Cloud computing moves toward the factory

The software-as-a-service (SaaS) model is well established in some enterprise software markets. Need a SaaS-based customer-relationship management (CRM) solution?—the vendor widely credited with popularizing SaaS—stands ready to serve you. In the enterprise resource planning (ERP) space, NetSuite is thriving under SaaS...
By Roberto Michel, Senior Contributing Editor September 1, 2009

The software-as-a-service (SaaS) model is well established in some enterprise software markets. Need a SaaS-based customer-relationship management (CRM) solution? —the vendor widely credited with popularizing SaaS—stands ready to serve you. In the enterprise resource planning (ERP) space, NetSuite is thriving under SaaS, while for human resources management, Workday has become a force.

Under the SaaS model, users pay a subscription, either monthly or yearly, to access applications hosted in the vendor’s data center. Because users are accessing remote applications, this model is also referred to as "cloud computing."

The model has many virtues, most related to cost and ease of implementation, but when it comes to the challenges of running manufacturing and certain aspects of supply chain operations, many industry observers say cloud computing doesn’t provide sufficient cover.

Some of that sentiment is changing, however, with the entry of more manufacturing-focused SaaS vendors. Some of these vendors are startups; while others are long-time industry players now offering SaaS versions of existing solutions.

New SaaS vendors include Amitive, a vendor of a collaborative platform for supply chain management, and Rootstock, a vendor of manufacturing solutions built on NetSuite’s platform. Other relatively new SaaS vendors with a manufacturing bent include Tuppas Software, which offers ERP and factory execution, and Manuvis, a manufacturing intelligence specialist.

Perhaps the "first-mover" in SaaS-based manufacturing solutions is Plex Systems, whose suite spans ERP, shop-floor, and quality functions.

In short, the notion that SaaS works well for CRM and fairly generic ERP functions such as financials and order entry—but not manufacturing—is fading.

All SaaS vendors concede that their ultimate success in the market depends on their ability to overcome some critical challenges, such as:

  • Making it easier for their applications to integrate with all the applications companies currently rely to run their businesses; and

  • Delivering solutions that can be easily configured to support any company’s unique business processes.

For Orthera, a maker of custom orthotics—and one of Amitive’s first customers—flexibility was just as important as avoiding the IT hassles that typically come with purchasing and installing a solution on the user company’s premises.

Orthera, based in San Mateo, Calif., custom configures its products for each customer, based on a scan of the customer’s feet taken at Orthera’s retail partner locations.

Orthera is a recent start-up, and Thomas Pichler, CEO, says the SaaS model has made it easier for the company to land new customers.

Unique user needs

For instance, Pichler says, "We were closing a deal with a very large, warehouse-style retailer, and needed a Web-based solution to avoid having the retailer install and maintain the software at each individual store. Moreover, as a small company, we recognized the efficiency and cost savings of having an end-to-end solution that would span all business processes, including: order creation directly at retail locations; order validation at Orthera headquarters; creating manufacturing work orders; tracking orders through production; and managing shipments. We couldn’t do all that with an on-premise solution."

Amar Singh, president and CEO of Amitive, says Amitive’s solution is a highly configurable, SaaS-based application platform rather than a narrow SaaS application. While SaaS experts talk about "multi-tenant" architectures that allow the vendor to centrally store configurations unique to each user company while maintaining one single version of the software, Singh says Amitive’s architecture takes this concept further. It does this, he says, by eschewing predefined data structures, instead using rules and workflow settings to adapt the software. Singh contends this allows Amitive’s platform to be molded rapidly to many scenarios.

For Orthera, Amitive needed to support a unique business model: selling via retail locations where foot scans would be conducted and orders placed via Web kiosks, with manufacturing and fulfillment handled in a matter of days by Orthera and its partners. Pichler says Amitive’s platform didn’t force any changes on the envisioned business process. "Because this kind of business model was unheard of just a few years ago, taking any off-the-shelf software product with a pre-defined data structure meant that we would have compromised the very nature of how we run our business and what we promise the customer," says Pichler, Orthera’s CEO. "Retrofitting an existing solution—if it could be done at all—would have resulted in not only higher cost to us, but more importantly, compromising the consumer experience."

One other big reason SaaS makes sense, says Pinchler, is Orthera’s inherently inter-enterprise business model. As Pichler puts it, "SaaS lends naturally to moving information across multiple organizations and systems."

Ray Wang, a long-time industry analyst and now a partner at the Altimeter Group, sees SaaS catching on across nearly all categories, but especially for "innovation-focused" business functions that were not the original focus of solutions like ERP or manufacturing execution systems (MES). "I’m seeing SaaS solutions having very much success in areas that are all about innovation, but not as successful when it’s a replacement decision," he says.

At Frank Foodservice Systems, a Smyrna, Tenn.-based manufacturer of equipment for the restaurant industry, a SaaS-based electronic kanban solution has helped cut inventory turns, says Christian Zweifel, Franke’s VP of manufacturing technology. The kanban solution from Ultriva is integrated with materials data from two key suppliers to manage lean replenishment, says Zweifel, and will be rolled out to more suppliers in the future.

