The current global economic downturn is changing the way corporations value cash on hand and, accordingly, capital investments. Until the markets (such as financial, automotive, consumer, raw materials) become more stable, capital investments will proceed with caution. Those allocating funds for software investments will likely look for alternatives to large-scale, costly implementations and license fees.

Supply chain complexity is also rising due to globalization, which for supply chain means global suppliers, global customers and global competitors. More and more capabilities are externalized, as companies look to become asset-light, lower direct costs and focus on their core competencies. The growing number of trading partners creates a need for process integration and collaboration with extended supply chain partners. While a function is outsourced, however, visibility shouldn't be reduced as a result.

In response to current market pressures, companies are redesigning supply chain management processes to reduce non-value-adding complexity and requirements in order to improve supply chain application performance. The intent to reduce the complexity is in conflict with the reality of their business processes which are becoming more externalized and complex. What does it mean for supply chain applications? They need to provide both the ability to solve the end-to-end supply chain challenges as well as provide a simple and non-complex integration and process architecture.

Furthermore, companies are looking for simple integration requirements and solution simplicity; companies are looking to deploy SCM tools with short implementation times and rapid payback.

Companies do not have the luxury of large-scale IT implementations with customizations, especially with the shrinkage in capital markets. Companies still need to solve critical business problems; the approach is to look at the return on investment as the parameter that factors in the most for software investment decisions. The combination of short implementations and rapid payback is difficult to achieve but is critical for enterprises to do so. On-demand supply chains solutions play a critical role in enabling the top two strategic actions discussed above.

Since Aberdeen's 2007 benchmark study On-Demand Applications in Supply Chain, there has been a notable rise in SaaS adoption rates; the percentage of respondents not using and not considering using a SaaS solution dropped seven percentage points. Furthermore, SaaS is increasingly being considered as a long-term solution, particularly among Best-in-Class companies.

The Outlook

Market conditions justify further SaaS investment, and for more than basic transactions. For example, 38 percent of Best-in-Class are arranging transportation contract agreements with SaaS, and 47 percent say they plan to do so. Thirty-six percent of Best-in-Class respondents to the latest survey are optimizing shipping with supplier shipment collaboration; 47 percent say they have plans to do the same. And it is important to note that these statistical trends exist among manufacturers as well as transportation and logistics service providers.