Manufacturers Moving To the Cloud

April 15, 2015
A new IDC study finds that investments in cloud services for enterprise IT are on the rise spurred by cost benefits and scalability that will help companies manage the Internet of Things.

While analyst firms and vendors alike have touted the cost benefits, scalability, and easier application deployments that are associated with the Cloud, manufacturers have largely shied away from an infrastructure deemed out of their control. Whether it’s a private or public cloud, there have been concerns about process disruption or a potential security breach as a result of accessing information off premise.

That mentality, however, is shifting due to the need to speed up time to market to be globally competitive, as well as lower operational costs and to make use of the massive amounts of information being collected from the Internet of Things (IoT).

With that in mind, manufacturers-- often looked upon as dragging their feet when it comes to technology innovation-- have opened up to the Cloud concept and are now adopting the technology at a fast clip.

According to a new IDC Manufacturing Insights study, “Worldwide Cloud Adoption in the Manufacturing Industry,” the majority of companies are currently in the Cloud. But most of the manufacturers’ cloud-based strategies are focused on enterprise IT. Other areas, such as manufacturing operations and engineering, are proceeding with caution.

The study is based on several IDC surveys and analyzes the current trends and future plans for Cloud adoption among manufacturing enterprises worldwide. IDC included responses from 593 manufacturers from the United States, Canada, United Kingdom, Germany, France, Sweden, China, India, Malaysia, S. Korea, Australia, Japan, Mexico, The Netherlands, Spain, Italy, and Brazil.Interestingly, the majority of manufacturers worldwide are currently using public cloud (66%) or private cloud (68%) for more than two applications, IDC says. In the United States, 41% of manufacturing respondents indicated they are accessing IT resources via the public cloud.

Other key findings include:

  • "Cloud Also" remains the most common strategy for new and replacement IT investments in the public cloud; 61.6% indicated their company's posture for new IT services is "cloud also,” and the number is only slightly lower for replacing IT existing functionality (56.8%).
  • IT operations are the primary benefactor today from manufacturers' cloud strategy, and only 30 – 35% of respondents indicate operations, supply chain and logistics, sales, or engineering expect to benefit.
  • Only 41% of respondents believe giving business units more direct control over sourcing their own IT services is one of the top drivers for moving to the cloud.
  • Cloud services and cloud architecture's share of the annual IT budget allocation is going to increase 27% in the next two years for manufacturing respondents (based on results from the 2014 IDC CloudView survey).
  • Cloud computing will become the de facto standard for new operations (through organic or acquired growth) over the next 10 years for manufacturers that want to operate and serve customers globally. Manufacturers will increasingly rely on enterprise and industry clouds for access to information, technology resources, and operational support. To prepare, manufacturers will also need to review their underlying network and communication infrastructures.

“Manufacturers are in the midst of a digital transformation, in which 3rd platform technologies are absolutely essential to the way they do business and in the products and services they provide to their customers,” says Kimberly Knickle, research director at IDC Manufacturing Insights. “Consequently, a strategic approach to adopting Cloud is essential. Because of Cloud's tremendous value in making IT resources available to the business based on business terms– speed, cost, and accessibility-- manufacturers must ensure that the line of business and IT management work together in defining their requirements.”

According to the report, one of the ways in which the Cloud will bring significant value to the business is by allowing manufacturers to more easily make use of the data that will be connected from sensors throughout the manufacturing operations with IP-based connectivity and the Internet of Things. Data from sensors on connected products, on equipment in use in the plant, and on assets and inventory in the supply chain, is most valuable if that data can easily be accessed and analyzed by various organizations within the enterprise or even by partners in the value chain.The Cloud is an effective way to access, share, and analyze massive amounts of information.

In the short term, IDC Manufacturing Insights expects that manufacturers may opt for private clouds as a means of extending internal IT infrastructure without raising significant concerns over data security. However, capacity will likely shift to more cost-effective public clouds for noncritical efforts, and even more over the long term as confidence in the technologies to secure the public cloud increase.

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