[asset_ref id=”209″]Recent discussion on Supply Chain Standard’s Linked In forum about the role of cloud computing or software-as-a-service provides an interesting insight into the logistics industry’s changing attitudes since the topic first hit the headlines. Eighteen months ago we reported Gartner group’s assertion that within three years over a third of all software would be delivered over the net from service companies’ data centres rather than internally from computers owned by the user.
At the time it seemed a bold claim for a computing model that had yet to prove itself in mission critical applications. No surprise, perhaps, to learn that the influential Gartner company has to some extent back-tracked on its earlier, whole-hearted endorsement of cloud computing.
In a recent study, the company found cloud computing accounted for 3.4 per cent of spending on enterprise IT last year and suffered from similar problems as old-style computing such as those experienced by customers who ended up paying for services that their employees were not using. Now the advisory company believes that delivering software-as-a-service will not be as dominant as it once thought.
No-one is disputing the benefits of cloud computing. There are big financial and administrative advantages in having a third party take care of the maintenance, updating and hardware involved in running software. And cloud computing will have an important impact on logistics, where outsourcing has already become a way of life, because it delivers IT on demand like a utility that can be turned on or off. And as a service, it is paid for out of operating budgets rather than as capital expenditure. All this means projects can get off the ground more quickly and cheaply, plus they can be scaled up or down as circumstances dictate.
What is at issue is which applications are best suited to the third party treatment. In our forum some members argued that applications that ran round-the-clock and which called for a high degree of reliability and security – such as Gartner has to some extent back-tracked on its whole-hearted endorsement of cloud computing.
warehouse management systems – were not ideal candidates for the cloud.
However, others argued that there was no problem. Allen Scott, former vice president of WMS firm Manhattan Associates and now partner at @logistics Reply, argued that cloud computing in the warehouse “has come of age”. Scott highlighted infrastructure issues as the key to making the cloud deliver. Virtual private networks and third party platforms such as Amazon Web Services allow software vendors to provide on-demand WMS cost effectively and to reassure customers on the security and scalability issues, he said.
One thing all our correspondents were agreed upon: cloud computing providers with their neutral position and shared facilities are well placed to offer collaborative or multi-party applications such as transport management or integration services.
Deltion’s CarrierNetOnline real-time transport management system is one example of the impact of cloud computing in multi-party situations.
Building business-to-business integration and business process networks has long been an expensive nut for logistics managers to crack. Gartner estimates that around the world companies already spend some $1.5bn on integration services annually. “Integration service providers have increased their investments in B2B projects, and are competing more aggressively to win the business of managing those projects,” says the firm in a 2009 report entitled Magic Quadrant for Integration Service Providers.
Service suppliers are also becoming more innovative. Newer technologies including XML, web services and service-oriented architecture (SOA) have been used to build services such as managed file transfer for large amounts of data and tackle the notoriously complex area of international electronic invoicing.
Market leader GXS has joined up with RollStream to develop what it describes as a Facebook for e-commerce. New players such as OmPrompt and Wesupply – demand for whose EDI and messaging services is growing at over 30 per cent annually – are evidence of the appeal of simple online services that can cheaply and quickly provide links to a wide variety of partners.
Meanwhile, existing technology providers such as IBM, Microsoft and SAP are notable by their absence from the field. SAP has even been castigated by its users for dragging its feet over providing cloud computing. The ERP company is pursuing a hybrid model with some applications operating in the cloud while others remain on customers’ premises. However, its much-touted Business ByDesign software-as-a-service only became available this August. Polls of SAP users reveal there is an appetite for cloud computing, but at current rates of uptake there are some years to go before appreciable numbers of supply chain managers are prepared to entrust their core business processes to web-based service providers.