This week’s readings about the role of
IT in supply chain management (SCM) touch on the growing significance of the role
of software as a service (SaaS), or “Cloud Computing” solutions. In their
chapter dedicated to the discussion Information
Technology in a Supply Chain, Chopra and Meindl predict that “reduced
maintenance expense is likely to be a major factor driving customers to go for
the software as a service model in supply chain software.”[1]
Cath Jennings elaborates on this concept in her article in her 2009
ComputerWeekly.com article, Cloud
Computing: The Answer to Supply Chain Woes, by presenting the concept
of the “patchwork approach” in which companies adopt cloud computing in a
hybrid manner. She cites several scenarios where cloud computing could improve
overall SCM, but would be difficult to implement. One example of this is requiring
offshore suppliers to file reports to the cloud for aggregate data analysis by
the company. The article reports that high tech manufacturers would be the
earliest adopters of such practices, but that industry wide change would unfold
more slowly.
A more recent discussion of the pros
and cons of adopting SaaS can be found in a September 2012 InformationWeek article,
Impact
of Cloud Computing on Supply Chain Management. The author, Michael Dominy,
concisely lists some key considerations for companies as they face the decision
of how to proceed with their SCM and cloud strategy. Dominy arranges these
factors into three categories: Speed, Cost, and Business Value. Dominy summarizes
the tradeoff associated with less investment requirements upfront, and
long-term maintenance and usability. My take away from his overview is that
SaaS can be a lower-cost solution that affords smaller organizations IT
capabilities that they may not otherwise be able to implement. However, these
organizations should be advised to consider the long term costs both explicit (service
contracts) and implicit (compromised functionality). He warns that “The total cost of ownership (TCO) could also be more
expensive for SaaS applications after five years, versus on-premises
deployments for large enterprises with well-established data centers during the
same timeframe.”[2] Cloud computing is changing
all aspects of SCM: supplier relationship management, internal supply chain
management, and customer relationship management. As companies experiment with
new approaches to internal and external SCM, we will wait to see how it
ultimately takes shape.
What capabilities does cloud
computing afford companies as they continue to seek effective SCM IT solutions?
What are the tradeoff’s
associated with implementing software as a service versus on-premises hosted
applications?
[1] Chopra, Sunil, and Peter Meindl. Supply Chain
Management: Strategy, Planning, and Operation/ Sunil Chopra, Peter Meindl.
Bosten [etc: Pearson, 2010. Print.
[2] "Impact of Cloud Computing on Supply Chain
Management." InformationWeek. Www.informationweek.in, 26 Sept.
2012. Web. 1 Oct. 2012.
<http://www.informationweek.in/Cloud_Computing/12-09-26/Impact_of_cloud_computing_on_Supply_Chain_Management.aspx>.
I found this article very interesting, specially the links provided, thanks for sharing!
ReplyDeleteDespite the long term cost may look more expensive using cloud computing but there are other advantages as converting capex to opex, reducing one off costs, etc.
Managed Cloud Computing
Role of IT in supply chain management (SCM) touch on the growing significance of the role of software as a service (SaaS), or “Cloud Computing” solutions.SaaS ERP model offerings are typically smaller. This is normally best for organizations with limited complexity, size and global presence.
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