Aberdeen-OnDemand SCM

The On-Demand Tipping Point in Supply Chain
How Enterprises Are Gaining Faster Time to Value with On-Demand or

“Software as a Service” Applications
March 2006
— Sponsored by —
Executive Summary
On-demand applications are making headlines in the sales automation space, with ven-
dors such as Salesforce.com. But much less has been said regarding on-demand applica-
tions (also called Software as a Service (SaaS) or externally hosted applications) in the
supply chain realm. This is about to change.
• Approximately half of study participants say they now use or are considering us-
ing on-demand applications to manage select portions of their supply chains. This
is similar to the interest expressed by these companies in using on-demand sales
force applications and higher than that reported for on-demand procurement
software. However, adoption for on-demand SCM is still in its early stages.
• The mystique of using on-demand supply chain management (SCM) technology
is disappearing, making it a viable alternative for companies of all levels of sup-
ply chain maturity. While current users of on-demand SCM tend to be above av-
erage supply chain performers, the study results show the highest near-term inter-
est in on-demand adoption is from below average performers. Interest is also
similar across all sizes of corporations.
Quantifying the Benefits from On-Demand SCM

Current on-demand SCM users report overwhelming benefits from the on-demand
model, especially in implementation speed, maintenance ease, and return on investment
(Figure 1). Moreover, nearly half say customer service is better from their on-demand
vendors than from their traditional supply chain vendors, an outcome of the fact that on-
demand vendors are on the hook every day to make sure their applications are operating
well for their clients.
Figure 1: On-Demand SCM Outperforms Traditional “License and Install”

Applications in Key Areas
Ease of upgrade process 16% 19% 66%
Return on investment 3% 32% 64%
Implementation time and effort 9% 34% 57%
Customer service from vendor 7% 47% 46%
0% 25% 50% 75% 100%

On-demand performs worse % of Respondents That Use On-Demand Today
On-demand performs about the same
On-demand performs better
Source: AberdeenGroup, March 2006
All print and electronic rights are the property of AberdeenGroup © 2006.
AberdeenGroup • i
Finding the On-Demand Sweet Spot in SCM

Companies aren’t moving to wall-to-wall on-demand SCM. In most cases, they’re using
on-demand to create extensions around their existing supply chain IT investments or to
replace selective modules that manage externally facing processes. For instance, the two
areas of highest current on-demand usage – and the highest-rated areas for continuing on-
demand adoption – are transportation management and supply chain visibility. Collabora-
tive forecasting, inventory optimization, and demand-supply synchronization with sup-
pliers and contract manufacturers also are rated highly as potential on-demand usage ar-
eas. Among the lowest rated areas are facility-centric applications such as warehouse
management and internal manufacturing planning and scheduling.
Common attributes of companies considering on-demand SCM include:
1. Pressured to improve externally oriented processes, which legacy SCM applica-
tions do not support sufficiently
2. Constrained internal IT resources or have outsourced aspects of their IT organi-
zation
3. IT portfolio strategy of investing internal IT resources on business differentiating
areas, with goal of using external technology experts for non-core processes
Current Buying Trends

Enterprises prefer on-demand SCM specialist vendors that have service in their DNA, not
just technology. Respondents also express surprisingly high interest in on-demand offer-
ings from their current ERP vendors, even though these vendors have not yet delivered
significant on-demand SCM options. Traditional SCM vendors are preferred by just 5%
of respondents. However, Aberdeen is seeing worthwhile hybrid on-demand models
emerge from some traditional SCM vendors.
About half of companies view on-demand as their long-term application deployment
strategy. The rest view it as an interim application deployment strategy that drives imme-
diate value; these companies plan to migrate their on-demand applications in-house over
time or replace them with on-premise software from their ERP vendor when the ERP ca-
pabilities become robust enough.
Recommendations for Enterprises Considering On-Demand SCM

Key recommendations and insights covered in this report include:
• How top CIOs are evaluating on-demand SCM opportunities in the context of IT
portfolio management and corporate business pressures.
• Why all on-demand is not the same – understanding the pros and cons of the five
on-demand deployment models: multi-tenant, multi-instance shared services,
ASP, utility ASP, and hybrid.
• What to expect from implementation time, time to ROI, and total cost of owner-
ship for on-demand SCM.
ii • AberdeenGroup
Table of Contents
Executive Summary .............................................................................................. i
Chapter One: Issue at Hand.................................................................................1

Drivers for On-Demand SCM Adoption.......................................................... 2
Assessing the On-Demand SCM Tipping Point ............................................. 3
“Supply Chain as a Service” Trend Is Accelerating
On-Demand Interest................................................................................ 4
Chapter Two: Key Business Value Findings for On-Demand SCM.......................5

How On-Demand SCM Performs Against Traditional Applications ................ 5
Top Barriers to Using On-Demand SCM........................................................ 7
Who in the Organization Likes On-Demand
SCM the Most (and Least)............................................................................. 7
Top Supply Chain Areas for On-Demand Adoption ........................................ 8
Above Average Performers Use More On-Demand SCM.............................. 9
Chapter Three: On-Demand SCM Deployment Strategies................................ 10

