AberdeenGroup. On-Demand Manufacturing Planning & Scheduling. How Manufacturers Are Achieving Faster Business Value with Software as a Service

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1 e AberdeenGroup On-Demand Manufacturing Planning & Scheduling How Manufacturers Are Achieving Faster Business Value with Software as a Service Business Value Research Series August 2006

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3 Executive Summary Many companies are seeking to deploy manufacturing technology to improve productivity in the face of global competition, to satisfy increasingly rigorous and dynamic customer demands, or to support business growth without having to invest in additional labor and equipment. However, the prospect of undertaking a traditional software implementation and dealing with all the related IT requirements and operational disruptions can be daunting. At many companies, enterprise managers and executives can no longer wait for IT resources to become available to implement traditional manufacturing installed software to address pressing manufacturing needs. Aberdeen research of 180 companies finds that more than half are willing to consider a new alternative: using on-demand manufacturing software (Figure i). Unlike traditional on-premise applications, which are paid for upfront and installed inside your company, on-demand applications are hosted at the vendor and are typically paid for through a monthly subscription model. On-demand applications are also often called software as a service or SaaS. Figure i: Percentage of Companies that Would Consider an On-Demand Manufacturing Planning or Scheduling Application % of respondents who use or would consider an on-demand manufacturing application 60% 40% 20% 0% 53% 54% Small (Less than $50 million) Mid-size ($50 million to $999 million) 46% Large ($1 billion+) Source: AberdeenGroup, August 2006 On-Demand Applications Delivering on Their Promise Aberdeen research is showing that users of on-demand manufacturing and supply chain software report much quicker implementations, faster return on investment (ROI), and the ability to deploy software with radically lower IT requirements. Most on-demand users say their software was operational in under three months and achieved ROI in less than a year. In fact, 64% of current on-demand users cite better ROI with their on- AberdeenGroup i

4 demand application than with their on-premise software, while just 3% said ROI was worse. On-Demand s Broadening Appeal Adoption of on-demand is still in its early stages and the availability of solutions for manufacturing organizations is still not widespread. It is important to note that companies aren t moving to wall-to-wall on-demand applications today. In most cases, they are using on-demand to replace manual processes or to create extensions around their existing manufacturing or supply chain IT investments. Supply chain visibility, transportation management, and supplier and contract manufacturer collaboration are some of the application areas that have gained early traction in the on-demand model, but on-demand is now spreading to other areas such as warehousing, forecasting, and manufacturing scheduling. Recommendations for Action For lower startup capital, less implementation time, and fewer IT resources, on-demand manufacturing applications can deliver business value. On-demand applications are not appropriate for all organizations, but they are an option that most companies should explore for at least limited portions of their operations. Many manufacturing executives are discovering that they can use on-demand applications to solve business problems today, versus having their valuable projects pushed to the back of a very long line of planned IT projects. IT organizations are also seeing the advantages of on-demand applications, viewing them as a new way of meeting their business users evolving requirements without disrupting current projects Companies should consider on-demand applications in the manufacturing area if they have one or more of the following attributes: Are seeking to automate previously manual-intensive processes, such as spreadsheet-based scheduling Are looking to replace aging home-grown applications and reduce IT maintenance costs and requirements Are looking to create extensions around existing ERP and supply chain application investments Have an IT staff consumed with an ERP implementation or an ERP upgrade project Running secure, high availability application data centers is not a core competency for the organization DO NOT DELETE THE SECTION BREAK BELOW THIS PARAGRAPH ii AberdeenGroup

5 Table of Contents Executive Summary... i On-Demand Applications Delivering on Their Promise... i Recommendations for Action...ii Chapter One: Manufacturing Software Challenges...1 The Challenges of Traditional Software Approaches... 1 Assessing On-Demand Interest... 3 Chapter Two: The On-Demand Alternative...5 Enterprise Interest in On-Demand Manufacturing Software... 5 Proven Benefits of the On-Demand Model... 6 Top Enterprise Concerns with On-Demand Systems... 8 Total Cost Model for On-Demand... 9 Chapter Three: Recommendations for Action...12 When to Seek On-Premise Applications How to Succeed With an On-Demand Initiative Author Profile...14 About AberdeenGroup...15 AberdeenGroup

