How Manufacturers Can Leverage Cloud Services to Drive Business Value
- May 17, 2021
According to research by leading analyst firms such as IDC and Gartner there are three distinct benefits from the adoption of cloud services: increased IT efficiency as cloud-based platforms replace legacy systems; improvements in business operations efficiencies through modernized applications and architecture; and increased speed to value for new business capabilities. With 86% of manufacturers already using cloud-based applications to support critical services like business intelligence, process optimization, and ERP systems, those who have begun to adopt the cloud are now asking how they can use their burgeoning experience to further optimize it to enable digital business and drive business value.
We recently held a masterclass with the Manufacturing Leadership Council to answer these questions and more. In it, Jay Monahan, NTT DATA’s Managing Director Business Consulting Manufacturing and Life Sciences, was joined by Dr. Aater Suleman, Vice President, Cloud Transformation, and Edward Wilson-Smythe, Senior Advisor: Manufacturing Industry Strategy and Solutions to explore how manufacturers can drive business value from their cloud investments.
Here is a highlight of their recommendations. Watch the entire discussion.
Cloud First Speeds Business
In a traditional capital budgeting process, it can take nine months for a portfolio analysis, prioritization and funding, 12 months to hire a vendor through an RFP process, and 24-36 months to implement a system. By the time the system is released, it is most likely obsolete. So, 90% of traditional IT initiatives don't even get implemented because of cost or time limitations. Migrating to the cloud is less about technology and more about a business model that aligns IT with the speed of the market. Cloud-first models enable a focus on the business as they shortcut a significant part of this process, helping meet needs on a much closer timescale that address the rapid pace of change in both technology and business models.
Then, once enabled, transformation becomes a lot easier and faster to execute in cloud environments. For example, Wilson-Smythe notes that, “I don't think we've had a conversation with a client over the last two years where any project is longer than three to six months and delivering tangible client value.”
Achieve New Business Models
To ensure the business achieves value from its cloud investment, Dr. Suleman warns manufacturers to retain focus on business transformation. He cites the case of a clinical testing company that was introducing a new solution. As the company focused on technology that would help launch the solution, changes happened in the Medicare regulation that completely altered the business need for the solution. While the solution was discontinued, the technology investment continued, resulting in a $5 million a year investment that created little business value. Technology for the sake of technology is a recipe for failure.
The inverse of this are manufacturers that intentionally use technology as a vehicle to get closer to the customer. For example, Pepsi recently launched Snacks.com, leapfrogging retailers they historically rely on for market insight. In a very short period, they were able to directly reach consumers and achieve their own real-time market feedback.
Ultimately, manufacturers can use cloud technologies to not just improve current business operations but as Pepsi proves, to get closer to the end customer and drive new lines of revenue. This type of business development can fuel customer insights that manufacturers can use to increase customer loyalty and lifetime value. Dr. Suleman notes, “This is the time to think bigger. This is the time to think about brand new business models, not just improving current operations, because that's what the real opportunity is for manufacturers here.”
The Role of Data
Whereas manufacturers previously had pockets of data that were less frequently reported on, data sources from across the Manufacturing value chain can now be integrated and analyzed in real-time, providing powerful insights into the hands of decision makers, changing the dynamic of what is possible. Dr. Suleman recalled his work with an agri-tech company that collected data from its devices in the field; each device had hundreds of sensors collecting data, constantly measuring, and pushing the data into the public cloud for processing. The data connected into just-in-time manufacturing directions where a particular part could be built and shipped directly, reducing the warehousing cost of heavy metal manufacturing.
Lift and Shift is Not Transformation
Taking separate functions and just moving them to the cloud is only a start. Says Monahan, “Some clients are under a brick-and-mortar type mindset where they're taking the same application and moving it to the cloud. They’re not benefiting from the holistic platform that you get in the cloud and the things that you can build upon it.”
Cloud is a fundamentally different way of doing business. Moving servers from a data center to a cloud provider can lead to marginal benefits in terms of tactical things like patching. Yet, according to Wilson-Smythe, “it does almost absolutely nothing to enable the business, and that's where transformations happen that can cost a lot and not deliver business results.”
To this end, Monahan notes that, “Our focus is on working with the companies that want to make continuous changes in the environment in this age of rapid business change and disruption. If somebody is still steadfastly opposed to the concept of the cloud, we've found that to be a counter-productive discussion. If that's your mindset, proceed at your own peril.”
Ultimately, the view that technology needs to both align to the pace of business operations and be the catalyst for business transformation is what sets leaders apart. They shift from thinking about providing a more cost effective and reliable home for technology to instead considering how technology can enable business interactions with customers, suppliers, and business stakeholders. Struggling with where to start? Tangible outcomes achieved by several Manufacturers, ranging from improved customer engagement, improved product quality, increased throughput, reduced downtime, to growing supply chain integration can all provide clues as to where the business can benefit most from its cloud investment.
Interested in learning more? Watch the full discussion here.