Is On-Demand SCM an Interim or Long-Term Strategy? ............................. 11
Understanding the Five On-Demand Deployment Options.......................... 11
Community Benefits Shifting from Theory to Reality ............................. 13
New for 2006: Hybrid On-Demand Models............................................ 13
Will TCO Be Higher or Lower?..................................................................... 14
Top Performers Seek to Drive “Velocity of IT Value” .................................... 15
Chapter Four: Recommendations for Action ...................................................... 17

Recommendations for Below Average Supply Chain Performers ................ 18
Recommendations for Industry Average Supply Chain Performers ............. 18
Recommendations for Above Average Supply Chain Performers................ 18
Featured Sponsors............................................................................................. 20
Sponsor Directory .............................................................................................. 23
Author Profile ..................................................................................................... 24
AberdeenGroup
Table of Contents
Appendix A: Research Methodology .................................................................. 25
Appendix B: Related Aberdeen Research & Tools ............................................. 26
About AberdeenGroup ...................................................................................... 27
AberdeenGroup
Figures
Figure 1: On-Demand SCM Outperforms Traditional

“License and Install” Applications in Key Areas ..................................................... i
Figure 2: Supply Chain Applications Match Sales

Force Applications in On-Demand Interest...........................................................1
Figure 3: Why Enterprises Want to Adopt On-Demand SCM ...............................2
Figure 4: Tipping Point Indicators for On-Demand SCM ......................................4
Figure 5: Current On-Demand SCM Users

Report Implementation and ROI Time..................................................................5
Figure 6: On-Demand SCM Outperforms Traditional

“License and Install” Applications in Key Areas ...................................................6
Figure 7: Attitude Toward On-Demand SCM, by Role in Company ......................8
Figure 8: Top Supply Chain Performers Use More On-Demand SCM..................9
Figure 9: Enterprise Preferences for Type of On-Demand SCM Vendor ............ 10
Figure 10: Firms Split on if On-Demand SCM Is Interim or

Long-Term Strategy............................................................................................ 11
Figure 11: Total Cost of Ownership Expectations ............................................... 14
Figure 12: On-Demand SCM Sweet Spot .......................................................... 16
Tables
Table 1: Top 5 Barriers to On-Demand SCM Adoption .........................................7
Table 2: The Five On-Demand Deployment Options Explained ......................... 12
AberdeenGroup
Chapter One:
Issue at Hand
• Companies are attracted to on-demand SCM because they want to deploy applications
Key Takeaways
with fewer IT resources and achieve a faster time to value for their technology invest-
ments.
• User adoption of on-demand SCM is spreading from supply chain leaders to laggards.
• CEOs and COOs at top supply chain performers are twice as likely to be supporters
of the on-demand model.
• The “Supply Chain as a Service” management model is accelerating interest in on-
demand SCM.
O n-demand applications are making headlines in the sales force automation space,
with vendors such as Salesforce.com. But much less has been said about on-
demand applications (also called Software as a Service (SaaS) or externally
hosted applications) in the supply chain realm. This is about to change.
Nearly the same percentage of companies report using or considering using on-demand
for SCM as report planning to use it for sales force automation (Figure 2). On-demand
SCM is of roughly equal interest to companies of all sizes, unlike with on-demand sales
force automation in which smaller companies are more avid adopters. However, adoption
for on-demand SCM is still in its early stages.
Figure 2: Supply Chain Applications Match Sales Force Applications in On-

Demand Interest
Supply chain or logistics application 51%
Sales force automation application 47%
Purchasing or sourcing application 43%
ERP 31%
Financial application 29%
0% 10% 20% 30% 40% 50% 60%

% of Respondents Who Use or Are Considering Using an On-Demand Application
The interest in on-demand SCM has been increasing despite the fact that ERP vendors
and traditional SCM vendors have been slow or half-hearted to date in offering on-
demand SCM solutions to their customers. The market curiosity about on-demand SCM
AberdeenGroup • 1
solutions is finally being matched by vendor activity, as 2006 is seeing almost every tra-
ditional SCM vendor announce a new or revitalized on-demand strategy.
Drivers for On-Demand SCM Adoption

Overwhelmingly, companies are attracted to the on-demand SCM model because they
want an application deployment model that requires fewer IT resources to implement and
maintain and a faster time to value for their supply chain technology investments (Figure
3). As Chapter 2 discusses, on-demand applications are delivering on this promise.
Figure 3: Why Enterprises Want to Adopt On-Demand SCM
Fewer IT resources required to implement and

69%
operate on-demand solution
Seeking faster implementation and ROI from on-

63%
demand model
Enables support of unique business processes for

40%
selective product categories, customers, or channels
Better trading party collaboration because of shared

39%
application platform and common view of data
0% 20% 40% 60% 80%

% of Respondents Saying Factor Is "Highly Influential" in Causing Them to Consider On-Demand SCM
Two-thirds of respondents report they are somewhat or greatly influenced by the fact
that, in their opinion, traditional “license and install” supply chain applications (also
called “on-premise” applications) don’t support their companies’ needs. Interviews with
respondents reveal that many of the “missing capabilities” are in the areas of collabora-
tive processes with business partners, or in the transparency and control of dynamic or
time-sensitive business processes. Although their “license and install” SCM applications
may support some of the requirements, respondents perceive that these traditional appli-
cations are too inflexible or are too challenging for business partners to adopt.
These results foreshadow that we are entering a new era of supply chain innovation that
will better suit today’s environment of multi-party, customer-tailored supply chains. Al-
most all of today’s SCM on-demand applications are aimed at helping companies manage
these multi-party processes.
2 • AberdeenGroup
Assessing the On-Demand SCM Tipping Point

