A model that boosts affordability

Software-as-a-service makes the acquisition of enterprise applications, otherwise out of reach, possible for smaller manufacturers.

For smaller manufacturers that may consider enterprise applications too costly to implement or too complex to use, the software-as-a-service (SaaS) delivery model could be the answer.

Under the SaaS model, a software vendor hosts and operates the application, either independently or through a third-party, for its customers to use over the Internet. Rather than purchase the software outright, customers pay a subscription fee or only when they use the software.

Balaka Baruah Aggarwal, manager of emerging services at Springboard Research, said small manufacturers can enjoy great value for money through SaaS because of two key reasons. First, he said, it cuts down the entry barrier because of low upfront costs.

"This has enabled many small companies to adopt IT applications for the first time," Aggarwal said in an e-mail interview. Second, he said, SaaS is easy to use and manage.

"Its plug-and-play nature makes it convenient for any customer to just login and start using the application," he added.

Some choices that promise manufacturers affordability
Various software vendors have come up with packages that cater specifically to smaller manufacturing service providers.
For instance, Oracle's Accelerate program aims to enable midsize manufacturers with limited resources and IT personnel, to adopt software that address critical, industry-specific business needs.
Oracle said this offering--provided through its partners--allows midsize manufacturers to manage industry-specific processes and key business operations such as human resources and finance and accounting, in a more affordable and scalable way.
SAP also recently announced its "Fast Start Program" that it said lets midsize companies view features and specifications of the software vendor's products, and receive an immediate online cost estimate through the SAP Business All-in-One Configurator.

    Jasbir Singh, general manager of manufacturing, retail and distribution division, Oracle Asean, noted the growing interest in SaaS among midsize organizations, especially for managing sales and customer relationships.

    According to Aggarwal, the increase in awareness is because midsize companies have the right level of technology exposure and are more willing to experiment with innovative technology.

    However, he said, uptake has been slower among very small companies with fewer than 100 employees.

    Debashis Tarafdar, Asia-Pacific senior research manager at IDC's Manufacturing Insights, noted that because each manufacturer's business environment is different, the need to tweak SaaS applications to suit each manufacturer's needs, has hindered large-scale adoption.

    "The key challenge is to fit the SaaS workflow with the various business entities, and achieve the level of integration required, at an affordable cost," said Tarafdar.

    Graham Sowden, Asia-Pacific senior vice president at Informatica Southeast Asia, said the main impediment midsize companies encounter during an SaaS deployment, is usually data integration work between SaaS applications and backoffice systems.

    This is especially the case for retail and manufacturing businesses, where expediting an order for delivery is crucial, Sowden said in an e-mail interview.

    He added that Informatica offers data integration services similar to SaaS CRM applications. The hosted, Web-based services are offered on a subscription and "pay-as-you-go" basis, he said.

    For Oracle, its applications are supported via a "hybrid" approach based on the hosted SaaS model, as well as an on-premise delivery platform. According to Singh, the company is seeing increasing adoption of its CRM On Demand offering across the Asia-Pacific region.

    Diane Fanelli, SAP Asia-Pacific and Japan's senior vice president of industries and solutions, pointed to midsize manufacturers as a fast-growing market segment for the software vendor.

    Its Business ByDesign on-demand business software was designed to simplify IT adoption "by substantially reducing the cost of ownership and combining efficiency with business flexibility", Fanelli said.

    The software, which aims to help companies manage backoffice work and tasks such as salesforce management or order fulfillment, is delivered and used over the Internet. Customers pay a monthly subscription, putting it within reach of companies that may not have a big IT budget, she said.