How cloud ERP gets manufacturing work done

Profile picture for user Mark Humphlett By Mark Humphlett October 11, 2015
Summary:
Manufacturers seeking the agility to prosper in today's business environment are staking their future on cloud ERP, writes Infor's Mark Humphlett

Key to ERP cloud shape on blue sky © paisan191 – Fotolia.com
Not a day goes by that I don’t hear cloud deployment mentioned in the news or discussed at a conference. As manufacturers gear up for the new technologies transforming plant operations, cloud deployment is almost always a key ingredient of the strategy. Manufacturers are turning to cloud deployment for their critical operations, not just edge applications.

Cloud is changing how we do business — especially in manufacturing. As organizations strive to keep pace with mounting global competition and pressures to anticipate trends and customer expectations, organizations are turning to big data, mobility, supply chain connectivity and advanced business intelligence. These advanced manufacturing concepts require real time visibility and storage of vast amounts of data. Cloud makes it possible.

Relying on ERP

Manufacturers have relied on ERP systems as their technology backbone for at least 25 years now. From handling administrative tasks, to scheduling manufacturing processes, ERP systems have successfully managed hundreds — if not thousands — of important tasks in the manufacturing value chain. That’s a lot of history, a lot of ingrained commitment to on-premise ERP and 'we’ve always done it this way' habits.

More and more manufacturers deserve a congratulatory pat on the back for their forward-thinking ambitions and willingness to boldly move critical applications to cloud deployment. While some will say a leap of faith is required to make that move, I think the facts — not faith — provide the compelling drivers.

Manufacturers have learned their lessons from the recent economic crises that hit manufacturing so hard, causing plants closing and migration to countries with low overhead. Manufacturers seem to now realize that when the writing is on the wall, it’s time to take immediate action. Manufacturing is not a business for hand-wringers and sideline observers. It requires decisive moves in order to remain relevant and competitive. Moving critical ERP solutions to the cloud — is exactly that kind of move. It’s an important first step in a total IT modernization strategy.

Global adoption trends

Global analyst firm IDC recently issued a Manufacturing Insights report on the adoption trends of ERP solutions in the cloud, with particular focus on the Internet of Things in manufacturing. Describing the report, S Ramachandran, principal research manager, says:

Manufacturing companies need to keep looking for opportunities to migrate to a cloud based ERP in stages if not in entirety to fully leverage the advantages offered by the next generation of applications and their deployment methods available in the market today. The advantages range from better cost models to improved functionalities leveraging best practices, global performance standards and competitive SLAs that cannot be ignored.

Manufacturers simply cannot pass up such opportunities if they want to remain relevant and competitive today. Waiting to take action or simply 'testing the water' with a few solutions in the cloud will only delay the full-scale modernization that will eventually be required.

Fortunately, tech savvy manufacturers understand this urgency and are jumping in with both feet.

In a Forbes roundup of cloud computing forecasts earlier this year, global SaaS software revenues are forecasted to reach $106B in 2016, increasing 21 percent over projected 2015 spending levels. The article goes on to cite a Goldman Sachs study which projects spending on cloud computing infrastructure and platforms will grow at a 30 percent CAGR from 2013 through 2018. Enterprise on premise software sales are only expected to increase by five percent In the same period.

Look to the future

Analyst firm Gartner also discusses the topic in an item on the emergence of postmodern ERP, saying, “By 2018, at least 30 percent of service-centric companies will move the majority of their ERP applications to the cloud.”

Gartner also acknowledges manufacturers are turning to hybrid solutions for critical deployments, choosing to keep some functionality on premise. This will undoubtedly evolve, says Nigel Rayner, research vice president at Gartner:

Longer term, over the next 10 years and more, we envision a scenario where more of the market 'flips' to the cloud. Instead of having on-premises core solutions that are complemented by innovation or differentiating processes being supported in the cloud, some organizations will move all their ERP functionality to the cloud. These won't be single vendor megasuites but instead will be loosely connected solution suites of cloud functionality, which will create new integration challenges for IT.

If you haven’t yet devised your plan for modernizing your IT infrastructure — and your ERP solution — now is the time to engage. Cloud deployment offers advantages that manufacturers need such as greater efficiency, reduced costs, and faster time to value. In the cloud, you get the parts of an ERP system you want, without wasting time, money, or effort on the parts your business doesn’t need. And, you’re spared a lot of IT staffing headaches because your cloud partner handles integrations, migrations, security, and hosting for you. Updates are also easy and deployed automatically — so you can remain competitive in today’s rapidly evolving technology world. No wonder everyone’s talking about it.

Image credit: Key to ERP cloud shape on blue sky © paisan191 – Fotolia.com.