The question of when the on-demand SCM tipping point will occur has three dimensions:
(1) when on-demand SCM applications will become commonly available on the market,
(2) when on-demand SCM applications will become commonly considered as a deploy-
ment option, and (3) when on-demand SCM applications will achieve widespread adop-
tion. Here are key tipping point indicators for each dimension.
• Availability of on-demand SCM applications is accelerating. As discussed, 2006
appears to be the watershed year of when traditional “license and install” vendors re-
alize that they must provide deployment choice to their customers. Some of these
vendors are creating innovative hybrid models for letting users continue to run on-
premise software at their companies and extend these solutions with on-demand ca-
pabilities. At the same time, on-demand SCM specialist vendors are accelerating the
functionality offered over their on-demand platforms and are pioneering new ways to
deliver value to their networked users.
• About half of companies are now willing to consider on-demand SCM. Accord-
ing to the results shown in Figure 2, half of enterprises surveyed are using or plan-
ning to consider adopting on-demand SCM applications. It is important to note that
companies aren’t moving to wall-to-wall on-demand SCM. In most cases, they are
using on-demand to create extensions around their existing supply chain IT invest-
ments, to replace selective modules that manage externally facing processes, or to
manage certain product lines, channels, or business units.
• User adoption of on-demand SCM is spreading from supply chain leaders to
laggards. Among survey respondents, almost half of companies that consider them-
selves top supply chain performers are already using on-demand supply chain appli-
cations. These companies are also more than twice as likely as below average per-
formers to have adopted on-demand sales force applications. (Note: Above average
performers occurred across all sizes of enterprises, and were not biased toward large
organizations.)
However, on-demand adoption is no longer limited to the supply chain innovators;
as Figure 4 indicates, 2006 adoption plans are highest for below average performers.
Many underperformers see on-demand as a way to affordably introduce SCM soft-
ware into their organizations for the first time; fully 40% of underperformers de-
scribe their current supply chain processes as mostly manual.
In general, below average performers are twice as likely as their peers to view price
and payment method as their top factor when selecting an on-demand vendor. Said
an international transportation director at a multi-channel retailer, “Being able to pay
a subscription fee and expense it as an operating cost versus as a capital expenditure
helped push through the case for on-demand SCM.” By comparison, 62% of top per-
formers care most about application functionality, compared with just 30% of below
average performers.
AberdeenGroup • 3
Figure 4: Tipping Point Indicators for On-Demand SCM

60%
Plan to Use Within 12 Months

50% 8%
Use On-Demand SCM Application Today
40%
% of Respondents
30% 6%
20%
46%
20%
28%
10%
12%
0%
Below average supply chain Industry average supply Above average supply chain
performer chain performer performer
Enterprises seeking on-demand solutions should assess which part of the market vendors
are striving to serve and their strategies for doing so. For instance, a number of on-
demand SCM specialist vendors are investing to meet the innovative needs of top per-
formers while at the same time creating streamlined functionality bundles and best prac-
tice templates for below average performers. Other vendors are pursuing an on-demand
strategy aimed at the mid-market in which low-cost application access trumps innovation.
Be sure to select a vendor aligned with your supply chain maturity and improvement
goals.
“Supply Chain as a Service” Trend Is Accelerating On-Demand Interest

Customer centricity strategies and the pursuit of low-cost country sourcing are funda-
mentally changing how manufacturers, distributors, and retailers need to think about and
operate their supply chains. An emerging approach, treating “supply chain as a service,”
is gaining favor. This management philosophy involves treating supply chain and its sup-
porting components as flexible services to be assembled to serve the customer rather than
as fixed assets, roles, and processes.
One of the key elements of a successful supply chain as a service strategy is assembling a
technology architecture built for change. On-demand applications are intrinsically well-
suited to this model, given their faster time to value, subscription or transaction payment
models, and elimination of the need to buy and maintain hardware. (For further informa-
tion, read Supply Chain as a Service: The Next Big Thing?) As the advantages of this
model become more apparent, more companies will become open to considering using
on-demand SCM for selective parts of their supply chain.
4 • AberdeenGroup
Chapter Two:
Key Business Value Findings for On-Demand SCM
• On-demand applications outperform traditional “license and install” SCM applications

Key Takeaways
in numerous areas, including fast implementation and ROI.

