A Walk in the Clouds

Posted by Andrew Bartolini on April 21st, 2010
Stored in Articles, General, Solution Providers, Technology

As I write this, I wish I was in the clouds, literally. But I am not, still grounded in Italy by the volcanic ash clouds of Eyjafjallajökull (what a nice ring). My two+ day Italian adventure has extended to seven and I am reliant upon an unknown agent to prioritize my navigation home. Without my own global support or mobile travel solution (Monday’s article), clouds of uncertainty remain.

When it comes to supply management solution deployment methodology and general preferences, clouds of uncertainty also exist among the business decision-makers; but they are starting to clear. Over the past few years, I have asked thousands of Chief Procurement Officers (CPOs) and their lieutenants what, if any, preference existed for technology delivery – installed versus Software as a Service (SaaS) – within their departments and within their enterprises. In the vast majority of these cases, the preferences could best be described as either mildly leaning one way or non-existent. I have also worked with hundreds of organizations as they contemplate solution selection. Here too, the preferences have not been strong. Functionality (defined broadly here) and price have been the two overriding attributes used to select a supply management solution. But as we’ll see below, in some specific markets, interest in deployment methodology is rising as a consideration for solution selection. More generally I think that the “Cloud’s” time has come (cloud computing is the same general concept as SaaS but is expanded to include hardware). That said, there still is and will continue to be a need for installed solutions; and, as with most things in the supply management space, change happens more slowly than one would expect. Nonetheless, I’ll highlight a few key factors explaining why I think the trend towards Cloud Computing (and SaaS) is building and will continue to accelerate.

  1. The language and information used to explain cloud computing has improved – In the early days, the discussion around cloud computing was driven almost solely by solution providers who offered On-Demand” solutions. On-Demand was the precursor term to SaaS, which is becoming, I hope, the precursor term to Cloud Computing (Sidebar: I have been suggesting to all the solution providers that I work with that they adopt ‘cloud computing ’ terminology and move away from SaaS and On-Demand. There is growing recognition in the broader market of “the cloud” and heavy marketing support for this term by the world’s largest technology companies). Fair enough, but many of the arguments were skewed or subjective, or worse, terribly confusing. In some cases, the solutions presented were not technically SaaS offerings (Warning: this still continues in some instances today). And, in many cases, the arguments made, while true, could not be validated and as a result, created uncertainty and doubt. Today, the prevalence of third-party information on cloud computing is impressive, maybe to the point of overkill. But the new consistency in messaging has helped create very good awareness for the main value proposition of cloud computing (Please comment or email me if you would like me to present a more detailed analysis of the installed v. cloud decision for supply management solutions).
  2. Long-term enterprise IT trend – Is your enterprise looking to move its storage into the cloud? What about email servers? Maybe not on this cycle, but Google Apps may one day warrant consideration. In part to retain their relevance, IT departments are now taking the bull by the horns and initiating cloud computing initiatives. Ironic since these solutions have long been used as a strategy to bypass IT. With its staunchest opponent now newly converted, cloud computing projects will start accumulating.
  3. Short-term cash needs – Rent or buy? One of the major questions when looking at cloud computing. When cash is tight, a model that allows you to pay as you go (rent) instead of paying cash up front (buy) has its appeal. One aspect of the buy v rent discussion that I find interesting is the duration that is used in the analysis. I think some CPOs are not being realistic when they look at these investments as ten year decisions, I would say that five years is closer to reality.
  4. A more competitive solution provider marketplace – Initial cloud providers like Iasta, Hubwoo, and Ketera, and the marketplaces including Enporion, Quadrem, and Exostar were born in the clouds and remain exclusively there. A small set of companies, like Ariba then invested significant resources to re-architect their legacy CD offerings into an on-par cloud offering. Most newer companies, like Coupa and CVM Solutions come to market exclusively on the cloud. SAP which acquired a cloud eSourcing and Contracts solution in 2006 (Frictionless Commerce), is now contemplating a cloud strategy for its entire solution set. Most supply management solution providers are now getting in on the game and that is to the benefit of the users.
  5. Solution configuration – One of the early arguments against “the cloud” was the limited ability to modify ‘out of the box’ functionality. This problem was magnified by the fact that many of the early cloud/on-demand providers had lower end offerings (this is no longer the case). With the advances in Web 2.0 functionality and newer, more sophisticated administrative (or functional) configuration capabilities this argument has much less traction.
  6. Green/sustainability trends – For many enterprises, energy usage and carbon footprint discussions are becoming entire sections in annual reports. Solutions which are multi-tenanted pool the resources and infrastructure used to support the solutions across a number of users. Since most supply management applications do not run at capacity, cloud computing generally increases the likelihood of lower energy usage and a reduction in the carbon footprint.

A few weeks ago, I dialed into a meeting of CPOs and other procurement executives to discuss trends in supply management solutions. It was a great call and I hope they invite me back (I also hope they’ll come out to see me on May 20th when I am in town – more on that later). I began with a retrospective on the evolution of supply management solutions, something akin to a ‘how did we get here?’ discussion when questions started coming fast and furious about “one of the newest trends,” cloud computing. Perhaps it was their location (Silicon Valley) and their industry (predominantly hi-tech), but most CPOs on the call had strong preferences for cloud computing and understood fully, its key benefits and features. As we began to discuss different solution or application areas, the group wanted me to start with the list of SaaS providers. For the solution providers I mentioned to this group, being on the cloud was a silver lining.

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