Make the move

Jun. 16, 2015 – Early predictions suggested that manufacturing would lag behind other industries in Cloud adoption by two to three years. This has not been the case. In fact, a 2013 KPMG survey revealed that 41 per cent of respondents are already using Cloud-enabled services in finance, accounting and financial management and 35 per cent of respondents are likely to adopt such services within the next 18 months. The primary driver of Cloud adoption was also thought to be Total Cost of Ownership (TCO) and, in reality, speed, agility and risk mitigation have proven to be great motivations for Cloud investments.

In this marketplace, very few industry experts would deny that Cloud computing has become a fixture of the business landscape. In fact, for most organizations, it is not a matter of if they will transition to the Cloud but when, especially in an industry such as manufacturing, where organizations need to manage complex value chains, fast-paced projects and meet escalating customer demands. Why are CFOs turning to the Cloud? There are three main reasons: cost efficiency, flexibility and speed.

New technology offers cost efficiency and more effective resource usage
The ability for a manufacturer to update business and operational processes while moving away from technologies that are outdated, growth constraining and difficult to maintain and support is more than a motivator — it is a business imperative. When moving operations to the Cloud, the vendor takes on the responsibility of managing upgrades, supporting the environment, maintaining authentication, authorization and access controls, as well as data security. Subscription based pricing and immediate scaling based on changes in headcount are also added benefits to today’s CFO.

More options and more choices are available to all-sized businesses
As the Cloud market continues to mature, a number of trends are emerging that are likely to accelerate Cloud adoption. One is the ability to adopt hybrid architectures that offer incredibly flexible deployment options for core Enterprise Resource Planning (ERP) and edge applications. For example, let’s say a manufacturer selected an ERP solution in past years but suddenly needs to support a new plant in a distant location. Using today’s flexible technologies, they can now choose an appropriate Cloud ERP solution and support a new location without risking business integrity.

This hybrid approach also allows companies to select focused edge applications that extend core ERP capabilities while maintaining some legacy systems on premise. This is also becoming a popular option for organizations looking to test the waters. Larger businesses are now more likely to pursue a hybrid model rather than entertain total replacement, as they would have done in the past. Motivated by a growing recognition that the cloud can serve more broadly as a springboard for process transformation, innovation and increased business agility, CFOs are increasingly anxious not to get left behind. Initially, the Cloud was attractive to smaller and mid-sized organizations but there is now clear evidence of larger organizations transitioning to the Cloud. In fact, Gartner previously noted that nearly half of large organizations will have hybrid cloud deployments by the end of 2017.

In addition, the Cloud is also where many businesses will find the latest innovations and opportunities for process improvement, since newer applications developed specifically for the Cloud are displacing older, on-premise capabilities. CFOs are finding that it is easier to drive innovation since the SaaS (Software as a Service) business model allows all users to take advantage of new functions and capabilities as soon as they become available, without resorting to individual upgrades and migrations which has historically been the case.

Organizations who have yet to invest in Cloud solutions will be relieved to find that there are also more trusted vendors in the marketplace offering these solutions. There has been a notable shift toward increased dependability, with established vendors introducing new Cloud-based applications that have been specifically developed for deployment.

Businesses are more flexible and agile in the face of change
Perhaps the greatest benefit is the business agility that companies can realize through Cloud deployment. For example, companies expanding into emerging markets in pursuit of growth are able to test the market, rapidly deploy Cloud applications into new ventures, and scale them up or down in concert with market developments. Similarly, Cloud-based applications can help businesses to standardize transaction processing and reporting in new acquisitions or smaller subsidiaries where traditional solutions based around on premise applications would have taken months to bring to fruition. The accessibility and immediacy of Cloud-based solutions means that a newly acquired company could be up and running on a new budgeting application in the Cloud, for example, within a matter of days, where a comparable on premise solution requiring investment in infrastructure could take weeks or months.

CFOs are moving to the Cloud, and cost efficiency, flexibility and speed are the key reasons. Aging legacy applications just can’t keep pace with the agility of new solutions and outdated systems continue put a drag on productivity — and profits. With this in mind, 2015 should prove to be a banner year for cloud applications as more and more companies realize the cost savings associated with the Cloud and solidify its position firmly in the mainstream.

Larry Korak is Industry Strategy Director for Infor’s Industrial Manufacturing vertical. He has extensive experience in product, customer and supply chain consulting.

This article originally appeared in the June 2015 issue of Manufacturing AUTOMATION.