How Manufacturing Organizations Can Regain Control Of Their Supply Chain

Sudy Bharadwaj

According to ChainLink Research, organizations outsource about 30% of their manufacturing on average, and that amount will continue to grow as firms shift the production of certain items to contract manufacturing organizations (CMOs). The good news is that the outsourcing organizations can refocus their energies on core competencies. The bad news? They surrender control over key components of their supply chain.

Depending on the industry, this loss of control can present formidable challenges:

  • High-tech: The responsibility to manage inventory may shift to members of the supply base, but it remains on your balance sheet – you own it, but it is effectively under your supplier’s control. Any mistakes on your supplier’s end can cost you.
  • Life sciences: While responsibility for certain inventory remains with the lead enterprise, compliance requirements fall on the entire supply ecosystem.
  • Consumer goods: Product safety and quality issues need to be managed along every link of the supply chain.

The outsourcing of manufacturing presents challenges as unique as the industries that rely on it.

Loss of control can yield poor results in terms of higher inventories or cost of goods sold (COGS, sometimes referred to as cost of sales). While there may be other financial metrics, these two are most prominent affecting shareholder value.

Gaining control over these financial metrics requires close collaboration with suppliers. Visibility and control over the flow of materials, dollars, and information can contribute significantly to improving these metrics. E-mail and spreadsheets for these purposes have been around for decades, but these tools offer limited capabilities:

  1. Cycle time: The time to obtain crucial information and react. This can involve a commitment to an external manufacturer, an exchange of forecast requirements from the external manufacturer, or a purchase order. Working collaboratively to reduce this cycle time can unlock tremendous value. For example, if a forecast-commit collaboration between your organization and external manufacturing organizations takes 4 weeks, an improved process leveraging cloud-based network technology reduce this to 2 weeks. This can create efficiencies such as making the wrong thing for only two weeks versus four. The shift to external manufacturing may have sacrificed four weeks of control over the cycle, but technology can help cut that loss in half.
  1. Richness of information: Information that must be shared with external manufacturing entities and the teams within the outsourcing organization can be vast and overwhelming. Methods such as e-mail and spreadsheets offer limited insight. In contrast, a cloud-based network can benefit the ecosystem by shedding light on additional factors: time, locations, detailed bill of materials, etc. Spreadsheets also present the challenge of version control: Which one contains the most up-to-date information? A network offers real-time metrics for the entire ecosystem – internal team members and external entities alike. Ultimately what it offers is accountability for all parties involved.
  1. Management by exception: By including such information in a sophisticated and collaborative framework, those parties responsible for external manufacturing can focus on specific problems. Where there are no problems, no time need be wasted. When an exception occurs, the system can flag it, and the organization can rectify it immediately while devoting the bulk of its attention to important, high-priority issues.

Organizations need to ascertain their limitations and capabilities and those of their trading partners. A cloud-based network enables them to gain control over both. To do so effectively, the organization must work with its external manufacturing partners and invest in the appropriate capabilities to create a collaborative rather than adversarial relationship. All parties need to realize the benefits of enhanced visibility and the teamwork it enables.

Learn more about how digital transformation can impact your supply chain operation. Visit our value calculator and analyze the impact and generate your own customized reports.

Comments

Sudy Bharadwaj

About Sudy Bharadwaj

Sudy Bharadwaj has over 25 years experience in helping businesses transform operations in a variety of areas and industries. Sudy's current focus for SAP is helping organizations transform direct spend leveraging supply chain and sourcing competencies.

How Robots Are Changing The Business Of Toilet Paper And Diapers

Judith Magyar

In spite of all the changes brought on by digital technology, humans are essentially analog creatures. For evidence, look no further than the consumption of toilet paper and diapers.

And while they are readily available and affordable in developed countries, that’s not always the case in the developing world. More than 2 billion people around the globe have no access to improved sanitation and basic hygiene products, while another 800 million lack regular access to clean water.

What’s this about?

