SaaS: Speeding Up or Delaying the Future?

Stephen DeAngelis

December 6, 2011

Stephanie Neil writes, “Hosted applications remove the burden of buying and maintaining hardware, but off-premise systems could cause data integration problems that require serious consideration in any purchase decision.” [“Is SaaS Sabotaging Enterprise Integration Efforts?” Managing Automation, 15 August 2011] Since most analysts predict that cloud-computing will dominate the business landscape in the future, the concern raised by Neil must be taken seriously. She continues:

“Through industry standards, application programming interfaces (APIs), and middleware for enterprise integration, manufacturers have made great progress in uniting the islands of information that once kept them from sharing data between plant floor and enterprise systems. As a result of these enterprise integration efforts, companies can now connect production operations with back-end accounting systems to keep material costs under control and manufacturing schedules on track. They can integrate supply chain data, warehouse management systems, and even sales forecasting applications to deliver the right product, to the right people, at the right time. When done right, it’s a huge competitive advantage. But any CIO or systems integrator will tell you that integrating applications that target different departments is not easy to do, since business needs change as fast as applications are upgraded.”

We all know that the IT sector’s most enduring feature is change. Software and hardware change so fast that some people (and companies) hesitate to make investments out of fear that today’s purchase will be made obsolescent by tomorrow’s breakthrough. Most analysts believe that cloud-computing will help assure companies that today’s investment will continue to pay dividends in the future. Neil doesn’t dispute this reality. Her point is that data integration that helps break down corporate silos is not easy under any circumstance and may be more difficult in the cloud. She explains:

“Enter software as a service (SaaS) applications, which might seem to be an IT manager’s dream: no server and storage systems to buy and maintain. But their emergence presents a whole new integration problem between on-premise legacy apps and those that live in the cloud. According to the recent InformationWeek Analytics 2011 Enterprise Applications Survey, 43% of SaaS users are very happy with the ability to deploy the applications quickly, but are much less satisfied with the complexity of integrating hosted apps with on-premise systems and data sources. The InformationWeek article cites a handful of SaaS-based problem areas that are causing many CIOs to forgo the cloud, for now. Among them was the view that a lack of integration creates information silos—catapulting us back to the islands of information that make it difficult to share information or run business analytics. Another issue respondents cited was the inability to maintain a master data set that includes enterprise wide governance of the information flowing among the applications.”

These are indeed serious concerns. One of the reasons that Enterra Solutions® offerings have been well received is that they are agnostic about the kind of system being used by clients. Our technology helps integrate information regardless of source or format to provide supply chain visualization and optimization solutions. Neil believes that all SaaS offerings need to be developed with integration in mind. She concludes:

“One has to wonder whether some of the new integration appliances and brokering services emerging, including Jitterbit, CloudSwitch, Cast Iron, Boomi, and Vordel, will address these challenges. They may well offer a better alternative to custom programming, but that’s just a start. They’ll have to do a good job of integrating on-premise and off-premise data, managing workflows, governing data structures, and keeping the enterprise secure. To that end, it’s pretty clear to me that a lot more work will need to be done before CIOs at large organizations fully embrace the cloud as part of their technology landscape. Sure, they’ll dabble with an app or two, but for now, SaaS will likely remain an application island within the enterprise.”

Since my company is a Solution-as-a-Service firm, I’m obviously more optimistic than Neil. The upsides of SaaS applications far outweigh the downsides. Monique Rupert lists a few of those upsides:

 

  • Quick start to deployment
  • Ease of maintenance
  • Predictable Total Cost of Ownership (TCO)
  • Faster Return on Investment (ROI)
  • Shorter deployment time
  • No upfront infrastructure costs
  • Better use of internal IT resources
  • Service Level Agreements
  • Etc.

[“Speeding Up Deployment Time with SaaS,” The 21st Century Supply Chain, 2 February 2011]

 

Rupert, who heads the professional services team at Kinaxis, has witnessed all of these benefits over the years. Her article, however, focuses, on one of them — shorter implementation times. She writes:

“There is no lengthy wait to procure hardware only to find out it wasn’t sized appropriately and no waiting weeks for a software installer to come onsite to spend days if not multiple weeks (for many ERP vendors) installing software on your hardware. … There is also global user availability instantly as there is no ‘roll-out’ of software to sites – just an internet connection required. Imagine all your users around the globe having access in day one. This is a huge timesaver in our global world.”

