Published: 06 December 2010 12:00 AM
Industry Channel: IT/SoftwareAuthor: Malory Davies
A system failure is not just a problem for one customer - it's going to affect all of them. We can't afford that to happen.
Denis O'SullivanCloud computing and software-as-a-service is with us to stay - the problem is deciding where and when to make use of it. OmPrompt chief executive John Wakeman argues that cloud computing is not only less costly but presents less risk than traditional methods of software adoption. "Because we can share optimum levels of security and expertise over a series of clients, our customers can dispense with layers of specialist staff, specialist software and processes required to support business critical supply chain systems."
And Denis O'Sullivan, chief executive of Deltion, is convinced that SaaS is the only way forward. "I can't think of any way in which conventional software is better," he says.
It allows for the development of a feature-rich product, he says, pointing out that Deltion's CarrierNet system is upgraded every month - and every customer gets the benefit of the upgrade immediately.
Deltion originally targeted smaller users, but more recently has shifted focus to larger operators providing systems for both Cadbury and Asda.
However, O'Sullivan points out that there are added responsibilities with SaaS. A system failure is not just a problem for one customer - it's going to affect all of them. "We can't afford that to happen," he says, pointing out that customers are involved in an exhaustive series of tests before changes are made to the system.
RedPrairie has been a major player in the logistics software market for many years using the traditional on-site software model. But some months ago it made a move into the software-as-a-service sector as a way of targeting smaller customers.
However, that's not necessarily the way things have worked out, says RedPrairie's Andrew Kirkwood. "We have had a lot of interest in it from all sizes of organisation," he says. "We have had more demand than we anticipated and it has opened up new areas of the market." Larger organisations are using SaaS as a way of adding functionality quickly and cheaply - for example where an additional small or temporary warehouse is needed, he says.
David Grosvenor, managing director of Wesupply says: "The world of commerce is changing quickly with large organisations looking to employ more collaborative style solutions to drive supply chain optimisation. Unfortunately for many SME suppliers, each major customer will invariably wish to collaborate and organise the supply chain in their own, unique manner, leading to complexity and cost for the supplier.
"One way that smaller and mid-sized businesses can retain competitive advantage is by working with cloud based B2B e-commerce specialists who can provide the necessary flexibility and quality of service. Cloud providers can leverage the significant economies of scale to keep costs to a minimum and the most successful are able to not only cope with the demands of the large corporations but also empathise with the SME to deliver a responsive, high quality service."
Kelly Thomas, senior vice president of manufacturing at JDA, says: "By bridging the gap between front and back end planning, organisations can more efficiently satisfy customer demand, while improving overall profitability through better inventory control and investments. Improved sales, reduced cost of goods sold, increased asset throughput and a decrease in inventory are just a few of the potential top line and bottom line benefits of cloud-based solutions."
In addition, says Michael Cannell, director of global solutions at Integration Point, the SaaS model allows companies to access and share regulatory knowledge and trade content in a much easier fashion than conventional software allows. "For instance, when a country changes a tariff rate, companies need to notify internal parties such as accounting and logistics, but also to share updated product classifications with brokers and suppliers within the supply chain."
And Mick Paddington, product manager, business integration at Kewill, says: "Flexibility of SaaS applications with the ability to upgrade, downgrade functionality used, along with ramping up usage, is attractive to organisations who are unable to predict future requirements. This gives SaaS a convenience that traditional software delivery cannot match."
However, he points out that while these are compelling reasons to use the SaaS model, it's not for everyone. "Conventional on-premise application deployment is still dominant with SaaS accounting for only ten per cent of the total worldwide software sales last year. Although initial concerns over the security and availability of SaaS have been addressed, there is still an on-premises infrastructure investment out there. Companies still see the need to use this rather than move to the SaaS mode."
And RedPrairie's Andrew Kirkwood is also concerned that SaaS can struggle with the high throughputs of a major WMS operation arguing that on-site systems are needed to provide the speed of response. However, the idea that SaaS struggles with high volumes of data is challenged by Shiran Liyanage, head of channel development at Metapack. "Outdated wisdom! MetaPack's biggest customer shipped nearly 60,000 orders per day last year and is due to reach 100,000 per day this year. Each order requires at least three calls to the MetaPack SaaS, with system decisions being presented within 0.47 second."
