Software as a service: developments in supply chain IT
3rd April 2007
Most companies are still lagging behind in the use of information technology to manage their supply chains and logistics. But now a major development is changing the way companies use their software.
Denis O’Sullivan explores the concept of software as a service.
Left: Denis O'Sullivan
The leaders in IT are usually the very big companies who have spent millions to buy or to develop major customised systems. However, this is not always as beneficial as intended. Upgrades and enhancements are expensive and changing systems can cause major business disruption. But, changing market requirements and customer demands mean that regular changes and upgrades are essential. This in-house approach is no longer economical for even the largest of companies, and certainly not for smaller companies. It is the software equivalent of painting the Forth Bridge. However, even this analogy is no longer valid; technology means that this once symbol of never-ending work is now only painted once every 20 years!
Major changes in applications incur major investments beyond the cost of development or licences. New software usually brings with it the need for updated hardware, or at least some additional expensive hardware. Then there is the need for maintenance contracts or in-house maintenance costs and often additional support staff. But, without leading-edge logistics solutions, companies cannot meet customer and consumer expectations. Therefore, the opportunity to grow and win business, by adding value through advanced use and sharing of information, is often based on the commodity concept of low-priced transport. In-house operators will often outsource rather than face up to the need for huge investment in IT.This may not solve the IT problem – if their logistics partner also does not have the best possible computer systems – but at least it moves the IT investment problem off the balance sheet.
Software as a service
A major development in IT is changing the way companies use software. It is a new approach to how we access and pay for the applications and is known as software as a service (SAAS).
SAAS – also referred to as on demand – has been talked about for several years and was originally fanfared as the end of the desktop PC. As is often the case, it took a breakthrough by one company to start the ball rolling. In this case that company was SalesForce, a traditional PC-based applications provider. When it changed to SAAS, it turned the customer relationship and sales force management market on its head. Now other software companies, including supply chain and logistics applications providers around the world, have followed this course. In fact, in several cases the UK SAAS providers are absolute world leaders.
These solutions provide access to business functionality remotely as a service, with costs that are aligned with usage, minimal upfront expense, rapid implementation, and time to value. The investment to get up and running is often very low and very quick, and the return on this investment (ROI) is almost instant. However, even better, the service is usually charged on a transaction basis. This means that companies do not have to pay for tomorrow’s needs today, but can wait until the business expands and more capacity or additional features are needed: in other words, not just a case of pay-as-you-go, but you also pay-as-you-grow.