One way to address that disparity is to produce, sell, and distribute toilet paper and diapers more efficiently so that they’re both available and affordable to everyone. At Essity AB, Sweden’s leading producer of hygiene and health products and solutions, that challenge has fallen to experts like Robert Sjöström, SVP Strategy and Business Development. The answers lie in the digital world.

At the recent ThinkX event in Stockholm co-sponsored by SAP and Singularity University, Sjöström described how Essity is automating its factories with AI-driven technology to enable waste reduction, use less energy, improve quality, and reduce costs by re-thinking how human workers impact the production process.

“Digitalization will impact the entire company, and we expect to develop our employees to perform other tasks,” he said. “We’re using robotics to optimize processes and to eliminate as much manual work as possible.”

Let’s not forget, machines were not invented to lighten the load of laborers but to increase output and value. In fact, toilet paper factories are already completely automated. While human beings may oversee the production line, they are largely removed from the operation; from the first stage to the last, toilet paper is made by a series of ingenious machines strung together by a system of conveyors.

But today it’s not enough to just create value through growth. Today, value must be sustainable over time.

Why it matters

“We create business value by meeting society’s most basic needs,” Sjöström says. “But the way we produce paper has not changed for hundreds of years.”

Wood chips are still processed into pulp that’s dried and formed into sheets, a process that hasn’t changed fundamentally since the company was formed. Originally a forest products company with roots in the 1850s, the new name Essity was implemented last year symbolizing essentials that are necessities. The fiber for Essity’s products comes from responsibly managed forests with a respect for biodiversity and fair labor conditions.

“What is changing is how we process materials in a more sustainable way and how we use technology to be more efficient,” Sjöström says.

Such changes require an innovation process that is deeply embedded in a company’s strategy and business model. At Essity, innovation activities are driven by market trends, customer and consumer insight, new technology and new business models which all require new skills and mindsets. The role of human workers will shift away from manufacturing and toward running the business.

“We will create new positions in the company such as digital analysts and robotic experts, so we’ll need to recruit more people with strong mathematical and digital capabilities. It’s also very important that our IT people have a better understanding of the business,” says Sjöström. “Management must stop thinking in a linear way about budgets and start thinking about how to train our brains to be more open-minded, to better understand data, to be less emotional and more fact-based.”

And while it’s true that machines can be more efficient than humans, Sjöström believes the human touch will be more important than ever.

“Our products will continue to be used in a traditional way in homes, but with machines taking care of processes in hospitals, for example, instead of running around looking for supplies or filling out paperwork to maintain stocks of hygiene products, nurses will actually have more time to care for patients at the bedside where it really counts,” he adds.

Good for people, good for business

New technologies like machine learning are making it possible to automate routine tasks which means efficiency will no longer be a differentiator. What will make a difference to the long-term relevance of a company is its reason for being. It’s no coincidence that Essity has made it a mission to improve health and well-being through personal and professional hygiene solutions in full alignment with the United Nations’ Global Sustainable Development Goals (SDGs).

Essity’s rigorous commitment to the SDGs means it aims to improve the well-being of people all over the world and create business opportunities as well. For example, Essity is helping to stop the spread of disease with handwashing programs in schools and to break taboos about menstruation and incontinence in collaboration with organizations like the Water Supply and Sanitation Collaborative Council (WSSCC). At the same time, its commitment to sustainable supply chain opens new opportunities for suppliers in all areas from fiber sourcing to water and waste management to climate and energy.

And last, but not least, employees feel good about their work because they understand their role in making the world a better place.

For more on how technology can improve lives, see Four Ways To Fulfill Your Purpose Through Technology.

This article originally appeared on Forbes SAPVoice.

Comments

Transform Transportation With Intelligent Condition Monitoring

Konstanze Werle

Today’s transportation industry faces a growing urgency to deliver service faster, more efficiently, and at scale amidst numerous challenges. Companies must find ways to maximize existing capacity to meet increasing demand for on-time (or just-in-time) delivery even as employment numbers fall. Even freight costs are facing increasing scrutiny. To mitigate these risks transportation companies will need to utilize intelligent condition monitoring.