6 Figures Figure i: Percentage of Companies that Would Consider an On-Demand Manufacturing Planning or Scheduling Application... i Figure 1: Pressures Driving Companies to Consider On-Demand Solutions...3 Figure 2: Interest in On-Demand Manufacturing and Supply Chain Applications.4 Figure 3: Percentage of Companies that Would Consider an On-Demand Manufacturing Planning or Scheduling Application, by Company Size...5 Figure 4: Benefits from On-Demand Supply Chain and Manufacturing Software.6 Figure 5: Implementation and ROI Times for On-Demand Solutions...7 AberdeenGroup

7 Chapter One: Manufacturing Software Challenges Many companies are seeking to deploy manufacturing technology to improve manufacturing productivity in the face of global competition, to satisfy increasingly rigorous and dynamic customer demands, or to support business growth without having to invest in additional labor and equipment. However, the prospect of undertaking a traditional software implementation and dealing with all the related IT requirements and operational disruptions can be daunting. Aberdeen benchmark research is finding that many organizations are now considering a new alternative: using on-demand software. Unlike traditional on-premise applications, which are paid for upfront and installed inside your company, on-demand applications are hosted at the vendor and are typically paid for through a monthly subscription model. On-demand applications are also often called software as a service or SaaS. Much has been said regarding on-demand s capacity to deliver value in the customer relationship management space, with vendors such as Salesforce.com. But less wellpublicized has been the success companies are having with on-demand applications in the manufacturing and supply chain realm. Notably, Aberdeen research is showing that users of on-demand manufacturing and supply chain software report much quicker implementations, faster return on investment (ROI), and the ability to deploy software with radically lower IT requirements. The Challenges of Traditional Software Approaches Although the prospect of installing a traditional on-premise software application in your manufacturing operation might appear to be an appropriate path to follow towards technology innovation, in practice it confronts a myriad of obstacles. The two most frequently cited concerns are: (1) a lack of IT resources to implement and support a new application, and (2) the length of time it takes to get a system operational and achieve return on investment. IT Resource Shortages In a recent study conducted by Aberdeen of 180 North American and European companies, 69% of respondents said they were interested in using on-demand software for their manufacturing or supply chain operations because it would reduce IT resource requirements to implement and operate the solution. Today, many companies simply cannot free up enough IT resources to tackle valid business application requirements from the manufacturing and supply chain organization. Common causes include: IT staff is consumed with an ERP implementation or an ERP upgrade project IT staff is stretched thin maintaining and enhancing the company s core legacy applications AberdeenGroup 1

8 IT staff is focused on other areas of the business (e.g., customer data management projects or sales and marketing application enhancements) and view manufacturing projects as a lower priority IT staff lacks the bandwidth to ensure installed applications are upgraded regularly, so business users often don t have the latest functionality at their disposal IT application implementation, database administration, and data center operation are not a core competency of the enterprise (an especially frequent occurrence at smaller companies) On-demand applications minimize the dependence on internal IT resources by virtually eliminating software maintenance and upgrade tasks as well as greatly reducing initial implementation requirements. As a result, many manufacturing executives are discovering that they can use on-demand applications to solve business problems today, versus having their valuable projects pushed to the back of a very long line of planned IT projects. On-demand applications minimize the dependence on over-stretched internal IT resources and reduce the overall risk of software implementation. IT organizations are also seeing the advantages of on-demand applications, viewing them as a new way of meeting their business users evolving requirements without disrupting current IT projects. On-demand systems can also help the IT department realize significant productivity gains. The IT staff hates running around deploying drivers and upgrading systems, so having [the administrative functions available] in a browser will save us so much time, says the MIS director of a food manufacturer that has switched to an ondemand manufacturing scheduling application. And we like the managed service model, so we don t have to be DBAs. Lengthy Implementations and Time to Value The second key driver of on-demand interest is the prospect of faster business value; 63% of organizations say they are intrigued by on-demand applications because of the prospect of much faster time to ROI and speedier implementations. Many companies have been disappointed by the length of time it has taken them to install their on-premise applications and achieve payback. Others feel tarnished by having paid upfront for software that did not delivery on its functionality or business value promises or that simply was not well-embraced or employed effectively by users. More and more companies are deciding that they cannot risk software implementations that stretch for quarters or even years, disrupting the business and draining IT resources. They also are uneasy with the risk that an on-premise application may not even deliver ROI or be accepted by end users. On-demand applications are rapidly accelerating companies return on investment and making it possible to solve business problems in much shorter time spans. And because on-demand applications are paid for as you use them (frequently on a subscription basis) versus having to pay upfront for new software and hardware, there is a much lower exit cost if the software does not meet business or user adoption expectations. 2 AberdeenGroup

