There is no question that 2010 is a transition year for most businesses. After a year or more of aggressive cost cutting and negative growth the business environment is changing. The financial crisis has abated, government sponsored stimulus programs are beginning to have an impact, stocks have rebounded and consumers are taking hesitant steps towards demonstrating confidence in the economy. However, with unemployment continuing to hover at record heights and with distressed home prices in most markets there is still a long way to go. Executives are walking a tight-rope balancing risk and growth.

The 2010 Executive Agenda

The pace of the economic recovery is the key point of uncertainty. How fast will consumer confidence return? How fast will the unemployment rate drop? If you are a middle manager you just keep your head down and grind out the work with fewer people and perhaps more overtime. However, executives have to make strategic bets on the future despite uncertainty.

Coming out of the recession unprepared for growth could lose market share and slow your recovery. Over investing in growth that does not develop could be just as bad.

While the CEO/MD leads the executive agenda setting, each functional Director has their own unique set of strategic challenges or opportunities. With the level of market uncertainty so high it is more important than ever that strategies are aligned and investments prioritised for their impact across the organisation. Warehouse Management Systems (WMS) offered through the Software as a Service (SaaS) commercial model are well positioned to work within the context of this 2010 reality. They align across the Director’s strategic objectives and near term goals.

Rethinking How to Purchase Warehouse Management Software (WMS)

The saying goes in the software industry that the difference between selling and lying is six months. Within six months a solution provider might be able to develop the capabilities promised, if the customer buys. Then again, an enterprising implementation leader talking to a confused customer may sell a promised change as a modification, increasing service revenue. The warehouse management segment of the software industry has seen more than its share of this behaviour.

The counter to these common sales shenanigans has been the appropriate development of rigorous purchasing processes. These processes include: Requests for Information, Requests for Proposals, Proof of Concept Pilots, and multiple “Out” clauses in contracts. Buyers may also engage consultants that specialise in evaluating software or be advised by software industry analysts. All of these purchasing steps make sense in a business relationship where most of the risk is on the buyer.

The risks buyers face with traditional solution providers include justifying the upfront commitment of capital to a future stream of benefits in the hope the investment produces an adequate return. A second risk involves the ability of the significant implementation expense to be managed on time and on budget. A third risk involves the ability of the solution to be strategically relevant over time as business conditions change. These risks make effective purchasing practices absolutely necessary. The down side of this rigor is the cost of the purchasing process and the length of time it takes.

Ultimately it lengthens the time between a recognised business need and the realization of benefits from fulfilling the need. Software as a Service is different….

SaaS WMS Changing the Rules in the Tier-One Market

Software as a Service Warehouse Management Systems (SaaS WMS) represents an innovation in the tier-one WMS market. This innovation is changing the rules of the game for success. SaaS WMS solutions are reducing customers’ business risks while offering the same benefits as traditional tier-one competitors. SaaS WMS solution providers are reducing costs as they assume new responsibility for costs traditionally borne by the customer. These reduced costs involve the cost of infrastructure, solution support, and implementation. The efficiencies solution providers gain as they manage these services allow them to achieve respectable profit margins while providing customers with a much lower total cost of ownership. The net result of reducing customer risk and lowering the total cost of ownership is that the WMS market expands as WMS solutions become more affordable.

SaaS WMS solutions will both grow the tier-one WMS market and take market share from traditional WMS solution providers. Traditional WMS solutions providers will be challenged by the need to shift their business model and address the necessary technology changes for competitive SaaS performance. Shifting the business model requires a multi-year transition for revenue recognition practices to realign. Technology changes may require reengineering the solution to reduce the performance latency potential that adding hardware alone can’t address. This massive business restructuring will impact profitability in the short term and will provide limited value to existing customers paying maintenance.

This white paper will explore the economic changes in the WMS marketplace driven by SaaS innovators. It will address the reality of delivering tier-one capabilities by addressing the necessary changes in the technical application architecture, services function, support function, and risk management.

Other articles include:

• Special Report on SaaS by Manufacturing and Logistics IT Magazine

• Total Cost of Ownership

• SaaS WMS Embracing Distribution Complexity

Go to our knowledgebase for the full copies of all of these article and more.

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