Key transportation concerns of business owners

The complexities of the transportation sector limit not only its ability to thrive but also to change and grow to meet today’s fast-changing environment. From consumer ride-share services to e-commerce free shipping, transportation companies face challenges at every turn.

Safety and compliance are two key components of concern for many in the transportation industry. Information from Juniper Research suggests that ride-sharing services such as Lyft and Uber, for example, will grow from 4.3 million users to 8.6 million by 2022. Yet regulatory changes, such as London’s recent refusal to allow Uber to operate due to safety concerns, continue to challenge of these startups. Trucking companies in the U.S. are now working to ensure they are in compliance with the logging device mandate, implemented in December 2017, that securitizes drivers and safety practices within the organization.

Companies are also facing difficulties within daily operations. For example, the U.S. Department of Transportation forecasts a massive 40 percent increase in the transportation market over the next 30 years, much of which is coming from increased demand from online purchases. Hampering this growth is a significant lack of workers. A shortage of as many as 225,000 transportation employees is expected by 2022.

In short, there is a growing need for on-time delivery and more demand for capacity planning to ensure that companies can maximize capacity, reduce costs, and minimize the impact of the worker shortage. Safety and compliance issues add an additional challenge. How can companies mitigate these risks without hampering growth?

Intelligent condition monitoring creates new opportunities

At the heart of the industry’s most prominent resource is data. Implemented and utilized properly, data can help transportation companies better meet the challenges they face and enable organizations to get the highest possible return on their assets. To achieve this, they must gain insight that helps them better align assets and resources to achieve their goals.

Imagine how efficient transport asset management could impact each sector of this industry. It aids in reducing costs while improving service. It can help companies to mitigate risk, including compliance-related risks and those specific to the industry. Here’s a closer look.

Predictive maintenance and service tools

Predictive maintenance and service can prevent asset downtime before it happens. Companies can minimize the number of vehicles and employees accordingly. Such insight also helps reduce unplanned downtime and, over time, maintenance costs. This is done through a connected, intelligent condition monitoring platform.

Existing maintenance programs also become more efficient. Instead of tapping into unknown problems, maintenance teams have more insight into what’s truly happening within the vehicle to tailor their use of maintenance time to maximize the vehicle’s performance. This also works to increase the lifespan of any vehicle, reducing costs even further.

Vehicle insights and asset intelligence networks

What if assets could be used more effectively? As noted, capacity planning has become essential to ensuring on-time delivery across the industry. With the help of data insights and intelligent condition monitoring, it is possible to increase asset utilization without hampering delivery times, so companies do not need to worry about customer delays.

There is also more opportunity to boost asset management across the ecosystem by collaborating more fully and linking seemingly unrelated sectors to improve efficiency and drive capacity models.

All of these factors deliver key benefits to the transportation industry. Transportation companies are able to deliver more and higher-quality of transport services using fewer assets. They achieve a higher level of reliability and reduce overall costs. In the current environment, in which infrastructure is constrained, such engagement empowers all divisions of the industry. Ultimately, it leads to responsible growth due to better service, lower costs, and better asset management. Improved maintenance also means a cleaner planet and greater energy efficiency across the board.

It all stems from access to information, intelligent condition monitoring, and a focus on innovation in a tight, limited industry. Transportation companies that implement such opportunities are likely to see numerous gains for years to come.

Learn how to innovate at scale by incorporating individual innovations back to the core business to drive tangible business value by reading Accelerating Digital Transformation in Transportation.

Comments

Konstanze Werle

About Konstanze Werle

Konstanze Werle is a Director of Industries Marketing at SAP. She is a content marketing specialist with a particular focus on the travel and transportation, engineering and construction and real estate industries worldwide. Her goal is to help companies in these industries to simplify their business by sharing latest trends and innovation in their industry.