9 Payment Challenges An added benefit of the on-demand model is that it makes it possible to deploy new technology even when capital budgets are tight. Being able to pay a subscription fee and expense it as an operating cost versus as a capital expenditure helped push through the case for our on-demand supply chain application, explains one user. On-demand s one monthly fee often includes ongoing application usage, maintenance and upgrades, support, and server hardware and database software. IT personnel are no longer logging hours on an installed application as all software maintenance and upgrades are done by the on-demand vendor. Assessing On-Demand Interest The majority of companies surveyed by Aberdeen say they now use or would consider using on-demand solutions in the future to manage select portions of their supply chains and manufacturing operations. Overwhelmingly, companies are attracted to on-demand technology because they want an application deployment model that requires fewer IT resources to implement and maintain and a faster time to value for their supply chain technology investments (Figure 1). Figure 1: Pressures Driving Companies to Consider On-Demand Solutions Fewer IT resources required to implement and operate on-demand solution Seeking faster implementation and ROI from ondemand model 69% 63% On-demand lets us always be on the most current software version and avoid technology obsolescence On-demand lets us manage business processes that straddle multiple ERP or planning systems 38% 37% 0% 20% 40% 60% 80% % of Respondents that Say Highly Influential in Causing Them to Consider an On-Demand SCM Application Source: AberdeenGroup, August 2006 In addition, unlike in some other enterprise application areas, interest in using on-demand applications in supply chain is similar across all sizes of corporations, from multi-billiondollar global organizations to $20 million manufacturers. On-Demand s Broadening Appeal However, adoption of on-demand is still in its early stages and the availability of solutions for manufacturing organizations is still not widespread. It is important to note that companies aren t moving to wall-to-wall on-demand applications today. In most cases, they are using on-demand to replace manual processes or to create extensions around their existing manufacturing or supply chain IT investments. Supply chain visibility, transportation management, and supplier and contract manufacturer collaboration are AberdeenGroup 3

10 some of the application areas that have gained early traction in the on-demand model, but on-demand is now spreading to other areas such as warehousing, forecasting, and manufacturing scheduling. As Figure 2 shows, the first wave of adopters has been companies that considered themselves to be above-average supply chain performers and were looking to on-demand as a way to drive more innovation, especially in externally facing processes with suppliers, logistics partners, and customers. (Note: Above average performers occurred across all sizes of enterprises, and were not biased toward large organizations.) Figure 2: Interest in On-Demand Manufacturing and Supply Chain Applications 60% 50% Plan to Use Within 12 Months Use On-Demand SCM Application Today 8% % of Respondents 40% 30% 20% 10% 20% 6% 28% 46% 0% 12% Below average supply chain performer Industry average supply chain performer Above average supply chain performer Bargain Hunters Best Practice Seekers Innovation Seekers Source: AberdeenGroup, August 2006 Currently, the market is experiencing a new wave of buying interest by below-average performers that see on-demand solutions as a less expensive, less operationally disruptive, and lower risk way to finally gain supply chain technology and catch up to their industry peers. Many underperformers see on-demand as an affordable way to introduce commercial manufacturing and supply chain software into their organizations for the first time; fully 40% of underperformers describe their current supply chain processes as mostly manual or operating off of spreadsheets. Effective manufacturing scheduling is the heart of our operations, as we turn our inventory every two days, says the IT director at a snack manufacturer that is now moving to an on-demand application. We had been doing manual scheduling through tribal knowledge but were getting increasingly concerned that our experienced planners were nearing retirement age. This company concluded that its ERP system was too cumbersome and not flexible enough not to meet its manufacturing scheduling needs. The more advanced and easier to use on-demand application is now helping the company improve inventory management, plant line utilization, and customer satisfaction. 4 AberdeenGroup

