Head in the clouds

At first glance, Workington-based Pentagon Chemicals seems unremarkable: a privately-owned manufacturer of speciality agricultural chemicals with 200 or so employees.

But take a closer look and you’ll see something rather less ordinary: an ERP system housed not on in-house servers, but in the ‘cloud’, accessed over the internet.

There is, undeniably, a great deal of hype surrounding cloud computing. Through accessing applications hosted remotely in giant server farms, so the argument goes, companies can significantly lower their IT costs and also benefit in other ways.

Cloud computing is becoming a reality that more and more of us touch each day — whether as businesses or individuals. Rentokil Initial, logistics provider Deeset and automotive manufacturer Jaguar Land Rover, for instance, are all users of Google Apps, cloud-based substitutes for Microsoft’s familiar office productivity tools: e-mail, spreadsheets, contact managers, word processing and the like.

“We switched our entire global organisation of over 15,000 users to Gmail, Calendar and Contacts in one weekend in December 2009 as we separated from our former parent company Ford,” says Jaguar Land Rover’s chief information officer, Jeremy Vincent. “Now, almost one year in, we have a truly enterprise-wide common critical business application which is delivering benefits continuously — especially as we turn on more Google applications.” CRM specialist Salesforce.com, to choose another popular cloud-based offering, claims some two million users, including the sales forces of British manufacturers such as David Brown Engineering, Invensys, IndigoVision and Coventry-based flooring company Amtico International. Edinburgh-based CCTV security system manufacturer, IndigoVision, openly credits Salesforce.com with helping it to grow revenues 15-fold in just six years. And other manufacturers are contemplating joining such pioneers.

The perfect host?
Take South Wales-based subcontract manufacturer Axiom Manufacturing Services. “There’s a lot of hype out there, but the cloud does need to be carefully considered,” says Mike Doyle, Axiom’s IT manager. “We don’t have any applications on the cloud right now, but we are certainly prepared to think about it as opportunities emerge.” Leeds-based street lighting manufacturer, Harvard Engineering, has done more than think about it: an on-line power consumption utility that it offers its municipal customers was hosted on the cloud — closely followed by other applications such as e-mail and Microsoft Exchange. “It wasn’t part of the original plan,” says finance director, Martin Baum, “but our experience has been really positive. Now we take the view that it doesn’t matter where such applications are hosted.” In one sense, of course, cloud computing is simply one step on from a more familiar notion: software as a service (SaaS), where businesses subscribe to externally-hosted applications that can range from niche transportation planning offerings through to full-blown ERP systems. And many of the same benefits apply. Fewer IT support staff are required, no costly servers to buy and house, no server capacity constraints to worry about, a lower software maintenance overhead — it’s not difficult to see the attractions.

It’s also not difficult to see the risks, and the dangers. With applications hosted in-house, manufacturers have control over the physical and digital security, as well as control over the network that connects users to systems. But with applications located in the cloud, and accessed over the internet, fewer assurances apply. Quite apart from security concerns, slow response times — ‘latency’, in the jargon — could impede efficiencies. And while that’s also true of SaaSbased applications, there’s one critical difference between SaaS and the cloud: with conventional, externally-hosted SaaS applications, manufacturers know exactly where their systems — and valuable data — are operated from. They can visit, and audit, the data centre in question. They can ask questions about its physical and digital security, and physically touch ‘their’ server.

With the cloud, there are far fewer specifics: servers — and even data centres — are shared, and can be widely geographically dispersed, with manufacturers accessing different applications from potentially divergent locations. In short, a manufacturer with Google Apps, Salesforce.com and a handful of other typical cloud-based applications, is a very different proposition from one where everything is hosted in-house.

And certainly, despite the much-hyped flow of companies such as Jaguar Land Rover moving away from in-house, server-based versions of Microsoft’s popular Office and desktop tools towards cloud-based versions such as Google Apps and Zoho, there’s a small-but-persistent flow of traffic in the opposite direction, having tried the cloud, and found it wanting. One 1,100- user American company, for instance, apparently found that slow response times could be traced to the fact that its data was stored at a Google data centre in Berlin — rather than a centre in California, close to its location.

“Manufacturing plants require instant access to data at the process automation and control level,” argues Timo Brueggemann, director of business development at ultra-high availability computing specialist Stratus Technologies. “Critical data has to be accessible on-site, not out there somewhere, hosted on somebody’s cloud.” “Cloud-based applications never really get put together until they hit the user’s we browser,” warns Richard Stone, cloud solutions director at Compuware. “They’re pieced together from potentially multiple data sources — which makes measuring and monitoring their performance very difficult. A performance that is acceptable at one time of day might be less so at other times of the day, and at other locations.” There are potential regulatory dangers, too, warns Srinath Murthy, a vice-president at consulting firm ITC Infotech: “If a company does not have control over where data is stored, it could unknowingly lead to a breach in compliance.”

