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Supply Chain in the Cloud - Looking Beyond TCO

I have had a significant number of conversations recently about cloud, and how it applies specifically to the supply chain. OK, not all that surprising, after all, along with mobility, cloud is very much at the apex of the hype cycle. Yet if one looks beyond the hype, cloud offers the potential to not only transform how supply chain organizations procure IT capabilities, but also to fundamentally change how they manage business processes. Certainly I do not wish to 'over-egg' the omelet here, or suggest that this will happen tomorrow, but it is coming -- and perhaps faster than we might appreciate.

Up to now, the conversation about cloud in the supply chain, and cloud's 'as-a-service' progeny, has tended to begin with total cost of ownership (TCO). There seems little question that for some companies, and in some cases, an 'as-a-service' application can provide a lower TCO than its on-premise alternative. Whether there are diminishing returns (driven my company size and/or number of users), I'll leave to another discussion, but suffice to say that you are remiss if you do not at least consider a cloud alternative when evaluating a system change.

Although TCO will always be important, it is my sense that the conversation about cloud in the supply chain is rapidly moving beyond just cost to also consider capabilities, and the speed with which capabilities can be made available to the supply chain. I have made the observation recently that as the 'clock speed' of business accelerates, multi-year IT implementations increasingly make no sense -- how can you possibly anticipate where your supply chain will be? Although it will be different for all companies, it does seem clear that the 'clock speed' of the business is running faster and faster for most manufacturers -- whether in the volatility of demand, requirements for shorter lead-times, or the acquisition of new capabilities -- yet the delivery of traditional IT capabilities is struggling to keep up. Software vendors have done a good job in offering quicker implementation capabilities, however, for most manufacturers, IT resource limitations quickly become a bottleneck for the supply chain. It is the view of IDC Manufacturing Insights that cloud does not need to be constrained by these limitations, and can be transformational in better aligning the 'clock speed' of business with the acquisition of IT capabilities.

And there are other potential advantages to supply chains from cloud applications that we will discuss further in subsequent research, including the ability to scale easily to business changes, lower barriers to entry for smaller partners, ease of application modernization, ease-of-use/access, and a 'single version of the truth'.

What do you think? We would love to hear you thoughts and opinions!

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