Hack the CIO

By Thomas Saueressig, Timo Elliott, Sam Yen, and Bennett Voyles

For nerds, the weeks right before finals are a Cinderella moment. Suddenly they’re stars. Pocket protectors are fashionable; people find their jokes a whole lot funnier; Dungeons & Dragons sounds cool.

Many CIOs are enjoying this kind of moment now, as companies everywhere face the business equivalent of a final exam for a vital class they have managed to mostly avoid so far: digital transformation.

But as always, there is a limit to nerdy magic. No matter how helpful CIOs try to be, their classmates still won’t pass if they don’t learn the material. With IT increasingly central to every business—from the customer experience to the offering to the business model itself—we all need to start thinking like CIOs.

Pass the digital transformation exam, and you probably have a bright future ahead. A recent SAP-Oxford Economics study of 3,100 organizations in a variety of industries across 17 countries found that the companies that have taken the lead in digital transformation earn higher profits and revenues and have more competitive differentiation than their peers. They also expect 23% more revenue growth from their digital initiatives over the next two years—an estimate 2.5 to 4 times larger than the average company’s.

But the market is grading on a steep curve: this same SAP-Oxford study found that only 3% have completed some degree of digital transformation across their organization. Other surveys also suggest that most companies won’t be graduating anytime soon: in one recent survey of 450 heads of digital transformation for enterprises in the United States, United Kingdom, France, and Germany by technology company Couchbase, 90% agreed that most digital projects fail to meet expectations and deliver only incremental improvements. Worse: over half (54%) believe that organizations that don’t succeed with their transformation project will fail or be absorbed by a savvier competitor within four years.

Companies that are making the grade understand that unlike earlier technical advances, digital transformation doesn’t just support the business, it’s the future of the business. That’s why 60% of digital leading companies have entrusted the leadership of their transformation to their CIO, and that’s why experts say businesspeople must do more than have a vague understanding of the technology. They must also master a way of thinking and looking at business challenges that is unfamiliar to most people outside the IT department.

In other words, if you don’t think like a CIO yet, now is a very good time to learn.

However, given that you probably don’t have a spare 15 years to learn what your CIO knows, we asked the experts what makes CIO thinking distinctive. Here are the top eight mind hacks.

1. Think in Systems

A lot of businesspeople are used to seeing their organization as a series of loosely joined silos. But in the world of digital business, everything is part of a larger system.

CIOs have known for a long time that smart processes win. Whether they were installing enterprise resource planning systems or working with the business to imagine the customer’s journey, they always had to think in holistic ways that crossed traditional departmental, functional, and operational boundaries.

Unlike other business leaders, CIOs spend their careers looking across systems. Why did our supply chain go down? How can we support this new business initiative beyond a single department or function? Now supported by end-to-end process methodologies such as design thinking, good CIOs have developed a way of looking at the company that can lead to radical simplifications that can reduce cost and improve performance at the same time.

They are also used to thinking beyond temporal boundaries. “This idea that the power of technology doubles every two years means that as you’re planning ahead you can’t think in terms of a linear process, you have to think in terms of huge jumps,” says Jay Ferro, CIO of TransPerfect, a New York–based global translation firm.

No wonder the SAP-Oxford transformation study found that one of the values transformational leaders shared was a tendency to look beyond silos and view the digital transformation as a company-wide initiative.

This will come in handy because in digital transformation, not only do business processes evolve but the company’s entire value proposition changes, says Jeanne Ross, principal research scientist at the Center for Information Systems Research at the Massachusetts Institute of Technology (MIT). “It either already has or it’s going to, because digital technologies make things possible that weren’t possible before,” she explains.

2. Work in Diverse Teams

When it comes to large projects, CIOs have always needed input from a diverse collection of businesspeople to be successful. The best have developed ways to convince and cajole reluctant participants to come to the table. They seek out technology enthusiasts in the business and those who are respected by their peers to help build passion and commitment among the halfhearted.

Digital transformation amps up the urgency for building diverse teams even further. “A small, focused group simply won’t have the same breadth of perspective as a team that includes a salesperson and a service person and a development person, as well as an IT person,” says Ross.