• Data security and integration concerns are the top obstacles to adoption, though
current on-demand SCM users don’t report these areas being issues.
• IT organizations can be barriers to on-demand adoption unless they have adopted one
of three specific IT management strategies.
• Above average performers use more on-demand SCM, especially for transportation,
visibility, data synchronization, and demand-supply synchronization.
O n-demand SCM users report overwhelming benefits from the on-demand model.
In particular, on-demand SCM excels at fast implementation and return on in-
vestment (ROI). A majority of on-demand SCM users say they achieved opera-
tional status with their application in less than 3 months and ROI in less than a year (Fig-
ure 5).
Figure 5: Current On-Demand SCM Users Report Implementation and ROI Time
Implementation Time with Time to ROI with

On-Demand SCM On-Demand SCM
More than 2
More than 6
years, 9% 6 months or
months, 16%
less, 35%
1- 2 years, 26%
4 to 6 months, Less than 3

23% months, 61%
7 to 12 months,
30%
How On-Demand SCM Performs Against Traditional Applications

On-demand application benefits shine in numerous areas when compared with traditional
“license and install” SCM applications (Figure 6). At the top of the list is ease of up-
grades. Because the upgrade process is typically handled by the on-demand vendor, ex-
cept for back-end integration changes, companies find that on-demand lets them auto-
AberdeenGroup • 5
matically keep current with the latest functionality and thus run more advanced supply
chain processes than competitors.
Many users report being pleasantly surprised with the speed and seamlessness of on-
demand system enhancements. “We didn’t really appreciate at the outset just how valu-
able the on-demand vendor’s feedback/implementation cycle speed would be in solidify-
ing supplier support for our initiative,” says the director of planning for a large retailer.
Figure 6: On-Demand SCM Outperforms Traditional “License and Install”

Applications in Key Areas
Ease of upgrade process 16% 19% 66%
Return on investment 3% 32% 64%
Implementation time and effort 9% 34% 57%
Customer service from vendor 7% 47% 46%
System uptime/availability 10% 46% 44%
Adoption rate of trading partners on the system 14% 43% 43%
Application response time 25% 46% 30%
On-demand performs worse 0% 25% 50% 75% 100%

On-demand performs about the same % of Respondents That Use On-Demand Today
On-demand performs better
The majority of current on-demand SCM users also cite overwhelming benefits in the
velocity of value, including better implementation speed and return on investment than
with their traditional SCM applications. “We were able to drive $1 million in savings in
eight months with our on-demand transportation management system,” reports a supply
chain executive at a mid-size consumer goods company.
Moreover, nearly half of on-demand SCM users say they receive better customer service
from their on-demand vendor than from their traditional supply chain vendors, an out-
come of the fact that on-demand vendors are on the hook every day to make sure their
applications are operating well for their clients. On-demand vendors can also see what
views and clicks are most popular with users and streamline access to them to ensure on-
going incremental productivity benefits for users.
Even in areas such as system uptime and application response time, which are traditional
IT concerns about on-demand solutions, more enterprises report that these solutions out-
perform traditional applications than under perform. Because these capabilities are
strongly dependent on the capabilities of the individual on-demand provider, companies
should continue to evaluate on-demand vendors rigorously in these areas, including via
multiple reference checks.
6 • AberdeenGroup
Top Barriers to Using On-Demand SCM

Despite the mounting evidence that on-demand solutions provide a faster time to value,
market adoption is embryonic. What’s preventing more companies from adopting on-
demand SCM? Study participants were asked to identify the top three adoption chal-
lenges and the most effective responses to those challenges. The biggest barriers identi-
fied were data security and integration concerns (Table 1).
Table 1: Top 5 Barriers to On-Demand SCM Adoption
% %
Top Challenges Selected Desired Responses to Challenges Selected
1. Data security concerns 64% 1. Low-risk trial or pilot of on-demand 62%
solution
2. Concerns with integrating 60% 2. Service level agreements with clear 60%
on-demand solution with inter- performance metrics, penalties, and
nal systems incentives
3. Perceived lowered ability to 47% 3. Robust on-demand data model and 40%
customize solution interfaces for easier integration with
internal systems
4. Fear of application not being 35% 4. Benchmarks, tests, and audits to 40%
available (unanticipated down- validate system security and perform-
time) ance
5. Application response time or 35% 5. Ability to bring solution in-house 35%
scalability concerns when desired (e.g., install behind the
corporate firewall)
Current on-demand SCM users say that running a pilot “to prove the concept” and
closely involving operations in designing workflow and software configuration are the
top factors for project success. General education on the on-demand model also helps. A
director of transportation services for a large CPG company, explains that its on-demand
transportation system was the first “app on tap” used by the business on the operational
side. He says that “enlightened” internal IT champions were instrumental in helping the
company transcend the hurdle of allowing its transaction data to go over the Web.
Who in the Organization Likes On-Demand SCM the Most (and Least)
Given the faster deployment times, business partner collaboration capabilities, and pre-
connected partner networks that many on-demand SCM solutions provide, it’s no sur-
prise that many supply chain executives are strong supporters of the on-demand model.
In fact, they’re twice as likely as others in their organization to be cheerleaders for on-
demand SCM (Figure 7). Supply chain executives at large enterprises (over $1 billion in
revenue) are the most enthusiastic, with 71% of respondents classifying these executives
as supporters. Survey results also show that CEOs and COOs at top supply chain per-
formers are twice as likely to be supporters of the on-demand model as those at below
average companies.
AberdeenGroup • 7
Figure 7: Attitude Toward On-Demand SCM, by Role in Company