Another benefit of SaaS applications that Rupert highlights is the fact that the applications themselves are “already being administered by experts,” which means your company’s IT department doesn’t have to learn how to administer them. She concludes:

“Many times during deployment projects, patches or fixes may need to be applied. This seemingly simple activity could delay an on-premises activity as the IT administrator struggled with learning how to do this. With SaaS this task, and all upgrades, are being performed by the experts and thus the process is typically invisible to the project team. Software fixes and upgrades go in without notice and impact to the project.”

Chad Collins, Vice President of Marketing and Strategy at HighJump Software, also believes that cloud-computing and SaaS represents the future in the supply chain sector. For logistics service providers (LSPs), he believes that the cloud is a godsend because, for most LSPs “the difference between the revenue and expense (their margin) is so small, it must be relentlessly scrutinized.” [“Solving Logistics Service Provider Business Problems with Cloud Computing,” Logistics Viewpoints, 31 March 2011] As Rupert pointed out earlier, SaaS applications can help LSPs track expenses more closely because they provide a predictable total cost of ownership. Collins continues:

“Given that many customers view LSP services as a commodity, LSPs are constantly challenged to differentiate their offerings against the competition. Fortunately, cloud computing is emerging as a viable solution for helping LSPs battle these challenges.”

The first challenge that cloud-computing and SaaS applications help tackle is cost. Not not only do SaaS applications provide a predictable total cost of ownership but they help create better supply chain visibility as well. Collins explains:

“There are variety of expenses like facilities, transportation assets, fuel, personnel and technology required to deliver the service that generates the revenue. If an LSP has clear visibility to all their expenses associated with providing a particular service to a particular client, it becomes much easier to manage the margin and increase profitability. There are many tools available to help LSPs gain this visibility. Transportation management systems (TMS) have sophisticated algorithms for allocating transportation costs across multiple clients. Similarly, warehouse management systems (WMS) have logic to allocate the cost of labor, space and value-added services to clients.”

Collins admits that these tools have been offered as standalone systems for years and have not required access to the cloud. The problem, he states, is that standalone solutions are expensive to install and expensive to update. He continues:

“One area that remains difficult to allocate is technology infrastructure (hardware, networking and software). This is because traditional enterprise technology requires significant upfront investment and generally requires purchasing enough capacity to handle volumes at peak times (which may only occur one or two times per year). New advances in both hardware and software can address this challenge. The emergence of cloud computing infrastructure and software applications delivered via cloud computing can help LSPs buy only what they need and more closely align the cost of the technology infrastructure with the use of the technology.”

Collins notes that another benefit of cloud-computing is its scalability. He writes:

“Cloud technology also provides additional flexibility as the LSP’s use of technology expands. The cloud is elastic. This means that as the LSP adds more clients, processes more transactions, and expands services, the technology (and corresponding cost) scales nearly linearly. This is in sharp contrast to the traditional approach to computing infrastructure which requires large capital purchases and the use of depreciation to reduce impact on the income statement (sometimes not successfully).”

Like Rupert, Collins insists that decreased implementation time is an enormous benefit of cloud-computing and SaaS applications. “This is critical for LSPs that often cite the time to onboard new clients as a large challenge,” he writes. Even though he is mostly positive about SaaS applications, Collins does note that “multi-tenant model” applications (i.e., where “all customers share a single instance of the software”) can be too constraining in some environments, like Warehouse Management Systems (WMS). He asserts that “warehouse processes and customer requirements are too varied to succeed using a ‘one-size-fits-all’ model.” He continues:

“There are solutions available today that are single tenant allowing LSPs to personalize the applications to quickly meet each individual customer’s process requirements while retaining the benefits of scalability and cost efficiencies of the cloud model. This is critical to taking full advantage of the benefits of a best-of-breed WMS.”

Collins also agrees with Rupert that relieving company IT staff from the burdens of system administration allows them “to focus on strategic initiatives that will differentiate their service offerings.” Such differentiation, he claims, will allow LSPs to be viewed as more than a commodity and “will enable them to increase their revenue and profitability.” He concludes:

“I strongly believe the use of cloud technology (both computing infrastructure and software applications) will continue to grow. Because of the scalability of this model, short lead time on expanding infrastructure, visibility to costs, and the ability to quickly onboard new customers without expanding IT bandwidth, this model is ideally suited for LSPs.”

Most companies will find that implementing cloud-based SaaS solutions will benefit them in the future. Although data integration will likely remain a challenge for some companies, it is not an insurmountable challenge. So, in answer to the question asked in the title of this post, I believe that cloud-based SaaS applications will speed up the future rather than slow it down.