At Lenovo, the global technology giant, many of these cross-functional teams become so used to working together that it’s hard to tell where each member originally belonged: “You can’t tell who is business or IT; you can’t tell who is product, IT, or design,” says the company’s CIO, Arthur Hu.

One interesting corollary of this trend toward broader teamwork is that talent is a priority among digital leaders: they spend more on training their employees and partners than ordinary companies, as well as on hiring the people they need, according to the SAP-Oxford Economics survey. They’re also already being rewarded for their faith in their teams: 71% of leaders say that their successful digital transformation has made it easier for them to attract and retain talent, and 64% say that their employees are now more engaged than they were before the transformation.

3. Become a Consultant

Good CIOs have long needed to be internal consultants to the business. Ever since technology moved out of the glasshouse and onto employees’ desks, CIOs have not only needed a deep understanding of the goals of a given project but also to make sure that the project didn’t stray from those goals, even after the businesspeople who had ordered the project went back to their day jobs. “Businesspeople didn’t really need to get into the details of what IT was really doing,” recalls Ferro. “They just had a set of demands and said, ‘Hey, IT, go do that.’”

Now software has become so integral to the business that nobody can afford to walk away. Businesspeople must join the ranks of the IT consultants.

But that was then. Now software has become so integral to the business that nobody can afford to walk away. Businesspeople must join the ranks of the IT consultants. “If you’re building a house, you don’t just disappear for six months and come back and go, ‘Oh, it looks pretty good,’” says Ferro. “You’re on that work site constantly and all of a sudden you’re looking at something, going, ‘Well, that looked really good on the blueprint, not sure it makes sense in reality. Let’s move that over six feet.’ Or, ‘I don’t know if I like that anymore.’ It’s really not much different in application development or for IT or technical projects, where on paper it looked really good and three weeks in, in that second sprint, you’re going, ‘Oh, now that I look at it, that’s really stupid.’”

4. Learn Horizontal Leadership

CIOs have always needed the ability to educate and influence other leaders that they don’t directly control. For major IT projects to be successful, they need other leaders to contribute budget, time, and resources from multiple areas of the business.

It’s a kind of horizontal leadership that will become critical for businesspeople to acquire in digital transformation. “The leadership role becomes one much more of coaching others across the organization—encouraging people to be creative, making sure everybody knows how to use data well,” Ross says.

In this team-based environment, having all the answers becomes less important. “It used to be that the best business executives and leaders had the best answers. Today that is no longer the case,” observes Gary Cokins, a technology consultant who focuses on analytics-based performance management. “Increasingly, it’s the executives and leaders who ask the best questions. There is too much volatility and uncertainty for them to rely on their intuition or past experiences.”

Many experts expect this trend to continue as the confluence of automation and data keeps chipping away at the organizational pyramid. “Hierarchical, command-and-control leadership will become obsolete,” says Edward Hess, professor of business administration and Batten executive-in-residence at the Darden School of Business at the University of Virginia. “Flatter, distributive leadership via teams will become the dominant structure.”

5. Understand Process Design

When business processes were simpler, IT could analyze the process and improve it without input from the business. But today many processes are triggered on the fly by the customer, making a seamless customer experience more difficult to build without the benefit of a larger, multifunctional team. In a highly digitalized organization like Amazon, which releases thousands of new software programs each year, IT can no longer do it all.

While businesspeople aren’t expected to start coding, their involvement in process design is crucial. One of the techniques that many organizations have adopted to help IT and businesspeople visualize business processes together is design thinking (for more on design thinking techniques, see “A Cult of Creation“).

Customers aren’t the only ones who benefit from better processes. Among the 100 companies the SAP-Oxford Economics researchers have identified as digital leaders, two-thirds say that they are making their employees’ lives easier by eliminating process roadblocks that interfere with their ability to do their jobs. Ninety percent of leaders surveyed expect to see value from these projects in the next two years alone.

