The manufacturing industry is undergoing a major transformation which is driven by smart technologies and IT, notably cloud computing. The main thrust of cloud computing is to provide reliability, scalability and on-demand provisioning of resources. According to industry sources, the availability in a distributed environment along with economically attractive pay-as-you-go pricing and instant provisioning of redundant resources to manage agility can be considered as some of the major factors for adoption in the manufacturing industry.
The recent trends in IT such as internet of things, collaboration, analytics, smart manufacturing and many others are shaping enterprises worldwide. Manufacturing industry is diverse where cloud computing platforms can play a major role due to its benefits in enhancing agility, expanded flexibility, reduced costs and enhanced productivity. According to one IDC survey on Worldwide Cloud Adoption in Manufacturing Industry, trends show that the adoption rate of public clouds is 66% and 68% have private cloud, out of 593 respondents across 17 countries including India.
In India, according to MintJutras research, 22% of manufacturing and distribution software uses the cloud SaaS delivery model and this adoption is expected to exceed 45% in the next decade. Manufacturing industry is increasingly becoming more and more dependent on cloud models for the following reasons:
- Manufacturers pursue a cloud strategy to achieve business goals by focusing on business systems, processes, models and performance to develop long standing relationships with customers.
- To realize the full automation in industrial and operational management systems. Clouds due to their computing abilities ensure effectiveness in producing physical goods and to manage product lifecycles.
- Clouds provide efficient information flows along with easing complexities in implementing fully automated workflows in operations.
- Provide greater supply chain visibility and improved forecasting accuracy through the use of cloud based applications.
- Organizations are enabled for more growth, remain competitive and at the same time explore new markets.
- Offers the ability to solve system integration problems easily. Cloud based enterprise software, ERP, CRM, SCM systems and other manufacturing systems can automatically scale up or down as required.
In addition to the above, cloud services offer the platform for continuous innovation, agility, ability to scale and flexibility, business focus and availability, cost savings and so on which are some of the other pointers accelerating cloud adoption. Some of the recent cloud adoption trends in global and Indian scenarios are explored a bit more and summarized here.
Cloud adoption scenario in manufacturing globally: The IDC study provides insights on cloud based strategies in manufacturing that are oriented towards enterprise IT. Adoption in other manufacturing areas such as engineering and operations are proceeding with caution. In a recent Bain & Company study titled ‘Tapping Cloud’s Full Potential’, enterprise organizations are able to realize 35% of their total potential value from cloud deployments. However the reliance on cloud for integrating existing systems and for developing new business models is increasing steadily.
The Enterprise Cloud Report 2015 from Cloud Sherpas, based on a survey shows that almost 66% of organizations prefer cloud services due to its agility – positioning IT to change automatically to alter capacities according to changing business needs.
IDC Manufacturing Insights explains that manufacturing industry is in the middle of a digital transformation where manufacturers want to operate and service customers globally. Trends indicate there is more dependency on cloud service providers for technology resources and operational support at low costs.
Clouds support manufacturers in realizing tremendous value in terms of speed, cost and accessibility however IT and line of business must be defined clearly to realize full benefits of clouds.
Cloud adoption scenario in manufacturing in India: Cloud adoption in India is primarily aimed at overcoming challenges in legacy software, disparate systems, inefficient demand planning, high cost and low productivity. Indian manufacturing companies look towards adopting cloud models to implement collaboration and analytics tools, CRM, ERP, enterprise mobility tools and dashboards to share information and enhance accuracy in their production processes.
Manufacturing industry in India is a major contributor for Cloud ERP market and according to Infoholic Research, cloud ERP market in India is estimated to reach $97.8 million by end of 2015 and growing. Estimates provided by Infoholic Research also show that manufacturing market in India is expected to grow at 19.4% CAGR from 2015 to 2020.
The ‘Make in India’ initiative by the Government is providing a big boost to manufacturing sector with 24.1% contributions to the total cloud ERP market in India. In addition to this, SMEs are also implementing ERP systems on cloud platforms which can further promote cloud adoption trends in this area.
Ernest & Young India news release on cloud adoption mentions that more than 60% cloud implementations focus on infrastructure consolidation by adopting IaaS. The manufacturing industry is rapidly virtualizing their servers and desktops along with SaaS platform for enterprise application deployments by many manufacturing firms.
The Indian manufacturing scenario offers big potential for cloud adoption in 2016 and beyond. Government initiatives like Digital India and Make in India are expected to foster cloud adoption among manufacturing SMEs and large enterprises.
Insights on Cloud Service Delivery and Deployment model adoption in manufacturing: According to IDC Global Technology and Industry Research Organization IT Survey, manufacturing respondents access IT resources via public clouds. IDC Manufacturing Insights survey and IT Priorities survey results show that almost 50% of European manufacturing firms had already adopted ERP in public cloud models. Manufacturers in Asia Pacific region are using a mix of public and private clouds with an adoption rate at 49%. IDC cloud adoption estimates show that 61.6% companies prefer to use public cloud services and another 56.8% are planning to replace their existing IT functionalities through IaaS and SaaS cloud deployments.
A survey by EMC involving 900 respondents show that 88% respondents view cloud services as critical to their organization to realize digital transformation and 63% are already experiencing multiple benefits due to cloud adoption. Hybrid clouds seems to be the preferred adoption model to improve customer service, and EMC results show that 86% respondents are able to acquire new customers and another 82% are able to make real time business decisions. Hybrid clouds are preferred by manufacturers to implement their PLM strategies and applications.
Verizon Enterprise Solutions 2016 State of the Market: Enterprise cloud report explains that almost 50% of surveyed respondents use a mix of public and private clouds for their IT resource. Hybrid cloud adoption is gaining momentum with cloud spending growing at 38% compared to 2014. SaaS and PaaS adoption found to be increasing as more and more organizations are using these platforms for implementing applications, web pages and for development and testing new software models.
Industry estimates predict that 80% of new applications will be deployed on the cloud in the next few years. Indian manufacturers prefer to use open source technology and acknowledged OpenStack IaaS for its low cost and to avoid vendor lock-in concerns. SaaS platforms are emerging as a delivery vehicle for mobility, analytics and for handling big data projects.
Verizon report also highlights that manufacturers prefer cloud based ERP implementations to improve their workloads and this market is increasing steadily. According to Gartner estimates, almost 30% companies in services will move their ERP applications to the cloud. Traditional ERP vendors such as SAP and Oracle offer IaaS, SaaS and PaaS products to extend existing applications to cloud or on-premise apps and to create and develop new capabilities. Oracle offers a PaaS platform in their cloud ERP solutions.
Cloud service models are poised to provide significant value to manufacturers by integrating emerging technologies such as IoT, sensors, big data analytics and so on. In summary, cloud computing services are an effective way to access, analyze and share large volume of information across the manufacturing industry.