70%
60%
% of Respondents
50%
40%
IT organization
30%
CFO/ finance organization
20%
COO or BU general manager
10% VP/SVP of supply chain
CEO
0%
Supporter Neutral Barrier
Resistance to on-demand SCM comes foremost from IT organizations, which often don’t
like to lose control of application ownership and are concerned about the reliability of
on-demand applications. Nonetheless, a third of IT organizations are supporters of the
on-demand model. These IT supporters fall into three main groups:
• IT organizations that are short-staffed, are consumed with on-going ERP
implementations or upgrades, or must support frequent M&A activity. They
see on-demand applications as a way of meeting their business users’ evolving
requirements without disrupting current projects.
• IT organizations that have already outsourced some or all of their IT opera-
tions. They view on-demand SCM as a natural extension of this outsourcing.
• IT organizations that have adopted a portfolio approach to IT management.
They see on-demand SCM as a way to leverage external technology and connec-
tivity experts for areas of the business where internal IT cannot add differentiated
business value.
“Assembling the right internal skills for a B2B project is not meaningful to do yourself,”
says a high-tech CIO. “It takes a dedicated set of skills to do this efficiently. The level of
headache you save for yourself by using an on-demand specialist is huge. Instead, do
something with your internal resources to drive differentiated value for the business.”
A vice president of global logistics for a large apparel company agrees: “If the software
and implementation already exist, why do we need our internal IS organization to recre-
ate it?”
Top Supply Chain Areas for On-Demand Adoption

Companies aren’t moving to wall-to-wall on-demand SCM. In most cases, they are using
on-demand to create extensions around their existing supply chain IT investments or to
replace selective modules that manage externally facing processes. For instance, the two
areas of highest current on-demand usage – and the highest-rated areas for continuing on-
demand adoption – are transportation management and supply chain visibility. Collabora-
8 • AberdeenGroup
tive forecasting, inventory management, and demand-supply synchronization with sup-

pliers and contract manufacturers also rate highly as potential on-demand usage areas.
Among the lowest rated areas are facility-centric applications such as warehouse man-
agement and manufacturing planning and scheduling.
Above Average Performers Use More On-Demand SCM

Companies rating their supply chain performance as above average in their industry are
much more likely to be using on-demand SCM applications (Figure 9). They are also
more likely than their peers to be considering using on-demand options across additional
SCM areas.
Figure 8: Top Supply Chain Performers Use More On-Demand SCM
35%
Domestic transportation management 27%
0%
35%
Supply chain visibility 25%
8%
28%
Data synchronization (e.g., UCCnet) 2%
0%
24%
Demand-supply synchronization with
10%
suppliers/contract manufacturers 0%
0% 10% 20% 30% 40%

% of Respondents That Use On-Demand Today
Above average supply chain performers
Industry average supply chain performers
Below average supply chain performers
AberdeenGroup • 9
Chapter Three:
On-Demand SCM Deployment Strategies
Key Takeaways
• On-demand specialists are the most preferred source of on-demand SCM, while tradi-
tional SCM vendors rate the lowest.
• On-demand deployment models come in five primary flavors, with distinctly different
user benefits.
• Top CIOs are incorporating on-demand SCM options into their IT portfolio strategies.
M ore enterprises prefer to purchase on-demand SCM from vendors specializing

in on-demand SCM than from any other vendor category (Figure 9). On-
demand specialists have organically built their solutions and their organiza-
tions to run an on-demand model (some also offer customers the ability to mi-
grate the solution in-house). Other on-demand SCM specialists include B2B hub opera-
tors and value-added networks (VANs) with on-demand application layers.
Figure 9: Enterprise Preferences for Type of On-Demand SCM Vendor
Which category of vendor is your company most likely to

use for on-demand supply chain applications?
Our current SCM vendor
New SCM vendor offering Vendor specializing in
5%
on-demand & traditional licenses 6% on-demand SCM
software
New ERP vendor offering 9%
on-demand & traditional licenses
44%
Our current ERP vendor 14%
Logistics service
provider (e.g., 3PL) 22%
“We wanted a vendor whose executives had the service aspects of the on-demand model
in their DNA, not just technology capabilities,” says one high-tech CIO, explaining why
his company had chosen an on-demand SCM specialist. “They need to be attuned to de-
livering value and reliability every day and every hour.”
Respondents (especially industry average performers) express surprisingly high interest
in on-demand offerings from their current ERP vendors, even though these vendors have
not yet launched focused on-demand SCM initiatives. Also notable is that 22% of com-
10 • AberdeenGroup
panies are looking to access on-demand SCM technology from a logistics service pro-
vider, further evidence that advanced IT capabilities are becoming an expected (and re-
quired) element of logistics outsourcing.
Traditional SCM vendors are preferred as an on-demand source by just 5% of respon-
dents. This low showing can be traced to the fact that: (1) most have application architec-
tures built to support a single enterprise per software instance versus a networked com-
munity, and (2) most lack the daily operational focus and support structures and pre-
connected trading partners that many of the specialist on-demand vendors bring to the
table. However, Aberdeen is seeing worthwhile hybrid on-demand models emerge from
some traditional SCM vendors.
Is On-Demand SCM an Interim or Long-Term Strategy?