11 Chapter Two: The On-Demand Alternative At many companies, enterprise managers and executives can no longer wait for IT resources to become available to implement traditional manufacturing installed software to address pressing manufacturing needs. These needs include: Improving manufacturing productivity through better planning and scheduling Providing wider visibility for the organization and executives on current manufacturing activities and performance Providing visibility and collaboration tools for processes with suppliers, contract manufacturers, co-packers, and others in the supply chain, allowing for better planning and information sharing Enterprise Interest in On-Demand Manufacturing Software More than half of small and midsize companies, and nearly half of large enterprises, say they would consider using an on-demand manufacturing application to ease these business pressures (Figure 3). Figure 3: Percentage of Companies that Would Consider an On-Demand Manufacturing Planning or Scheduling Application, by Company Size % of respondents who use or would consider an on-demand manufacturing application 60% 40% 20% 0% 53% 54% Small (Less than $50 million) Mid-size ($50 million to $999 million) 46% Large ($1 billion+) Source: AberdeenGroup, August 2006 We wanted a way to move from spreadsheets to an interactive scheduling tool, says a director at a food manufacturer. We re a fairly small company, so using an on-demand system has been a big benefit. IT is not our core competency, so moving to an on-demand manufacturing scheduling system has given us better system security, service, and support and quicker upgrades. AberdeenGroup 5

12 For this company, the ability to adopt a more advanced manufacturing application in the course of a few months has set the company up for a number of business benefits. Because we have the flexibility to make any number of items on any day, explains the director, having a dynamic daily manufacturing scheduling application has let us cut by three-quarters the time it takes to make the schedule and it is setting us up to become at least 10% more efficient with our labor. Based on the success of the first implementation, the company plans to roll out the on-demand manufacturing scheduling application across its two other plants. Proven Benefits of the On-Demand Model Current users of on-demand manufacturing and supply chain applications report overwhelming benefits from the on-demand model, especially in implementation speed, maintenance ease, and return on investment (Figure 4). For instance, 64% of current users cite better ROI with their on-demand application, while just 3% said ROI was worse. Figure 4: Benefits from On-Demand Supply Chain and Manufacturing Software 70% 60% 50% 64% 70% 60% 50% 57% On-demand Supply Chain Applications Perform: 40% 30% 32% 40% 30% 34% Better About the same 20% 10% 0% 70% 3% Return on investment 66% 20% 10% 0% 70% 9% Implementation time and effort Worse 60% 60% 50% 50% 46% 47% 40% 40% 30% 30% 20% 19% 16% 20% 10% 10% 7% 0% Ease of upgrade process 0% Customer service from vendor Source: AberdeenGroup, August 2006 Because the upgrade process is typically handled by the on-demand vendor, except for back-end integration changes, companies find that the on-demand model lets them automatically keep current with the latest functionality and thus run more advanced supply chain processes than competitors. 6 AberdeenGroup

