While both software-as-a-service (SaaS) and on-premise software providers have been challenged by the recent economic difficulties, there may be a silver lining in it for SaaS providers. With IT budgets slashed and working capital at a premium, companies have turned to smaller, less costly IT projects that offer rapid implementation and a lower total cost of ownership (TCO). And, of course, TCO is of the utmost importance these days. SaaS providers promise lower TCO and rapid ROI by delivering their services via an on-demand, pay-as-you-go model-meaning that there is no hardware to purchase, and you only pay for what you actually use.
Even more significant, however, are the capabilities and functionalities offered by SaaS applications-including complete partner onboarding and data integration; rapid enablement of business processes and network changes; and improved customer, supplier and manufacturer relations-a sure upgrade over on-premise capabilities, which are often restricted to the four walls of the enterprise. And in today's business landscape, remaining within the four walls of your enterprise is simply not an option. But perhaps most importantly, SaaS-based applications are typically implemented in weeks or months as opposed to years as with many on-premise applications.
On-Demand vs. On-Premise
The on-demand versus on-premise discussion is nothing new to the supply chain world, but in an increasingly outsourced, capital-starved ecosystem, the evidence continues to mount in support of on-demand offerings.
The most obvious reason companies are now switching to on-demand implementations is that they're significantly cheaper and faster to implement. Not only are overhead costs lower, but ongoing costs are also reduced, as SaaS providers take care of 100 percent of deployment, partner onboarding and ongoing services. This means that both cash and internal resources are freed up to focus on the business's core competencies.
On-demand solutions are also better suited to support the current shift from linear, vertically integrated supply chain models, to global demand-supply networks. The fundamental shortcoming of an on-premise solution is its inability to provide visibility or process management outside the firewall. While this may have worked adequately 10 years ago, today's outsourced businesses require far more. The key to effective supply chain management today is an end-to-end approach-meaning visibility, collaboration and business intelligence across the entire demand-supply network, including all tiers of trading partners.
While this is certainly no small feat, good SaaS providers make it feel remarkably simple. More outsourcing means more trading partners; more trading partners mean more integration and collaboration requirements-all of which on-demand solutions are uniquely designed to support.
SaaS providers are able to reduce this increased complexity by integrating customer and supplier processes along a single, Web-based platform-meaning that multiple tiers of trading partners are able to connect and share data in near real time, regardless of protocol or technological sophistication.
'Quick Fix' or Long-Term Solution?
For years SaaS has been gaining ground on traditional supply chain management solutions, but not nearly as quickly as many analysts had anticipated. The source of the slowdown?-certainly not a lack of technological sophistication or functionality on the part of SaaS applications. Instead, it seems that until recently many companies viewed SaaS as a short-term solution only, a "quick fix" that could be used temporarily to cover up any gaps in ERP functionality. As a result, companies may have been less apt to consider it as a long-term, strategic investment.
But marketplace attitudes are definitely changing, with more and more companies recognizing SaaS as an intelligent, long-term approach. In addition to rapid onboarding/integration and a significantly lower TCO, SaaS solutions also provide the functionalities necessary to ensure the continued health and efficacy of today's dynamic supply chains. The ability to adjust seamlessly to business process and trading partner changes is a huge advantage, as it allows companies to constantly evolve and improve efficiencies without disrupting the flow of information and inventories. As a result, many CIOs are now viewing SaaS-based applications as a very compelling way to rapidly and effectively respond to demands from their businesses.
The ease and speed with which an on-demand model facilitates deployment also has a tremendous value in terms of improving the working relationship between suppliers, customers and manufacturers. Because SaaS solutions offer collaborative capabilities to all trading partners regardless of technical sophistication, the entire value network is allowed to function as a unified, multi-enterprise organization working toward common goals-as opposed to multiple enterprises working in isolation.
Yet another reason SaaS implementations continue to be successful is that they effectively free companies from the burden of "big bang" approaches, which require huge capital investments up front, and are slow and difficult to implement. SaaS providers can offer companies a "phased" approach to implementation, enabling companies to integrate their own systems and processes with the on-demand solution gradually to ensure minimal supply chain disruptions. This approach also enables companies to add new functionalities as they grow, as opposed to on-premise implementations, which lack the flexibility to evolve alongside the enterprise. Of course, a phased approach also means that companies are up-and-running much more quickly-allowing them to see return on investment within months of implementation.
The 'Little Black Dress' of Supply Chain?
SaaS is quickly becoming a staple of effective supply chain management-providing the technology and services to navigate today's complex, dynamic network topologies. As companies continue to discover the hazardous limitations of on-premise solutions, SaaS is becoming even more "basic" to global supply chain strategy. Indeed, it is hardly a stretch to define SaaS as a new class of demand-supply management systems specifically designed to meet the needs of 21st century global businesses.
In marked contrast to traditional on-premise solutions, on-demand solutions are as adept at managing external processes, partners and buyers as they are at managing inside the firewall. They make it easy to reconfigure processes on the fly; quickly onboard new suppliers, channel partners and customers; deliver a level of analytical capabilities tuned to a multi-tier, multi-enterprise environment; and provide seamless upgrades to new versions with enhanced functionality.
But just because we've found the perfect item to complete our supply chain repertoire, hardly means that we have to abandon existing investments, such as on-premise ERP and SCM systems. Indeed, part of the beauty of SaaS is that it complements, rather than displaces, existing systems and tools. Maybe SaaS really is the new "little black dress" of the supply chain ensemble-and just in time for the holidays.
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