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Pulse
Market
Pulse
What are your organizations policies regarding deployment of new cloud-based applications that are not from your ERP provider?
11% We are aggressively pursuing cloud computing applications that can enhance our current systems 24% We have no formal policy regarding this
a particular proposal or request for information. By coming together within a cloud-based demand-generation app, suppliers can see a 20 percent to 30 percent increase in sales yearover-year.
In every other supply chain application category, enterprise organizations (those with revenues over $500 million) lead the way to adoption. However, small organizations (with less than $50 million in revenue) lead the way in the adoption of cloud-based demand 24% generation applications at 20 percent. EnterWe have standardized on our ERP and it is strongly prises come in second at 18 percent, and the discouraged to add new systems midmarket (revenue between $50 and $500 41% We are open to cloud computing million) at 12 percent. These organizations benapplications that can enhance efit from exposing their products and services our current systems and meet businesses needs to a network of organizations they normally wouldnt be exposed to. The Ariba Network, Source: IDG Research, March 2011 for example, connects more than 500,000 trading partners and sees more than $350 billion in ronment. The customer sends only the data it needs commerce per year. Sellers have easy access to share with partners to the cloud, where partners to buyers with money to spend who are interested in can access and respond to this data. When supply their products. chain management applications are integrated with ERP systems, buyers and sellers benefit from a robust Order management in the cloud network that enables more efficient trading relationOrganizations are also considering cloud-based order ships and collaboration across a shared community, management applications. According to the CIO survey, regardless of which back-end systems a party uses. 33 percent of organizations around the world have
deployed, are currently deploying or are very likely to deploy cloud-based order management applications, while 38 percent will possibly consider doing so in the next 24 months. These enterprises and small organizations both lead the way at 17 percent, with the midmarket trailing behind at 12 percent. In certain areas ERP can do order management and do it well. It all depends on the type of order and the complexity of the supply chain that fulfills the order. For example, services procurement (like temp labor) is not done well by ERP, because it does not allow for the interactions that tend to occur between the buyer and seller during these transactions. Cloud-based order management applications can facilitate the collaboration of a request for candidates, resume submission and proposal, counter-proposal and acceptance. Order management is typically thought of as a supplier-side element. But a cloud-based application can
Market
Pulse
How do these cloud-based applications perform against your expecations and goals?
Far exceeded expectations Exceeded expectations Met expectations Slightly below expectations Did not meet expecations at all
13%
60%
13% 13%
13%
25%
38%
13% 13%
11%
67%
11% 11%
200 or 300. Combining these two elements means poor adoption of the system and as a result, a low percentage of spend managed. Finally, ERP systems do not effectively handle advanced contract compliance during the requisitioning process. That means getting it right the first time by checking the contract during the requisition process for the approved supplier and the preferred product at the right price. Checking compliance during the invoice stage can mean the proverbial getting the horses back in the barn after the barn door is opened. This wastes time and money. Organizations are turning to the cloud to address these issues. Thirty-one percent of respondents to the CIO survey say their organization has deployed, is currently deploying or is very likely to deploy cloud-based spend management applications; and 34 percent say their organization will possibly consider deploying cloud-based spend management applications in the next 24 months. Enterprise organizations are more likely to aggressively pursue spend management in the cloud, at 11 percent. Once again, the midmarket trails behind at 7 percent. Cloud-based spend management applications are easy to use and do not require extensive training. Anyone in the organization that needs to use the application not just the ERP finance professionalcan do so. And, because they are accessible through a common platform and easy to update, companies and their trading partners are more likely to enable many more catalogs for procurement. An intuitive user interface plus more catalogs enabled for procurement means greater adoption and increased spend managed, resulting in both efficiencies and savings. Additionally, contract compliance capabilities ensure that contracts are fulfilled correctlythe right products and services are delivered for the negotiated price from the preferred vendor. With these three issues addressed, organizations see more value not only from their spend management capabilities, but also from their ERP systems. Cloud-based spend management isnt confined to catalog requisitioning. Applications that drive it can manage the entire source-to-settle process including procureto-pay activities that require collaboration between buyers, sellers and financial institutions. Organizations that use such solutions can save from 4 percent to 20 percent or beyond, based on the amount of spend
Financial Applications
19%
56%
13% 13%
Source: IDG Research, May 2011
go beyond managing the receipt and collaboration of an order to include managing the settlement process (delivering the PO electronically and automating twoand three-way matches before posting for payment) on the buyers side. A cloud-based order management solution can benefit both the buying and selling portions of the organization. Interestingly, the survey found that EMEA enterprises were generally ahead of their U.S. counterparts in implementing cloud-based order management, indicating that EMEA enterprises are more likely to reap the associated collaborative benefits.
