Supply Chain Trends and Issues: Our Weekly Feature Article on Important Trends and Developments in Supply Chain Strategy, Research, Best Practices, Technology and Other Supply Chain and Logistics Issues  
 
 
  - Nov. 17, 2010 -  

Cloud versus SaaS for Supply Chain Software and the Ability of Applications to Scale


Gartner's View of Differences between Cloud and SaaS; Fralick says Giving Up Back End Control has Risks

 
     
     
  by SCDigest Editorial Staff  
     
 
SCDigest Says:
A given Cloud-based vendor might scale and perform well with say 20 companies using the system, but falter later as the number of other customers increases over time.

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The current marketing hype by many supply chain software providers about "Cloud computing" technology, coming on the heels of Software as a Service, On-Demand, and other terms has left many companies and their supply chain and even IT professionals often a bit dazed and confused.

SCDigest has sorted this out from our perspective several times, most recently in our Supply Chain Digest Letter on On-Demand Supply Chain Software, downloadable here: On-Demand Supply Chain Software Resource Center.

The smart analysts at Gartner have also been doing quite a bit of work on this at a more general IT application and services level, across all types of software.

In a recent research note, Gartner analysts Robert  Desisto, Daryl Plummer, and David Smith say that "With cloud computing gaining substantial "buzz" in the IT industry, some vendors have transformed their positioning from SaaS providers to Cloud-computing providers without changing one element of their offerings."

To Gartner, Cloud computing is a very important trend and one it defines as "a style of computing where massively scalable IT-enabled capabilities are delivered as a service to external customers using Internet technologies."

In other words, it is all about the ability to leverage a back end infrastructure of hardware and management software to allow users to flexibly scale up and down based on needs and current volumes. Cloud-based computing can be used for pure data storage or to run Transportation Management System (TMS) applications for customers. In other words, software applications are only one example of Cloud-based computing.

Software as a Service, says Gartner, is application software that's owned, delivered and managed remotely by one or more providers - what most supply chain professionals think of as being "On-Demand."

The technical difference between SaaS and On-Demand is that with SaaS applications "The provider delivers an application based on a single set of common code and data definitions, which are consumed in a one-to-many model by all contracted customers anytime on a pay-for-use basis, or as a subscription based on use metrics."

 

An On-Demand model, conversely, might be a single "instance" of an application for a single customer that is hosted remotely and delivered over the web.

 

Gartner says some SaaS applications are architected to work on a Cloud-based back end, and some have been doing so for years. Others do not really support Cloud-based architecture.

 

Should Users Care?

 

Should potential buyers of supply chain software really care about what at one level might seem like technical minutia? It depends.

 

For starters, if there were two vendors of competing applications and one took full advantage of a Cloud-based back end and another did not, in theory the one that did should have cost advantages that would allow it either offer the application at a lower price or to make more profit that could be put back into product development over time. Is that important enough to overcome differences in functionality? Probably not, but still worth taking a look at the differences.

 

(Supply Chain Trends and Issues Article - Continued Below)

 

 
 
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A second issue is how Cloud computing might impact flexible usage and cost models. For business with big seasonal swings, for example, with Cloud computing users could literally go out and procure certain storage and processing capacities from the vendor say just for the last couple of months in a year to meet high seasonal volumes, then scale back down after the Holiday period is over. This is in fact how some Cloud-based companies operate today, notable Amazon.com and its array of Cloud computing business services.

Most supply chain vendors try to mimic that approach by looking say at a year's worth of requirements and coming up with an average usage and cost, like a utility company's level billing. That may work for most companies, but the Amazon model might allow companies to get more precise in usage and cost -  at the price of more management complexity.

The biggest issue to consider relative to Cloud computing by far, however, is one of scale. In the traditional supply chain software world, the ability to scale - whether it is the time required to complete a big optimization run in the planning area or handle huge volumes of transactions in a Warehouse Management System (WMS) - would be evaluated somewhat by understanding its technical architecture, but primarily by reference checks on companies with similar processing and volume characteristics. Some fail to make those checks and perform the analysis - often to their later regret.

Mark Fralick
 

 

A company could do similar checks with Cloud-based vendors, but the analysis may be even more tricky. First, how to evaluate a Cloud-based vendor's ability to scale is a skill few IT professionals today probably possess.

More importantly, "scalability" is now not a attribute specific to your situation and software instance - how well the system performs at peak period heavily depends on the vendor's ability to manage its infrastructure over time, how many other users are also stressing that infrastructure, and other issues.

For example, if a vendor has more than one data center, how well it plans and manages across those facilities could enhance or detract from performance, says Mark Fralick, SCDigest Technology Editor and president of ROI Solutions.

"If a Cloud-based software vendor doesn't get its geo-planning right, that could lead to some real performance issues," Fralick says.

All this also raises issues about who really has the control of the software system and performance.

"I am a bit of a control freak in terms of the software," Fralick says. "With Cloud computing, the application "plumbing" is really out of a user's control. You can almost always rather quickly deal with problems in the application itself before too long, but if there are problems in the plumbing, that can be "lights out." The question is whether you want to give up that control for mission critical applications and how well you understand whether the Cloud-based vendor really will be able to deliver on the back end."

He notes that a given Cloud-based vendor might scale and perform well with say 20 companies using the system, but falter later as the number of other customers increases over time, depending on the vendor's investment in infrastructure, technical skills and back-end Cloud management software.

He says that for some applications that are relatively low intensity, customers probably don't have much to worry about from a Cloud-based approach.

But for more intensive applications in terms of processing and transaction throughput, companies really need to decide if they want to give up most of the control of the back end, and to really understand how potential SaaS vendors can deliver scalability both currently and over time.

"You have to really decide how much control you are willing to lose," Fralick says.

The bottom line: supply chain managers need to be at least modestly knowledgeable about these issues and trade-offs, understand that not all Cloud or SaaS-based vendor are really the same, and push IT to really investigate control and architecture issues that sometimes get overlooked in on-demand deployments.

Do all this technical stuff with Cloud and SaaS make your head spin? Do you think the back end capabilities really are important? Do you think control issues are worth thinking about? Let us know your thoughts at the Feedback button below.

 

 

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