13 Explains a supply chain leader at an industrial manufacturer in Europe, Using an ondemand solution took the burden off our IT staff, both in initial implementation and ongoing upgrades and support. Moreover, nearly half of current on-demand users say customer service is better from their on-demand vendors than from their traditional application vendors, an outcome of the fact that on-demand vendors are on the hook every day to make sure their applications are operating well for their clients. On-demand vendors can also see what views and clicks are most popular with users and streamline access to them to ensure ongoing incremental productivity benefits for users. Faster Time to Value Most on-demand supply chain users say their software was operational in under three months and achieved ROI in less than a year (Figure 5). This is two to four times faster than typically experienced with on-premise SCM projects. We were able to drive $1 million in savings in eight months with our ondemand supply chain system, reports an executive at a mid-size consumer goods company. We re on track to see three times the return on investment in the first year, reports a supply chain director at a food manufacturer that uses an on-demand manufacturing application. We ve done analysis that shows us that giving our managers 20 more hours per week on the floor versus in the office translates into more than half a million dollars in savings annually, says the director of product support at a well-known candy manufacturer. By moving from spreadsheets to an on-demand manufacturing scheduling system, the company estimates its will regain 20 hours of management time and 20 hours of clerical time per week. Figure 5: Implementation and ROI Times for On-Demand Solutions Implementation Time with On-Demand SCM More than 6 months, 16% Time to ROI with On-Demand SCM More than 2 years, 9% 1-2 years, 26% 6 months or less, 35% 4 to 6 months, 23% Less than 3 months, 61% 7 to 12 months, 30% Source: AberdeenGroup, August 2006 AberdeenGroup 7

14 Because on-demand applications can be up and running much quicker and typically with lower training requirements than traditional applications, companies also find them easier to implement even in very busy execution environments. Another key value point expressed by users is the built-in role-based views available with most on-demand solutions. For instance, an on-demand manufacturing solution will typically come complete with different views of the manufacturing schedule for different people within the organization, such as purchasing, shipping, warehouse, and production. For instance, giving the purchasing group easy visibility into more accurate manufacturing plans will help minimize unplanned changeovers due to raw materials shortages. Similarly, the warehousing operation will be able to improve its labor scheduling, enhance throughput, and speed up shipping times. Top Enterprise Concerns with On-Demand Systems Despite the mounting evidence that on-demand solutions provide a faster time to value, market adoption is embryonic. What s preventing more companies from adopting ondemand applications? Study participants were asked to identify the top three adoption challenges and the most effective responses to those challenges. The biggest barriers identified were data security, system uptime, and integration concern. However, Aberdeen research shows that companies and their on-demand providers have been able to effectively mitigate these issues in most cases. Data Security Concerns. An increasing number of companies are finding on-demand applications secure enough to process even their most sensitive product data and financial transactions. For instance, on-demand platforms are gaining widespread adoption for automating the invoicing, financing, and Many companies find that on-demand hosting environments provide superior availability and reliability over what their internal corporate IT departments can provide. payment processes between companies and their suppliers. Once companies investigate the role-based security technology and policies that most on-demand vendors have in place, the data security issue quickly comes off the table. System Uptime Concerns. It may be surprising to many, but Aberdeen benchmark research finds that about three times more enterprises report that their ondemand supply chain solutions outperform their on-premise applications in system availability and uptime than under perform. To ease any lingering concerns about on-demand system reliability, compare the uptime and availability of internal systems, if tracked, to that of the on-demand vendor s documented performance. Many on-demand vendors invest in specialized resources either in their own data centers or via a third-party hosting provider that can address system reliability, availability, and security challenges better than their customers internal staffs. These providers are in the business of delivering continual, reliable service, which means they have skilled resources, engineered hardware and network redundancies, automatic failover for clustered servers, stand-by power generators, up-to-date security management and intru- 8 AberdeenGroup

