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THE CLOUD:
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M A R K E T M O N I T O R
R E S E A R C H S E R I E S
Taking Manufacturing
to the Next Level
M A R K E T M O N I T O R R E S E A R C H S E R I E S
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Cloud computing is one of those terms we hear a
lot about these days, and whether you understand
it or not, it’s transforming manufacturing even
as you read this. Simply put, cloud computing is
accessing software as a service over the Internet.
Those apps on your phone or in your Web browser
— that’s cloud computing. You no longer need to
download programs and software, just an Internet
connection and a login.
With the current trajectory of technology, it appears
that tomorrow’s successful manufacturing business
will be utilizing cloud computing to manage at least
some aspects of their business. Not only that, but
cloud computing in manufacturing allows for in-
creased company efficiency through greater work-
place collaboration, seamless automatic updates of
the software across an organization, lower capital
expenses (since many cloud computing services are
pay-as-you-go) and even disaster recovery.
“If you go back five years ago, we were talking
about cloud computing as though it was an eco-
nomic decision,” explains Craig Downing, senior
director of cloud at Epicor. “Today, when we talk to
customers about why the Cloud is important, we
start seeing themes that really have nothing to do
with economic needs or cost of ownership. We’re
seeing customers talk about how it allows them to
regain their IT department.”
Recently, Manufacturing Business Technology (MBT)
surveyed its readers to understand how many of
them are using cloud computing in their business
operations, why they are using it and the push
behind adopting the technology. Approximately 41
percent of the respondents came from companies
with more than 500 employees; 34 percent came
from small companies with less than 50 employees;
and the remaining 25 percent were mid-sized com-
panies with between 50 to 500 employees.
According to respondents of the survey, 40 percent
are currently utilizing the Cloud or are in the pro-
cess of implementing it. Out of those who are not
using the Cloud, approximately 27 percent of those
companies are planning to move at least some ser-
vices to the Cloud in the next one to three years.
This report looks at those results and includes in-
dustry insights and trends relating to cloud com-
puting in manufacturing including: where cloud
computing is today; how companies are utilizing
cloud capabilities; the biggest challenges concern-
ing cloud computing; and where the industry is
headed.
THE CLOUD: TAKING MANUFACTURING TO THE NEXT LEVEL
3M A R K E T M O N I T O R R E S E A R C H S E R I E S
SECTION 1: WHERE WE ARE
In today’s world, cloud computing is becoming
more and more important for manufacturing
companies. They’re looking at cloud computing as
a way of being able to adopt newer technologies
at a quicker pace. The technology allows them a
lot more flexibility and agility when it comes to
building out their solution footprint and being
able to adopt some of those newer technologies,
versus being on-premise — where they’ve histori-
cally done lots of customizations, but don’t neces-
sarily upgrade as often as they’d like to.
Benefits and Trends
Oftentimes, the biggest benefit to Cloud use is
driven by the company’s ability to cut IT infra-
structure costs out of their organization.
“Finances continue to be a very compelling ar-
gument for the Cloud,” says Downing of Epicor.
“There’s no question that companies get to the
Cloud and recognize they are saving more than
they thought. When manufacturers start going
through the real cost of ownership, they realize
that without those on-premise big powerful
servers, they’re saving $1,000 a year of electricity.
They’re also not bringing in consultants every
six months to install updates, because they get
installed automatically by Cloud vendors.”
There are also the collaborative benefits of cloud
computing in an organization as well. One of the
common things that happens when companies
standardize cloud computing across the enter-
prise, is it allows them to leverage experience
elsewhere in the organization. By using social en-
terprise modules, it allows employees to ask ques-
tions, start conversations or form working groups
around customers, products or processes that are
important. A team that services a customer might
include the account executive, the designer and
the engineers, but also the shop floor people who
are responsible for manufacturing those products,
creating an environment where they can collab-
orate and talk to one another, breaking down
what — up until that point — had
probably been email threads back
and forth.
