As Myths Fade, the Cloud Beckons

For many years, supply chain integration solutions have required installation of software, computers, and highly-trained technical staff to manage the IT infrastructure that handles the day-to-day activities of electronics manufacturers, suppliers, and their customers.

The accepted approach has been to install software within the company’s firewalls, and for many years, that was the only option available. But a growing number of companies are providing supply chain applications that are installed outside the firewall and use high-speed Internet connections.

These software-as-a-service (SaaS) or cloud-based applications are finding increasing acceptance among supply chain participants looking to reduce costs and increase their ability to interact with more trading partners.

Attitudes to the cloud are changing as negative ideas are proven unfounded. At the top of the list of perceived problems with the cloud were reliability, security, access, and suitability to any particular task. But there was one other issue that trumped the negative speculation raised by the adoption of SaaS: lack of information.

The real problem was that those individuals most likely to be in a position to make decisions on choosing a non-locally-installed supply chain management program were simply uninformed about the nature and benefits of SaaS and cloud-based systems.

When companies developed their cloud-based applications, they discovered that although their sales prospects understood the applications, most of them had little knowledge, and plenty of skepticism, about how these mysterious applications could be competitive with the systems they had relied on for years.

But over the last two years or so, the process of educating prospects has become less of an issue for some organizations.

“We find it less necessary to explain the workings of SaaS, and are able to concentrate on the benefits of our product line,” says Jim Frome, executive vice president and chief strategy officer for SPS Commerce, a provider of EDI translation and trading partner enablement programs.

Frome believes this change has come about slowly but has accelerated recently. Discussions about off-premise applications now focus on the relative merits of different offerings, rather than on whether the technology is viable.

People are becoming more comfortable with the security of cloud-based systems. It was one thing to wonder how secure these systems would be, when considered independently. But now that cloud-based offerings are being compared with their locally-installed competitors, the reality of delivering truly secure and robust environments has taken on a different set of comparison standards.

Local software installations are dependent on the resources available inside the firewall. Smaller organizations, in particular, may not have the manpower and financial resources to deliver 24/7 monitoring and protection. However, because cloud-based offerings depend on delivering security as part of the service, in most instances their security efforts are better than what can be expected of in-house protection.

Martin Kerr of Bestborn Business Solutions believes that security has now become a selling point for cloud and SaaS offerings: “Many of the smaller companies could not pass SAS 70 certification based on being able to handle just their own data. So as the SaaS services improve, they may actually be offering customers what amounts to an upgrade in how secure their data is.”

Most cloud-based offerings are still young, relative to those software applications traditionally installed inside firewalls. But as supply chain software and services vendors continue to move toward the cloud, the full range of these systems' advantages will be tested and, hopefully, confirmed.

13 comments on “As Myths Fade, the Cloud Beckons

  1. AnalyzeThis
    April 25, 2011

    Scott, I agree that one of the big obstacles to SaaS adoption is simply people being uninformed about the nature of the services and their potential benefits.

    While security is still a valid concern, you make a very good point about SAS 70 certification, for instance.

    In time, I think the concerns and fear around SaaS will fade; it'll just be commonplace.

    There are still issues with cloud-based offerings of course, but I think even at this relatively early point, the rewards outweigh the risk: since moving to a more SaaS-focused strategy, I have discovered numerous advantages when it comes to reliability, access, expansion, ease of deployment, and integration with internal and external partners.

  2. SunitaT
    April 25, 2011

    Its interesting to know that security has now become a selling point for cloud and SaaS offerings.

    “what amounts to an upgrade in how secure their data is”  ?

    How will companies know what amount of upgrate is necessary for the organization ?  Are the companies educated in that aspect as well ?

  3. Scott Koegler
    April 25, 2011

    The fact that SaaS/Cloud services may be more secure than in-house apps is not in itself a cure for not understanding the risks and components required for good security. I think the best that might happen is that uninformed or under staffed companies may become more secure by using these services than they would be using their own implmentations. Or they may become more vulnerable if they choose unwisely.

    But the decision may still be done with the same amount of attention, or lack thereof. My guess is that the overall level of security may rise. But surely there will be disasters — as always.