15 sion detection, and so on. They can leverage these investments across multiple client companies whose resources may not allow the same investment. As a result, many companies find that on-demand hosting environments provide superior availability and reliability over what their internal corporate IT departments can provide, and for a lower solution fee and operating cost. For instance, one large company saw computer viruses and worms crash its internal IT systems, including its tier 1 ERP system, but found that its planners were able to still keep working by going to Starbucks and logging into the on-demand manufacturing system via the Internet. A small food company concurs, We get better system protection with our on-demand manufacturing system than we could internally. Integration Concerns. A common misconception about on-demand systems is that they don t integrate well into back-end systems. This is typically not true. Many SaaS vendors can support a spectrum of integration approaches to a company s internal systems. These may range from spreadsheet uploads and downloads to EDI document exchange to real-time, bi-directional, XML-based Web services. We were able to implement our on-demand manufacturing system, including back-end integration, in just 10 weeks, reports the IT director at a mid-size snack foods company. Demand and inventory levels are downloaded from our Oracle [formerly J.D. Edwards] ERP system into our on-demand manufacturing system. Our on-demand system creates the manufacturing schedule, which is then uploaded back to the ERP system. As Aberdeen benchmark research shows, quick implementation times of one to three months is the norm for on-demand supply chain applications. Indeed, a manufacturer of dairy products reports that it was able to implement its on-demand manufacturing system in just five weeks. Look for an on-demand vendor with a proven track record in your preferred integration method, ideally with integration experience to your brand of enterprise systems. Also, ensure that the on-demand vendor or its third-party hosting provider has the appropriate network and communication links to support your desired integration approach, such as a dedicated VPN to enable two-way integration into your on-premise ERP system. Total Cost Model for On-Demand A common misconception about ondemand systems is that they don t integrate well into back-end systems. This is typically not true. Most on-demand solutions promise a lower up-front investment as well as a lower total cost of ownership (TCO). Based on Aberdeen research, more than half of the supply chain managers surveyed believe that on-demand cost savings don t stop with lower initial investment and installation costs. Over the course of the system s lifecycle, a slight majority believe that TCO will also be lower. Sometimes the TCO analysis is very straight-forward: AberdeenGroup 9

16 A consumer goods manufacturer that switched to an on-demand supply chain management system found that its new subscription payments cost it less than what the company had been paying in annual maintenance costs and biannual upgrades for its previous on-premise application. A CIO at a high-tech manufacturer says that its on-demand system cut its TCO by 35% by enabling it to retire the mainframe that its legacy application ran on. The company uses the on-demand solution to manage demand-supply synchronization across suppliers and customers, including across 11 internal facilities and thousands of suppliers globally. For other companies, evaluating TCO is not as simple. Companies often struggle to create an accurate TCO comparison for an on-demand application. An accurate comparison requires a net present value analysis on payments because of the subscription or transaction based pricing used for most on-demand solutions. But it also requires a full comparison to a company s traditional in-house costs such as upgrading installed software; creating, maintaining, and trouble-shooting trading partner connections; acquiring, implementing, and monitoring hardware; staffing an IT help desk, including turnover costs; and accessing internal IT staff to configure and code changing workflow or reporting requirements. Companies with constrained IT resources today or that lack the capacity to staff and run high-performance application data centers should also place additional consideration on the improvement in uptime performance and security that an on-demand system can bring. No matter the TCO result, this metric should be just one of many decision factors related to which vendor to choose and what deployment method to use. A low TCO on a legacy application that no longer meets the demands of the business or on an on-premise commercial solution that lacks the flexibility and functionality to support business change is a worthless comparison. 10 AberdeenGroup

