Cloud computing: the silver lining

LinkedIn +

Instead of stand-alone programs, software is accessed over the internet often by a web browser and the data is held on a remote server. It sounds absurdly simple, but not only is the number of applications growing, the sophistication of the applications is also increasing so it is now possible to run an entire warehouse management system as a software as a service (SaaS) application.

The question is: how far can you go with this approach and what are the limitations? Rob Smith of Kewill points out that the proportion of SaaS has shifted quite dramatically over the past five years. “Five years ago the proportion would have been significantly lower and we see the wider trend in the market that demand for SaaS is still growing strongly.”

In its last annual report published in July 2008, Kewill says that revenue from SaaS was 51 per cent of the total.

According to IT research company Gartner, the market for SaaS is forecast to reach £6.3 billion ($9.6bn) in 2009, a 21.9 per cent increase from 2008. The market will show consistent growth through 2013 when worldwide SaaS revenue will total £10.6bn for the enterprise application markets.

“Adoption of the on-demand deployment model has grown for nearly a decade, but its popularity has increased significantly within the last five years,” says Sharon Mertz, research director at Gartner. “Initial concerns about security response time and service availability have diminished for many organisation. As SaaS business and computing models have matured, adoption has become more widespread.”

Denis O’Sullivan, who chairs the CILT Supply Chain Integration Technology Forum, says: “When it comes to developing and acquiring applications software for a business, supply chain and logistics applications are usually Cinderella functions when compared to other business applications. In most companies, manufacturing process applications are front-runners.

“However, when it comes to cloud computing, the supply chain is leading the way in non back-office applications. And, again unusually, British companies are among the world leaders in developing cloud applications for supply chains.”

The other most important factor is budgeting. Major software purchases come out of the capex budget and must go through the stringent approval process – particularly in today’s market. SaaS has a totally different cost model, usually transaction or subscription-based. This model means the service can be funded from an operational budget and show a very rapid return on investment. Maintenance and upgrades are also included in transaction cost and come out of logistics operational budgets.

O’Sullivan points to a growing number of companies offering supply chain services on an SaaS basis. Oxford-based OmPrompt, for example, provides EDI and business-to-business connectivity software. Kimberly-Clark uses the service for management of carrier operations. Peter Surtees, Kimberly-Clark’s director, European supply chain, says: “We have been able to increase the number of carriers without increasing back-office work. Also, using cloud computing is no great burden on our ITS department – it lets them concentrate on customers’ needs and not suppliers.”

Manhattan Associates has made its transport lifecycle management solution available via a traditional software licence or SaaS.

DPS, the vehicle routeing and scheduling provider, introduced logiXcentral in 2006 and has seen its market share grow, while Deltion has a transaction-based logistics management service, CarrierNetOnline, which provides real- time visibility and collaboration across trading partners.

Paul Cowley, vice president of sales at Basware UK, says: “Faced with tight budgets, businesses are reluctant to commit to new systems that require large investments of time or money, but with electronic procurement solutions available as SaaS, the practical realities of moving to automated purchasing are taken care of for you. SaaS offers a flexible solution so that businesses can reap the benefits of an efficient purchasing process, without having to commit a huge amount of money or resource to the implementation.”

Martin Port, managing director of Masternaut Three X, which uses cloud computing for delivering real-time vehicle tracking and mobile asset and resource management, points out that cloud computing can “seriously undercut the cost of traditional systems as there is rarely a need for internal IT infrastructure investments”.

Cost savings of 20 to 30 per cent are possible for an SME, reckons Steven Hargreaves, group product director of enterprise software provider Solarsoft. “A good IT services provider can transform the cost/benefit argument for small and medium-sized businesses. But this is a confusing marketplace with a bewildering variety of different service models being discussed by the technology crowd.

Behind the jargon, the key fact is that it is now practical and cost effective to access enterprise software over a network so systems can be treated as a utility: a service delivered for a fee under a predefined Service Level Agreement, says Hargreaves.

Snapfulfil has developed a 100 per cent SaaS warehouse management system. Mark Darley-Usmar, head of Snapfulfil, says: “SaaS offerings must offer multiple layers of resilience. Our service offering is supported by two separate data centres, with fully resilient failover both within the primary data centre and the secondary data centre. We also provide dedicated internet connectivity from not one but two providers, ensuring maximum resilience within your managed service. Web deployment from such a safe environment also provides our clients with an excellent disaster recovery platform. All inventory data is secure and with minimal hardware changes, the solutions can be up and running in a new warehouse within days.

He rejects the notion that some applications are just too big and complex for the SaaS approach. “Many of the largest global businesses already deploy their complex ERP systems via data centres across the world, so it would appear not. The only limiting factor for smaller organisations is the cost for such deployment. SaaS benefits from economies of scale, with hundreds of users accessing the solution at their data centres, the cost per user becomes low enough to support this type of software deployment for everyone. Software complexity is largely a matter of design. If the system is designed to be an SaaS solution, it will have been designed to accomplish goals in a simple, structured way.”

Some companies are concerned that their mission-critical data would be held only on servers belonging to a third party. However, says Darley-Usmar, this should be seen in context. There are a variety of hazards in the conventional model – for example, companies can fall prey to “vendor lock-in”, the data is theirs, the servers are theirs, but, he asks, how do they retrieve this data for any future move to another vendor?




Share this story: