Posts Tagged ‘On-demand (SaaS)’

The current economic uncertainty facing many companies in the world will likely be the accelerant needed to push the on-demand (or SaaS) model further into mainstream. The result will be a win-win for both consumer of the service, and service provider. Indeed, the on-demand industry has the potential for significant and positive growth in these trying times while legacy perpetual software companies may see threat to survival.

As the white paper “Four essential requirements for today’s supply chain management solutions” articulates, global supply chains have never been more complex, or more volatile. Regardless of size or tenure, companies are outsourcing all or most of their manufacturing operations to regions often outside their target markets. The velocity of innovation has never been faster (and it is accelerating still). And there’s my personal favorite, the nuvo-art of selling in a world undergoing a major “Groundswell” (a must read book by Charlene Li and Josh Bernoff, Harvard Business Press).

The business challenges are undeniable, and companies will find it difficult, if not unbearable, to leave their current supply chain condition untreated. Existing within a distributed supply chain model means the information about a company’s ‘true’ overall health is equally distributed. What could be more natural than an outsourced solution which reconsolidates your supply chain visibility into a single point? With large scale, large capital projects facing unprecedented scrutiny, or postponement, organizations will look to lower cost solutions where their investment closely coincides with their return. On-demand service based offerings are in the rather unique position to accomplish just that where one can expect, among other things, the following:

• No capital investment in hardware
• No software license investment
• No infrastructure foot-print
• No software maintenance tasks
• Monthly subscription fee over perpetual fully paid up license
• Variable contract terms
• Lower cost of deployment
• 24×365 monitoring and support
• >99% or greater service level agreements
• Lower IT support requirements (usually focused on user/group account management)
• Try & Buy programs
• Optimized data center for high-availability, security, redundancy, bandwidth consistency, and business continuity

For the first time in history, small to medium sized enterprises are able to afford the same rich and sophisticated solutions as the multi-billion dollar enterprises. There is also a surge in coverage from the respected analyst community, the most recent I read was an article by the Aberdeen Group entitled “SaaS in Supply Chain: Boon or Boondoggle” where they state their hypothesis:

“While there are many drivers today forcing companies to evaluate and implement SaaS-based SCM solutions, our hypothesis is that the predominant pressure faced by the enterprise is the cost to purchase and deploy traditional on-premise SCM solutions.”

I believe adoption of on-demand service-based solutions for supply chain will see significant adoption through 2009 and beyond, giving it the same potential growth witnessed as Salesforce.com entered the CRM space.

I had the opportunity last week to sit down with Rob Bell, director of service operations at Kinaxis, to talk about our new white paper entitled “Four Essential Requirements for Today’s Supply Chain Management Solutions: On-demand Services Uniquely Qualified to Deliver.”  Rob has an interesting role relative to this topic.  He’s been supporting global manufacturers and their supply chain management processes for years, he runs IT at Kinaxis and he manages our on-demand service operations.

If you’re unable to view the above view, try this link: Essential requirements for today’s SCM solutions.

This morning we announced that we have successfully completed the SAS 70 Type II examination.  For those of you not familiar with SAS 70, it is the “gold standard” in determining if you have the proper controls and auditing processes in place to run an on-demand service.  Completion of the examination indicates that the processes, procedures and controls for the Kinaxis on-demand RapidResponse service have been formally evaluated and tested by an independent accounting and auditing firm.

Lori Smith sat down with Rob Bell, who runs our on-demand service to talk about the importance of this announcement.

If you’re having trouble viewing the above video, try this link: Rob Bell, Kinaxis, discusses SAS 70 examination

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Kinaxis Successfully Completes SAS 70 Type II Examination
On-demand Supply Chain Management Service Helps Customers Succeed in Complying with Sarbanes-Oxley

Ottawa, Canada, December 9, 2008 – Kinaxis™ Inc., provider of the on-demand RapidResponse service that empowers multi-enterprise manufacturers with the collaborative and integrated demand-supply planning, monitoring, and response capabilities required in today’s complex and dynamic world, today announced that it recently completed its first examination in conformity with Statement on Auditing Standards No. 70 (SAS 70), for the period May 1, 2008 through October 31, 2008. This widely recognized audit standard can help Kinaxis customers and their auditors to address the requirements of Sarbanes-Oxley.

Completion of the SAS 70 Type II examination indicates that selected Kinaxis processes, procedures and controls for its on-demand RapidResponse service have been formally evaluated and tested by an independent accounting and auditing firm.  The examination included controls related to organization and administration, logical and physical access, backup controls, change management and incident management. 

SAS 70 is designated by the U.S. Securities and Exchange Commission (SEC) as an acceptable method for a user organization’s management to obtain assurance about service organization internal controls without conducting separate assessments.  A SAS 70 examination is widely recognized, because it represents that a service organization has been through an evaluation of their control activities as they relate to an audit of the financial statements of its customers.  A Type II report not only includes the service organization’s description of controls, but also includes detailed testing of the design and operating effectiveness of the those controls.

“Kinaxis is committed to developing and refining systems that fully secure our service delivery infrastructure,” said John Sicard, executive vice president, development and service operations at Kinaxis.  “In today’s global economy with ever-increasing compliance requirements, we consider the SAS 70 examination a necessary stamp of approval that most sophisticated buyers will be looking for when evaluating our on-demand RapidResponse service.”

About Kinaxis
Kinaxis™ RapidResponse is a single on-demand service that empowers multi-enterprise manufacturers with collaborative and integrated demand-supply planning, monitoring, and response capabilities. RapidResponse embraces human judgment to enable planners and front-line responders to handle unpredictable changes. Global leaders such as Casio, Honeywell, Jabil, Qualcomm, and Raytheon use RapidResponse to achieve breakthroughs in sales and operations planning (S&OP), demand management, supply management, and supply chain risk management. The results are superior customer service, improved operations performance, and a competitive market advantage. For more information, visit the Kinaxis web site at www.kinaxis.com or the company’s blog at www.21stcenturysupplychain.com.

Kinaxis has just published a new white paper entitled “Four Essential Requirements for Today’s Supply Chain Management Solutions.” An abstract for the paper follows:

The continued downward pressure on IT budgets combined with the shifting dynamics of today’s supply chains has created an environment ideally suited to be addressed by on-demand service offerings. With the right capabilities, on-demand solutions for supply chain management can offer a unique combination of tangible benefits to IT (costs savings and low IT resource requirements) as well as to the business (sophisticated computing solutions designed to excel within today’s global and collaborative supply chains).

There was a recent post at Sandhill.com on a similar theme. The post, entitled SaaS reinvents the supply chain, suggests that “high-tech companies need to take advantage of SaaS-model benefits for real-time visibility into their supply chain—especially in tight economic times.” The post goes on to describe some of the business challenges and describes the unique benefits that on-demand (or SaaS) solutions have in meeting those challenges – starting with supply chain visibility.

I would argue, though, that this is not at all unique to high-tech companies. While high-tech companies have certainly been some of the first and most aggressive global supply chain outsources, they are no longer alone in this regard. Today, companies in all industries – from aerospace & defense to industrial and automotive – have globally outsourced supply networks. They too share the same challenges of seeing into their widely dispersed network of partners and of orchestrating the intricate cooperation and coordination necessary for these sophisticated networks to work efficiently and effectively. And, with the pace of change and volatility on the rise, their challenge continues to grow.

In a recent Supply Chain Management Review article, John Fontanella, Noha Tohamy and Wayne McDonnell of AMR Research articulated the reasons why it is a good time to invest in supply chain management technology.  According to the article, AMR feels “there is no better time than now to invest in technologies that yield greater transparency and control within the supply chain.”  AMR provides recommendations on how to use supply chain management (SCM) technologies to protect and enforce your company’s best interests.  The following are a couple of examples:

• Strive for transparency in all your supply chain activities.
• Prepare your company for the unexpected.
• Measure your company’s performance against goals.

As a vendor of supply chain management solutions, of course we agree!   But, I’ll leave the AMR experts to explain their reasons in the article.

What I will add to the discussion, however, is the huge advantages of selecting an on-demand service to solve your supply chain management problems vs. the traditional legacy on-premises solution.  An on-demand service means there are no hardware and services fees to be paid, you subscribe to an on-demand service instead.  This means the ongoing support and maintenance of that service are taken on by the vendor rather than requiring your IT staff to do these tasks.  Things like upgrades are done by the on-demand service provider rather than your IT staff.  These benefits are summarized here and here.

There’s an opportunity in tough economic times to consolidate custom supply chain management solutions (spreadsheets, custom applications, Access databases, etc.) into a single on-demand service capable of solving your supply chain managemnt business challenges.  The right solution can help address one of the burning priorities today – reducing supply chain costs.

I came across this very interesting blog post entitled “SAP admits that SaaS is cheaper for you too” talking about SAP’s on and off moves into on-demand (or SaaS).  It raises some very interesting questions about the SAP cost structure for on-demand vs. on-premises offerings.  I’ll leave it to you to form your own judgments relative to your use of SAP, but I can just say that I know a lot of companies struggle with the enormity of their SAP projects and costs, which directly ties to the return on investment (ROI) justification.

This is one of the biggest reasons we see people abandoning their deployments of their legacy demand planning and supply chain planning on-premises systems and moving to an on-demand service like RapidResponse that can solve a variety of their supply chain challenges from a single service.

See more discussion on the adoption of on-demand services at the post “Software that works.”

Ben Worthen has a good article at his Business Technology blog at the Wall Street Journal entitled “Big companies want software that works.”  In the article, Ben discusses the decision criteria that big companies use to select technology solutions and why they are increasingly open to on-demand services to solve their needs – provided they work.

I commented on the site and have included it here as well.

## My comment ##

For global brands, on-demand software platforms provide far too much value to ignore; particularly, as this article alludes to, when real-time collaboration is necessary.

As an on-demand vendor, Kinaxis is witnessing the migration from traditional on-premise systems to online delivery of our supply chain management solution. The improved multi-enterprise accessibility and availability makes it easier (and in many cases, makes it possible where it wasn’t before) to collaborate with global team members and partners.  This is an important capability when dealing with the increasing volatility of supply and demand and having to reconcile it on a daily basis.

You’re right to point out that data security has historically been one of the biggest obstacles for adoption. But when managed with dedicated hardware, software and physical security; online services can be as, or even more, secure than on-premise servers.  In fact, many companies have higher expectations for an on-demand service around security, reliability, etc. than what they have with their on-premises implementations, so we’ve had to prove that repeatedly.  Good on-demand providers can deliver the reliability, security, and capabilities they need while completely reducing the need to procure hardware, install and manage upgrades, manage the systems infrastructure, etc.

The interest is growing to the point that the fact that we are an on-demand service is viewed as a distinct advantage to many of our prospects faced with growing pressures on IT staff and budgets.  To this point, Kinaxis signed with one of the world’s largest aerospace & defense manufacturers, certainly one of the most security-conscious companies around, for our on-demand service.

As global collaboration becomes a necessity for companies, we see on-demand services not as a trend, but a unique solution.

I read the white paper ‘Enabling Sales and Operations Planning with RapidResponse’ with interest. Organizational thinking is often inherently bound by the dimensions of the ‘box’ it is currently in because people don’t question working assumptions strongly enough. It takes a lot of energy and political skills to overcome ‘process inertia’ built up over the years within companies especially when the processes involve cross-functional teams and individuals at different levels of the organization. Popular business press and sales and operations planning (S&OP) consultants will tend to advocate what has worked in the past (i.e. conventional tools and processes). Taken together, this results in organizations likely short-changing themselves when investing in S&OP.

Personally, I’ve found that investment in S&OP is intermittent in many organizations. Interest in S&OP gets hot when a crisis occurs (e.g. the recent housing market collapse) because the organization understands that fundamental changes are occurring and S&OP is a tool to help them ‘get out of this mess’. The result of this is that companies often don’t move cleanly from one stage in the maturity model to another.  They can attain different levels of maturity in different areas and may even fall back because of a change in technology (i.e. the new demand planning system does not talk to the supply planning application) or personnel (i.e. ‘our new CEO doesn’t like to work that way’). S&OP, like any other strategic and tactical planning, takes constant investment and buy-in from senior levels.

I don’t believe that all organizations need to plan more often than monthly. A monthly cycle might be fine for organizations that have slow product turnover and a mature market. I think the key requirement is to be able plan when, and as often as needed; this is, S&OP ‘on-demand’. Recently, I talked to a company that manufactures residential light fixtures. Historically, a monthly S&OP cycle has served them quite well. However, the recent housing market downturn required that they re-evaluate their S&OP five times in two months. Also, many companies are ‘big-deal’ driven. So, what happens when one of those big deals comes in the day after the end of the last S&OP cycle?  They key is that the S&OP process shouldn’t be held back by the technology and this is where many organizations need to make sure they do their homework.

