UP IN THE CLOUD

The business software systems that companies have been buying for the past 35 years were designed to do essentially one thing: automate the processes within the single company. They weren’t designed to handle the processes that occur daily between companies. This is especially problematic for companies conducting business on a global scale today, since global trade involves significantly more process complexity than “local sourcing” practices.

To be competitive and efficient, companies – even the smallest companies – must be ready to source and conduct business globally. Smart systems that can handle inter-company data exchange are absolutely crucial to the smooth functioning of these businesses and their dynamic trading communities.

You could argue that the business of logistics is defined by inter-company collaboration and information sharing. It certainly is when you’re talking about corporate stakeholders and their myriad logistics service providers who work together to drive down costs and gain better visibility. That’s a large group – it’s practically every company that buys or sells or moves a physical product.

So there’s a fundamental disconnect: companies desperately need help managing inter-enterprise transactions, but traditional business software doesn’t scale to meet the demands of inter-company collaboration. In other words, you can’t easily take the system you’ve installed to manage transactions that stay within the four walls of your company and stretch it to handle the information flows between you and your partners —or trading partners – continents away. However capable they might be on their own, your computer systems don’t speak the same “universal” language that your partners’ systems speak.

For years now companies have been investing in EDI and messaging software to help them manage this information exchange chasm. But even for companies with the most savvy and capable IT departments, the prospect of stitching together the data integrations and partner systems to automate the hundreds of supply chain processes that occur daily across global partner communities is simply not feasible. It’s incredibly complex and expensive; and these types of IT ventures are high risk.

BREAKING THE MODEL

But there is some good news. And that is cloud computing, which is changing the rules in IT. Indeed, if you read the business press at all, you’ve most likely already picked up on the buzz around “cloud”.

Cloud breaks the traditional IT model of investing in and managing software and systems directly in or very close to the place where physical business is being done. It does this by putting software and systems on the internet – anywhere.

You access the services remotely, and you pay for them in the same way you pay for any service: as you go, based on what you use, when you use it. It’s like getting electricity from the grid instead of buying your own generator – and maintaining it yourself, in your basement.

Right off the bat, this gives users tremendous economies of scale. Elasticity is built in. You can scale up to use a lot without buying all the infrastructure and software that “a lot” requires. But the model is also very economic and stable for the service vendors themselves – the infrastructure and software service providers who have committed to the cloud delivery model.

Software providers can focus on just one hardware and systems configuration, replicable and repeatable across thousands of individual customers. No longer is it necessary to maintain the hundreds of unique combinations of hardware ensembles that end users have constructed on their own over the years. A single unified hardware configuration can support a broader single software instance for the entire community to speed software updates and eliminate the update woes and complications that companies have faced historically with enterprise software system upgrades.

Cloud reduces headaches and hassles. And cloud vendors can accomplish this with a lot less overhead and cost themselves because they don’t need to maintain hundreds of combinations of hardware systems to develop, to test, to maintain for “mirror” support environments. They’re healthier companies because of this. And they can pour the savings into greater, faster innovation to help their customers even more.

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SUPER SHARING

But when it comes to logistics, cloud computing provides much more than just good IT economics. In logistics, especially global logistics, where intercompany collaboration and data sharing is fundamental, cloud computing allows entirely new ways of sharing information. Cloud enables information sharing models that simply were not possible “on the ground” using traditional business software systems designed for the single enterprise.

Here is a simple but very powerful idea: put a single cloud-based collaboration platform at the center of a huge but enormously inefficient industry — global trade and logistics.

Doing this gives companies a rapid, low-cost way to automate and manage hundreds of inter-company supply chain processes on a global scale – which then drives new levels of operational efficiency and business agility. The supply chain is not a chain after all — it’s a network. Cloud makes network-wide, massively scalable information exchange finally possible.

There’s still one more very important consideration. No technology platform, however perfect, is enough to deliver breakthrough results on its own. A platform needs content, and a community to drive the content. Community gives a platform its real value.

Like the social networks of the consumer world that have become so pervasive, the success of business networks is reliant on the success of the communities they serve. These networks are not just technology platforms; they are dynamic ecosystems – constantly evolving and improving themselves for the benefit of all.

While the actual term “cloud” may be relatively new, the concept it describes is now well entrenched and proven. In supply chain and logistics, cloud computing is gaining ground especially quickly now. For most of the past decade, leaders have actively embraced the cloud to get the job done. Carriers are there. So are the big 3PLs and shippers. It’s one of the most mature “cloud enabled” industries today.

Look around and you will see case studies and press releases from a multitude of companies all saying the same thing: “We got things we never had before, quickly and cost effectively. Now we’re looking for ways to exploit this platform even more.”

RENTING BENEFITS

While it is easy to dismiss public testimonials as marketing hype, one thing about the cloud delivery model is that it must work exceptionally well for customers to continue to use it, because like many services, it can simply be turned off if customers aren’t satisfi ed. Unlike traditional software and IT systems, which have been purchased and capitalized, cloud is an operational expense. Customers don’t buy anything, they rent. If the service doesn’t deliver, they simply stop renting. They walk away. That’s probably one of the most powerful economic advantages a customer can ever have.

What’s especially telling is the type of companies that have embraced cloud early on. In theory, with the power plant v home generator scenario, you would think the economics of cloud would appeal most to smaller companies that don’t want to build their own software solutions internally. But the early adopter companies in logistics are very large, established companies and real market leaders.

They are the very companies one would expect to have the IT resource bench and war chests to solve their logistics IT problems with cutting edge business software. The reality is they have not been successful in making inter-company datahandling transactions work in a truly economic and scalable way with traditional software.

CREATIVE COLLABORATION

The cloud continues to evolve. As mobile devices and online communities become more a part of the way people do business with one another, the social network phenomenon will saturate the business world too. It won’t be just massive data crunching power and ondemand collaboration software you find in the cloud. You’ll find whole communities in the cloud, all working from the same standardized content base and collaborating easily and cost effectively to transform their businesses.

And cloud platforms are not just sets of IT tools and applications delivered over the Internet. They are places. They grow and become more valuable as they are visited and used over time.

So we are at the beginning of a very different and very transformative era in IT and global logistics. The companies that can harness the power of newer state-of-the-art cloud platforms for global trade and logistics will be far more effi cient, and far more responsive to new opportunities – and risk – than the companies we know today.

They’ll be the winners in their markets. And they’ll do it on the strength of their ability to share and act on information across their global trading partner networks – quickly, cost-effectively, and completely. And they’ll do it in the cloud.

Greg Johnsen is executive vice president of marketing and co-founder of GT Nexus (www.gtnexus.com).