Hosted, pay-as-you-go business applications are no longer just a cost-effective option for small and mid-size companies. Increasingly, these applications bring robust business computing capabilities to large and diverse workforces, some of which are spread across multiple work centers, IT environments, and countries.
As a result, more and more organizations of nearly all shapes, sizes and industries are going to the cloud. And not just for business-user applications, but for critical transaction platforms and more.
Organizations have already migrated in droves to cloud solutions that help manage basic functions like CRM, HR, and accounting. They’ve also migrated to cloud-based, data-driven applications for digital marketing, helpdesk support, and process automation.
But there’s one big, encompassing business process that the marketplace is only just now beginning to look for in the cloud: Integrated Business Planning (IBP), the enterprise-wide extension of S&OP.
Again, cloud or SaaS-based solutions have evolved rapidly from light-weight tools in the browser to consummate enterprise solutions. These include IBP platforms that deliver advanced-analytic algorithms, seemingly boundless user scalability, lightning-fast query response times, and the capacity to crunch massive data sets for clients anywhere in the world.
Yet, IBP platform providers are as a whole still competing with spreadsheets for the lion’s share of the planning and forecasting market. Of course this is changing. But still, why the lag?
Part of the answer is that it’s hard for many organizations to shake deeply entrenched practices, such as using Excel as the basis for all planning and forecasting. Also, decisions to change forecasting processes can get tied up for years among competing management concerns, especially at large organizations with big legacy infrastructures.
From Cloud Technology to Cloud Thinking
The more forward looking answer to the lag question is that cloud technology has evolved rapidly. And it is only just now that cloud thinking is starting to catch up.
Take supply chain, for example. In the cloud, you and your extended partner network are part of a streaming, social network-like exchange, similar to LinkedIn or Facebook. This, argues Abir Thakurta, VP of Global Supply Chain for Havertys Furniture, by mere association, you see and react to constant updates; and with that many members (partners) posting that many updates, a single version of the truth begins to emerge. This is a level of transparency that is simply not available in the legacy paradigm. Nor is it present in the minds of still many in the marketplace. It’s still an unprecedented way of thinking.
Nevertheless, enterprise-minded organizations are certain that both cloud and collaboration are the future. Many are taking steps to develop IBP processes and cultures. Increasingly more are also investing in best-of-breed IPB platforms that integrate with their ERP, or core transaction systems. These organizations understand that there is simply too much to gain from the cloud – or too much to risk by not migrating.
According to research by Aberdeen Group, organizations that migrate or extend analytics capabilities to the cloud are more likely to make use of a wider range of analytic capabilities than those who do not. Migrants are also more likely to reduce reliance and expenditure on IT.
From Lower Costs to Greater Collaboration
Yes, the most obvious benefits of cloud-based systems include lower IT overhead, reduced capital spending (no big upfront outlays or ongoing maintenance), flexible monthly contracts, and other commercial and financial advantages. But the much greater potentials are strategic.
Right now, the best cloud-based tools and platforms not only automate processes, such as the preparation of forecasts, they also enable multiple teams and partners to collaborate like never before. Once disparate groups can now compare plans and forecasts on a rolling basis. They can reconcile gaps, reassess priorities, or simulate the effects of proposed changes on KPIs, or on upstream or downstream partners. These seem like advantageous capability, and they are. But just remember that what is a competitively differentiating investment today may be a mere table-stakes investment tomorrow.
Again, the leaders in the market have already determined that forecasting and planning must be a collaborative process. One of the clearest examples of this is the shift in who is using advanced analytic capabilities. It used to be mostly technical experts. Now, it’s non-technical business users in sales, marketing, finance, and operations who are driving collaborative forecasting, and more recently cloud adoptions.
This is certainly true for planning and forecasting, where many non-technical knowledge workers own or help manage forecasts. Some of our own clients have dozens of users who actively engage our platform. They simulate competing business plans, make proposals, and add layers of insight that affect predictions, plans, investment decisions, and long term policies. These aren’t passive consumers of data. They’re integral to business-critical processes and they demand powerful tools built into real-time, collaborative work spaces.
Cloud solutions will no doubt satisfy increasing demand for collaborative planning. And in doing so, they will reinforce the collaborative culture that underpins IBP. We believe that this evolution will enable breakaway competitive performance for early adopters of the IBP process and culture, as well as IBP technology.
In any case, truly collaborative IBP holds great potential, especially for manufacturers, distributors, and retailers – even more so for verticals with volatile supply chains, such as pharmaceutical manufacturing.
More generally, we can say that mass adoption of cloud-based planning and forecasting is a when, not an if. This doesn’t mean all organizations need an all-cloud approach. It just means that nearly all should evaluate cloud, as well as on-premises versions of key technologies.
At Vanguard Software, we see that new clients are increasingly keen on our SaaS offering. Think about it: lower cost, greater collaboration, less reliance on IT, greater contract flexibility, zero upfront outlay, faster time to value. What’s not to love?
Let’s close out now with five key considerations to make as you evaluate the cloud for planning & forecasting, and beyond.
From On-premises to the Cloud: Five Key Considerations
1. Cost Benefit
Should we stay or should we go? It all comes down to your end-of-day calculation of net value, and whether that’s a positive or a negative. Start by cost modeling both on-premises and cloud options over 3-year and 5-year horizons. When is the payback? Also, be sure to factor all “hidden costs,” as well as IT support costs into the on-premises calculation. Many organizations leave the hidden costs out of the calculation because they’re not readily obvious. The most common hidden costs are usually server related. They include the electricity bill, the “5-year rule,” downtime, and more. Look it up.
2. Time to Value
During your evaluation of a cloud forecasting solution, find out if there are any prebuilt models to accelerate time to value. How much time is saved, if any, by using the cloud version versus the on-premises version.
3. Data Migration
OK, so you decided to move to a forecasting solution in the cloud. How the heck do you get your data there? How do you get it back into your internal system? Is it real time? Batch upload? Any data quality concerns? These are a few of the questions you need to answer before your move to the cloud.
4. The IT Dance
Cloud solutions enable individual lines of business to select their own self-service solutions without ever bothering IT. This may not be the model for your organization but you should know that it’s an option with potentially hard benefits. For one, it gives individual lines of business the autonomy and agility needed to access new tools to address rapidly changing needs. And while IT is not entirely out of the picture, it is liberated to refocus on more entrepreneurial and higher value-generating pursuits.
5. Potential Risks
Going cloud is like any other business decisions: pros, cons, trade-offs. Take data. One thing to remember about cloud solutions is that the data they query may or may not reside in the same country, or in the country in which it originated. Find out where your data will be stored and check your corporate regulations to get ahead of potential compliance issues. Next is user access. For starters, remember that more people than necessary may want to play with the shiny new toy. Careful here: many cloud providers set prices on a per-user basis. That means the costs can really escalate. Make sure that all licensed, would-be users will not only use the software, but have good reason to do so. And when adoption time does come, make sure you have training and change-management plans in place. No quicker way for a project to fail, then to under-train or under-enthuse end users.