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The Value Proposition of Cloud Computing is Broader in Scope and in Business Implications

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What is the business value proposition for adopting a Cloud computing strategy?  In this Supply Chain Matters commentary, we wanted to dwell somewhat on the implications of a full Cloud suite in supporting broad supply chain business process needs.

This author just completed nearly two days of briefings and conference presentations related to Oracle’s Cloud based technology offerings.  The first day included a full day of industry analyst briefings that updated us to the latest product strategies and customer interest levels generated by end-to-end Cloud suite offerings. The second day included attending Oracle’s Cloud Computing roadshow that has been touring across the U.S. and other countries.

As previously highlighted in our nuggets from Oracle Open World 2015, this enterprise technology vendor is convinced that wide-scale adoption of Cloud is an unstoppable force. So much so, that Oracle has released a broad spectrum of Cloud based technology that spans everything from hosting an entire computing, networking and data management infrastructure to various enterprise suite applications that can either run on the Cloud or behind the firewall. This includes the Oracle SCM Cloud suite that supports end-to end supply chain business processes that span planning, procurement, product lifecycle management, order fulfillment, transportation and warehousing. A Cloud based manufacturing management suite focused on discrete manufacturing process support has been added this month.

One specific area brought forward in the analyst briefings was the compelling pressures that today’s businesses are struggling with.  Oracle CEO Mark Hurd is a masterful communicator of such pressures. More demanding customers, new industry disruptors and relentless pressures to reduce costs and increase productivity abound.  I’m fairly sure that readers can relate to the environment described.

According to Oracle, thus far, many of the early adopters of the provider’s Cloud based technology offerings are indeed would-be industry disruptors or up and coming businesses. Rather than adopt an overhead structure that includes owned data centers and IT infrastructure along with supply chain, procurement or product management applications developed years ago, before today’s globally extended supply chains, they instead appear eager to adopt a different pay-and-adopt- as-you-go structure that offers flexibility to needs.

Think about that!

An industry disruptor with lower overhead, infinite flexibility to add technology when needed, and not burdened by supply chain applications that are too disruptive and far too expensive to upgrade.  Instead, supply chain functional and line-of-business teams have turn to opportunistic strategies to augment problem business processes, more often adopting a singular Cloud based application. The problem with this strategy is that while it addresses specific one-time process needs, it risks another Cloud-based island of information needing future information integration when other processes and/or applications change.

Another compelling business trend is that all corporate functions are under enormous pressures to reduce costs.  That includes IT where studies consistently reinforce that 50-75 percent of costs stem from maintaining existing IT infrastructure or business software applications.  Thus at every annual budget cycle, IT executives must present cost avoidance alternatives.  In large businesses, IT is often classified as a corporate-wide service that evokes a tax burden on various lines-of-business and functions such as supply chain operations. Throw in frustrations relative to on premise business applications that were designed prior to today’s changed business and supply chain frameworks and the pressure to change is somewhat more compelling.

For emerging businesses, a Cloud based adoption strategy that can avoid being locked into a cost intensive IT infrastructure or acquiring software that will receive little daily use makes more practical sense.  The analogy is why buy an automobile and pay for daily operation and maintenance when you can rent by the hour or day.

The takeaway for supply chain and line-of-business teams is to not dismiss Cloud based technology adoption as just more technology vendor hype. That may be short-sighted; Cloud is rather a response to growing industry frustrations related to today’s IT technology cost and service challenges.

Another takeaway is to view a Cloud based technology strategy from the perspective of a broader focus on an engineered suite of pre-integrated software applications that are continually updated to reflect changing business needs. Why settle for business application innovation every 1-2 years when every 6 months is an option, and with lower capital and overhead costs.

It is a compelling argument and one that from this author’s lens, will permanently change the technology landscape sooner rather than later.

Bob Ferrari

Copyright 2016. The Supply Chain Matters® blog and The Ferrari Consulting and Research Group. All rights reserved.

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