All too often, when companies buy and implement supply chain software, you hear a similar story: the implementation took longer than planned and the company grossly underinvested in training. Also, the needed software customization made future upgrades costly and time consuming to the point where upgrade cost and effort often rivaled a brand new implementation. Because of this, companies understandably delay upgrades for years, thus foregoing the latest product enhancements. In the meantime, power users leave the company and the value the company can derive from the software diminishes.
JDA Software, a leading provider of supply chain planning, merchandising, and pricing solutions (and an ARC client), appears to recognize these problems. A few weeks ago at its JDA Focus 2012 User Conference, the company announced a cloud strategy to improve time-to-value for its clients and reduce both implementation and support costs. JDA’s intention is to move from “behind-the-firewall” solutions to a cloud-based business model over the next three to five years.
When JDA speaks of cloud solutions, it means a private cloud, or hosted solution, rather than a multitenant cloud solution. JDA’s clients include some of the largest manufacturing, retail, and distribution companies in the world. These companies require extremely-rich functionality, but are also hypersensitive about data security. JDA believes that most of these large companies would not be willing to use a multitenant cloud solution.
It is easy to see how a multitenant cloud solution, like Salesforce.com, could potentially provide faster time-to-value and easier upgrades. After all, the architecture associated with a multitenant cloud solution eliminates the potential for customization, which as we have seen, typically lengthens implementation times and makes upgrades onerous. But how can hosted solutions improve time-to-value?
The key area in which a private cloud solution saves time over a behind-the-firewall solution is in hardware testing and deployment. JDA argues that, with a behind-the-firewall solution, ordering new hardware, receiving it, and testing it to make sure the hardware will scale to handle complex optimization will usually take at least six weeks. The company argues that the private cloud model can take four weeks off this timetable, reducing this to a two-week process. Based on this, JDA believes private cloud deployments will lead to an implementation that is about 10 percent faster overall.
JDA also believes that its costs to maintain private cloud solutions are substantially less than the costs associated with servicing behind-the-firewall solutions. In particular, the maintenance associated with upgrades should be diminished. When customers decide to do an upgrade, regression testing must be performed to determine whether the addition of a new feature or function will break any of the existing functionality the customer is already using. In the hosted model, JDA believes it can perform regression testing quicker and more reliably, leading to fewer service calls following the upgrade.
JDA proposes to share these maintenance service savings. For private cloud deployments, JDA will charge 20 percent of the software license cost for maintenance, rather than the existing 22 percent fee.
Finally, JDA has been providing managed services surrounding planning for several years. Clients can hire JDA professionals to help them forecast demand, tune demand, and inventory solutions to make sure the solutions continue to provide value. JDA’s professionals can also help prepare reports and analysis for sales and operations planning meetings. JDA can provide these services remotely or send planners to customer sites. Following an implementation, these services can be particularly helpful in helping to develop power users and helping companies accelerate time to value. JDA believes private cloud solutions will make it easier for its managed services personnel to add value.
JDA recognizes that some of its customers will never make the move to private cloud solutions. The company’s announced five-year plan to move customers to the cloud is an aspiration, not a requirement. Further, the company is closely examining its business processes in the consulting, training, implementation, and maintenance areas to better understand how changes in processes can be mirrored with hosting to improve its customers’ return on investment. JDA has already begun to invest in this journey.
As enterprise solutions get richer and richer in functionality, it becomes harder for software vendors to differentiate solely on this basis. Time-to-value can be a differentiator. JDA’s cloud strategy does not solve all the problems associated with implementing and driving value from supply chain solutions. It does not solve, for example, the problem of locating and cleansing master data, which can greatly delay any supply chain implementation. Nor does the cloud strategy fully solve the customization problem. Nevertheless, JDA’s initiative is laudable and can serve to improve the ROI associated with supply chain planning projects.
