Analyst Insight: The convergence of constrained capital, limited IT resources, and demands for higher productivity functionality continue to expand the footprint for SaaS- and on-demand-based technology applications across the supply chain. SaaS-based applications are no longer the hype; instead they are the quickest and most cost-effective way to provide supply chain execution technology for 2011 and beyond.

SaaS and on-demand applications will continue to grow across the supply chain landscape. There are several key points for companies to consider while contemplating what they want to achieve and how to adopt SaaS and on-demand as part of a supply chain technology strategy in the coming year.

-Kevin Hume, principal, Tompkins Associates

Market Adoption by Segment - SaaS and on-demand applications have higher adoption levels in certain areas of the supply chain application landscape. Supply chain applications that require a high level of integration and collaboration - such as visibility, global trade management, transportation management, procurement - all have a robust SaaS and on-demand application market.

Large-scale WMS applications (high transaction volumes, automation/sortation requirements) drive complexities that are not supportable by SaaS or on-demand products. However, most WMS applications with small- and medium-transaction volume have many SaaS and on-demand application offerings in the market.

Understand Key Terms and Technology - As with any emerging technology, it is important to have a clear understanding of terms and how they impact your specific operations. On-demand is probably the broadest application description, ranging from a single application that is available to multiple clients, to a client-specific application instance "hosted" by a third party.

SaaS applications are a single instance of code and data definitions that are made available to multiple customers (multi-tenancy). As a result of multi-tenancy, the volume of features/function options is somewhat more limited than what is expected in a typical licensed software application.

Analyze Pricing Models - There are an ever-evolving range of pricing models in the SaaS and on-demand markets. Most models price integration services as an upfront consulting service. Beyond integration services, pricing begins to vary. Multi-tenant SaaS applications typically provide both one- to three-year subscription services. On-demand applications can provide similar subscription options, as well as transaction-based options. Companies should evaluate the requirements for seasonal peaks and determine costs across transaction and subscription options. It is important to look for "pay as you go" options that allow companies to incrementally add additional functionality or modules as they gain experience with the initial deployment.

In general, companies should not expect a single pricing model as they evaluate SaaS and on-demand application models. By looking carefully at each application's peak loads and feature function requirements, companies can determine the best pricing option for their own application.

The Outlook

On-demand and SaaS applications provide a compelling opportunity to dramatically reduce the technology investment burden managed by many supply chain organizations today. Now is the time to assess supply chain applications and determine the best adoption strategies for SaaS and on-demand supply chain applications that place organizations in front of the competition.