SaaS continues to spread within enterprise and SME manufacturing companies

Technology solutions delivered via SaaS have been around for some time; however, it's only recently that their adoption has seen a marked increase throughout the manufacturing industry. In a new report, Delivering Software as a Service to Manufacturing Companies, independent market analyst Datamonitor examines the drivers associated with SaaS technology solutions. Of the 150 enterprises surveyed in North America, Europe and Asia-Pacific, the most common benefit associated with SaaS solutions was their ability to ease upgrades and provide access to the latest functionality.

“SaaS has largely been driven by adoption of customer-centric technology such as sales force automation, however the appeal of the delivery model is widening within manufacturing companies as IT budget outlooks start to look grim,” says Adam Jura, Manufacturing Technology Senior Analyst and author of the study. “As service providers shift away from traditional application service provider (ASP) models, the associated cost savings of multi-tenancy solutions can often be passed on to end-users. This makes investment in technology delivered via SaaS an increasingly attractive proposition.”

Service level and security concerns remain the biggest inhibitors for SaaS adoption within enterprise manufacturing companies

One surprising aspect of the primary research conducted for the study was the high importance still being attributed to security concerns by manufacturing companies. Because SaaS solutions are typically delivered from an off-site location, key data is often out of the direct control of manufacturing companies. This information could be mission-critical such as financials, customer lists and product data. Because of this, manufacturers are worried about whether their data will be kept fully secure. Interestingly, vendors have been spending considerable effort to allay these fears. Obviously, more still needs to be done.

Datamonitor believes that while the above features were based on interviews with enterprise manufacturing companies, the same can be said for the SME market. For these companies, SaaS solutions can provide affordable alternatives to on-site technology that may be more geared towards larger firms. Trying to provide a flexible IT environment for quick business growth is critical for SMEs as they seek to expand their operations.

“The SME and enterprise manufacturing industries are unsurprisingly rather different when it comes to current and potential adoption of SaaS technology solutions. Within SME companies, the range of processes supported is significantly higher as vendors like SAP bring more suite-oriented solutions to market. At the enterprise level, processes such as customer interaction and human capital management are more appealing for SaaS with other areas such as manufacturing operations management significantly less so,” says Jura.

Vendors still have some way to go before gaining the most out of the growing SaaS market

According to Datamonitor, the SaaS market holds considerable challenge for vendors wishing to increase revenues and market share. Core to the decisions taken by these vendors is the question of which of their existing on-site technology to enable for SaaS delivery. Vendors will need to be sure of their selection given the potentially costly modification of their code base for transformation into a SaaS solution.

Datamonitor believes that the enterprise market has not yet seen a winning vendor for SaaS. Some companies such as Salesforce.com and RightNow have made significant progress, however in Datamonitor's opinion, this represents only a small portion of the wider potential SaaS market. Those vendors that can adapt their go-to-market and product strategies to take advantage of the current demand for SaaS will reap the rewards of their efforts.

Jura concludes:

“Ultimately, SaaS itself is only a delivery model for technology solutions. Vendors will need to be able to offer their manufacturing clients a choice based on the unique circumstances of the engagement. What will be vital in attracting manufacturing companies to a SaaS solution is taking such a delivery model seriously. That means developing significant configuration options, creating templates that allow for regional or industry specificities, and providing appropriate service levels and security.”

Notes

Datamonitor's report Delivering Software as a Service to Manufacturing Companies looks at the evolving market for SaaS delivered technology solutions within the manufacturing industry. It assesses the current demand for SaaS, the inhibitors holding investment back, and Datamonitor's view as to the current readiness of the manufacturing industry. It also looks at where the most opportunity for SaaS lies within manufacturing companies and provides actionable insights into how vendors should be adapting their go-to-market strategies accordingly.