Market
Pulse
Which of the following types of applications is your organization deploying or likely to deploy to the cloud in the next 24 months?
Already have deployed Currently deploying Very likely to deploy Possibly will consider Will not consider
able outstanding (DPO) and cash, while providing trade and receivables financing options that ensure their mutual financial healtha must in todays still recovering global economy. Interest in and adoption of cloud-based financial applications demonstrates that security concerns associated with cloud computing are on the wane. Organizations are becoming increasingly comfortable with the idea of putting data in the cloud as providers become more transparent about their security controls. With relatively few exceptions, cloud computing providers understand their customers need and desire for stringent security requirements. Many organizations especially those with limited resources, as is the case for many small and midmarket organizationsare finding that cloud computing providers implement more robust security measures than they are able to afford otherwise. They understand their application vendors disaster recovery program along with security certifications such as WebTrust and SAS 70. Its not surprising then that the midmarket is leading the way in the adoption of cloud-based financial applications at 16 percent, with enterprise adoption closely behind at 14 percent. Organizations are seeing substantial cost benefits with cloud-based financial applications. It is not uncommon to see a $15 million improvement in working capital for every $1 billion in spend. This includes a 70 percent cost reduction in invoice processing and substantial cost savings from improving compliance to contracts and preferred suppliers, along with expanding early payment discounts while maintaining or extending DPO.
7% 10%
24%
34%
25%
4% 13%
16%
38%
29%
4% 9%
18%
34%
35%
Financial Applications
8% 8% 13%
29%
42%
Source: IDG Research, May 2011
thats being managed. The more thats managed in the cloud, the more organizations save.
Market
Pulse
top three perceived cloud benefits, compared to respondents not considering moving at least one business commerce application to the cloud (47 percent vs. 29 percent). Using a technology that your company and others can come together on to share information allows you to come together much faster than you would in the past. You can have conversations with suppliers right there. Theres no need for a separate email or separate bidding package. It allows for more visibility between all trading partners, says North Rizza. The cloud is uniquely suited to provide visibility and improve collaboration when it comes to supply chain management, but cloud computing services offer other benefits as well. The majority of respondents to CIOs Market Pulse survey see cloud-based applications cost benefits (54 percent) and agility benefits (52 percent) as two of the top-three business benefits offered by the technology. Visibility and transparency are the main benefits that you get immediately [from cloud-based supply chain management]. The second part is lower cost. Its like a many-to-many environment. Its not a zillion serial emails you have to read. Its everybody coming to the table at once, says North Rizza. Buyers and sellers spend less time finding each other, negotiating and making transactions. This lowers overhead and increases profits. MarkMaster, a manufacturer of marking and identification products, has seen great benefits in this area with the Ariba Network. MarkMasters electronic orders soared from 2 percent in 2000 to 95 percent today, and e-business efforts have driven sales growth of 20 percent a year since 2000even in a mature market. During the same time period, staffing increased by only 10 percent while overhead was reduced in every facet of the business. This is a clear demonstration of cost savings and effectiveness. Of course cost savings go beyond collaboration. Most organizations are well aware of the savings that can be achieved by offloading the implementation and maintenance of applications to a cloud services provider. ERP systems require complex integration and customization, for which organizations hire costly consultants and systems integrators. However, with
cloud-based business commerce solutions there is no need to implement complex technology or procure expensive systems to run them. Configuration is easily achieved based on requirements ranging from lookand-feel and fields, to workflow and permissions. Application updates and other maintenance is automatically handled in the cloud by the service provider; no more being one or more releases behind on the latest technology. Due to the ease of integration, organizations can get up and running in weeks, compared to the months or years it can take some organizations to begin using their ERP systems. As a result, organizations can unlock more value from the significant investment in their existing ERP systems. They enable internal customers to work more efficiently by improving their access to information today, not years from now.
Conclusion
Only the largest organizations have the resources to procure, implement and customize an ERP system. However, weaknesses in ERP systems leave huge gaps in key business processes, which can hamper productivity and performance for organizations of all sizes. Cloud computing changes all of that. Moving portions of the supply chainnamely demand generation, order management, spend management and financialsto the cloud enables greater collaboration, transparency and efficiency among hundreds of thousands of trading partners on a global scale. Now companies of all sizes can benefit from an inter-enterprise operating system that lowers costs while increasing profits. Cloud computing also enhances ERP systems to provide faster time-to-value for the cloud-based application as well as the ERP system. For more information: Ariba can help your organization extend the value of its ERP systems with its collaborative commerce solutions, which combine industry-leading technology with the worlds largest Web-based trading community to help companies discover, connect and collaborate with a global network of partnersall in a cloud-based environment. For more information on Aribas offerings and the value they can deliver to your organization, visit www.ariba.com.