Nearly all economists are in agreement that the next few years are looking very positive for manufacturing. Along with the organic growth many manufacturers will experience due to pent up demand from business and consumers, new product categories, more product diversity and greater geographic reach are important factors poised to keep manufacturing in positive business territory for the foreseeable future.
With all this growth in the industry, two things are inevitable: 1) mergers and acquisitions will increase; and 2) the trends around better data management for business analysis will only grow more heated. For these reasons alone, cloud computing is gaining more adherents across industry, despite concerns about security and off-site hosting of critical business data. A major factor behind this shift is that long-held security concerns about the cloud are being overcome by the realization that, for most manufacturers, cloud-hosted data is often far more secure than that housed on site and just as accessible.
As more businesses make the move toward cloud-hosting of critical data, several other benefits—beyond security and access—have also been achieved. To find out more about that, I spoke with Larry Korak, industry & solution strategy director, at Infor, a supplier of enterprise software. He pointed out five key reasons why manufacturers should seriously consider making the move to the cloud sooner rather than later.
1. Reduce costs. Numerous studies show that moving to the cloud can significantly reduce costs. According to Nucleus Research, cloud-based implementations typically require less development and testing resources, and cloud vendors usually provide much of the application support and maintenance. As a result, organizations that deploy cloud-based applications spend 40 percent less on consulting and 25 percent less on support personnel than organizations that deploy on-premise applications. In addition, cloud-based solutions are typically more cost effective than on-premise solutions. A study by Strategy& (formerly Booz & Company) found that, overall, the total cost of ownership for a cloud-based ERP system can be 50 to 60 percent less than traditional software implementations over a 10-year period.
2. Speed time to value. “With the cloud, deployments are faster, there are fewer work slowdowns during implementation, and there is no need to invest capital in upgrading your infrastructure,” Korak says. “Rapid response is critical when unforeseen events take place—such as new competition that can take market share in a matter of months. On-premise applications aren’t as quick to rapidly structure, expand, and scale up operations, which can put a company at a disadvantage when faced with other fast growing businesses.”
Citing the Stategy& research again, Korak notes cloud-based implementations can be up and running in as little 4 to 8 months versus 12 to 36 months for on-premise solutions. “Because cloud launches require less internal less internal support—in terms of both physical infrastructure and human resources—organizations typically experience little business disruption during implementation,” say Korak.
3. Grow faster. Because cloud deployments don’t require any physical infrastructure on site, they help make it significantly less expensive and time consuming to establish a business presence in new and remote locations. “If your business venture is successful, you can quickly scale the system to meet expanding needs; and if the venture is a bust, your minimal investment in the cloud deployment for that location represents a much smaller loss than you’d incur with an on-premise solution,” Korak points out.
“Also, with on-premise software and hardware, the bills don’t just stop after you finally build and finish the data center. There will be ongoing maintenance, needs for upgrades, power bills, cooling costs, and administrative needs—all of which will continue to mount up year after year,” says Korak. “In most cases, the cloud software vendor will automatically apply any patches or updates. This means that the software will always be current and able to meet your business needs, processes, regulations, and requirements as they evolve over time.”
4. Improve efficiency. Cloud applications are considered by many to be well suited for improving the efficiency of manufacturing operations because they can help automate many of the typical steps in business processes, replacing manual activities and often eliminating the need for duplicate data entry. Korak provides an example: “Consider automating your new product development and introduction processes to help get your products to market quicker. A cloud-based ERP system can provide a platform for collaborating between departments, as well as externally with suppliers and distributors. It can also give you early detection capabilities and real-time access to information about capacity, availability, qualifications, and interdependencies of employees, equipment, tools, and materials data.”
5. Improve visibility. With access to information about plant-floor resources easily available, “you can make the most effective usage of constrained resources, find areas where you can increase throughput and efficiency, and promote better material and asset management,” says Korak. “Being able to see how all of the pieces fit together—in real time—ultimately helps you operate more efficiently and make better, faster decisions.”