6. Learn to Keep Learning

The ability to learn and keep learning has been a part of IT from the start. Since the first mainframes in the 1950s, technologists have understood that they need to keep reinventing themselves and their skills to adapt to the changes around them.

Now that’s starting to become part of other job descriptions too. Many companies are investing in teaching their employees new digital skills. One South American auto products company, for example, has created a custom-education institute that trained 20,000 employees and partner-employees in 2016. In addition to training current staff, many leading digital companies are also hiring new employees and creating new roles, such as a chief robotics officer, to support their digital transformation efforts.

Nicolas van Zeebroeck, professor of information systems and digital business innovation at the Solvay Brussels School of Economics and Management at the Free University of Brussels, says that he expects the ability to learn quickly will remain crucial. “If I had to think of one critical skill,” he explains, “I would have to say it’s the ability to learn and keep learning—the ability to challenge the status quo and question what you take for granted.”

7. Fail Smarter

Traditionally, CIOs tended to be good at thinking through tests that would allow the company to experiment with new technology without risking the entire network.

This is another unfamiliar skill that smart managers are trying to pick up. “There’s a lot of trial and error in the best companies right now,” notes MIT’s Ross. But there’s a catch, she adds. “Most companies aren’t designed for trial and error—they’re trying to avoid an error,” she says.

To learn how to do it better, take your lead from IT, where many people have already learned to work in small, innovative teams that use agile development principles, advises Ross.

For example, business managers must learn how to think in terms of a minimum viable product: build a simple version of what you have in mind, test it, and if it works start building. You don’t build the whole thing at once anymore.… It’s really important to build things incrementally,” Ross says.

Flexibility and the ability to capitalize on accidental discoveries during experimentation are more important than having a concrete project plan, says Ross. At Spotify, the music service, and CarMax, the used-car retailer, change is driven not from the center but from small teams that have developed something new. “The thing you have to get comfortable with is not having the formalized plan that we would have traditionally relied on, because as soon as you insist on that, you limit your ability to keep learning,” Ross warns.

8. Understand the True Cost—and Speed—of Data

Gut instincts have never had much to do with being a CIO; now they should have less to do with being an ordinary manager as well, as data becomes more important.

As part of that calculation, businesspeople must have the ability to analyze the value of the data that they seek. “You’ll need to apply a pinch of knowledge salt to your data,” advises Solvay’s van Zeebroeck. “What really matters is the ability not just to tap into data but to see what is behind the data. Is it a fair representation? Is it impartial?”

Increasingly, businesspeople will need to do their analysis in real time, just as CIOs have always had to manage live systems and processes. Moving toward real-time reports and away from paper-based decisions increases accuracy and effectiveness—and leaves less time for long meetings and PowerPoint presentations (let us all rejoice).

Not Every CIO Is Ready

Of course, not all CIOs are ready for these changes. Just as high school has a lot of false positives—genius nerds who turn out to be merely nearsighted—so there are many CIOs who aren’t good role models for transformation.

Success as a CIO these days requires more than delivering near-perfect uptime, says Lenovo’s Hu. You need to be able to understand the business as well. Some CIOs simply don’t have all the business skills that are needed to succeed in the transformation. Others lack the internal clout: a 2016 KPMG study found that only 34% of CIOs report directly to the CEO.

This lack of a strategic perspective is holding back digital transformation at many organizations. They approach digital transformation as a cool, one-off project: we’re going to put this new mobile app in place and we’re done. But that’s not a systematic approach; it’s an island of innovation that doesn’t join up with the other islands of innovation. In the longer term, this kind of development creates more problems than it fixes.

Such organizations are not building in the capacity for change; they’re trying to get away with just doing it once rather than thinking about how they’re going to use digitalization as a means to constantly experiment and become a better company over the long term.

As a result, in some companies, the most interesting tech developments are happening despite IT, not because of it. “There’s an alarming digital divide within many companies. Marketers are developing nimble software to give customers an engaging, personalized experience, while IT departments remain focused on the legacy infrastructure. The front and back ends aren’t working together, resulting in appealing web sites and apps that don’t quite deliver,” writes George Colony, founder, chairman, and CEO of Forrester Research, in the MIT Sloan Management Review.