This is backed up by Gavin Clark, commercial director of Snapfulfil SaaS WMS, who says: "The internet might not be able to handle data fast enough, but this shouldn't hold you back, simply design a solution that doesn't require intensive data transactions. Develop a solution that uses data minimisation techniques and delivers all of the functionality that you need, without the 'lazy' approach of blasting everything you might need down the network. Work smarter, not harder is more conventional wisdom that we like to subscribe to."
Steven Hargreaves, group product director at Solarsoft argues that the internet can achieve very high throughput, "but does not lend itself to the most time-critical data flows. This could be an issue, for example, with production monitoring or warehouse management systems where sub-second response times are critical. In these cases, customers will want to secure capacity with a service level agreement and a quality of service guarantee.
"Fortunately, this can be achieved using virtual private networks (VPNs) which are intermediate in price between the internet and leased lines. VPNs can be linked to the public internet, giving the best of both worlds: guaranteed performance where it is needed and universal low-cost access."
The development of web services and virtual private clouds has had a big impact on the SaaS world. Andrew Spence, supply chain business development director at Oracle, says: "Web services and virtual private clouds provide a secure and cost effective way for organisations to share information and connect their supply chain systems.
"In a world of fragmented global businesses that rely on remote suppliers to deliver products and services, it is these technologies that re-connect the supply chain. To deliver good customer service cost effectively, supply chains need to be managed from end-to-end which requires the integration of multiple organisations across the internet."
Web services enable the use of cloud computing on a much better basis than older technologies, argues Matt Muldoon of Epicor, which produces an SaaS-based ERP system. "Web services host all the business rules so no matter what method I use to contact the data the rules are always invoked."
And Campbell Macfarlane, manufacturing practice director, BT Global Service says: "Don't confuse the public internet with a private network like BT's global MPLS network, on which we offer VPNs to our logistics customers."
The internet is best effort, he says, but enterprise-grade networks provide assured performance.
"So, yes, avoid cloud applications over the public internet but even with private networks, be careful. If you look separately at the applications and the network, you won't achieve the best result, so it's important - indeed, essential - to focus on overall performance as seen by the user - that is, round trip, end-to-end," says Macfarlane.
SaaS applications offer a financial advantage in that there is no large upfront payment but do they work out more expensive in the long run? Rob Gibney, UK country manager of Imtech Logistics Software, says: "If you look purely at the hard figures over, say, a seven year period then traditional software may appear to work out as a cheaper option but only if nothing changes in that time. This of course is never the case; in reality a user will change their circumstances, grow, and will want an upgrade in functionality and hardware. This means more training and reimplementation. So, while it may appear on a spreadsheet that SaaS is more expensive than the traditional model the reality is somewhat different. You have to consider all the possibilities that change will deliver over the long term. Of course, the other key benefit with SaaS is that if you don't like it, you can move on and you are not caught in a trap of trying to get better value out of it.
The training issue is also highlighted by Terran Churcher, chief executive of Codegate. "It's not just the initial roll-out training cost, but normal staff attrition and movement will often prove a high recurring cost. The more involved the training the higher the cost."
Mark Brannan, general manager of AEB points out that: "Cloud might be hip - but 70 per cent of all SCM operations are based on systems that can be categorised with a very un-hip word: legacy. This stable environment is the backbone of the supply chain business and will remain so for quite some time. Hybrid is, therefore, likely to be the new trend."
"Whether SaaS can be applied as easily to supply chain management processes depends on the extent to which the processes to be supported by software are capable of being standardised and are critical to competitiveness. In the logistics world, processes are very diverse and need to be flexible to react to steadily changing requirements and individual customer needs.
"This is not in line with the nature of SaaS solutions. Despite this, there are a lot of extensions and add-ons to processes that can follow a standard approach and are thus ideal for SaaS solutions," he says.
DecisionOne, which provides technology support services to hardware OEMs and IT service providers, was challenged with maintaining its compliance with the complex and ever-changing export regulations, streamlining its processes and working within budget.
With 1,500 export orders a year, DecisionOne required a simple to use, flexible compliance system that could support its expanding sales volume and deploy quickly without costly software or hardware. It chose Management Dynamics' Export On-Demand, a complete export compliance system aimed at medium-sized exporters.
Time-saving features such as a product master, workflow tools and screening engines, have enabled DecisionOne to improve export productivity by 50 per cent without hiring additional staff.
The company has begun to expand its export operations as a result of the added flexibility to do more with the same level of resource, such as updating data in real-time, adapting quickly to new regulations and eliminating delays.
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