Move to the cloud? Four hard-nosed manufacturers explain to Malcolm Wheatley why they’ve done it.
In early 2011, Crawley-based Edwards Ltd faced a quandary, explains information management director Anil Patel. The firm – a manufacturer of vacuum equipment for the world’s semiconductor and other hi-tech industries – wanted to move its fast-growing Chinese operations onto its existing SAP ERP infrastructure.
But that infrastructure, built around SAP’s venerable mainstream R/3 (now re-badged ‘ECC’) solution, and in place since 2003, covered just SAP’s commercial and financial modules. Manufacturing-specific functionality was handled by Mapics, a legacy MRP1 solution that had been in use within the business since the mid-1970s.
And while a roadmap for migrating this manufacturing functionality over to SAP ECC did exist, says Patel, a global template was needed before migrating the company’s Czech and Korean operations over to it – a process expected to take two years.
“But we couldn’t wait that long to bring China on board,” says Patel. “The Chinese operations were growing too quickly.”
The solution? SAP’s cloud-based SAP Business ByDesign, a solution intended for small and medium-sized businesses, but one that was equally at home as a solution for the subsidiaries of larger enterprises wanting to put in place a lightweight ERP footprint in businesses that might struggle to absorb the full weight of SAP’s ECC solution.
“China crystallised our thinking. We’d focused on the major countries in our international portfolio, and hadn’t really considered if the cloud, and Software as a Service [SaaS], could be of value.” – Anil Patel, Information Management Director at Edwards Ltd
Run from highly secure data centres that are managed, monitored, and maintained by SAP experts, SAP Business ByDesign offered a complete, integrated suite of enterprise applications that could run an entire business; right thorough financials, human resources, sales, procurement, customer service, and supply chain.
“Better still, we saw that it could be implemented relatively quickly,” he adds. “It wouldn’t need to be a hugely sophisticated implementation – just enough to get the China operation up and running with the core business processes that they needed: order-to-cash, purchase-to-pay, and inventory management, together with the right disciplines and master data.”
At which point, as implementation began, Patel and the wider Edwards team realised that SAP Business ByDesign could be the solution for other countries in the Edwards portfolio as well.
“We saw how quickly the users in China adapted to it, and how easy it was to use,” he related. “And then we started to think: why not put it into Brazil, India or Israel?” In each case, relatively small national teams of employees – just 30 or so in Brazil’s case – were slated to have SAP ECC implementations. But the lighter footprint, rich functionality, of SAP Business ByDesign could in fact be much more appropriate.
“China crystallised our thinking,” sums up Patel. “We’d focused on the major countries in our international portfolio, and hadn’t really considered if the cloud, and Software as a Service [SaaS], could be of value.”
Edwards is not alone in this realisation. Across British manufacturing – and beyond – it seems that others are coming to very similar conclusions. Indeed, 2012 is the year that the cloud “got real”, according to one influential American columnist.
Faster, better, cheaper
The logic is inexorable: as individual consumers, we all happily use Twitter, Facebook, YouTube and other popular software services. So why should the corporate world be any different? Yet hitherto, it often has been different, with worries about firewalls, security, reliability and integration routinely trotted out as barriers to adoption.
That has changed. Businesses – including manufacturers – are genuinely moving to SaaS, and to cloud-based providers of such services. As noted on p90 of this issue, moving to the cloud is increasingly seen as a way of freeing-up scarce management time, operating budget and capital expenditure, and redeploying them more strategically – to grow the business, rather than provide IT infrastructure.
That said, security considerations do remain. There is a growing body of opinion reckoning that the ‘private’ cloud – as proprietary hosting solutions like those offered in SAP’s Business ByDesign are termed these days – is to be preferred to a ‘public’ cloud of the sort operated by Amazon. com’s Amazon Web Services.
In fact, research into the global adoption of such services, published earlier this year by Tata Consultancy Services, found that just 20% of European and American businesses would consider putting their most critical applications into the public cloud, while twothirds of American companies, and almost half of European companies (48%) would consider putting core applications in private clouds.
