Paul Carreiro, managing director – EMEA, Infor looks at the extent to which manufacturers are embracing the cloud in 2014, and why a new generation of cloud apps are expediting adoption rates.
After years of debate and numerous predictions as to when cloud computing would reach widespread adoption, it seems that 2014 was the year where it finally came of age. With 78% of UK organisations claiming to have formally deployed at least one cloud-based service, and with saturation levels having increased by 61.5% since 2010, it is difficult to dispute claims that the ‘fluffy stuff’ has hit the mainstream.
The drivers behind this acceleration are three-fold. Firstly, a reduction in the cost of cloud computing has made it increasingly difficult for companies to ignore. Research shows that most organisations rapidly realise significant cost savings that actually increase over time as a result of the many indirect costs related to on-premise software. In fact a recent IDC study showed that cloud solutions offer an average payback period of seven months, and five year ROI of 626%, a level that few other investments can match.
Secondly the flexibility and scalability provided by cloud solutions are compelling as manufacturers focus less on cost cutting, instead placing greater emphasis on innovation in their quest to pursue growth strategies, whether that is setting up a new subsidiary operation quickly and easily, or bringing a new product to market in line with changing customer demand.
And finally the security concerns expressed in earlier debates have proven in many cases to be unfounded. On the contrary one recent study found that 94% of SMEs have actually experienced increased security benefits since moving to the cloud.
An evolving landscape
But despite its eminence, cloud adoption looks very different to the picture painted by industry soothsayers five years ago. While its value proposition has remained consistent—easy provisioning, flexible scaling and cost savings – what cloud computing represents has now evolved into something new. Early on, the term cloud was used to describe, almost exclusively, the public cloud. Today cloud computing encompasses a range of hybrid offerings.
Enterprises now have an expanded set of options. Rather than switching everything wholesale to the cloud, they can choose to manage their cloud infrastructure in-house, or opt for a managed cloud whereby their provider is responsible for the day to day management of systems. Modern infrastructures typically span a mixture of public cloud and private cloud, on-premise systems, as well as cloud-esque hardware such as bare metal servers which offer flexible server capacity.
Through taking selective, incremental steps, organisations get to maintain control over their systems, and pay only for what they actually use. Put simply, the cloud of the past was very much a one-size-fits-all concept. Today it is about designing an infrastructure which reflects specific needs and preferences.
The eye of the storm
But while the hybrid cloud approach that 2014 has witnessed offers a multitude of benefits, it does throw a number of complexities, specifically integration challenges, into the mix. Cloud applications often require integration back to core systems such as financials, CRM, order management, inventory, HR, manufacturing and supply chain. This means that the benefits of reduced maintenance and lower costs might be heavily impacted by high consultancy and integration costs. So in order for the momentum we’re currently seeing to continue, such challenges must be addressed.
The best brains in the industry have already responded to these challenges by offering cloud solutions which encompass lightweight middleware, based on a loosely coupled architecture, to ensure straightforward and low cost integration with other systems. This new breed of cloud applications also contain social collaboration to facilitate greater sharing of information, and engage millennials into the workforce; analytical capabilities which contextualise data and transform insight into foresight; and crucially, deep, end-to-end micro industry-specific functionality to eliminate the gaps associated with one-size-fits-all systems. To compound security and manage risk profiles, the market leaders are also opting to partner, rather than own, the most secure cloud environments.
The tipping point
In our experience, the cloud market is now reaching a tipping point whereby the risks of delaying a move to a cloud model are mounting. Testament to this tipping point is the fact that 90% of all UK businesses are expected to be using at least one cloud service by the end of 2015.
For evidence that the model works you only have to look at brands such as NetFlix, Pinterest and Etsy who have built their entire businesses in the cloud, and become household names within months. When pitched against costly datacentres; cumbersome agility-stifling systems; sluggish disaster recovery plans; and increasing pressure to minimise environmental footprints, it is clear that resisting change has become the dicier punt for manufacturers.