About half of companies view on-demand as their long-term application deployment
strategy (Figure 10). The rest view it as an interim application deployment strategy that
drives immediate value; these companies plan to migrate their on-demand applications
in-house over time or replace them with on-premise software from their ERP vendors
when the ERP capabilities become robust enough. There’s no right or wrong answer to
the question of “interim or long term?” but the response will influence the style of on-
demand deployment, among other factors.
Figure 10: Firms Split on if On-Demand SCM Is Interim or Long-Term Strategy
Plan to migrate Plan to use for

on-demand more than 3
system in-house years, 21%
in the near future,
24%
Plan to use for 2
to 3 years and
Will use until then reevaluate,
ERP system 25%
meets needs in
the near future,
30%
Understanding the Five On-Demand Deployment Options

On-demand applications come in different flavors, and it’s critical for companies to un-
derstand their options before making a buying decision. Table 2 sets out the key pros and
cons of these deployment models. Survey results show that about half of above average
and average supply chain performers prefer a multi-tenant model for their on-demand
application. By comparison, nearly three-quarters of below average supply chain per-
formers want to adopt an ASP model. Many of these companies should be considering a
multi-tenant or multi-instance shared services model instead to gain more significant
benefits.
AberdeenGroup • 11
Table 2: The Five On-Demand Deployment Options Explained

Option Definition Advantages Drawbacks
Multi-Tenant Multiple companies use • TCO and implementation speed benefits • Harder to migrate imple-
the same instance of over standard ASP model because the cost mentation in-house.
hosted software; con- of software, hardware, and connections to • Requires robust company
figuration settings and suppliers, carriers, data sources, and so on and role-based data secu-
company and role- are shared across multiple firms. rity model.
based access personal- • Users automatically are on latest software • Less flexibility for unique
ize business processes version and can quickly leverage new func- security, data storage, or
and protect data secu- tionality. performance needs.
rity. • Easily enables community benefits such as • Intense scalability re-
industry benchmarking, backhaul matching, quirements as adoption
and group buying power. grows.
Multi- Each company is given • Assurance of complete data security. Flexi- • More limited community
Instance its own instance of the bility for unique data storage or perform- benefits.
Shared software but shares ance requirements. • Shared services must be
Service some common ser- • Enables some community benefits, such as able to scale as adoption
vices, such as an inte- a shared network directory that provides grows.
gration platform, secu- easier, faster, and less costly trading part-
rity and permissibility ner connectivity.
models, or optimization • Ability to stay on back version of software.
engines.
• Easier to migrate system in-house.
ASP Application is hosted by • Somewhat faster deployment than in-house • No ability to share cost of
the vendor or, more implementation. hardware or business part-
often, by an outside • Assurance of complete data security. Flexi- ner connections.
hosting company in a bility for unique data storage or perform- • No native community
separate instance on a ance requirements. benefits.
separate piece of hard- • Enhanced ability to customize application.
ware just for your com-
• Ability to stay on older version of software.
pany.
• Easily migrate implementation in-house.
Utility ASP Application is hosted by Same benefits as ASP, plus: • No ability to share cost of
vendor or outside host- • Ability to share cost of hardware with other business partner connec-
ing firm in a separate companies. tions.
virtual instance just for • No native community
your firm but is housed benefits.
on hardware shared by
multiple companies.
Hybrid Primary SCM applica- • Creates new value from existing in-house • Implementation and main-
tion located at your SCM implementations without having to tenance costs do not
company’s or your trad- staff an in-house IT project. change for primary SCM
ing partner’s premises. application.
• Elegant way to extend information or appli-
Supplementary func- • Requires robust company
cation value to new stakeholders.
tionality provided via and role-based data secu-
on-demand model. • Supports community benefits.
rity model.
For companies planning to use on-demand to jumpstart a software implementation and

then bring that implementation in-house over time, the ASP (or utility ASP) model makes
intrinsic sense. For companies seeking to exploit the complete set of potential on-demand
benefits, a multi-tenant model is often preferable, especially when business partner con-
nectivity or community benefits are desired. Multi-tenant solutions are also sometimes
called “network-based on-demand solutions.”
Community Benefits Shifting from Theory to Reality

Multi-tenant solutions and multi-instance shared service solutions often come with a pre-
connected supplier or carrier base that fast tracks trading partner connectivity, improves
data quality, and lowers the cost of supporting each integration point. For instance, one
retailer recently found that 70% of its interna-
tional logistics community was already trans-
acting business over an on-demand SCM ven- Fully 92% of top performers say
dor’s platform. that they are interested in exploiting
Be aware, however, that “pre-connected” does the on-demand model’s potential
not mean that integrated data is instantly avail- benefits from a community of
able, though the amount of time, cost, and ef- connected parties.
fort is reduced. Typically, users benefit from
the pre-established communication connec-
tions, document and mapping templates, and institutional knowledge and business part-
ner relationships gained by the vendor through active integrations across multiple cus-
tomers. However, a structured, customer-specific integration process still must be exe-
cuted, including document and data flow mapping, message testing, and validation.
Fully 92% of top performers say that one aspect of the on-demand model they are inter-
ested in is the potential benefits from a community of connected parties. These benefits
can include industry benchmarking, business partner discovery (e.g., identifying appro-
priate suppliers or carriers to use), matching of transportation backhauls or continuous
move opportunities across companies, best practice sharing, shared data content (e.g.,
descriptions of ports, transportation carrier capabilities, and sailing schedules), and group
buying power (e.g., cargo space, warehouse services, and brokerage services).
Companies should inquire about their potential vendors’ plans for community services
and how their deployment models support these capabilities. Multi-tenant architectures
are intrinsically constructed to make community benefits easier to achieve, while gaining
these benefits from an ASP model is more challenging, though not impossible. Note,
however, that most multi-tenant solutions are just gaining the transaction volume and
required commitment from multiple companies needed for these community benefits to
become a reality. It is premature to base an on-demand business case on these benefits.
New for 2006: Hybrid On-Demand Models