The SaaS-based solution has just two points of integration to Franke’s customized ERP solution, says Zweifel, both related to the opening and closing of purchase orders. Product data from the suppliers’ ERP systems also is uploaded into the system. The kanban solution also was integrated with some minimal bar-code scanning of shipments from supplier sites, and receiving at Franke’s site.

Ultriva’s Web-based software makes it convenient for suppliers to see what kanban requirements are waiting (email alerts also can be used), and both Franke and its suppliers have Web-based access to reports. The insights have helped the partners hit leaner inventory levels, resulting in a 275-percent improvement in inventory turns for goods sourced via the system.

Because kanban is inter-enterprise, it’s a good type of application for a Web-based solution, says Zweifel. But Zweifel also says the pay-as-you-go nature of SaaS held appeal because Franke’s IT department didn’t have resources to deploy an on-premise solution. "We wanted the solution to be easy from an IT perspective, and not task our IT department with new requirements," says Zweifel.

According to Wang, this low-touch nature helps drive SaaS. "Business leaders are getting more involved in making these decisions because IT might not have the budget for them, but the business unit might have enough funding," he says. "So they are thinking, ‘I could buy this without having to go through IT.’"

Handling the factory

The appeal of SaaS for supply chain management is borne out by the growing number of vendors who follow the model. For example, supply chain vendor i2 Technologies, which has offered some SaaS-based transportation solutions for close to 10 years, is expanding its SaaS offering.

The latest SaaS-based solution from i2 is Planning on Demand, a set of demand and supply planning functions targeted at fabless semiconductor companies. According to Puneet Saxena, an i2 practice director, the expansion came on the heels of an exhortation from new i2 CEO Jackson Wilson to expand i2’s market reach into growing companies. SaaS is used in other supply chain niches such as supplier and quality management, where start-up SaaS vendors include SupplierSoft. However, questions about whether the SaaS model can work on the factory floor linger. Production environments have unique equipment, assembly lines, or special data collection procedures. But SaaS is entering this environment, especially for higher-level functions such as materials planning, work-in-process tracking, engineering-change control, or manufacturing intelligence.

Can cloud platforms cover manufacturing?

Manufacturing enterprises are turning to software-as-a-service (SaaS) or “cloud” solutions in growing numbers. So, it appears that manufacturers are ready for the cloud. But this realization begs another question: is cloud computing ready for manufacturing?

While cloud solutions have caught on for business processes such as customer relationship management where workflows need to be automated, can cloud platforms stand up to collaborative manufacturing processes where partners need to crunch large data sets involving hundreds of products or suppliers, and potentially tens of thousands of parts or ingredients?

Early entrants in the cloud space—such as CRM-focused or NetSuite, which offers basic ERP functionality—say other applications, including manufacturing-oriented solutions, can be easily linked to their platforms. But some vendors contend these generic cloud platforms can’t handle heavy duty manufacturing functions.

“A cloud platform for manufacturing needs to have the capability to address very large data sets involved in supply chain and manufacturing challenges,” argues Christian Verstraete, chief technologist for HP’s Worldwide Manufacturing & Distribution Industries Group.

HP recently unveiled its cloud computing platform for manufacturing industries. The first solution—done in partnership with GS1 Canada—focuses on food recall. In a food recall scenario, notes Verstraete, instead of one end-product being at issue, it’s often a common ingredient to many products at the root of the problem. So instead of the data management challenge being limited to one product, it can cut across many product lines and all the finished goods inventory for those product lines in the downstream supply chain.

Expertise within HP Labs—the company’s research arm—was used to ensure the platform would be able to quickly gather, organize, and analyze the huge data sets that might be involved in supply chain problems, says Verstraete. “The way we built the platform was very much with whole data management aspect in mind,” he says.

Besides the food recall solution, Verstraete says, HP will look to apply its cloud platform to other supply chain and manufacturing solutions.

Narayan Laksham, founder and CEO of Ultriva, which offers a SaaS-based kanban solution, says manufacturers’ need for system reliability prompted Ultriva to build its own cloud platform. “Manufacturing solutions are mission critical,” he says. “They need to be up and running 24 × 7. If a CRM system goes down for an hour, it’s probably not the end of the world, but for a factory to lose its ability to replenish for even an hour would be unacceptable.”

Some vendors who have attached their applications to the so-called generic cloud platforms say those platforms are more than robust enough to support manufacturing operations.

For instance, Rootstock Software, a partner of SaaS-based ERP vendor NetSuite, has built a manufacturing solution on NetSuite’s cloud that handles the large data sets involved in materials planning.

Patrick J. Garrehy, founder and CEO of Rootstock, says that when he was looking at ways to bring a manufacturing-focused SaaS solution to market, “We recognized that [NetSuite’s] platform technology can support small and mid size manufacturers, as well as large companies, in a software-as-a service environment.”