Supply Chains: The Next Killer Application in the Cloud

Supply-chain software is likely the cloud’s next big killer application. That being said, nobody seems to agree on the nature of these applications.

For example, companies such as GT Nexus offer multitenant software-as-a-service applications for managing supply chains from companies. Meanwhile, rivals such as E2open build single tenant cloud applications, which might be preferred by companies uncomfortable sharing IT infrastructure with other companies.

On top of that, many companies already have massive investments in on-premise supply chain software. Ripping out and replacing all those systems (and the business processes that depend on them) isn’t feasible for most organizations. As a result, for a significant portion of those companies, supply chain software in the cloud will likely be fundamentally hybrid.

Moving supply-chain management into the cloud should make companies more agile. The cloud creates a natural space for companies to collaborate. Supply-chain applications in the cloud would make it a lot easier for companies to add and subtract from a network of suppliers—which in theory to make them more competitive via a process known as supply chain segmentation.

“The basic idea of moving supply chain software in the cloud is that is make it a lot easier to switch between suppliers,” said Jeff Kaplan, managing director for THINKstrategies, an IT consulting firm that specialize in cloud computing.

A recent survey of 374 supply chain professionals, conducted by E2open in conjunction with SCM World, found that collaborating via the cloud led to marked improvements in operational metrics such as inventory days, total landed cost, and cash-to-cash cycles.

Despite those potential gains, however, not everyone agrees that supply chain software will be moving entirely into the cloud. Rob Thomas, senior vice president of global research and development at Manhattan Associates, a provider of supply-chain software, suggests that most companies today have business processes tightly coupled to existing supply chain applications.

While there’s no doubt that those applications will be extended into the cloud, Thomas said, it’s unreasonable to expect that most organizations will want to move the entire management of the supply chain to the cloud: “We’re talking about pretty complex applications that are connected to multi-channel sales environments.”

Craig Hayman, general manager for IBM software industry solutions agrees with that idea: “Supply chains almost by definition are going to be a hybrid cloud environment.” In addition to working closely with companies such as Manhattan Associates, IBM manages the Sterling Collaboration Network, one of the assets that IBM gained when it acquired Sterling Commerce, a provider of e-commerce application software. “Supply chains in the cloud will be more flexible because after all partnerships are made and broken every day,” Hayman said. “But we’ve also created hundreds of pre-built integration points back to private and public clouds using out Cast Iron cloud application integration software.”

Ultimately, everybody seems to agree that managing supply chains via the cloud to one degree or another is going to be a critical business capability. However, like most things concerning matters of faith, there is vehement disagreement over what constitutes the best approach. Multitenant applications, private cloud and hybrid cloud deployments are all viable options. In fact, it’s not outside the realm of possibility that organizations will end up using them all.