisis happens to the network or internet service provider (think of Mastercard), both the SaaS provider and their supply chain users will be unable to provide a service. Can you afford to be down for a day? It helps to have your data held in escrow, in much the same way as a software source code can be held in escrow, as a protective measure.
Who is currently using SaaS for supply chain? The answer (to date) is smaller companies with low or no IT resource and a very limited supply chain budget. Lighter, less critical apps where time is not really an issue (such as a parcel track and trace web service, for example) can be delivered for any supply chain environment using SaaS but for business critical applications where intensive transaction processing and timeliness is key we recommend that users have their own, self-managed servers. They have the option to move those servers into an FM environment, where they can be run for them or to rent server space from a third party. If the user does want to run their application via an ISP that’s their call but at least it will be their data and their system that they control.
On the other hand Gavin Clark, commercial director of Snapfulfil, the SaaS warehouse management system, argues that SaaS applications can handle high volumes of data, “but they have to have been built from the ground up using web native technologies to truly limit latency, which can be present in some less web architected solutions.
“Our WMS supports clients with complex functional requirements as well as multiple sites with significant levels of throughput and data volumes, an example being one client shipping up 50,000 orders per day from one 40,000 sq ft facility.
“Each of these orders involved multiple data transactions to prepare, release and ship the order along with all of the real time task monitoring to keep the operatives as efficient as possible.
“Hundreds of thousands of transactions a day are easily catered for, with the right processes and data handling architecture.”
Brian Bolam of OmPrompt says: “SaaS is the most efficient way to handle large volumes of data transmitted across the enterprise, particularly for those trading partners that fall outside the EDI inclusion zone.”
And JDA’s Kelly Thomas says: “Like any new technology, it takes time to develop and while there were issues with data intensive applications when cloud first became a core part of business practice, those issues have largely been resolved.