"We spent several months analyzing available technologies. Iasta provides a great value with its optimization-based sourcing features as well as its global support services. The software enhances our analysis capabilities, enabling us to consider multiple supply chain scenarios in dramatically compressed time frames. For supply chain management, the tools and services are invaluable."
On Demand applications are making headlines in a number of functional areas, the most prominent being sales force automation. However, this phenomenon is spreading quickly through the supply management world and in the minds of procurement professionals.
On Demand supply management solutions are externally hosted and managed applications, content, and services that are delivered as Web-based services and offer flexible pricing models. A true "On Demand" solution leverages a service-oriented, multi-tenant application architecture and shared services delivery model to support multiple customers from a single platform. An On Demand model:
Allows economies of scale that allow rapid, low-cost; low-risk deployment of supply management solutions and services without the up-front fixed investment to purchase and install software and hardware or the costs and resource burdens required for ongoing support;
Enables faster initial deployment and enterprise rollout of a supply management solution; and
Allows for community benefits similar to the concepts of Web 2.0 in enabling users to benefit from benchmarks from the supply management activities of all members of a community.
Key Findings
In this report, which is based on surveys and interviews of approximately 135 industry executives, we found certain areas in which On Demand solutions perform better than the traditional "license and install" model. However, there are certainly challenges with the On Demand model, two of the top concerns being data security and integration with internal systems such as ERP. However, in many cases, companies have been able to effectively mitigate these two challenges.
A key point that came up during this research was the fact that, compared with the 10- to 15-year commitment that an ERP system requires, an On Demand solution is largely considered a 2- to 3-year decision, after which a company may choose to reevaluate it.
With this in mind, we concluded, based on our data, that an On Demand solution can help companies increase the amount of spend under management at a faster rate than an installed on-site model will. On average, On Demand users improved spend under management 27.5% within a year after deploying the solution. Whereas, behind the firewall users were able to improve this number only 21.5%.
Other observations include the fact that lowering total cost is not a top reason for pursuing an On Demand strategy. Additionally, we found there is still an appetite for licensed solutions. Respondents also prefer a constant rate or flat monthly fee as the preferred pricing model, and a subscription pricing model offers the enterprise a known, budget-able expense over the life of the agreement.
Recommendations
An enterprise's ability to bring more spend under management is the key to reaping all the benefits of cost savings, supplier performance, contract compliance, and other factors associated with procurement and supply management. A huge value afforded by the On Demand delivery model is flexibility. Supply managers can leverage On Demand services to address functionality gaps in their solutions architecture quickly, augment internal operations and delivery resources, and enhance competitiveness by accessing specialized domain expertise and content on an "as needed" basis. Our recommendations here include the following:
Laggards should start off small; for example, take a category of spend and try to execute a sourcing process using an On Demand solution.
Enterprises should increase supply management capabilities both breadth-wise (a complete suite of supply management solutions) and depth-wise (more spend under management).
An enterprise must protect critical data by having a plan for migration and disaster recovery;
Adopt SLAs with clear performance metrics, penalties and incentives; and
Benchmark your company's performance against the community.
