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Capitalizing on the cloud How migrating can benefit manufacturers and distributors

MANUFACTURING INSIGHTS  | 

A growing number of companies are moving data and business applications to the cloud with the potential of increased flexibility and decreased costs through diminished need for infrastructure, staff and software. Information is stored in a central repository, allowing multiple facilities to access data and information through a single portal. Several cloud strategies could potentially make sense for manufacturers and distributors, although the right timing and implementation strategy are always key considerations.

These technologies have matured and are being adopted by enterprises large and small. Strategies typically consider three levels of cloud offerings:

  1. Software as a Service (SaaS) – Applications delivered to the end-user directly from an external host provider over the Internet (example: NetSuite®, Microsoft Dynamics® CRM, Microsoft Office 365TM, etc.)
  2. Platform as a Service (PaaS) – External host vendor provides for the support of the entire application environment—development, testing, deployment, run-time, hosting, delivery (example: Microsoft Azure, Google, etc.)
  3. Infrastructure as a Service (IaaS) – The delivery of infrastructure resources such as computing, storage and network—as a service by external vendors (example Rackspace, AT&T, McGladrey, etc.)

It is important to realize that these offerings are building blocks with IaaS as the foundation (as depicted below). IaaS can be procured as a separate service but is included if you contract for PaaS or SaaS services. Similarly, IaaS and PaaS are included if you contract for SaaS services.

Software as a service (SaaS)
A SaaS solution allows companies to purchase and utilize software on demand in the cloud. Several very robust traditional and manufacturing-centric applications have been developed that can be purchased and deployed as cloud-based solutions. With Office 365 and other desktop applications now offered online, companies do not have to make a significant upfront capital software investment, and can quickly adjust use up or down for seasonal business needs. These cloud applications also reduce the amount of IT staff and infrastructure needed to maintain the solution. Upgrades are handled remotely and only a Web browser, router and Internet connection are needed to access software from a warehouse, office or factory floor.

SaaS applications such as NetSuiteTM enable organizations to run their entire business value chain—ecommmerce to marketing to lead to quote to fulfillment to cash—in a single source platform without the need for infrastructure. SaaS strategies also provide more effective collaboration across facilities. For example, if a company utilizes SharePoint® in the cloud, it is easier to share important documents, processes and procedures versus each facility maintaining their own IT staff and SharePoint sites. Multiple locations don’t have to be physically part of the same wide area network (WAN) to enable collaboration.

Platform as a service (PaaS)
PaaS solutions facilitate the hosting and operation of custom applications in the cloud, as companies rent the back-end software licenses that are required for use. For example, licenses can be obtained from Microsoft for SQL Server® or Windows Server® to host a custom application. Operating systems, server systems, the database and other technical components that are a part of the application or required to make an application run, can be provisioned through the cloud via PaaS solutions.

Infrastructure as a service (IaaS)
IaaS platforms provide companies with virtual storage and hardware, deploying systems in a public or private cloud environment. IaaS allows you to redistribute your IT resources that are dedicated to in-house on-premise infrastructure. In addition to gaining additional resources, this strategy also enables quick and easy seasonal fluctuations as your needs scale. Organizations can implement more servers or SAN disk space without needing to place an order for hardware.

Managing needs as the company evolves
With the improved economy, many mergers and acquisitions are occurring in the manufacturing and distribution industries. Whether a company is scaling up because of a purchase or scaling down through a divestiture or a sale, cloud-based solutions are often more affordable rather than buying perpetual licenses up front. Under a cloud solution, usage can be dialed up or back as necessary—this capability gives you more agility to adjust your IT footprint, based on the current needs of the business.

Timing is critical
It is important to time your move to a cloud environment to coincide with significant business initiatives or technology capital investments (i.e. technology refresh, core system replacement, etc.). You will not realize immediate payback if you have sunk investments that will, for example, require you to purchase additional software licenses when you may have already invested in perpetual licenses or technology that has not achieved end-of-life.

The most effective cloud deployments involve moving a significant amount of software and infrastructure at once (or in a short timeframe) usually in conjunction with a large-scale business or technology transformation. If a company staggers movement to the cloud, personnel (and the associated costs) are still needed to manage on-premise solutions as they wait for migration and those resources and funding must wait for deployment to other areas.

An optimal time to move to the cloud is when you are planning a major transition, such as replacing your ERP solution. If new licenses must be purchased for the company, cloud solutions should be evaluated. If you have aging PCs and servers and are considering an upgrade, that is a great time to look at IaaS solutions. Finally, if you are performing a merger or acquisition and must purchase additional perpetual licenses or move employees to a new system, the cloud frequently makes financial and operational sense.

Conclusion
Migrating to the cloud presents a host of potential benefits for manufacturers and distributors including cost savings, increased collaboration and reductions in IT staff and infrastructure. The per-use cost model of the cloud and remote storage and maintenance allow organizations to reallocate funding and resources to other integral functions of the business, rather than IT. However, companies must know when to act to obtain maximum financial benefits and must understand available (and proven) cloud options to implement the right solution.

For further information, please contact Jim Klimkowski, Regional Leader Great Lakes – Technology Consulting, McGladrey LLP and Dean Evans, Infrastructure Practice Leader – Technology Consulting, McGladrey LLP.