Cloud Applications Save Big Dollars

Plants are turning to cloud computing for energy management, predictive maintenance and supply-chain support.

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Sina Moatamed, the chief technology officer at BendPak Inc., of Santa Paula, Calif., needed to purchase an enterprise resource planning (ERP) system with world-class infrastructure.The company—which builds lifting systems, pipe-benders and air compressors for auto shops—had two ERP systems and a customer relationship management (CRM) system, but they weren’t sufficient for the growing needs of the company. “Each department functioned well independently, but nothing tied it together,” says Moatamed. “There was no integration path for continuity, and we were not able to scale beyond our facility.”

Moatamed liked what he saw in the ERP application offered by solutions provider SAP AG, Walldorf, Germany, but the in-house system came at too high a cost. Not to mention the implementation costs, plus, there would also be the continual expenses of new modules and upgrades. The idea of using SAP’s recently released cloud solution, Business ByDesign, became attractive and affordable. “With a multi-tenant system, if you have a need for growing resources, they’re available,” says Moatamed. “You don’t have to buy more gear to make it happen.”

Software as a Service (SaaS), or cloud computing, is a new concept for manufacturing applications, so Moatamed was concerned. “It was early on in Business ByDesign, so we wondered if that would be a problem. You don’t do ERP lightly,” says Moatamed. “But we saw good players in SAP. They know manufacturing, and we knew they are going to be around.”

Cloud computing has come into its own. Just in the past two years, software vendors have developed services customers can access without installing software or hardware on their own premises. For large plants, energy management and data analytics have become popular as a cloud-based extension of in-house applications. For small to medium-size companies, hosted computing suddenly makes ERP and supply-chain applications affordable. Remote monitoring has also caught on as a cloud-based tool.

It’s only been recently that manufacturers have become open to the idea of sharing their data outside their walls. “We started shopping this a couple years ago and got a cold reception. But now, they realize that all of us as consumers are accepting the cloud,” says Rob McGreevy, vice president of platforms and applications, at automation supplier Invensys Operations Management, in Plano, Texas. “It’s especially gaining acceptance in energy management where you have to share data.”

The savings that come with cloud computing helped manufacturers understand its value. “We first went live with cloud computing around two years ago. There was a change coming in the market. We noticed that customers were interested in a service model,” says Rich Carpenter, chief technology officer of software and services at GE Intelligent Platforms, a Charlottesville, Va.-based automation vendor. He notes that customers are adding cloud computing to CRM because it’s much easier and less expensive than in the past. “You can now get a $10 chip with call capabilities and build a business around remote monitoring for customers with remote assets.”

The security challenge

For years, vendors couldn’t get plants to consider cloud computing. Operators didn’t like the idea of plant data residing on outside servers. The concept began to change as people started using cloud computing at home. E-mail is a good example. In recent years, consumers have discovered— through multiple hard-disk crashes—that the least safe place to store years’ worth of e-mail is on your hard drive.

Saleforce.com became the final tipping point. Marketers across the globe started to insist on the cloud-based sales software. Once executives—and information technology (IT) personnel—saw that hosted software was safe, indeed safer, than in-house software, they started to give the green light to cloud software for the plant. “Salespeople demanded Saleforce.com. That happened while IT expenses were getting cut, so companies went outside the wall to do it,” says Fred C. Yentz, president and chief executive officer of software provider ILS Technology LLC, Boca Raton, Fla. “Salesforce.com broke the bubble. People started to look at more and more they could do outside their walls.”

The shift from security concerns to the acceptance of cloud computing happened quickly. In just the past year, attitudes about security have changed. “We haven’t received a lot of pushback or questioning around security lately,” says James Norwood, senior vice president of production at Epicor Software Corp., an Irvine, Calif., ERP company that offers cloud computing. “Even just a year ago when it was new, we had a harder time convincing financial people it was OK. But now, security is not a big issue.”

