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Fodder for Breeding Cloud Adaption

Around two years back, I wrote this blog which talked about how and why supply chain enterprise applications are the right breeding ground for cloud based SaaS applications.  If we look back now, you will notice that most of the projections in the blog have turned out to be right. Cloud enablement did happen in all facets of supply chain management- be it procurement, planning or execution. However it is also noteworthy that it did not see same extent of adaption in all areas. One specific trend we are seeing is that the maximum SaaS growth and adaption is happening in CRM, HCM kind of "external facing", mostly standard business process. One common attribute of all such applications, which are so called "early adapters" of cloud, is that they all have an inherent need to rapidly scale up or scale down based on market conditions. Whereas we can see that the adaption has not been as much in inward facing business processes like PLM. I am attempting to figure out what is the fodder that is resulting in this uneven breeding of the SaaS in this blog...


SaaS thrives wherever the business process is not perceived to be a strategic differentiator. Companies innovate to survive, especially in their processes and systems. They need to be unique. If everyone has the same systems how do they support their innovation? The underlying philosophy of SaaS is "one size fits all". As we all know, in the enterprise application - especially in ERP world the current trend is towards micro-verticalization.  That makes it less suitable for cloud enablement. Whereas in applications like CRM, I believe, the processes are more or less standardized and there is not much process variation from one industry to another. The need for such products is to rapidly scale up (or scale down) based on market dynamics. In such cases cloud enablement helps in a big way. However if you see the ERP usage in SME segment, for them the cost consideration over-rides the process-driven differentiators. Therefore we can see a higher degree of adaption. 

SaaS will be more effective in such business processes where the change management is easier to achieve. End of the day, when introducing change into business, technology is only a small part. The user adaption is the biggest challenge. Just to give a personal example- I have a Gmail account. One fine day they just changed UI of this cloud based SaaS product- ostensibly to improve the end -user experience.  For all their good intentions, I still haven't quiet understood how the new UI works- leave alone how it making my life easier. May be it's only for me- but I did not like the new interface. But there is nothing much I can do about it. Reason, again is- it's a SaaS- one size fit all! If this is the case for a simple email application, one can imagine what impact this kind of unilateral changes can have on users of big, complex enterprise applications. Moreover SaaS tend to support incremental upgrades better than dramatic platform or UX or architecture updates. That raises the next question- can all change forever be handled incrementally? What will happen when there is significant or more fundamental change in technology - akin to transformation from client-server to web based architecture? Does the SaaS providers all will need to start a second platform, throw away the first, and migrate people over?

SaaS will be more acceptable in relatively younger business processes. By younger, I mean, more recent additions to enterprise IT landscape. If you see the evolution of enterprise application, all the non-core modules or applications are all relatively recent additions.  This include CRM, SRM, Planning Engine, and HCM....etc. If you trace back the origin and evolution of enterprise applications, it all started with basic Data Processing function. When the architecture was conceptualized those days, enterprise apps didn't have to worry about space and time - there was no mobile or instant communications. The data was assumed to be static in nature. So was the user base. Modern day systems need to be based on processes which cater for time (between actions) and location (where each action takes place.) variability. SaaS offers a better solution in such cases.

One another consideration that determines the SaaS adaption is regulatory compliance. SOX compliance mandates the change management in the form of user acceptance testing for the finance-impacting core ERP systems. Cloud or no cloud- the customer company leadership is responsible for effectiveness and efficacy of such a testing. In a SaaS arrangement, the exact mechanism of this participation of the customer organization in managing such changes being implemented by the vendor is still evolving. Till process matures and finds acceptability, there could be some hesitation in moving such critical, core applications to cloud.

They say SaaS is the best thing to happen to enterprise application world in the recent times- something which liberates the IT managers from the strangle holds of highly disruptive product releases, which brings down the exit barriers in switching from one service provider to another. If you add up the software maintenance fees - necessitated by frequent product upgrades by vendor, hardware purchase and upgrades, power and other hard and soft costs associated with on premise solution, the SaaS model is clearly an attractive option in the long run. Notwithstanding all these favorable factors, as described in this blog, SaaS is not a magic band-wagon everyone is waiting to jump on to.


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