  4. Wale Bakare
    April 25, 2011

    Cloud computing architecture – interfacing with other resources, management and reusable of components may be secured in privately clouded area.

    Can the security be guaranteed or reliable in public Saas/cloud? factoring in the ownership not be given to a single paticipant. 

  5. eemom
    April 25, 2011

    While Cloud is still in its infancy as far as adoption, the need for a better more secure and robust system will govern and we will probably see more and more companies adopt the technology.  I am curious if the problems for the supply chain today caused by the Japan crisis is a selling point for a more centralized, standardized system as opposed to the ones installed inside the firewall!

  6. DataCrunch
    April 25, 2011

    Supply Chain software can be more complex than other enterprise software components, such as Finance, CRM, Planning, HR, etc.  In more automated supply chains where automation is used in warehousing and distribution environments, SaaS is not practical.  Automated warehousing where the use of conveyors, various material handling equipment, wireless devices, robotics, etc., computers and software at the physical site is critical to the operation.

  7. Scott Koegler
    April 26, 2011

    Certainly some components require local connectivity. The items you mention are perfect examples. But the central collection and distribution of data and processing power is perfect for the supply chain environment where there is no 'local'. Every trading partner needs to connect to at least some of the same data, and transforming hundreds of small and dissimilar (not to mention locally (mis)managed) installations into a single consistent database has proven to be a perfect solution for an increasing number of suppliers and their customers.

    Yes… local computers and applications are definitely necessary, but as a part of the system rather than as the entire system.

  8. jbond
    April 26, 2011

    It is interesting to see the growth of the cloud based business. I feel that as more companies can get past the negative stigma of the cloud, they will realize that their information is just as secure as it would be on their own networks. As more companies are offering cloud based storage and applications, the security systems in place will continue to get stronger. Many people are going to also convert to the cloud as a precaution to possible disasters. How many total networks were lost from the Japan earthquake with data that may never be recovered?

  9. prabhakar_deosthali
    April 26, 2011

    For many decades , the manufacturing companies have been dominated by the IT departments. Those IT heads used to decide how the supply chain professionals would work. The purchase orders, monthly schedules, shortages lists , vendor payments and all that was tighly controlled by the processes defined by the IT heads and not the supply chain heads. The supply chain heads used to be at the mercy of these IT honchos who in the name of technology constraints, software constraints and budget constraints used to push the same old type of systems to the supply chain department. The CLOUD and SAAS services have freed these supply chain professionals from  all these shackles. Now they have a choice of how they want their supply chain support systems to operate. That is the biggest paradigm shift in  my opinion. From the IT centric organizations these organizations will now really become business centric organizations

  10. mfbertozzi
    April 26, 2011

    Personally, with regard to manufacturing, I think we have reached exactly the point.

    -IT Depts had to support business and not to act as decision makers to limit for example sometimes possibile challenges to face by whole industry.

    -Cloud's advent could scare, but if we spend 5 minutes to breakdown its architecture and services, we will find, basically, several friendly services already in place and used by several of us, but simply provided in a different way.

    Going further, it is quite interesting to analyze top ten positions, inside empirical ranks by users from several cloud communities; in fact most positions are held by quite recent companies (i.e. Joynet) and not worldwide blu chips and it could allow organizations and users to save costs in adopting cloud model.

  11. Ms. Daisy
    April 27, 2011


    “How many total networks were lost from the Japan earthquake with data that may never be recovered?”

    The Japan earthquake shattered my organization's false sense of security we had about the local software installed within the company’s firewalls. All the local softwares installed in the companies destoyed by the quake are gone with the rubbles if they have no “cloud” backups. This is a plus for the growing cloud business.

    My concerns are, how do we secure the cloud from natural catastrophies, and what other forms of backup do we need for such occurence?

  12. Backorder
    April 30, 2011

    I would believe that operating on a SaaS would be more tricky for securtiy as against the backup-on-a-cloud model. Maybe these are all perceptions, but security for large organizations is paramount and cloud providers would need to ensure and demonstrate a reliable network for business to grow.

  13. Scott Koegler
    May 1, 2011

    I would imagine there are possibilities of putting cloud services pretty much anywhere. Why would it be important that they be in China?

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