We issued a news release today, in light of JDA’s acquisition of i2 Technologies, announcing a new incentive program to current i2 customers.

Our director of product marketing, Trevor Miles, wrote about the acquisition recently here, as have many in the industry before and since.  Bob Parker at Manufacturing Insights is one example.

In addressing the question of how buyers should approach their investment roadmap given this acquisition, Bob believes “the answer lies in whether JDA will satisfy the pent up needs of the installed base or ride out the maintenance stream until customers move on.”  I really wonder how many i2 customers will want to live in such limbo?

Furthermore, Bob advises current i2 customers to “…have a replacement plan devised as soon as possible…thinking through the alternatives and having contingency actions ready is wise.”  I agree, and in fact I would argue that i2 customers should question if they want to put themselves in such a passive and reactive position, waiting for others to make the decisions for them. (See Bob’s full article here.  This is what Bob had to say about Kinaxis –  “Kinaxis: This company is doing a great job in supplier intensive planning and execution in industries like consumer electronics and aerospace.”)

Meanwhile, vendors are looking to offer safe passage programs or similar (of which, admittedly we are one).  One supply chain planning (SCP) provider is offering their “next-generation supply chain planning applications that are the equivalent to previously owned i2 products.”  In these challenging times, my gut tells me that people won’t settle for the equivalent. 

Our suggestion to i2 customers is to turn this time of uncertainty into a time of opportunity… to do something different and get more.  i2 customers really need to evaluate their “pent up” needs and look for a solution that can best address them, and in a most cost-effective, low-risk,  time-efficient way.  I try to avoid a lot of self-promotion on this blog, but in this case I want to be sure that everyone knows what we can offer here as we have a number of customers that have made the switch.

Casio is a perfect example of a customer of ours that installed i2 (and took 3 years to do it), only to find that the performance results achieved were far below targets, and that it failed to address changes in demand and supply effectively so users still had to deal with these manually.  Several other customers, Toshiba as one example, evaluated i2 and decided to go with RapidResponse.  There is a good article here on Toshiba – one quote says it all – “The company looked at several other solutions (including i2), but found that nothing provided the capabilities that RapidResponse did – it was unique in the value proposition it could offer.”

We offer a one-to-many value proposition, providing a single integrated on-demand service that solves a variety of supply chain problems (which can replace upwards of seven i2 modules, incidentally).   There is a real difference between RapidResponse and traditional planning systems, namely:

RapidResponse
Capitalized on human judgment
1000’s of daily users/experts
Plan-Monitor-Respond
Typical deployment – 14 weeks
On-demand
One solution – many applications

Legacy Planning Systems
Black-box optimization
1-5 expert users
Plan only (assumes static world)
Lengthy – often promised  benefits never entirely realized
On-premise (significant IT resources)
Multiple planning tools + Excel hell

Food for thought anyway….

Great post by Tim Minahan over at Supply Excellence talking about the realities of on-demand (software as a service or SaaS) and debunking many of the myths out there about such solutions.  As an on-demand vendor, we know all too well that many of these myths still exist – but it’s changing.  More and more companies are open to on-demand/SaaS solutions and, in fact, many are embracing it and viewing the fact that we are an on-demand service as a key advantage.

I posted a comment on Tim’s site and have included it here also.

** My comment **

Tim – great post.  It’s great to see someone putting some facts out there to counter the many myths that exist about on-demand/SaaS solutions.  We’re an on-demand service provider with a supply chain management solution so we see a lot of this everday.  It’s interesting, as you noted, that many companies have higher expectations for an on-demand service around security, reliability, etc. than what they have with their on-premises solutions.  Yet, we and other on-demand service providers are able to meet those demands with our offerings as you accurately pointed out.

The tide is turning.  As you noted, most large companies do have several on-demand services that they use.  We’re seeing this across the board with all types of manufacturers – the interest is growing to the point that the fact that we are an on-demand service is viewed as a distinct advantage now for many IT organizations.  As you point out, we’re able to deliver the reliability, security, and capabilities they need while completely reducing their need to procure hardware, install and manage upgrades, manage the systems infrastructure, etc.

The myths are mainly perpetuated by those on-premises vendors that don’t see that the future is about on-demand services that can deliver the functionality companies need at a lower overall cost of ownership.  Posts like yours and the growing body of companies that have successfully leveraged on-demand services will eventually overcome these perceptions.