17 Case Study: On-Demand Manufacturing Success Story Wise Foods, a leading producer of salty snack foods, was challenged by a manualintensive and error-prone scheduling process. It used to take 10 hours to build a schedule three hours of preparation, five hours to build, and two hours to create a materials plan, says the company s director of logistics. The company considered using its Oracle (formerly J.D. Edwards) ERP system for scheduling but evaluation showed that it was not flexible enough, too text intensive, and cumbersome for users. After extensive evaluation of their system options, Wise Foods chose an on-demand manufacturing scheduling solution called OnePlan Factory Scheduler, from Ross Systems. Ross offered a real-time, GUI drag and drop process that had robust rules capabilities, explains Wise s IT director. They also had an experienced implementation team that helped us improve our processes and adopt several best practices. With OnePlan, scheduling beginning to end takes one hour (versus 10 hours under the manual process). We are now producing to order, explains the logistics director, and as changes occur throughout the day, we can adjust on-the-fly using OnePlan s graphical planning board. Other benefits achieved include: Reduced inventory by 40,000 cases from 142,000 to 102,000 while maintaining a 99.6 percent service-to-sales level Reduced short shipments from thousands of cases per day to a mere handful Reduced the number of stales and damages Dramatically cut labor costs by predicting needs more than 24 hours in advance, saving $600,000 annually Cut changeovers by 35 percent across packaging and processing lines The system has also created new revenue opportunities. We re now able to handle work we would have had to turn away before, says Wise s logistics director. We were recently able to accept a 48-truckload promotion from Shaw s Markets, allowing us to increase revenue and improve shelf-space with a key customer. AberdeenGroup 11

18 Chapter Three: Recommendations for Action For less startup capital, lower implementation time, and fewer IT resources, on-demand manufacturing and supply chain applications can deliver business value. On-demand applications are not appropriate for all organizations, but they are an option that most companies should explore for at least limited portions of their operations. Companies adopting on-demand applications in the manufacturing area commonly have one of the following attributes: Are seeking to automate previously manual-intensive processes, such as spreadsheet-based scheduling Are looking to replace aging home-grown applications and reduce IT maintenance costs and requirements Are looking to create extensions around existing ERP and supply chain application investments Need to support rapidly a new business practice or improve performance for a specific set of products, customers, or channels Have a large supplier or contract manufacturing network that needs coordination IT application implementation, database administration, and secure, high availability data center operation are not a core competency of the enterprise If your company faces one or more of these issues and has constrained internal IT resources, then it should evaluate on-demand manufacturing applications as an alternative. The level of headache you save for yourself by using an on-demand specialist is huge, says one CIO. Instead, do something with your internal resources to drive differentiated value for the business. When to Seek On-Premise Applications Companies should seek traditional license and install on-premise manufacturing applications if they: Require highly customized software Have a low-cost, high-quality internal IT data center and sufficient resources for initial and ongoing installations, integrations, and upgrades Need to support complex internal workflow with many tight integrations to corporate systems How to Succeed With an On-Demand Initiative Enterprises seeking on-demand solutions should assess which part of the market vendors are striving to serve and their strategies for doing so. For instance, a number of ondemand SCM specialist vendors are investing to meet the innovative needs of top per- 12 AberdeenGroup

19 formers while at the same time creating streamlined functionality bundles and best practice templates for below average performers. Other vendors are pursuing an on-demand strategy aimed at the mid-market in which low-cost application access trumps innovation. When considering an on-demand solution: Look to see if the vendor has a technology architecture built specifically for Web performance, security, and reliability Make sure that the vendor has proven integration capabilities to back-end systems with its on-demand offering Perhaps most important, make sure the vendor has a corporate culture of daily service does it have service in its DNA from the executive level on down? Does its hosting service have proven reliability? Is it able to take advantage of the on-demand model to make fast enhancements to applications when required? Additional Questions to Ask an On-Demand Vendor Which Web services are available for integration into customer service applications, enterprise portals, etc.? What are the options to expand usage, including internal and trading partner usage? What are the integration options and approaches into our back-end systems? What levels of role-based support are included? What is the cost of configuration, integration, and training initially and on an on-going basis (e.g., what costs are not included in the monthly subscription fee)? Are pre-built analytical reports or domain-specific business process templates available? How intuitive is the system? Will additional training, user documentation, or internal help desk support be required? Are business users able to configure and reconfigure the application and reports or is IT assistance required? What are the costs for archived data and how easily is this data accessed and analyzed? Is custom configuration or application customization needed or supported? AberdeenGroup 13