Companies should also closely monitor the emerging hybrid model of on-demand. This is
an elegant way to leverage the advantages of the on-demand model while expanding the
value of existing “license and install” SCM applications. Examples of hybrid innovation
launched in 2006 by vendors include:
• A solution that lets a manufacturer deploy an application in an on-premise model

in some divisions and in an on-demand model in others, while enabling a merged
version of data for central control and analysis. This is particularly useful for
companies with business units that vary significantly in size or IT bandwidth or
for companies that do a lot of M&A activity and want a rapid way to standardize
key processes, enable EDI capabilities, or create central visibility and reporting.
It is also useful for companies looking to outsource part of their business process
to a trading partner (e.g., logistics service provider, contract manufacturer, or co-
packer) yet want to maintain consistent technology and a single view of their op-
eration.
• A solution that enables a brand owner to access an on-demand application and
perform a what-if simulation of placing a new order with its contract manufac-
turer, which runs an on-premise scheduling and materials management applica-
tion. This simulation would use the real contract manufacturing plan to identify
material or capacity constraints and solutions, enabling brand owners to respond
to new customer orders or change requests in near real time and to accept a
higher percentage of high-margin rush orders.
Will TCO Be Higher or Lower?

A slight majority of companies perceive that on-demand SCM will drive a lower total
cost of ownership (TCO) than a comparable “license and install” supply chain application
(Figure 11). These TCO expectation percentages hold true for both current on-demand
SCM users and for those companies that have yet to try this model.
Figure 11: Total Cost of Ownership Expectations
On-demand
TCO will be
higher, 23% On-demand
TCO will be
lower, 51%
On-demand
TCO will be
about the
same, 26%
Sometimes the TCO analysis is very straight-forward. A consumer goods manufacturer

that switched to an on-demand transportation management system (TMS) found that its
new subscription payments cost it less than what the company had been paying in annual
maintenance costs and biannual upgrades for its previous packaged TMS application.
A CIO at a high-tech company says that its on-demand SCM system cut its TCO by 35%
by enabling it to retire the mainframe that its legacy application ran on. The company
uses the on-demand solution to manage demand-supply synchronization across suppliers

and customers, including across 11 internal facilities and thousands of suppliers globally.
For other companies, evaluating TCO is not so simple. Companies often struggle to cre-
ate an accurate TCO comparison for an on-demand application. An accurate comparison
requires a net present value analysis on payments because of the subscription or transac-
tion based pricing used for most on-demand solutions. But it also requires a full compari-
son to a company’s traditional in-house costs such as upgrading installed software; creat-
ing, maintaining, and trouble-shooting supplier and carrier connections; acquiring, im-
plementing, and monitoring hardware; staffing an IT help desk, including turnover costs;
and accessing internal IT staff to configure and code changing workflow or reporting
requirements.
Some large consumer goods companies, for instance, report that it used to cost them
$10,000 or more per year for each carrier EDI connection, when hardware, software,
support personnel, and messaging costs were tallied up. Moving to a multi-tenant on-
demand transportation management system dramatically lowered these costs.
No matter the TCO result, this metric should be just one of many decision factors related
to which vendor to choose and what deployment method to use. A low TCO on a legacy
application that no longer meets the demands of the business or on a commercial solution
that lacks the flexibility and functionality to support business change is a worthless com-
parison. A number of current on-demand users that anticipate a higher on-demand TCO
still plan to use the on-demand deployment model as their long-term solution. Reasons
include a quicker time to business value with on-demand, greater business partner adop-
tion and collaboration, and better flexibility for the future IT roadmap.
Top Performers Seek to Drive “Velocity of IT Value”

