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In 2010 and 2011, cloud-based software solutions were the new, much-buzzed-about technology trend. Now, as adoption spreads and these technologies mature, 2012 is poised as the year of mainstream, top-to-bottom, adoption of the cloud by many industries. Similar to a few other major technology trends, the supply chain realm has been a little slower to embrace the cloud than other industries, such as retail and transportation, but we expect it to follow a similar trajectory. Clearly, many factors drive the adoption of new technologies, but this article attempts to describe a handful of factors that will characterize the evolution of the cloud this year.
More than just hardware and software cost savings
When SaaS and cloud applications first hit the market, many companies purchased them to reduce capital expenditures for software and hardware that needed to be purchased and upgraded each year. For the most part, this still holds true. Cloud-based supply chain technology systems still offer IT cost savings through faster time-to-deployment, reduced complexity and reduced annual software costs. However, many companies now see the greatest ROI from an even bigger business advantage: by outsourcing the bulk of software and hardware management and maintenance, IT teams are left with more time and resources to focus on system innovation and improvements that drive profits, such as customer-facing technologies that increase sales or strengthen service.
Also, as more and more business operations move online, security risks increase and the threats can change quickly over time. Security management alone used to consume vast amounts of IT staff time. On-premise systems require frequent security patches, updates and bug fixes; all of which demand constant support from highly skilled technologists. Cloud technologies have alleviated this burden by allowing companies to rely on a technology vendor's well maintained and cutting edge security measures, which are built into the cost of the technology. Companies must remain aware of new threats and exposures, but they can sleep easier knowing that a team of dedicated experts is on the watch - even while they sleep. Disaster recovery plans and service levels are often the top concerns for customers looking at cloud deployments, so make sure you ask the right questions to ensure you're covered.
Another important, yet often overlooked, advantage is increased IT agility and speed. Cloud systems are extremely fast to deploy, which compresses the time that passes between supply chain optimization decisions and implementation. For instance, a cloud-based WMS can leverage preexisting templates, as well as a myriad of back office system integrations. This all leads to faster ROI and accelerated profits. Typical deployment timelines for on-premise enterprise software can range between six to12 months compared to average cloud deployments for the same software taking as little as two to three months.
The cloud isn't just for large global enterprises
Many industry insiders and analysts predict that the volume of cloud deployments will increase dramatically across the board, with a very significant shift for supply chain oriented businesses. This trend is the result of a tipping point in the industry - the early adopters have proven the value of these systems, so more businesses will take the plunge.
For the many distribution-oriented business that are small to medium-sized (think 3PLs, food and beverage companies), adopting the latest and greatest enterprise-level technologies has been a daunting task due to perceived high costs and a "my old system still works" approach. For that reason they have been slower to move to the cloud, but this is changing. Many of these companies are realizing that it is much easier and more cost effective to abandon their legacy systems in favor of cloud-based solutions, some of which offer even more features than their on-premise alternatives. Hesitance is also the result of concerns about the viability of the cloud versus on-premise for data security, disaster recovery and latency, among others. These worries have been ameliorated in recent years - the cloud is more stable and secure.
Other factors that affect the rate of adoption include a greater desire for "large company" technology with a small business price tag and support model. Smaller companies see cloud technologies as an opportunity to deploy enterprise-level performance and functionality without the need to employ a large IT team. Many vendors have exceptional customer care teams that keep maintenance painless and, because the cloud model is scalable, the service grows with your business.
Swimming in the cloud: going beyond wet feet
Perhaps not surprisingly, companies that start using cloud-based technologies in one part of the business will expand usage across its technology ecosystem. For example, the "first wave" of cloud apps focused on CRM-type functionality, such as lead management or email marketing platforms. In fact, we've seen many supply chain oriented companies move (loosely) along the following progression: CRM/sales > Marketing > Financials > ERP > WMS > TMS > DSD > Labor Management > EDI.
We also expect to see a number of companies that are so comfortable with these technologies they move to a "cloud-first" option, which means the marketplace is shifting from "why should we move to the cloud" to "we want to deploy in the cloud unless you think there are good business reasons not to." This is great news for businesses and their vendors. The more these technologies proliferate throughout different markets, the better and more cost effective they become. Keep in mind that the cloud is not a strategy itself; it's a tool to achieve business goals. It doesn't have to be an all or nothing proposition; businesses would be best served to review it on an application-by-application basis. In the end, businesses who adopt cloud computing models have an opportunity to become more agile and efficient, with a greater IT focus on innovation and customer service.
Source: HighJump Software
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