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On-Demand Value of The Supply Chain

The use of software-as-a-service (SaaS) for supply chain management (SCM) is gaining traction, and early adopters are reaping the rewards of faster implementation times, quicker returns on investment and lower costs.

According to a new study from Aberdeen Group, more than 50 percent of enterprises surveyed are either using or considering using on-demand applications as part of an overall SCM solution.

The study also showed that while uptake of SaaS is lower for more inward-facing applications, such as ERP, acceptance for this model is growing here.

Companies that have adopted on-demand SCM solutions are reaping considerable benefits.

"Early adopters have found an overwhelming value in this space," said Beth Enslow, senior vice president at Aberdeen Group and author of the study.

Enslow told internetnews.com that with on-demand software, companies can be up and running within three months and see a return on their investment within a year.

"That's not the typical results you get with [on-premise] enterprise applications," she noted.

Enslow also said that total cost of ownership (TCO) with SaaS can be 20 to 30 percent lower than with an on-premise model.

Most of the penetration by SaaS vendors has been in customer- or partner-facing applications.

These processes can include forecasting and inventory management with customers, achieving supply chain visibility and managing transportation processes.

In many cases, using a hosted solution is more efficient when customers and suppliers can log into the same grid, rather than trying to patch proprietary systems together.

"The time to value for using SaaS for outward-facing processes was very strong," said Enslow.

One provider in this space, GXS, based in Gaithersburg, Md., offers an on-demand B2B trading grid that provides detailed tracking information and can dynamically calculate a new ETA when a shipment is delayed.

"You can't do that just by doing EDI," noted Steve Keifer, vice president of industry solutions and product management for GXS.

Keifer told internetnews.com that SaaS also provides customers with a built-in trading network. "You're never going to get all the different transportation providers to log onto your system," he said.

GXS boasts that it is the "world's largest trading community," with 40,000 direct customers using its GXS Trading Grid.

The Aberdeen study also shows that inward-focused applications such as ERP are still dominated by the traditional license-and-install model.

Even here, though, Enslow said there is demand growing for on-demand ERP, particularly among smaller companies.

"That's a surprising result of the study," she said.

She cautioned that SaaS is not going to entirely replace traditional software applications, but said the study shows that on-demand providers can find a niche either providing one piece of a larger puzzle, or by allowing SMBs entrée into a world of functions that previously were the exclusive province of the bigger companies.

With on-demand software, SMBs that "could not afford to implement a best-of-breed system can have access to very good functionality," said Enslow.

For the most part, the offer of on-demand tools has been dominated by so-called pure-play SaaS vendors, but Enslow says traditional license-and-install vendors are seeing that they can bring new features to market more quickly using the on-demand model.

"We're starting to see some traditional on-premise vendors offer on-demand extensions to create net new value for their installed customer base," she said.