Thanks to cloud computing and easier development tools, many departments are developing on their own, without IT’s support. These days, anybody with a credit card can do it.

Traditionally, IT departments looked askance at these kinds of do-it-yourself shadow IT programs, but that’s changing. Ferro, for one, says that it’s better to look at those teams not as rogue groups but as people who are trying to help. “It’s less about ‘Hey, something’s escaped,’ and more about ‘No, we just actually grew our capacity and grew our ability to innovate,’” he explains.

“I don’t like the term ‘shadow IT,’” agrees Lenovo’s Hu. “I think it’s an artifact of a very traditional CIO team. If you think of it as shadow IT, you’re out of step with reality,” he says.

The reality today is that a company needs both a strong IT department and strong digital capacities outside its IT department. If the relationship is good, the CIO and IT become valuable allies in helping businesspeople add digital capabilities without disrupting or duplicating existing IT infrastructure.

If a company already has strong digital capacities, it should be able to move forward quickly, according to Ross. But many companies are still playing catch-up and aren’t even ready to begin transforming, as the SAP-Oxford Economics survey shows.

For enterprises where business and IT are unable to get their collective act together, Ross predicts that the next few years will be rough. “I think these companies ought to panic,” she says. D!


About the Authors

Thomas Saueressig is Chief Information Officer at SAP.

Timo Elliott is an Innovation Evangelist at SAP.

Sam Yen is Chief Design Officer at SAP and Managing Director of SAP Labs.

Bennett Voyles is a Berlin-based business writer.

Read more thought provoking articles in the latest issue of the Digitalist Magazine, Executive Quarterly.
Comments

Tags:

Cloud Computing: Separating Myth From Reality

Misa Rawlins and Krishnakant Dave

Across industries, many enterprise leaders believe and understand that cloud computing is here to stay. Globally, public cloud services market revenue is projected to reach US$411 billion by 2020, compared with $260 billion in 2017, according to research firm Gartner, Inc. Cloud technology in all its forms—software, platform, or infrastructure as a service—is rapidly becoming essential to the needs of business today. With cloud computing, organizations can simplify IT, save costs, scale rapidly, drive standardization and user adoption, and start getting ahead of tomorrow’s needs when it comes to customer engagement, the supply chain, the workforce, a simplified finance function, and more.

Despite the short- and long-term advantages, some executives remain uncertain about the next steps or have lingering questions about the benefits of moving to the cloud. For many leaders, separating the cloud myths from the facts can prove daunting. Start here, with these insights that can help you bust big myths about the cloud and start moving confidently toward a cloud-enabled transformation of your organization.

Myth No. 1: Moving to the cloud is too costly. “Costly” is a relative term. The cloud can be costly – but costs should be weighed against benefit and return once requirements and migration plans are in place. Rapidly evolving business demands, for example, can dramatically alter cloud-related requirements. Meanwhile, new technologies are dramatically redefining the art of the possible with the cloud. Because migrating to the cloud is not a true “plug-and-play” proposition, and many enterprise leaders underestimate what a migration or implementation involves, some organizations can be surprised by the costs of a cloud transformation. Without a clear understanding of the potential benefits—without a clear business case for moving to the cloud—the focus on costs can overshadow the return on investment. Knowing the value that cloud solutions can bring—not just the costs—can help manage expectations.

Myth No. 2: The benefits of the cloud aren’t substantial enough. As vendors adopt a “cloud-first” stance for many solutions and product updates, organizations that move to the cloud may have a competitive advantage—no matter the size of the enterprise. Cloud solutions continue to offer abundant and increasing functionality. And with the help of an end-to-end solution provider, you can configure cloud solutions to the specific needs of your industry and your business. For larger organizations, rapidly deployable cloud solutions can help support growth or the unique needs of certain business units, such as new acquisitions or foreign subsidiaries, for example. For smaller organizations, the cloud can help you position your organization to tap new opportunities and tame growth challenges.

