Software as a Service's Functional Catch-up
Written By: Predrag Jakovljevic
Published On: January 15 2007
One should not readily dismiss software as a service (SaaS) as an effective solution for front-office functions only (that is, e-mail, messaging, calendaring, and similar team-oriented collaboration functional nuggets), or for juvenile purposes like managing personal web sites or music and movie downloads. SaaS solutions are emerging to address nearly every "mission critical" business application need. These needs range from financial and accounting, asset management, and human capital management (HCM) applications to supply chain management (SCM) and channel management solutions.
Part Three of the series SaaS-ing the Manufacturing Opportunity.
In fact, while in many sectors functional depth, vertical orientation, and customization remain works-in-progress for SaaS vendors, there are certain realms of HCM (recruitment, employee performance management, expense management, talent management, human resources [HR]/payroll, eLearning, and compensation management), where SaaS solutions have quite a deep functionality (at least on par with that of on-premise solutions) and serve the largest, most complex organizations in the world. Authoria, Taleo, and Ultimate Software, in addition to the earlier mentioned ADP/Employease and Centive, are only some companies worth mentioning here. For more information, see Thou Shalt Manage Human Capital Better.
Along similar lines would be the on demand collaborative e-procurement, sourcing, spend management, vendor on-boarding, or contract management providers like Ketera, Procuri, or Frictionless Software (now part of SAP). Procuri, for example, offers on demand software for spending analysis, supplier management, sourcing, and contract management. Emptoris, which recently merged with contract management vendor diCarta, offers a similar array of supplier relationship management (SRM) software that users can opt to deploy on premises or via a SaaS model.
A good indicator that the market for back-office and SCM SaaS solutions is growing could also be the increasing number of application providers adding their names and solutions to THINKstrategies' SaaS Showplace online directory (http://www.saas-showplace.com). While the uptake has thus far been too fast for one to remain current with the latest number of available solutions therein, there are presently a few dozen SaaS providers in such software categories as accounting and financial management applications and various e-commerce providers. In addition, there are also over a dozen enterprise resource planning (ERP) and SCM solution providers, and even several offering some niche manufacturing SaaS applications. Among the forty or more software categories listed in the SaaS Showplace directory, some of the more notable ones include call center management; dispatch management; document management; project portfolio management (PPM); product lifecycle management (PLM); and web analytics.
For more background on the SaaS trend, see: SaaS-ing the Manufacturing Opportunity and Software as a Service: Not Without Caveats.
Manufacturers and Distributors are Checking Out Software as a Service
There are a growing number of indications that manufacturing and distribution enterprises of all sizes are looking into hosted software for such core supply chain functions as demand planning and factory scheduling. This interest stems from the need of these companies for tools to streamline business-to-business (B2B) processes across increasingly distributed supply chain networks. Web-centric environments are not new to manufacturers (see Differences in Complexity between B2C and B2B E-commerce), since online B2B trading hubs and exchanges mushroomed during the late 1990s. Many have meanwhile ceased to exist, but some, such as E2open, thrive today as community marketplaces and SaaS hubs for trading partner collaboration in terms of order and inventory management, supply chain visibility, spend consolidation, demand/supply synchronization, and eco-compliance management. Some might remember that this company began as a trading exchange for high-tech companies in mid-2000, at which time IBM led the formation of a consortium that included Nortel, Solectron, Toshiba, Hitachi, Matsushita, Seagate, and Panasonic.
CommerceHub would be an example of a focused SaaS provider in the tricky realm of drop-shipping; see A Drop-ship Enablement Pioneer Leads the Way. Global trade management (GTM) and similar applications that entail event management and visibility in a dispersed environment seem to lend themselves well to on demand deployment (see article on TradeBeam, Confronting Core Global Trade Problems: Order, Shipment, and Financial Settlement). Since 2005, Revionics has been offering SaaS pricing management and optimization capabilities for its retail customers.
Newcomer Mitrix is something of a hybrid, since its on demand SCM Live suite includes collaborative features such as private trading communities, but the vendor also has more traditional on-premise SCM functions including forecasting, inventory management, fulfillment, and logistics. Headquartered in Irvine, California (US), the company currently manages over $250 million (USD) in supply chain transactions across eight countries. The start-up software company has an interesting pedigree. It is a subsidiary of Japanese conglomerate Mitsui & Co., which built the Mitrix system to handle supply chain activities for its assorted business units. Mitsui USA, founded in 1966 and headquartered in New York City, New York, is a leading international trading and service enterprise with an extensive global network consisting of eleven local offices and over ninety subsidiaries and affiliated companies across the United States.
