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- June22, 2006 -

 
     

The Pros and Cons of the On-Demand TMS Model

 
     
 

New approach gaining traction, but is not for all

 
 

 

SCDigest editorial staff

The News: On-demand TMS (Transportation Management System) are gaining increasing market traction

The Impact: Potential buyers need to analyze their needs carefully, and weight the pros and cons.

The Story: With the growing interest in on-demand TMS solutions, and a number of vendors focused exclusively on that model, how should potential buyers consider this model?

Stephen Craig of CP Consulting, a featured presenter in this week’s “How to Select a TMS” Videocast, (available soon “on-demand” – registration fee required) addressed this topic as part of his presentation.

The advantages of the on-demand:

 

  • Lower capital: This is a key element of the traditional pitch for on-demand solutions, by going to an on-demand model you can generally avoid up-front capital requirements and funding, and pay for the TMS as an on-going expense.
  • Faster implementation: There is generally less overall set-up time, and you can generally leverage the hosted solution’s existing carrier connectivity to take time out of that often slow process.
  • Faster time to benefit: Given the more rapid implementation, the time to value and saving can be faster as well.
  • Strategic flexibility: In theory, it may be easier to “unplug” an on-demand solution and move to something else down the road than is true with a traditionally deployed solution.
  • Reduced internal IT resource requirements: No installed application to manage.
  • Overcome objections to best-of-breed software: Some companies are finding that they are able to overcome the objections or rules against implementing software that doesn’t come from the company’s ERP provider if they use a hosted mode. In fact, some shippers have done this almost as “skunk works” outside the formal IT process.

 

These potential advantages must be weighed against possible disadvantages:

 

  • Cost: In general, within just 3 years or so you will pay more in subscriptions or transactions fees than you would have paid for the license up front. However, many on-demand vendors insist long-term total costs are lower.
  • More “vanilla” configuration: In general, your solution will have less flexibility to meet specific requirements
  • Potentially less functionality:  Some of the hosted solutions right now are just lacking in the depth of functionality of the most robust traditional solutions. In addition, some transportation planning functions are more effectively delivered via a rich “GUI” that is hard to replicate on-line.
  • Potential lost of control: Your data, carrier connectivity and other elements may be controlled by the hosted provider. What happens if they disappear or you want to make a change?

 

Interesting, Craig says we may see a hybrid model, where phase 1 of a TMS project is delivered via a hosted model, but that later the shipper goes to a more traditional deployment to move the process to the next level and maintain more control.

What do you see as the pros and cons of on-demand solutions? Do you think this is the future? Let us know your thoughts.

 
     
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