Cloud Computing: Calculating the Costs of On-Demand vs Traditional Supply Chain Software

Grazed from SCDigest. Author: Dan Gilmore.

On-demand or Cloud-based software is coming on fast, and I continue to believe as I predicted several years ago that it will dominate the supply chain market very soon. I predicted that would occur by 2015 – that may be a year or two too soon, but it’s coming. There are a variety on terms of course, with the original term "hosted" also still out there in some cases, and "Software as a Service" (SaaS) still pretty popular along with on-demand and Cloud. Each of these terms has its own nuance, but I have found supply chain managers use them rather interchangeably to mean the same thing.

What they generally mean is a supply chain software application that is indeed hosted by the vendor or its third party (Amazon S3 is becoming increasingly popular), and that rather than the traditional model of an often large upfront license fee, the company pays based on some subscription/transaction fee arrangement with the provider…

But the reality is that there are two or even three dimensions to this, as I have noted for many years: (1) the deployment model – hosted in some fashion or traditional "on-premise" (on your server); (2) the pricing model – subscription or traditional upfront license fee; and (3) the management model – in some supply chain areas, notably transportation management systems, there could also be a vendor (software company or 3PL) pitching to run all or part of the application for you…

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