The recession provided a breakthrough for cloud computing. Plant operators are always interested in any technology applications that can deliver measurable return on investment (ROI). Yet, the finance office has been loathe to invest in capital equipment, ROI or not. Many plants simply haven’t been able to get the financing. Cloud computing provides a way to buy applications on a service model that is far more attractive financially.

One of the drivers in cloud acceptance is the low cost of IT resources. Many manufacturers laid off IT personnel during the recession. Using the cloud is a way to avoid new IT investments. “The advantage to the user is they don’t have to buy servers, hardware or software. No IT resources. They don’t have to deal with upgrades,” says Kevin Rutherford, senior application engineer, Software Toolbox Inc., a Matthews, N.C., software provider. “It’s priced based on how much data you need, just the amount of data you’re processing.”

Cloud computing offers small companies an opportunity to make use of sophisticated applications on a by-the-cup basis. “If you’re a small to medium-size manufacturer, you don’t have the resources for an ERP system in-house. So there is a huge interest in having your ERP hosted by a third party,” says Ralph Rio, research director, ARC Advisory Group Inc., in Dedham, Mass. “Say, you have a business with monthly peaks. If it’s hosted, the host can handle your peaks.”

For the smaller company, cloud computing offers that ability to deploy very sophisticated tools without building an extensive IT department. “The companies that are taking cloud computing up aggressively are those with $50 million to $100 million in annual sales,” says Wayne Morris, chief executive officer of MyDials, a company in Louis, Colo., that offers SaaS applications. “They don’t have a lot of IT resources, so it’s very attractive to use cloud computing rather than building their in-house IT.”

Energy management

There are some areas of diagnostics that are particularly well-fitted for cloud applications. Energy management and analytics are well-suited for cloud applications. Determining what energy source is appropriate at any given time of day requires sophisticated monitoring of the smart grid. The applications that support this analysis are simply too extensive for a single plant. But some cloud-computing companies are collecting energy data that can be sold to multiple clients, thus bringing down the cost for individual plants. “We can calculate the real-time cost of energy on a Web server. It requires data that may not be accessible to our customers,” says Doug Lawson, chief software strategist at automation supplier Rockwell Automation Inc., in Milwaukee. “Cloud computing is a very cost effective way of doing this, since it is extremely demanding computationally. We’re looking at several hundred calculations over years of data.”

A wide range of applications is now being provided as remote, cloud-based services. These include the range of traditional accounting-based applications associated with ERP. Trace-and-track tools are available, as well as supply-chain applications on both the supply side and customer side. Remote equipment monitoring tools are available that let a machine original equipment manufacturer (OEM) watch its equipment to anticipate problems before they arise. “The machine maker can offer the buyer—the factory—a service to watch the machine and do predictive maintenance,” says Yentz of ILS Technology. “When the machine builder sees a potential problem, he can show up at the factory with the right part and avoid downtime due to failure.”

As well as providing an inexpensive way to manage plant data, many cloud computing providers also display data in a real-time usable manner. Instead of poring over spreadsheets of week-end or month-end data, operators can look at dashboards that show user-friendly graphs. “Human beings weren’t built to look at numbers. There’s also the problem of getting the right data to the right person,” says Doug Chappel, president of Lucas Technologies, in Cassadaga, Fla., a company that provides remote monitoring services to the wastewater industry. “With the data in the cloud, it’s easy to access and it’s more usable.”

SAP has been offering cloud computing services since 2007. The service was developed partly from customer requests and partly from technology developments. “We now have sufficient bandwidth at reasonable prices,” says Rainer Zinow, senior vice president of Business ByDesign, at SAP Americas, in Newtown Square, Pa. “At first, customers were uncomfortable putting financial info into the cloud.”

The technology behind cloud computing is not new. What’s new is the broadband pipeline that allows massive amounts of data to flow quickly freely—about as quickly as data moves in-house. Massive storage is also cheap. But perhaps the one change that opened the floodgates was the realization that data in the cloud is quite likely more secure than data in-house. Once the security concern is settled, it’s a matter of comparing costs.

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