Manufacturing is set for bright days. Factory floors are getting busier in Europe and US. China has cooled down a bit – but in overall scheme of things that may actually be OK. Funds are available for investment. IT departments are drawing up plans to fix things, modernize the infrastructure and applications. As they think through the new architecture, Cloud question figures prominently.
Should we invest in a new data centre or move to private/public cloud? What about virtual desktop? Why not move to Office 365? Should our S&OP app be an on-premise one or on-cloud?
Many questions and far too many options and opinions. In this blog, my attempt is to categorize all these options and way forwards into what I believe are essentially five types of Clouds.
First there is the Infrastructure cloud or better known through the clumsy acronym IaaS. You no longer buy your own servers, storage and operating systems, instead you ‘hire’ from a 3rd party and pay them for use. It is more challenging than it sounds though. You need to look at, and possibly pay for the bandwidth needed to access this infrastructure, you need to ensure resilience and you need to make sure the cost-benefit works out after taking into account exclusions and all exception scenarios when the load peaks. You can decide how you migrate to the infrastructure cloud. You can start small and move your development, testing and training infrastructure and then the production or you can bite the bullet and move many of your production apps at one go.
Then there is the Utility cloud which deals with emails, collaboration software, instant messenger, office productivity applications etc. The good thing about this Cloud is, unlike the ‘desktop’ world, companies do have multiple supplier options. The latest Office 365 is really cool. But then there are a bunch of great alternatives too – Google Apps, Lotus Live, Zoho, and Live Documents and so on.
Outside these 2 areas, Cloud starts to touch the core business process of manufacturers. A few years ago, such processes were outside the Cloud zone. As late as 2010, only 2 % of the manufacturers surveyed by Gartner indicated that they do not see wide-spread adoption of Cloud. This number has now gone up to 47%. What is driving this change? Honestly it is the supply side of the equation. Great innovative cloud software vendors are bringing fantastic new apps and are eating into the legacy world from front, back and also from the middle.
In the client –facing front end of the value chain there are great products like Salesforce.Com for CRM. But there are also many wonderful cloud apps for client facing processes such as Configure-Price-Quote (CPQ), B2B, and Service Management etc. Naturally we see a lot of action in this area and lot of adoption of client-facing cloud apps.
In the real back-end where the so called ‘context’ processes are executed, there are now proven cloud apps for HR, time and expense management, indirect procurement etc. Recently cloud is also making inroads into accounting, financial reporting, controlling, compliance etc. These processes are not about differentiation and the focus is to run them efficiently, securely and reliably. It is just a matter of time, before Context cloud apps become the default implementation mode.
However it is the middle – order management, production, direct procurement, product design etc., where Cloud was unthinkable even two years ago things are changing dramatically. When manufacturing companies globalize and expand, they don’t want to carry their large, monolithic and complex ERP applications to new countries and new business. Instead they are going for a 2-tier model, where the smaller countries and new business are getting into the Cloud straight on. Within the legacy landscape, also there are changes – there are many successful instances of cloud adoption in MES, S&OP, and Collaborative PDM and so on. In the next few years, the most exciting action will be in this ERP Cloud space (hopefully there will soon be a better name to categorize these applications).
Cloud adoption is well on its way. More and more infrastructure will be provisioned from Cloud. Utility and office tools will move to Cloud. New and innovative applications will start eating into on premise apps. But this will still be a beginning.
There are at least two major Clouds that are in the horizon- which we did not discuss in this blog. One is the Internet of Things Cloud. The second one is when manufacturers start thinking of being Cloud providers and not just consumers. That is when the Cloud First thinking will start ushering in a new business model.
About The Author:- Satya Samal is a Senior Vice President with Hexaware and runs Hexaware’s Manufacturing vertical. He can be followed on Twitter @Satya_Samal