But the choice isn’t always clear-cut, and a manufacturer unwilling to move permanently into the public cloud can still find that it makes sense to do so on a temporary basis.
One such business is hi-tech firm Oxford Instruments, which used a SaaS-based version of Infor’s ERP Business application on a trial ‘sandpit’ basis before moving it onpremise. Infor has two million subscribers for its SaaS-based offerings in the public cloud, of which ERP Business is among the top three.
“We chose Infor because the company’s expertise enables them to cover the majority of our requirements out-ofthe- box,” says Gary Wearing, director of the company’s nanosciences division. “We have some demanding milestones for the time and cost of implementation, and we will be measuring productivity improvements to make sure that the application delivers.”
Yet for SaaS, ERP isn’t the only game in town – far from it.
Research suggests that prior to even considering moving to SaaS-based offerings of such businesscritical applications, companies first experiment with more niche SaaS-based functionality.
“When it comes to customer and employee data, there’s still a preference for retaining it inside the corporate firewall,” says Charles Hughes, head of consulting firm AT Kearney’s strategic IT practice. “There are definitely a lot of applications it’s perfectly possible to host in the cloud, but how far a business goes along that route depends on its appetite for risk, and the effort that it is prepared to put into security. The cloud is here to stay, and the issue for most businesses is how quickly they understand that, and how quickly they leverage it to cut costs and reduce capital expenditure on in-house IT.”
Return on investment
At London-headquartered manufacturer Toye, Kenning and Spencer, a badge and medal specialist dating from 1685, it’s a message that has hit home.
Beset by high levels of ‘spam’ on its incoming e-mail feeds, by early 2010 the firm reckoned that just 8% of incoming e-mails were genuine – with a whopping 92% being spam, virus or both. Worse, erratic volumes of unwanted mail were consuming expensive bandwidth, slowing down more important internet traffic.
The company’s salvation came with a cloud-based application called Maildefender, sourced from its IT support vendor Icomm.
“It sounds trivial, but it really was a significant problem,” says Toye executive manager Tony Harvey. “Maildefender sits there in the cloud, we log on once a day to review questionable emails, which takes just a few minutes. It’s a managed service, so we don’t have to worry about hardware, or hardware and software going out of date, and our eighty or so licenses altogether cost us around £1,700 per year.”
“There are definitely a lot of applications it’s perfectly possible to host in the cloud, but how far a business goes along that route depends on its appetite for risk, and the effort that it is prepared to put into security.” – Charles Hughes, head of strategic IT practice, AT Kearney
What’s more, he adds, the firm’s Birmingham site has also moved to off-site backup of critical data – again, a cloud- based SaaS application sourced from Icomm.
“It’s saved us the cost of replacing our elderly tape drive, the time taken to perform backups – and the backups themselves are more reliable,” he enthuses.
At Ashford-based medical device manufacturer Smiths Medical, meanwhile, a private cloud ‘pilot project’ roll-out of ToolsGroup’s SO99+ forecasting and inventory management solution has also delivered impressive benefits. Furthermore, it has done so in a fraction of the time that an in-house deployment would take.
Inventories are down by 8%, safety stock levels down by 11%, product lines out of stock down 26%, and backorders reduced by 52%. Two further phases of the ToolsGroup implementation are scheduled for completion by the end of 2012, reports Cherelle Whitfield, director of global service management at Smiths.
What’s more, adds one insider close to the project, the computational burden involved in such calculations aptly highlights the benefits of the private cloud, against the public cloud.
“Running in batch mode is very different from running an ad-hoc Salesforce.com query,” he notes. “Forecasting demand and inventory requirements for ten million items takes a significant amount of time, even on a reasonably high-end machine. For tasks of that order, the private cloud is a better proposition.”
And pilot projects like these, says Peter Thorne, director at analyst firm Cambashi, are increasingly the Trojan Horse of IT business case justification.
“SaaS offers a shortcut: you can get purchase decisions made quickly, at a lower level, by people who can absorb the monthly subscription within their budgets,” he says. “If you’re a middle manager, your route to a business case justification is to sign up on a monthly basis, and show your boss the results.”