Myth No. 3: Cloud is too risky. All digital technologies and all business models come with inherent risk. In a hyperconnected world, no system is immune from cyber attacks, insider threats, data leakage, or related risks. No transformation project is a guaranteed success. Market changes, new competition, regulatory issues, and other factors can require you to change your cloud strategy overnight.

Because the risks are real, take advantage of resources and capabilities that can help reduce risk and ensure that your technology investments align tightly with clear business objectives. The maturity of the software goes a long way toward mitigating risk with cloud projects. You can add an extra layer of capabilities such as managed cloud services to provide active, hands-on oversight of cloud applications and infrastructure—helping you to avoid service interruptions and address issues proactively.

Myth No. 4: Cloud computing is still an immature technology. Like other evolving technologies, cloud is advancing every day. Those who wait for the next generation of cloud offerings may find themselves missing out on tangible benefits as competitors leverage cloud technology to sharpen their edge. Across industries, leading organizations are not waiting. Many view cloud technology as evolving but necessary, and they are leveraging it effectively today. Some, for example, are tightly integrating cloud software solutions to streamline supply chain processes, boost information transparency, and improve decision-making across the board—all the while tapping the cloud benefits of cost savings and scalability. Others are confidently turning to infrastructure solutions delivered and running solutions in a private or hybrid cloud. Still others are turning to cloud platform solutions to extend the power of existing applications, build modern analytics platforms, or support new Internet of Things business models. Turning the cloud to your advantage may depend less on the maturity of the technology and more on the power of your imagination.

Myth No. 5: Moving to the cloud will be easy. Cloud technology can help organizations streamline and simplify their IT landscapes and their business processes, reducing needs around capital expenses and infrastructure while helping to save costs. But migrating to the cloud requires more than simply plugging in technology. It requires an ability to address a host of considerations—data migration, the business-specific capabilities of solutions, change management, governance, systems integration, security, and more.

A cloud transformation is more than a plug-and-play project or a traditional system implementation. It requires progressive thinking and an ability to align technology with your business needs and processes— for today and for the future. Migrating to the cloud is a journey. Moving forward with the cloud will require a vision of your “to be” state—your destination—as well as a strategy for getting you there.

To learn more, and to find out what IDC thinks about the future of the cloud, please read this study that presents a strategic blueprint for enterprises on their digital transformation journey.

For more information on how to simplify innovation with cloud technology, learn more about SAP Cloud Platform.

Ready to reimagine the potential of the cloud? Contact us to get the conversation started.

Contact Krishnakant Dave at kdave@deloitte.com and follow him on Twitter: @kkdave

Contact Misa Rawlins at mrawlins@deloitte.com and follow her on Twitter: @misa_rawlins

www.deloitte.com/SAP

SAP@deloitte.com

@DeloitteSAP

This article originally appeared on Deloitte.com and is republished by permission.

Comments

Misa Rawlins

About Misa Rawlins

As a senior manager and consultant in Deloitte’s SAP practice, Misa Rawlins enjoys helping her clients not only to figure out how to solve their current business problems, but also to envision how a modern cloud platform can transform their organizations moving ahead. Within the practice, she has specifically chosen to take a leadership role around the sales and delivery of SAP S/4HANA Cloud because she considers it the wave of the future. She has made it her mission to deeply understand this technology to better advise clients on what moving to a cloud infrastructure really means.

Krishnakant Dave

About Krishnakant Dave

As a principal in Deloitte’s global SAP practice, KK Dave is a consulting leader for Deloitte’s largest clients; part of the U.S. SAP leadership team where he spearheads Deloitte's cloud offerings; and leader of global go-to-market efforts in the wholesale distribution and manufacturing sector. In these roles, he assists clients in their business transformation journeys using the absolute latest SAP toolset, which presently comprises SAP S/4HANA, SAP Cloud Platform, and SAP S/4HANA Cloud, among other technologies.