This research paper attempts to understand the growing importance of SaaS (software as a service) in the near future. It tries to explain the benefits of SaaS in various verticals and functions, especially in logistics and supply chain management. The paper also shows how pioneers in this industry such as Projectplace can take the lead in innovations in SaaS itself due to the very need of improvements required in any product or service which goes through a life cycle from a nascent stage to a mature stage.
Software-as-a-service, more commonly known as SaaS, is a type of model in cloud computing. Before prodding further, I will first explain cloud computing briefly. In simple terms, cloud computing is internet-based computing whereby software or any type of platform or infrastructure can be used over the internet based on demand just like some other utilities like electricity. It offers its services to be paid only on the usage basis. It is close to being a phenomenon which threatens to change the way Information Technology is used in enterprises. Though cloud computing still has many issues including data security and data ownership, these will eventually be addressed and this could pose direct threat to the ERP players (unless they too provide the solutions in the cloud). But wherever integrated solutions are not yet implemented, ERP players are facing fierce competition.
An element of cloud computing, SaaS is the most widely accepted model and has a potential to sweep the market in a most unprecedented way. SaaS is a software application hosted through the internet and accessed remotely from any internet enabled device. It is software that is hosted and owned, delivered and managed remotely by one or more service providers. SaaS model removes the burden of software maintenance, license upgrades, and high starting costs and reduces the need for having IT expertise. Its other unique characteristics are that it is highly scalable and allows application processing and data storage resources in one-to-many environment. The best part of SaaS is that it allows a user to start using an application just by being connected to the internet and subscribing to the service. It allows the user to pay on per-use basis or on a subscription basis.
With the recent recession that followed the global financial meltdown, the need to go for lean enterprise structures has become prominent. Organizations in many verticals such as manufacturing, banking, financial services and logistics and supply chain management use IT as a critical support function to increase efficiencies in their business processes. At the same time setting up an entire IT department entails huge upfront and on-going overhead costs. SaaS model promises to reduce this cost burden for the enterprises. In case where the functions are not optimally integrated, it is prudent to adopt SaaS model in order to save upfront and operating costs especially for the critical support functions such as IT management.
In this research paper I am going to present a hypothesis which will show that SaaS is the way to manage IT in the future. It will show that logistics, one of earliest industries to adopt SaaS, will drive the next generation SaaS – the SaaS 2.0.
Hypothesis or objective of study:
Fragmented logistics and supply chain management industry can be integrated better as the federated network in the next stage SaaS – the SaaS 2.0 and Projectplace can be a market leader because of its early market penetration.
For the purpose of study, I have considered logistics and supply chain management interchangeably because at many organizations both terms find different emphasis based on the scope that the subset functions of supply chain management or logistics have in different organizations.
For better clarification, I will define logistics as a function which includes planning, implementing and controlling the efficient and effective forward and backward flow of goods and services and related information between the points of origin and consumption. Further, it also includes planning and management of sourcing, procuring and conversion of raw materials and collaborating with channel partners such as suppliers or other third parties.
To show that logistics industry can be the driver for development of next generation SaaS 2.0, I have chosen the market leader in the European zone, Projectplace, as the example. The global supply chain management market itself in SaaS crossed $850 million by 2009. The total global SaaS market crossed $9 billion by 2009 with a growth rate of nearly 17%.
Projectplace, founded in 1998, was one of the world’s first companies to offer SaaS solutions. They started out with SaaS for Project Management. Started in Sweden, Projectplace now has nearly 640,000 users in about 220 countries. The company has a stable annual growth of 20% and cuts across many industries such as manufacturing, pharmaceuticals, oil & energy, logistics, education etc.
The network of players in the logistics industry or the companies which are logistics intensive, have embraced SaaS model fervently for improving their efficiencies, speeding up deliveries, lowering costs and human errors and ultimately improving customer satisfaction. In fact, the logistics and supply chain management vertical in SaaS market is among the top 15 industries who have adopted SaaS solutions widely.
The logistics network is a complex grid which comprises of trading partners performing various set of logistics related business functions such as transportation, warehousing and reverse logistics for warehousing. Most of these players in the logistics network have been adopting SaaS for specific functional processes such as order processing, fulfilment services, order tracking, warehouse management etc.
