Hot and cold running software?

Businesses in general, and manufacturers in particular, are entering a time of considerable change, owing to a panoply of new threats and opportunities, believes Mike Nation, of automotive and high tech industry system integrator Gedas. “Manufacturing companies are not only facing the intense external pressure of national and international competition, exchange rates and increasingly demanding customers; but are also facing the internal challenges of new technology, systems, distribution channels,” he says. And to that list he adds: “customer relationship models, new skills in systems, management and sales, shareholder pressure, and ultimately the imperative of business transformation.” Undeniably, IT systems are going to be at the heart of many of the difficult investment decisions that manufacturers are going to have to tackle when attempting to face up to these issues, but there’s a problem. “This is all happening at a time when there is a shortage of IT skills”, says Nation. Some are questioning whether fostering IT skills is something that manufacturers, and especially SME (small to medium) organisations, should be attempting in the first place. Says David Foster of enterprise software firm SSI: “In today’s global competitive markets, manufacturing companies in the SME space must be excellent not only in their prime activity, manufacturing, but in everything they do. But for most, maintaining excellence in IT is not possible and should not be necessary.” Fortunately, there is a new solution to this problem in the form of the ASP (application service provider) approach – today’s fancy name for a computer bureau. However, there’s a big difference from the mainframe service of old – today, with high-speed communications links becoming more realistically priced, the application is delivered to desktops within your company just as if you were running it yourself, on an in-house machine. Fraser Danbury, managing director of ASP company Mi8, explains how this works. “Instead of sinking resources into internal hardware and software, companies large and small are leasing software from application service providers that use the Internet to provide clients with everything from email to enterprise resource planning.” The ASP model seems an ideal solution, particularly for SMEs. In fact, according to a recent report from analyst Forrester, almost 60% of SMEs expressed interest in outsourcing applications in the next three years. That’s not surprising, since there are significant business benefits to be gained. “Best practice can be achieved with the most minimal of distractions to manufacturers, as the burden of software implementation and management is moved to an outside organisation. Consequently, the TCO (total cost of ownerhsip) is dramatically lowered,” says Donna Bullock, ASP industry manager at Microsoft UK. And Patrick Coates, UK managing director of ASP firm SevenMountains Software points out another big business advantage: “The time for implementing a new application is a lot faster, allowing increased responsiveness to changing business needs”. Cost is another major advantage, explains Tim Pickard, market development director of ASP firm ESOFT Global. “You can expect a total cost of ownership saving of between 25 and 40%, and of course you have access to specialist IT skills that are very expensive, hard to find, and are also hard to keep in an SME environment because of the lack of a career path.” Mark Tolley, business development manager at application software company TDS, gives an example of how the SME can achieve best practice via an ASP. “The TDS solution has revolutionised the SAP delivery model, and lets organisations from as little as five users access the fully functional range of modules at a fraction of the cost typically associated with SAP.” However, ASP is not without its problems. Inflexibility is one, as Ron Hixon from the managed services division at system integrator and services company Catalyst Solutions observes: “When confronted with the model, many people are put off when they recognise how little choice there is in the way an application would be deployed.” Part of the reason for this inflexibility is because the ASP has little knowledge beyond its own technologies – it just wants to manage the technology to deliver a vanilla application. But that’s not enough, says Mike Atherton, managing director of networking services firm Infonet UK: “Business process knowledge is crucial for an ASP to flourish.” Specifically, a manufacturer today needs to be good in the areas of product excellence and customer relationship management, as well as operational excellence. While an ASP may help address the area of operational excellence, without some added business value on the part of the ASP it doesn’t help address the other two areas. And for manufacturers, the situation is complicated. While an ASP may work well at delivering email or accounting services to a small services business, manufacturers today face the challenge of increasing integration – both within and outside the organisation. Says Gedas’ Nation: “The idea of a centralised, isolated infrastructure, does not fit the integrated supply chain model of manufacturing, where CPC (collaborative product commerce) and e-collaboration are now central components.” However, the ASP starts with an immediate advantage when it comes to offering integrated solutions, believes Gary Woodward, managing director of ASP firm Pasporte. “Manufacturing supply chains are notoriously complex, but having an Internet-based solution surely gives you the best chance of communication and interoperability across the supply chain.” Tracy Chandler, managing director of new to the UK enterprise software vendor Made2Manage Europe, explains how this can come about. “With complex supply chains, the integration of the ASP into an e-business web portal will simplify access to trading, as all the facets of the supply chain will be in one single accessible place.” Thus, where ASP application delivery can be combined with business-to-business e-commerce trading hubs, exchanges, portals and market sites, supply chain integration can actually be made easier. But even this isn’t going far enough – it’s still only concentrating on operational aspects, believes Nation. “The ASP model needs to be about more than just cost cutting – it must address business advantage.” “Gedas has therefore started to work towards more advanced models for the supply chain and ASP services – a shared, managed service that has the capability to integrate the business and supply-chain at a business-level,” continues Nation. “Two examples of this include the development of a PDM (product data management) and e-collaboration service targeted at SME manufacturers, and the recent announcement of a Gedas/HP/SAP ASP service in Spain for SMEs.” Nation also looks ahead to what the world will look like when ASPs become the e-business infrastructure. “This will enable situations where collaborators and competitors share a common infrastructure. This is already the case if you look at the travel industry and the global distribution systems. “Manufacturing companies and SMEs can, if they choose, collaborate or syndicate to create not just a new IT infrastructure but a genuine business infrastructure, capable of addressing, at an affordable cost, many of the issues faces by UK manufacturing today.”