20 Author Profile Beth Enslow Senior Vice President, Enterprise Research AberdeenGroup, Inc. Beth Enslow is senior vice president of enterprise research for AberdeenGroup. Enslow benchmarks and advises companies on how they can reshape their supply chain, global trade, and manufacturing processes and technology strategies to drive business value. Prior to joining AberdeenGroup, Enslow was senior vice president of strategic development for Descartes Systems Group, a global supply chain software company. At Descartes, she led initiatives in such areas as RFID, wireless-enabled delivery, and inventory performance management. Before that, Enslow was research director at Gartner, Inc., where she ran its supply chain planning and logistics advisory practice on a global basis. She has worked for a number of other research and consulting organizations, including the Conference Board, a leading business think tank and economic forecasting organization. Enslow is also a lecturer on supply chain technology at the Center for Supply Chain and Logistics Management at York University s Schulich School of Business in Toronto. Jeff O Neill Research Analyst, Supply Chain Group AberdeenGroup, Inc. Jeff O Neill is a research analyst in the Supply Chain Group at AberdeenGroup. O Neill benchmarks and conducts research on how companies can innovate their supply chain, extend their warehousing operations and transportation processes, and develop technology strategies to drive business value. Prior to joining AberdeenGroup, O Neill served as associate editor of Modern Materials Handling, the leading publication addressing technology in the warehousing and distribution space. Before writing for MMH, O Neill experienced a myriad of journalism opportunities, working at National Public Radio, New England Cable News, and most recently, as the Boston Correspondent for HSToday magazine, a business-to-government publication addressing homeland security concerns. O Neill holds a bachelor of arts degree from Williams College. 14 AberdeenGroup

21 About AberdeenGroup Our Mission To be the trusted advisor and business value research destination of choice for the Global Business Executive. Our Approach Aberdeen delivers unbiased, primary research that helps enterprises derive tangible business value from technology-enabled solutions. Through continuous benchmarking and analysis of value chain practices, Aberdeen offers a unique mix of research, tools, and services to help Global Business Executives accomplish the following: IMPROVE the financial and competitive position of their business now PRIORITIZE operational improvement areas to drive immediate, tangible value to their business LEVERAGE information technology for tangible business value. Aberdeen also offers selected solution providers fact-based tools and services to empower and equip them to accomplish the following: CREATE DEMAND, by reaching the right level of executives in companies where their solutions can deliver differentiated results ACCELERATE SALES, by accessing executive decision-makers who need a solution and arming the sales team with fact-based differentiation around business impact EXPAND CUSTOMERS, by fortifying their value proposition with independent fact-based research and demonstrating installed base proof points Our History of Integrity Aberdeen was founded in 1988 to conduct fact-based, unbiased research that delivers tangible value to executives trying to advance their businesses with technology-enabled solutions. Aberdeen's integrity has always been and always will be beyond reproach. We provide independent research and analysis of the dynamics underlying specific technologyenabled business strategies, market trends, and technology solutions. While some reports or portions of reports may be underwritten by corporate sponsors, Aberdeen's research findings are never influenced by any of these sponsors. DO NOT DELETE THE SECTION BREAK BELOW THIS PARAGRAPH AberdeenGroup 15

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23 AberdeenGroup, Inc. 260 Franklin Street Boston, Massachusetts USA Telephone: Fax: AberdeenGroup, Inc. All rights reserved August 2006 Founded in 1988, AberdeenGroup is the technologydriven research destination of choice for the global business executive. AberdeenGroup has over 100,000 research members in over 36 countries around the world that both participate in and direct the most comprehensive technology-driven value chain research in the market. Through its continued fact-based research, benchmarking, and actionable analysis, AberdeenGroup offers global business and technology executives a unique mix of actionable research, KPIs, tools, and services. The information contained in this publication has been obtained from sources Aberdeen believes to be reliable, but is not guaranteed by Aberdeen. Aberdeen publications reflect the analyst s judgment at the time and are subject to change without notice. The trademarks and registered trademarks of the corporations mentioned in this publication are the property of their respective holders.