Along with the Cloud, Big Data
and the Internet of Things (IoT)
are really driving innovation in the
manufacturing industry. For in-
stance, IoT exponentially increases
the amount of data that’s available
for manufacturing companies as
they start connecting devices and
machines to their systems. This
allows them to do additional mea-
surements not only on the shop
floor operations, but also be able
to gather information on a prod-
uct out in the field.
Does your company
currently utilize
the Cloud for
business purposes?
Yes 36.41%
No 48.72%
Unsure 11.28%
Currently Implementing 3.59%
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According to MBT’s survey, within organizations,
business IT decision makers are the No. 1 driver of
cloud computing adoption (51 percent), followed
by C-level management (34 percent) and IT staff
(29 percent). The primary reasons for this drive is
economic factors, agility and working in a global
marketplace (see chart on page 8). But what is mo-
tivating those individuals to look at cloud comput-
ing as a solution?
“We’re just now at the point where manufacturers
are comfortable with moving their manufactur-
ing systems into the Cloud,” explains Downing. “It
seems to depend on the success they’ve had with
less sophisticated or less mission-critical systems
already moved to the Cloud.”
Let’s go back and look at what business processes
companies have moved to the Cloud in the last
five years. They’ve stopped running their own mail
server and payroll systems, and that’s worked out
well for them. They’ve also stopped running their
own customer relationship management (CRM)
system and moved to platforms such as Salesforce.
com, for example. Companies stopped running
their own Web servers, and they’ve moved to web
hosting companies. Downing says that all of these
things have happened before manufacturing com-
panies have looked at moving
their production systems to
the Cloud — and probably for
good reason.
If a company’s mail server goes
down for an hour, that’s OK be-
cause emails aren’t lost forever.
Once the server comes back
online, the flow of mail resumes
and business continues. If your
CRM system goes down for an
hour, the sales team just has to
revert back to pen and paper
until the systems are back up.
But if a manufacturer’s shop
floor control, scheduling system,
costing systems or machine
management systems go down
for an hour, that’s a big problem.
SECTION 2: CLOUD UTILIZATION
How long have you
been utilizing
Cloud Computing?
1 year
or less
19%
2 years
29%
3 years
13% 4 years
9%
5 years
or more
24%
Currently
implementing
6%
“That increase in data, along with the Cloud,
offers companies different flexibility on how they
capture a lot of that information and then being
able to produce analytics from that information,”
explains Mark Humphlett, industry and product
strategy director at Infor. “Cloud is really helping
companies as they go down that path in being
able to analyze that kind of information.”
5M A R K E T M O N I T O R R E S E A R C H S E R I E S
“I think manufacturers have moved to the Cloud
in a thoughtful way,” adds Humphlett. “They’ve
looked at all the workloads that have been a little
bit less mission critical and where an outage won’t
stop their primary operating model and started
there. They’ve gotten comfortable with that first
before moving their ERP systems to the Cloud.”
Cloud Solutions
There are three types of Cloud solutions available.
The first one is a “private cloud” that can be on- or
off-site and is operated solely for a single company,
whether it’s managed internally or by a vendor. The
second type is a “public cloud,” where the services
are carried out over a network opened for public
use. Lastly, there is the “hybrid cloud” in which a
company manages some resources on-premise
and has other applications hosted in the Cloud.
Survey respondents indicated that approximately
47 percent are using a private cloud, while 22 per-
cent are using a public cloud and 22 percent are
using a hybrid system (see chart below).
According to MBT’s survey, the top motivating
factors behind the type of Cloud a manufacturer
invests in are: Ease of Use (48.5 percent); Applica-
tion Hosting (41 percent); Support (37 percent);
and Cost (32 percent). While security concerns are
typically considered a major hindrance to adopting
cloud computing technology, this actually came in
fifth place, at 28 percent.
