Cloud Q&A: Manufacturing and the Cloud

“Are cloud applications just focused on service firms or do solid solutions exist for manufacturers, too?”

I get this question frequently. In fact, I got it twice in as many weeks this month. Here are some realities if you’re wondering this same question.

1) Lots of cloud applications have been initially designed to be sold to service firms first with manufacturers targeted for later releases. That’s absolutely true. Why? Service firms often have less complicated functional needs (e.g., they don’t need design engineering, product costing and other industry specific solutions) and don’t need to support as many disciplines (e.g., process manufacturing, JIT, make-to-order, make-to-stock, etc.) . While it is true that many service organizations need applications like resource management and dispatching, not all do. As a result, vendors can get a product line to market quicker if they take on service buyers first.

2) However, you should not infer that there aren’t solid manufacturing solutions out there. Check out Plex Systems (Auburn Hills, Michigan) as they have hundreds and hundreds of manufacturers in their install base. Plex is a cloud-based, multi-tenant solution with a fairly full discrete ERP solution set. Even SAP has produced a very robust cloud-based product line marketed under the Business ByDesign name.

3) Several service software solutions are actually quite robust. In the last few weeks, I’ve taken briefings with TOA Technologies and other service and field service providers. TOA (Time on Arrival) is a cloud solution that is targeted for service firms with large mobile workforces. Their customers include pest control, cable television, home health care, and even big box retailers. They’ve created apps to run on iPads and utilize IVR (interactive voice response) technology.

4) A number of HR cloud solutions work equally well in service or manufacturing environments. In fact, these products are often some of the most impartial solutions out there (along with financial software and other horizontal applications) with regard to industry or vertical orientation. If your firm is interested in the cloud but wants to limit its initial experimentation with cloud applications, then look at horizontal applications like Salesforce.com (CRM), NetSuite, FinancialForce, Taleo, etc. You can add manufacturing capabilities in the future.

5) Can cloud ERP provide the 24/7 uptime that global manufacturers may require? Every cloud solution I have seen has scheduled downtime built into the service. This time is required to facilitate upgrades, patches, etc. Are these windows too wide for some firms? They could be but that’s something every manufacturer will need to cover with cloud providers. What many cloud customers don’t realize is that vendors do not convert all customers simultaneously to a new version of the software. Customers often get many upgrade windows to choose from and should be able to find one that works with their production schedule. Interestingly, when I hear of companies that need 99.9999% uptime, I often find that this statistic doesn’t cover scheduled maintenance or it suggests that the customer is not staying current with new software releases and upgrades.

6) Do some applications (like inventory picking, design engineering, etc.) have so much I/O that a local, on-premise solution is preferable to a cloud-based product? My good friend and colleague, Tom Ryan, and I have been debating this lately. Not every plant or distribution center has high-speed Internet. Some applications need virtually instantaneous updates and when the Internet speed and latency of communicating to a remote cloud center add delays, these applications may not be a good fit for some firms. Internet access is becoming ubiquitous but it's not as fast as some firms need everywhere. So, this point is one that may become less and less relevant over time, but for now, it must be reviewed on a facility by facility basis.

7) Can a hosted ERP manufacturing solution run on the cloud? There are cloud ERP solutions that are actually on-premise solutions that are available in a hosted option. They likely are not pure multi-tenant solutions and will likely have higher long-term maintenance costs. However, these solutions can be appealing to those manufacturing ERP buyers who want a lower upfront capital expenditure solution and lots of functionality but are not finding the immediate pure-play, multi-tenant SaaS cloud solution of their liking.

Bottom line: True cloud applications are abundant in horizontal applications and for service firms. There are fewer full-bodied, multi-tenant cloud apps for manufacturers but they do exist and more are coming. Soon!

UPDATE (11/23/2010): I inadvertently forgot to mention one more cloud ERP solution: Rootstock. Rootstock has developed an ERP offering that is built on the NetSuite platform and integrates tightly with NetSuite's financial and CRM software.