Splitting the difference
What has emerged, then, is a twin-track approach to the cloud. Axiom’s IT manager, Mike Doyle doubtless speaks for many when he notes that he draws a careful distinction between non-core applications that the company might source from the cloud, and mission-critical applications such as ERP, which seems a step too far. “As things stand, I wouldn’t feel comfortable putting our ERP system on the cloud.” It’s a sentiment that many IT insiders openly acknowledge. “Where we are right now — taking a typical manufacturing company — is that there’s a distinct tendency to differentiate between peripheral applications such as expense management and CRM, and core applications such as ERP,” says Phil Lewis, business consulting director at ERP vendor Infor. “Companies regard ERP as the jewel in the crown, and many manufacturers are uncomfortable seeing that jewel located remotely in the cloud.” “There’s a huge difference between putting generic mass-market applications such as e-mail systems on the cloud and locating mission-critical core applications there as well,” agrees Mac Scott, associate director of Manchester-based IT consultants, Xantus Consulting. “The risks of service interruption and resource contention are simply too great: a half-second delay in calling up your e-mail is one thing — posting business-critical transaction to an ERP system in the cloud quite another.” Indeed, some proponents of cloud-based computing positively encourage manufacturers to consider such a distinction. Christopher Barnatt, associate professor of computing at Nottingham University Business School, and author of a recent book, A Brief Guide to Cloud Computing, points out that cloud computing offers manufacturers the opportunity to focus anew on their core competencies. “By moving less essential and peripheral applications to the cloud, IT staff can actually focus on mission-critical systems that truly make a difference to the business, instead of spending time on e-mail servers and things like that,” he says.

Even so, both vendors — and users — are slowly but surely paving the way. Vendors are gradually making cloud-configured versions of their ERP applications available. And users, undeniably, are adopting them. ERP vendor Netsuite’s offering, for example, is only available as a cloud-based solution.

“We guarantee our customers 99.5 per cent uptime — and promise them refunds if we don’t hit it,” says Roman Bukary, head of industries marketing at Netsuite. “And we say to customers: imagine the costs that you would have to take on in order to achieve that level of uptime in-house.” “There’s more ERP cloud demand than you’d think,” adds Bruce Richardson, chief strategy officer at Infor, and a former highly-respected analyst at analyst firm AMR Research. The idea has distinct appeal, he explains, to small manufacturers looking for full function ERP at the lowest cost of deployment, as well as to larger global firms who can’t afford the initial implementation fees and ongoing operating costs of on premise deployments. At Pentagon Chemicals, for instance, it turns out that it is market leader SAP’s cloudbased offering, Business ByDesign, that the business is using, for precisely the reasons that Richardson articulates.

Box fresh
“We’re finding that a growing number of smaller manufacturers want to leverage cloud computing, says Schalk Viljoen, SAP’s director of business development for Business ByDesign. “They’ve realised that they don’t need ERP-skilled IT staff, don’t need IT infrastructure and can implement proven best practice out of the box — without having to discover those best practices for themselves.” Nicholas Lindop, Pentagon’s general manager, concurs. Moving to Business ByDesign on the cloud, he says, “standardises our business processes, supports scalable supply chain processes, delivers complete visibility of inventory and increases the transparency and efficiency of business operations. All this, and a reduction in IT support overheads as well.” Pre-configured with best practices for managing areas of the business such as accounting, CRM, projects, procurement, and supply chain management, Business ByDesign is now available in Germany, UK, France, US, India and China, says SAP’s Viljoen. “SAP takes care of installation, maintenance and upgrades — so you can focus on your business, not on IT.” Epicor is another vendor seeing strong demand — albeit once again from manufacturers at the smaller end of the scale. Epicor Express, the company’s on-demand cloud-based version of its flagship system Epicor 9, was written purposely for the cloud, says James Norwood, vice-president of product marketing at Epicor, and as such has won the company customers that it wouldn’t previously have targeted. “It’s not just a piece of legacy code hosted in a data centre,” he stresses.

“All that manufacturers have to do is subscribe to it and use it.” The cloud, he adds, “is just another deployment option — and we take the view that performance has to be just as good as on-premise software, with the cloud offering the added benefit that computing resources are be able to be scaled as required.” The cloud, in short, seems here to stay with manufacturers gradually becoming more sanguine about its risks and dangers. While the true level of the benefits that it offers have yet to be proven, initial worries over the cloud’s downsides certainly seem overstated.

CASE STUDY

Holicm – The Worlds 2nd largest Cement Manufacturer

With a remit of improving service level agreements, reducing costs of support, help desk functions, administration costs and improving production and supply chain coordination, the worlds’ leading cement manufacturer partnered with NIIT Technologies.

Services Provided
With over 400 manufacturing plans across 70 countries, it was essential that a 24×7 multi-lingual service desk support be provided. 800 network devices and 170 storage and server devices also required support, along with standard and customised applications.

NIIT Technologies provided services to manage Data Centre and Network Design, Application production Support, 24X7 Service Desk, Disaster Recovery Services and support with IT Infrastructure Management and Hosting Services for over 12,000 users in multiple countries.

Benefits:
The client was able to reduce administrative costs, personnel and infrastructure costs and improve global supply chain coordination across plants, regions and countries, and experienced improvements in Service Level Agreements.

• Improve Service Level Agreement to 99.7%
• Reduced administrative costs by consolidating and sharing Disaster
• Recovery facilities across countries in the regions
• Performance Improvement over 20-25% over SLAs
• No Data Loss
• 1 Sec network Response time

Technical Data: Tools Used
Applications:
• SAP R/3, SAP CRM, SAP BW, SAP Enterprise Portal, SAP ITS,
• Oracle

Tools:
• BMC Patrol, DB X-Ray
• SAP Solutions, SAP Trek, SAP DB Maintain
• Windows OS
• HP Open View – Network Node Manager, Cisco Works, MRTG, Ether Real, Orion – NPM