As manufacturers begin their research into cloud
computing solutions, they initially look at hybrid
clouds as an option since they’re typically com-
ing from a background of an on-premise kind of
IT shop. A hybrid cloud gives them the option to
pick and choose which applications they’ll begin
utilizing the Cloud for and which they’ll leave
on-premise. This can give the company time to see
the benefits of cloud computing without greatly
disrupting their operations before moving to a fully
public or private cloud solution.
So just what are manufacturers using the Cloud
for? The three classic applications in the Cloud for
the last 10 or so years have been CRM, expense
management and enterprise asset management
solutions. And as cloud computing gains traction in
the industry, more companies are looking at those
more business critical applications,
such as financials and shop floor
applications, in order to move them
to the Cloud as well.
According to Epicor’s Downing, the
best returns come from the pro-
cesses that cross across multiple
departments or groups of people.
Certainly moving a maintenance
management system to the Cloud
might be nice, because it means
an IT department doesn’t have to
run it anymore. But if only a cou-
ple of people are accessing the
maintenance management system,
the company isn’t solving a huge
problem. On the other hand, if a
manufacturer moves workloads
Is your system
a private cloud,
vendor supported
or a hybrid system?
Public Cloud 22.06%
Private Cloud 47.06%
Hybrid 22.06%
Unsure 8.82%
6M A R K E T M O N I T O R R E S E A R C H S E R I E S
that are across multiple people and
departments, or even across multiple
companies, countries and timezones
to the Cloud, there’s potential for enor-
mous return there.
“Think about new product design,” says
Downing. “You’ve got contract design-
ers and manufacturers, supply chain
people and maybe even engineering
collaboration with the customer. When
you move that workload to the Cloud,
everyone can now access the system
in real-time, while the transportation
company knows when it’ll be rolling off
the assembly line in China and ready
to be trucked to your Los Angeles port
location where it’s going to have final
assembly.”
When companies cross departments
and large number of participants in
those workloads, use of the Cloud pro-
vides greater value. Manufacturers can
extract a lot of the inefficiencies and
delays, while creating a more collabora-
tive process.
Disaster recovery is another one of the
leading advantages to cloud computing
that manufacturers are utilizing. That
way, if there’s an environmental, natural
or man-made disaster, all is not lost.
“When asking potential customers
about their disaster recovery strategy,
some of them just shake their heads,
while other indicate a server in a sep-
arate closet around the corner doing
data backups every night,” explains
Humphlett. “That’s not really a disaster
recovery plan.”
For what operations
does your company
utilize the Cloud?
Automation and Monitoring
Big Data Analytics
Cloud Database
Customer Relationship
Management
34%
38%
21%
21%
Disaster Recovery18%
16% eCommerce
41% Email
29% File Backup
44% File Storage and Sharing
10% Infrastructure as a Service (IaaS)
10% Platform as a Service (PaaS)
31% Software as a Service (SaaS)
9% Test and Development
23% Website Hosting
7M A R K E T M O N I T O R R E S E A R C H S E R I E S
Some manufacturers aren’t utilizing the Cloud, sim-
ply because they don’t really know what benefits are
available. It becomes a case of companies stopping
themselves from taking advantage of the platform,
many times due to customizations that they typically
won’t have without that multitenant world.
“I think there are awareness issues, and I think
there are historical investments in decisions that
sometimes we’re loath to reconsider,” explains
Downing. “For example, a typical $70 million
fabrication company may have built their proxy,
bought systems and made investments in those
systems. The thought of walking away from them
isn’t terribly compelling. A lot of people are looking
to get more out of their investments before they
run around and buy more technology or replace a
system that they think might still be working.”
The problem with that thought process is that most
manufacturing and ERP systems as a
whole have a life of about seven years. If
a company just bought a system two or
three years ago, maybe it’s got a lot of ca-
pabilities that modern manufacturing and
modern ERP systems have, but if they’re
using a 10 or 15 year old system, they’re
at least a couple of generations behind.
