Part 2 of the “Digitalization of the IM&C Industry” series
The first blog in this series discussed how industrial manufacturers are looking at digitalization. It is clear that digital disruption is a journey; new business models, processes, and applications are being developed every day. It also shows that the rate of digital disruption will impact us for some time, so manufacturers have to be prepared, and that means having a solid foundation.
For some time, manufacturers have valued solutions deployed in the cloud to support innovation. The benefits of cloud solutions are well known: they support quick deployment and are cost-effective, as the “pay for a service” model removes the need for huge upfront capital expenditures. In addition, it is easier to scale cloud solutions as your business grows (or shrinks), and it is a lot easier to consume new technological innovation without the need for complex and lengthy upgrades.
Companies are also recognizing that supporting business processes in the cloud has a positive impact on their ability to improve governance, security, and compliance – although interestingly, security is still seen as an area of concern and challenge. This is because cloud providers are already using the latest security technologies, and most companies often struggle to keep up with new capabilities and redesigning their approach to security in the cloud, especially in a multi-tenant cloud universe.
In addition, according to SAP benchmarking in 2017, companies that leverage the cloud to innovate rapidly achieve a 49% higher operating margin.
A July 2018 commissioned study, conducted by Forrester Consulting on behalf of SAP, reported that innovative manufacturers saw the benefits that supporting business processes in the cloud gave them much more clearly than other companies.
Although innovative manufacturers saw more benefits in all areas of strategy, business, and IT, the following were seen as most important to them (compared to other companies) in each area:
- Strategy enablement: Improving customer engagement and user experience, 94% to 65%
- Business benefits: Growing revenue, 94% to 67%
- From an IT perspective: Extensibility, agility, and scalability, 95% to 79%
There were other areas where innovative manufacturers saw significantly more benefit in the cloud than other companies: business agility, 29% more; simplification of the IT landscape 30% more; and increasing the speed of analytics and analysis had a 33% gap. All are important elements for digitalization.
So it is no surprise that the July 2018 study reported that innovative organizations have migrated a larger percentage of business processes to the cloud than other organizations. Specifically, 69% of innovators versus 58% of other companies have moved a large or very large percentage of their business processes to the cloud. Innovative manufacturers see cloud as the foundation and key enabler to achieve their key digital priorities and are investing more in business processes in the cloud to support digital transformation. Manufacturers are investing in processes such as manufacturing, finance, and risk management.
However, as manufacturers look holistically at their digital priorities and how to transform their business to achieve them, cloud solutions can no longer remain siloed. Cloud solutions need to be able to seamlessly pass data and insights across system boundaries, so that end-to-end industry processes can run in the cloud. The Forrester commissioned study found that 88% of manufacturers are highly interested in leveraging an industry cloud to execute on their strategic priorities.
What would be the building blocks of an industry cloud for discrete manufacturers?
- A digital foundation for next-generation business processes and cloud applications that supports everything from ERP to supply chain to customer experience and people engagement,through an industry perspective
- An intelligent system of innovation to create new business models, processes, and embed new technologies such Internet of Things, machine learning, and predictive analytics
- Real-time insights into the business based on one real-time source of data, from the boardroom to the detailed analysis, to monitor KPIs and root cause
- An intuitive user experience available through any device, anywhere, relevant, and in context
An industry cloud architecture allows you to innovate in different ways simultaneously. For example, manufacturers can optimize existing processes through using machine learning to automatically match invoices or categorize service tickets. They can extend processes to take advantage of innovative technologies, such as creating a digital twin that mirrors the lifecycle of the equipment and allows designers, manufacturers, operators, and suppliers to all collaborate. Finally, they can completely transform their business models, for example implementing new pay-to-outcome business model.
There are many different paths on the digital transformation journey – the right building blocks of an industry cloud can help you on your way.
For more information, read the white paper “The Intelligent Enterprise for the Industrial Machinery and Components Industry.”