The need for the trading partners of logistics network to work together is getting more and more prominent in order to speed up the entire process of logistics and supply chain management, from the point of origin to the point of consumption for goods and services. Hence, there is a need for collaborative platform on the cloud which could provide logistics applications and also provide multi-party connectivity for the network participants. When data is updated by any one of the participants, like the data about a product return updated by one SKU (stock keeping unit), it gets updated in the database of all the relevant participants such as that in the warehouse department, in the sales unit and in the manufacturer’s unit. Similarly if the company has a corporate partnership with any courier service provider, then the relevant data should get updated at the courier company’s database indicating the time that the returned product should be picked up and delivered back at the warehouse. All this can happen in real time if the SaaS solution is provided which merges all the trading partners along with the specific functional softwares in the cloud. In short, the traditional SaaS, in addition to providing on-demand usage of software application on the internet, has the need to evolve to SaaS 2.0, which merges the network along with the process and function specific software applications in the cloud.
Projectplace has some significant case studies to quote. For the purpose of presenting data for this research paper I will briefly analyse two of them out of fifteen success stories from either the companies in the logistics industry or the logistics-intensive companies from other verticals such as manufacturing.
IMI is a global company delivering innovative engineering solutions to leading customers worldwide in niche areas. IMI group supply chain used to drive projects across the globe with its business subsidiaries and with team members spread across different locations. But IMI global supply chain did not employ a single IT infrastructure across the business subsidiaries. Group supply chain activities were becoming more and more difficult and complex as they were getting involved more in cross-division projects. IMI group supply chain started using Projectplace and some of the significant achievements noted were that it enhanced remote working environment by providing single point contact and reduced duplication of information. IMI teams also used Projectplace to disseminate information to outside vendors for tendering requests and with select suppliers to share demand forecast information in order to reduce supply lead times and inventory pile up. According to the website of Projectplace (“How do you unite a remote working environment”, n.d.), Ian Kendall of IMI global supply chain was quoted saying, “From the benefits seen so far we will continue to seek other ways in which we can use the collaboration tools other than on discrete project activities.”
With around 7500 employees and 75 locations, DPD GeoPost is the market leader in B2B parcel shipment. The company had decentralized structure and wanted to integrate it to improve efficiencies. Although core function was to parcel shipment and ancillary services, every unit did it in their own way. The challenge was to bring different systems and merge with uniform software. Lothar Preis had the responsibility to integrate the systems and chose Projectplace to do so. The first step was to centralize the access of all the documentation and because of the inherent security features of Projectplace the access to the information could be provided to external staff though the restricted access rights which would be pre-defined.
According to the website of Projectplace (“More than data storage”, n.d.), Lothar Preis was quoted saying, “Documentation of the individual steps also prevented us duplicating work. The information is also binding and the content is safeguarded. Projectplace also proved very useful for assignments and resource planning and for member administration.”
From the two case studies above it is evident that the need for increasing efficiency, reducing redundancy in information flow, connecting backward and forward with external parties and resource planning are some of the key issues that the companies want to resolve on the logistics side. Couple this with the growing need of the entire logistics industry to work in collaboration to improve efficiency and increase customer satisfaction, there comes out the opportunity to expand a SaaS 2.0 concept (as explained earlier under “The study”) in the logistics industry. The need itself will drive the service and enable the SaaS players to define the market fitment for their SaaS 2.0 solutions. Ian clearly points out that they would look for better collaborative solution in SaaS rather than using just the traditional format of SaaS for separate functions or tasks. Some of the key highlights of this research paper are:
SaaS market is growing rapidly with logistics and supply chain management industry crossing $850 million by 2009.
Logistics and supply chain management vertical in SaaS is among the top 15 verticals to adopt to SaaS solutions.
The increase in demand in logistics and supply chain management, as reflected by the market value, implies a demand for value-added and customized SaaS solutions for specific industries as the next stage of industry growth cycle.
With ancillary demand to increase efficiency in the entire industry, the logistics and supply chain management itself will drive the demand for creating federated network SaaS solutions in the cloud – the SaaS 2.0.
For market pioneers such as Projectplace, who have been providing SaaS solutions for almost a decade and a half now across many countries and industries, it is much more viable to develop industry specific SaaS 2.0 concepts. With its vast customer base Projectplace can provide the SaaS 2.0 solutions to their customers in the logistics and supply chain management industry more as upgrades and they can continue to be the market leaders.
The traditional SaaS model has reached a tipping point in the logistics and supply chain industry (as reflected by the market value) where the customers would want value-added services in order to meet the ancillary demands too.
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