Nevermind not supporting new technolo-
gy like an iPad, it probably doesn’t sup-
port remote access, have a web interface
and doesn’t talk in an automated way to
manufacturing systems. Companies need
to become a little more courageous and
look at what modern systems are doing in
order to have a benchmark. That way they
can be better informed as to the trade-
offs they’re making.
“Money is a big concern with the smaller
manufacturers, because they have to
make sure they keep the doors open,”
says Susan Irby, senior product manag-
er at Exact. “One of the things I would
say to the smaller manufacturers is that
the Cloud allows them to scale up and
down as their businesses change. It is an
opportunity for them to start small and
work up without the initial investment
they would have if they were using an
on-premise solution.”
SECTION 3: BIGGEST CHALLENGES
What obstacles are
hindering your
investment in
Cloud Computing?
3% Can’t find a vendor or system to meet your needs
Don’t have the expertise
or staff18
%
6% Don’t know where to begin investing
Don’t see the
benefit33%
15% Don’t understand the Cloud
50%Security concerns
15% Too disruptive to current operations
Other
17% Too expensive
15%
8M A R K E T M O N I T O R R E S E A R C H S E R I E S
MBT’s survey respondents indicated that Economic
Factors (46 percent); Agility (44 percent); Working
in a Global Marketplace (29 percent); and Better
Supply Chain Collaboration (24 percent) were the
major motivating factors to investing in cloud com-
puting (see chart below).
Security Concerns
One of the bigger things that Cloud vendors hear
from manufacturers are their concerns about the
levels of security available in the Cloud. Manufac-
turers may be surprised to learn that most Cloud
providers offer a higher level of security than they
probably have internally within their on-premise
environment.
“In our data center we’ve got armed guards, locked
cages, video cameras and biometric sensors,” ex-
plains Downing. “I’ve got far more invest-
ed in securing my customers’ data than
my customers probably have in their own
data center. Most companies we look at
have a good lock on the closet door to
their server room, but that doesn’t stop
someone from within the network from
accessing that data.”
As people start taking a look at applica-
tion, network and physical security — or
even start to take a look at the operations
security such as data transmission, en-
cryption and privacy — companies want
to know just how strong the levels of se-
curity are within the Cloud environment.
When manufacturing companies move
toward monitoring, industry compliance,
passwords, digital certificates and all the
different types of ISO compliance that
they have to go through, how strong the
security is within the cloud computing
environment is of much concern.
“What it all comes down to is, you need
to work with the software vendor to
really understand how their security is
structured and how it is put together,”
says Irby. “The security concerns from the
software vendor perspective are very
important, so they attempt in every way
possible to address them.”
What motivated your
company’s investment
in Cloud Computing?
Agility44%
Better Supply Chain
Collaboration
24%
Big Data16%
Changing Workforce16%
Economic
Factors46
%
Global Marketplace29%
Making Investments
Future-Proof24%
Pressure to Innovate19%
Reducing Vulnerability/
Staying Secure 22%
Regulatory and
Compliance Issues9
%
Other7%
9M A R K E T M O N I T O R R E S E A R C H S E R I E S
The odds are that most business application pro-
viders today offer some kind of cloud option. It
could be a single tenant, private cloud; a managed
services offering; or it could be a multitenant type
solution. One of the best things to do is to just start
trying to get that initial education to understand
the differences between the on-premise world and
the Cloud world, because there are some pretty sig-
nificant differences between the benefits and what
you’re going to see.
Companies should also look at how this might
move them from a capital expense to an operating
expense by determining how often they currently
have to upgrade their hardware, their database, and
the actual business applications they’re looking
at. Manufacturers should understand the disaster
recovery policy and plan of a Cloud vendor, what
kind of service levels that are available, and the kind
of security programs that are offered.
It’s really an education process that an organization
needs to go through, because it’s fundamentally dif-
ferent than working through an on-premise world.
