As the supply chain looks for new tools to manage increasing complexity, as well as a need to manage risk and other variables quickly and proactively, cloud-based solutions, which are relatively underutilized today, will become more common.
We spoke to Vasu Rajagopolan, head of supply chain and transportation for Xchanging to get his take on some of the issues around cloud computing and the supply chain. The company provides business processing, technology, and procurement services to companies in a variety of industries and has its hand on the pulse of these trends.
EBN: What are some of the common misconceptions around cloud computing and supply chain applications?
Vasu Rajagopalan: Supply chain has generally been a very slow adaptor to new technologies, and cloud computing is no exception. Besides data security and ownership, other factors come into play around how the infrastructure would behave in terms of excess volumes and concerns the in-house IT team may have with feeling helpless when it comes to issues around performance, managing downtime, and handling end customer pressures.
EBN: Often, lack of management support is cited as a reason for not adopting cloud technology. Why do you think the corner office is reluctant to support these sorts of initiatives?
VR: Not all senior managers have yet to fully understand the implications of moving into cloud. They still look it as a pure cost saving initiative vis a vis the risks and the litigations they may end up facing in case they encounter issues around their data. Managers would like to hear success stories that [demonstrate that the concerns about] data security are all addressed by big product vendors, which are now moving over to cloud. Another factor is the rigidity of most products (not home grown systems), which don't allow client customizations. Most of the cloud providers don't even give full database access, so the internal teams become nervous letting go of a system that has been very much under their control.
EBN: What are the best ways that supply chain managers can “speak the language” of business leaders to quantify the potential benefit of cloud-based apps for the supply chain?
VR: The ROI of moving to a cloud-based service is very fast. Customers need not invest in capex for their expensive infrastructure, licenses, and upgrades. This can be very easily worked out. Another factor is that often, companies invest in large IT teams and have to constantly manage them – thereby deviating and investing in a division that is not their core business. By moving to the cloud, they can overcome this by maintaining a lean IT team. And yet another benefit is that companies who use cloud-based solutions can take advantage of the fact that the vendor would take care of the base application upgrade. More often than not, besides the huge cost involved in upgrades, there is a lot of frustration at the inability to quickly embrace new features of the release due to the risk involved in the migration.
For Tier 2 and 3 companies, the cloud offering gives them a very realistic option of moving from spread sheets or home grown products to state-of-the-art products, as they need to pay only transactional charges and not worry about license, maintenance and infrastructure costs.
Next week, we'll be talking about step-by-step solutions for successful implementations. Meanwhile, let us know in the comments section below about the biggest concerns or stumbling blocks that your organization has around cloud-based supply chain and procurement applications.