JRG Software, which CDC Software (a Ross Systems' parent) acquired in early 2006, is tackling one of the more computationally intense elements of SCM. Namely, JRG's OnePlan is an on demand solution for factory planning and scheduling that combines an interactive graphical planning environment with integrated business intelligence (BI). This combination enables the real-time creation, sharing, and monitoring of production plans across a manufacturing organization. In other words, OnePlan offers web-based factory planning and scheduling applications aimed at helping companies improve store fulfillment rates, trim order-to-production times, and respond more quickly to all-too-common demand fluctuations.
As a good example of coexistence of on demand and on-premise solutions, Wise Snacks, a renowned maker of snack foods in North America, needed a solution to address production delays and high overhead costs resulting from the company's highly variable production schedules. The company also sought to reduce the overall investments in finished goods inventory. Because of frequent schedule changes, one of the biggest problems for Wise Snacks was simply the amount of time required daily to create and modify schedules. To that end, the company selected the OnePlan Factory Scheduler to address this problem with a vision of making the plant more efficient while also cutting costs. The solution was also selected because of its low up-front costs and lower overhead for ongoing maintenance enabled by the on demand, SaaS application. Within ten weeks, OnePlan was reportedly fully implemented, integrated to the existing JD Edwards ERP system, and live in production. After one month in production with the OnePlan production scheduler, Wise measured several immediate benefits including
- Scheduling times reduced from six hours to one hour,
- Inventory levels decreased by 28 percent,
- Short (incomplete) shipments reduced by 95 percent,
- Lengthy line changeovers across packaging and processing lines reduced by 35 percent,
- Labor costs reduced by $600,000 (USD) annually, whereby much of the scheduling staff has been redeployed within operations.
More Vendors Offer Supply Chain Management SaaS
Among the most recent additions to the SCM SaaS landscape is Kinaxis (formerly Webplan) with its new web-based, on demand RapidResponse Response Management service that enables brand owners and contract manufacturers to respond to possible changes in product demand and supply. Kinaxis has long delivered the on-premise Response Management software to drive operations performance in today's complex manufacturing world, and the product has recently been enabled for SaaS delivery. By responding more rapidly to constant volatility and real-world variances in demand, supply, capacity, product, and daily operations, Kinaxis's RapidResponse supersedes the need for traditionally tardy and complex supply chain planning (SCP) systems by enabling quicker collaborative response and operations action aligned with corporate objectives.
Customers use the product to gain multi-enterprise visibility and to drive swift response to change across their supply chains, as the software empowers action teams with a single view of the truth and real-time collaborative what-if analysis of action alternatives. Action teams are able to respond with more speed and confidence, thereby reducing costs, shrinking cycle times, and increasing customer service levels, which have been reported by global companies like Casio, Coty, Honeywell, Jabil Circuit, Raytheon, and Benchmark Electronics. For more information, see Can Webplan Reconcile Planning and Execution? and Supply Chain Vendor Morphs into SCEM with Response Management Vision.
In a recent supply chain spending survey, AMR Research reported that 26 percent of surveyed companies were considering on demand service offerings. Similar findings came from Aberdeen for such areas as network design and strategic inventory optimization; supply chain execution (SCE); trade compliance; SCP; data quality monitoring and cleansing; data mining and analytics; supplier on-boarding; and others. Both confirm the market trends, which one should expect to see accelerating over the coming months and years (see Software as a Service beyond Customer Relationship Management and Sales). Times and mindsets have changed and moved on from the days when most companies felt that their information technology (IT) operations and business applications were strategic assets. Namely, today's economic and competitive pressures make nearly any form of outsourcing fair game, as many companies now consider a range of IT functions and business applications to be commodities rather than core competencies.
To that end, as long as the quality and reliability of SaaS solutions continue to improve, the appeal of SaaS will not go away—quite the contrary. Hence, nearly every established software vendor is being forced to rethink its traditional approaches and determine how to overhaul the ancient application business models in order to join the SaaS movement. Not only do they have to painstakingly redesign their products, but they must also revise their sales and financial models to accommodate the SaaS, pay-as-you-go fee structures. They also need to rebuild their corporate cultures to make them more service-oriented rather than product-centric, which is no small feat given the myriad of cultural, business model, technology, and service and support transitional issues. What's more, these vendors must try to avoid cannibalizing their existing software business in the process.