Initially just getting that level of education, and
talking to a business application provider, will allow
an organization to do that comparison and decide if
this is the right direction.
As indicated in the chart below, none of the re-
sponding companies utilizing cloud computing
so far are dissatisfied with their decision. An over-
whelming 83 percent indicated they were either
satisfied or very satisfied with their cloud solutions.
An Industry on the Move
Investing in technology is not just about knowing
where it is today, but knowing where it’s headed
tomorrow. Moving forward, Irby at Exact sees cloud
computing software becoming more robust to ad-
dress more of the manufacturers’ concerns in their
day-to-day operations and business.
SECTION 4: MOVING FORWARD
How satisfied are
you with Cloud
Computing so far?
Very
Satisfied
25%
Satisfied
58%
Neither
Satisfied or
Dissatisfied
16%
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M A R K E T M O N I T O R R E S E A R C H S E R I E S
“While there are some pretty powerful platforms
available, they aren’t necessarily as robust as the
on-premise products companies have been us-
ing,” says Irby. “We see that changing by leaps and
bounds, and software companies are really working
hard to get the technology and the functionality
up to the point where it can replace the on-prem-
ise products very easily and without question. It is
just an evolution of moving these robust, complex
ERP systems for manufacturing towards the cloud
— systems that will allow anybody in the organi-
zation to be able to access software at anytime,
anywhere, and at any location.”
Right now, vendors are trying to help manufactur-
ers understand the benefit of the Cloud and how to
leverage it inside their organizations, such as where
it makes sense first and where the greatest value is.
“Our job is to help manufacturers understand that
not every workload needs to be moved to the
Cloud with the same level of urgency,” indicates
Downing. “I think one of the things that we can
do as vendors is help manufacturers understand
where those processes are on that spectrum, and
help them understand the ones that they really
need to be focusing on.”
Downing suggests that manufacturers build an 18
to 36 month plan that diagrams out what process-
es are critical and what processes could be moved
to the Cloud sooner rather than later. Manufac-
turers should explore some early, easy wins to get
their feet wet around the Cloud so that when they
get to some of the more sophisticated systems,
such as material requirements planning (MRP) sys-
tems, they already have some experience in asking
the difficult questions and determining the ROI.
“I see more and more manufacturing companies
adopting the Cloud, and I think a lot of it has to do
with getting employees to be more engaged, more
empowered and hopefully more satisfied with us-
ing the business applications that an organization
is working with,” says Humphlett.
One of the key pieces to manufacturing success
is figuring out how to grow the business. By utiliz-
ing cloud computing, companies can drive faster
change and adoption of innovations quickly in
order to deliver new products to market and grow
the business.
“There are a lot of laggards out there when it
comes to technology adoption,” concludes Irby.
“But as they see success by others, I think they be-
gin to see the real opportunity and the advantage
of moving to the Cloud.”
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M A R K E T M O N I T O R R E S E A R C H S E R I E S
Market Monitor Research Series:
Advantage Business Media’s Market Monitor Research Series presents fresh re-
search and analysis on compelling and timely industry topics. “The Cloud: Taking
Manufacturing to the Next Level” was prepared by Manufacturing Business Technol-
ogy Associate Editor Jon Minnick. The data presented in this report is based on the
results of a survey of Manufacturing Business Technology subscribers, comprising of
CEOs, presidents, owners, engineers, managers, and directors across the manufac-
turing industries.
About Manufacturing Business Technology:
Manufacturing Business Technology has served as a leading resource for manufac-
turers for the past 30 years, and its longstanding readership in the manufacturing
marketplace makes it a respected source on the latest technologies. Manufacturing
Business Technology is a prime information source for decision-makers in opera-
tions, information technology, automation, and the supply chain.
About Advantage Business Media:
Advantage Business Media (www.advantagemedia.com) is a data-driven marketing
solutions company leveraging content, technology, and business intelligence to
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Cloud Computing in Manufacturing: Are You Ready For The Future?
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