On-Demand Supply Chain Management Solutions to Increase as Economic Pressures Accelerate

March 19, 2009
SaaS solutions can be completed in a matter of weeks and require only limited IT resources, enabling users to realize value quickly, which is simply unheard of for traditional business applications.

As the spiraling economy intensifies, so does the need to cut costs and increase efficiency. In this environment, on-demand solutions are rapidly gaining appeal. With large-scale capital projects facing unprecedented scrutiny, gone are the days when organizations could afford to buy and maintain expensive on-premise legacy systems that required months or even years to provide a return on investment. Instead, today's companies are seeking ways to operate fast and light -- increasing the demand for affordable, easy-to-implement, high-value solutions that solve myriad of business challenges and deliver measurable results in a short period of time.

In particular, the need for effective supply chain management (SCM) has never been greater. Regardless of size or tenure, companies are outsourcing most or all of their manufacturing operations to regions often outside their target markets, dramatically increasing supply chain complexity and volatility. At the same time, the push for innovation has reached an all-time high and continues to grow. Precarious global markets demand steadily improving business results, leading to more stringent operations performance goals -- especially inventory cost reductions -- and heightening the stress on IT staff and budgets.

These pressures have converged to create an ideal opportunity for on-demand or software as a service (SaaS) SCM offerings. By consolidating traditional SCM solutions -- such as spreadsheets, custom planning applications and databases -- into a single on-demand service, companies can rapidly gain tangible benefits to IT and the business. SaaS offers a unique medium that removes the traditional barriers to software application adoption by minimizing implementation risk and ownership costs. And the SaaS model is a natural extension of the growing use of outsourcing among brand owners and manufacturers. In short, SaaS is simpler and less expensive... and its time to shine is now.

SaaS solutions can provide the global visibility and mission-critical tools companies need to manage today's highly distributed and collaborative supply chains, offering a host of distinct advantages over legacy system.

Faster Deployment

Streamlined deployment processes can be completed in a matter of weeks and require only limited IT resources, enabling users to realize value quickly. This is simply unheard of for traditional business applications.

Cost-effective Implementation

Monthly subscription fees replace perpetual fully paid licenses, allowing organizations to recapture solution costs through efficiency savings and other benefits as they go. On-demand offerings can usually be implemented for the amount typically spent on just one or two software licenses, generating major savings for enterprises with multiple users. The elimination of hardware purchases and maintenance expenses increases savings even more.

Minimal Risk

"Try and buy" programs offered by many SaaS providers allow companies to employ the solution on a trial basis, eradicating the risks of major up-front capital investment required for traditional systems.

Easier Internal 'Sell'

Finance departments are more willing to pay small monthly fees for solutions that promise immediate ROI than to lay out large sums for software and systems that offer uncertain returns.

Greater Flexibility

Most SaaS providers have variable contract terms that can readily be adjusted to meet the needs of small, midsized, or large businesses. On-demand solutions can also be adapted for unique operating environments to provide unparalleled performance and service for each customer.

Superior Security

Hosted in a single location with 24/7 protection for sensitive customer data, the purpose-specific networks used by on-demand solutions allow extensive operating system hardening, eliminating most security risks. SaaS vendors may also offer third-party certifications like SAS-70 and independent security audits for added protection and credibility.

Exceptional Reliability

Optimized data centers provide steady bandwidth consistency, availability, and redundancy, delivering n+1 reliability by design. This ensures business continuity by minimizing the danger of costly system shutdowns or failures. Challenging application characteristics (e.g., extensive memory use) can be carefully managed for maximum reliability and high performance.

Less Demand on IT

Because hardware and software are monitored and maintained by the solution provider, SaaS solutions significantly reduce the drain on IT resources. There is no need for a data center, bandwidth, networks, servers, storage etc... And you don't need a team of experts to run or update them. Rather than waiting for overtaxed IT departments to handle system upgrades, businesses can depend on solution providers to deliver the latest and greatest software the moment it's available. Expert support services offer 24x365 troubleshooting and guidance on new features, minimizing downtime and ensuring greater continuity for the user community.

Global Access

The use of high-performance ISPs means that on-demand services can typically be accessed on any computer with a Web browser, providing connectivity from anywhere on the planet.

Excellent Scalability
Fee-for-service pricing and high solution flexibility make it easy for companies to scale SaaS offerings up and down as needed. On-demand solutions also help level the playing field by enabling small- and medium-sized organizations to afford the same sophisticated solutions as multibillion dollar enterprises.

Increased Visibility

The architecture of on-demand solutions facilitates data sharing across multiple ERP systems, geographical locations, and company boundaries, enhancing real-time visibility and collaboration throughout global supply chains. As a result, companies are better able to interact with a widely dispersed network of partners and orchestrate the intricate cooperation and coordination necessary for these networks to work efficiently.

High Value Incentives

With service-level agreements that tie specific performance measures to payment, on-demand service providers are extremely motivated to deliver results instead of excuses. IT processes must be continually tuned and focused to deliver optimal customer value by providing ideal conditions for success. The iterative nature of on-demand implementation also drives best-performance practices, as vendors quickly learn from real experience what needs improvement.

All these advantages make it increasingly certain that adoption of on-demand SCM solutions will accelerate significantly through 2009 and beyond. This idea is rapidly gaining ground in the analyst community as well. For example, Aberdeen Group has cited the high cost of legacy systems as a key impetus for companies shifting to on-demand models for their SCM solutions. And recent Gartner reports predict that nine out of ten companies will increase their use of SaaS in the next year, with worldwide SaaS revenue in the enterprise application market slated to more than double over 2007 figures by 2012.

The result will be a win-win for both consumers and SaaS solution providers. Consumers will gain a highly effective resource exactly suited to deliver the vital SCM and operations performance improvements they need, while vendors will enjoy positive growth during a time when many companies -- particularly those selling legacy SCM software -- may find themselves struggling to survive.

John Sicard is Executive Vice President, Development and Service Operations for Kinaxis. Kinaxis provides an on-demand supply chain management service called RapidResponse, which embraces human judgment to enable planners and front-line responders to handle unpredictable changes and achieve breakthroughs in supply chain visibility, demand management, supply management, sales and operations planning (S&OP), lean manufacturing, and supply chain risk management. http://www.kinaxis.com/supply-chain-management-products/rapidresponse.cfm

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