The last two years have brought an explosion of cloud-based Software as a Service (SaaS) provided in long-term subscription or on-demand models. Both new application providers and traditional enterprise software license firms have provided new versions of their software and services to ensure a market presence in these sectors of the technology market (though there are still a few hold-outs that sell only on-premise licenses).
There is plenty of good news here, since clearly, the multi-tenant architecture is more economical to operate for both users and technology providers. By eliminating the need to support many versions (thousands) of the software, both parties win with the reduction or elimination of annual support costs and fees that can be as high as 28% per year. We have begun research to compare the cost of ripping and replacing, which can be highly disruptive to an organization, with SaaS’s ‘silent’ upgrades that ‘evolve’ the user into adopting the innovative new options to their software as they become available. But let’s back up and define a few things, since it appears that there is a lot of intentional or unintentional obfuscation going on in the market right now regarding what is cloud. ChainLink’s definitions are based on the architecture of the technology and the economics — i.e. the methods by which the technology is developed, supported, and priced:
- Multi-tenant single instance — one codebase (single instance) for all customers (tenants)
- Multi-tenant — many customer instances (unique custom codebase per customer) with a cloud subscription
- Hosted — the customer owns the license, but it is managed by an off-site third party (this can be the software company or a hosting company)
- On demand — the ability to ‘sign-up’ and go live with cloud applications, while eschewing the contractual relationships which may accompany the first three mentioned above
- On premise — licensed software; customer is responsible for software, hardware and support
- Community or network — here there is a peer-to-peer capability. Many cloud solutions, such as ERP, focus on one enterprise at a time; these are not networks. Networks have been very prevalent in supply chain since the beginning of the web, especially in transportation.
There are many ways to vary these services, of course, but these form the core of the architectural approach to the software and how it might be supported by the provider. Along with all the cloud variants, we have witnessed new models in pricing strategies. The problem is that it is very hard to compare pricing, not just between the competitors, but also for same-company’s cloud vs. on-premise options. You can get details about understanding the pricing models in SaaS Pricing: Part One — Insanity or Good Deal for Users?
Cloud Enables Collaboration
Organizations are also looking to collaborate as never before. Knowledge sharing, joint project work and just socializing and sharing ideas through the web and mobile have exploded. The high cost of connectivity has given way to ‘free’ connectivity. The implications are global and universal. Collaboration technology such as video conferencing, enterprise social network, and shareware that supports asynchronous communications (which we call streams) is the way we now work day-to-day. The demand for connectivity has let the user community take the issue into their own hands using all the services to which they can connect. This is forcing solution providers to find ever more powerful and less expensive approaches.
Enterprise users are looking for fully integrated solutions that combine supply chain applications, B2B integration, and visibility with people via social networks. The People, Process, and Technology about which we have been talking for decades is starting to become a reality. People will no longer be separate from the process. To wit, several heavy-weight application providers such as Cloud Logistics have included enterprise social networking within their solutions such as ERP and Supply Chain.
Integrating the supply chain is also front and center due to the globalization of processes, and therefore, demand for visibility is increasing. Accomplishing transaction visibility has gone from just an efficiency issue to a legal one. Trade compliance regulations from Homeland Security, the FDA, and Consumer Protection all require full backward trace. And for products that require condition monitoring, tracking has gone from sometime to real-time.
Regardless of the stringency of the traceability requirements, we can’t get visibility and integration without inclusion. To that end, many commercial transportation solutions have opened their networks for messaging integration at no charge; EDI providers include smaller trading partner connections for free. Examples of companies that do this are Descartes’ Global Logistics Network in logistics, DiCentral in EDI, or Coupa with a self-service and free procurement network. Large enterprises have had huge issues getting ‘the rest of the world’ integrated, and the above are examples that break down barriers.
Cloud solutions help further an integrated supply chain vision by enabling an inter-enterprise community. Network variants of cloud provide a peer-to-peer environment for trade, communication, and collaboration. There is more to trading-partner dialog than transactions, such as finding new suppliers, obtaining industry information, communicating with the community about changes in compliance and regulations. Firms like Aravo provide this supplier-information management; their Aravo Assure product provides a free network to post credentials, among other things.
Conclusion — Power to the User
Of special note, on-demand variants have changed the balance of power in the relationships between technology providers and customers. Customers feel like customers with flexible, ‘easy to do business with’ sales models. Along with that, the providers need to continue to add value and support, or customers will go elsewhere. Though some might debate the pricing trade-offs, pronouncements about whether cloud actually pays off for users have not fully taken into account the full cost of ownership: the effects of the lack of scalability when you need it, since rapid changes in business can necessitate changes in the technology. And then there is the impact and cost of disruption when new systems are put in place: the pain of lost time and confusion for the users, under-funding by management, and always slightly less than promised benefits.
No technology is a panacea, but technology should be seen (as a benefit) and not heard (as in complaints).
More on cloud
To view other articles from this issue of the brief, click here.