Average and lagging supply chain performers would be well-served to understand how
top performers seek to gain value from their on-demand SCM deployments. According to
survey results, above average supply chain performers are more aggressive in seeking to
use on-demand SCM to improve the velocity of IT value.
Supply chain performance leaders in our study are less likely to be focused on achieving
a technology cost reduction and more likely than their peers to be looking to use on-
demand SCM to:
• Drive faster implementation and ROI times
• Reduce the dependency on internal IT staffs
• Exploit the new functionality and technology capabilities that come with using an
on-demand application that is always on the most up-to-date version
• Seek out community benefits
Many of the CIOs who are most enthusiastic about the on-demand model preach that
their IT strategy is one of focusing internal IT staff on areas that will drive unique com-
petitive benefits for the company and that cannot be procured from external specialists.
These CIOs report that implementing, maintaining, and, in some cases, building SCM
applications and external trading partner connections is not and should not be a core
competency for their internal IT organization. They feel that they will put their compa-
nies at a better advantage by becoming great at managing external on-demand SCM pro-
viders instead.
In essence, these CIOs are adopting an IT portfolio approach of investing internal IT re-
sources on business differentiating areas, with the goal of using external technology ex-
perts for non-core processes (see Figure 12).
Figure 12: On-Demand SCM Sweet Spot
High
ng
aci
F
ally ess No
n c
IT Resource
er ro
Availability
E xt P
On-demand
SCM sweet spot
Low Yes
Low High
Competitive Differentiation from
Internal IT Initiative
The VP of supply chain of a consumer goods company explains that he had tried to build
a custom supply chain visibility application in the past, but that it ended up having a huge
upfront cost. With an on-demand solution, if the application doesn’t work or employees
don’t use it that much, there is a much easier – and less costly – exit strategy, so the total
project risk is much lower.
For other companies, IT resource constraints or an IT outsourcing strategy make on-
demand systems the most expedient model. “We already subcontract a lot of IT staff al-
ready, so this was a natural extension of that philosophy,” says a supply chain leader at
an industrial manufacturing company. “When we were looking for a solution to help us
switch to a daily planning process for our inbound supply chain, we wanted to take the
burden off the internal IT staff of having to manage system upgrades, troubleshoot prob-
lems, and so on.”
A supply chain manager at a European consumer goods company explains that the ability
of its on-demand solution to enable more selective and more incremental implementa-
tions (e.g., for specific customers and commodities across processes that straddle multi-
ple IT systems) was important to driving faster value. “We don’t have to have the full
forecasting and replenishment solution implemented with each customer to get value,”
she says. Other companies echo that the flexibility to deploy selectively very thin func-
tionality or full functionality with their on-demand solution – and to change it by cus-
tomer, channel, or product line – is instrumental to improving the velocity of IT value.
Chapter Four:
Recommendations for Action
• Companies of all supply chain maturity levels should be evaluating whether the on-
Key Takeaways
demand SCM model is appropriate for selective aspects of their business.

• Use on-demand SCM to spur creativity and business innovation in the supply chain
organization.
• Treat an on-demand solution selection more as a service vendor decision, rather than
as a technology vendor decision.
B ecause on-demand SCM outperforms traditional applications so strongly, across

so many areas, companies of all supply chain maturity levels should be evaluating
whether this model is appropriate for selective aspects of their business. In most
cases, companies use on-demand SCM to create extensions around their existing supply
chain IT investments or to replace selective modules that manage externally facing proc-
esses.
Common attributes of companies considering on-demand SCM include:
• Pressured to improve externally oriented processes, which legacy SCM applica-
tions do not support sufficiently
• Constrained internal IT resources or have developed an IT outsourcing strategy
• IT portfolio approach of investing internal IT resources on business differentiat-
ing areas, with goal of using external technology experts for non-core processes
• Must support more complex electronic interactions with suppliers, contract manu-
facturers, or logistics partners
• Have a corporate strategy to limit in-house installations to a single ERP suite but
still need to access additional functionality today to meet the needs of the busi-
ness stakeholders
• Need to improve supply chain performance of certain product lines, selective
channels or even specific customers, and see on-demand as a fast way of deliver-
ing pinpoint functionality
A number of current on-demand SCM users say that relying on the vendor to operate the
technology has freed up their internal organization to focus more on how to drive value
from the functionality and created more innovative business thinking. They stress the
importance of change management and in making the operations staff responsible for
designing how and where the solution will be used.
“We’ve been able to use the on-demand project to move away from a ‘we’ve always
done it this way’ mentality,” says the vice president of global logistics for a large apparel
company. “Now our staff is more creative and open to thinking of better ways to operate
the business.”
Following are recommendations for action for companies considering using on-demand
SCM, based on a firm’s current supply chain maturity level.
Recommendations for Below Average Supply Chain Performers

On-demand SCM may be a quicker, lower risk way of ratcheting up your supply chain
performance than using a traditional “license and install” method. It will place less stress
on your internal IT staff and have a lower exit cost if the solution fails to deliver on your
expectations. Be aware that on-demand SCM is currently available only for certain as-
pects of supply chain functionality – but these aspects tend to be high impact, such as
lowering transportation costs or managing suppliers and in-bound inventory to increase
supply chain velocity and agility.
When evaluating vendors, pay special attention to how they can help you move to elec-
tronic communications with business partners through a pre-connected network, and
what capabilities they have relative to helping your company learn best practices during
initial implementation and on an on-going basis. Also investigate whether they offer
managed services, in which they may be able to take on some daily operational activities
for you or manage functions that require expertise you don’t have in-house. In other
words, treat an on-demand solution selection more as a service vendor decision, rather
than as a technology vendor decision.
Be comfortable taking a project approach of very rapid initial implementation for attack-
ing a select portion of your supply chain, and then rolling out additional functionality and
expanding to additional areas of the supply chain in future waves. Look to pay for what
you actually use versus what you could use. Finally, don’t underestimate the need to in-
tegrate the on-demand solution back into your internal systems to gain full value.
Recommendations for Industry Average Supply Chain Performers

Evaluate how on-demand SCM can help you fix selective problems in your supply chain
without having to rip and replace your entire infrastructure. Multi-tenant systems and
multi-instance shared service solutions, in particular, have been built to “play nice” with
existing in-house applications. These solutions are also a great way to create differenti-
ated collaborative processes with customers, carriers, or suppliers, and gain better control
of these multi-party relationships.
If you have an ERP-centric IT strategy, consider how you can use on-demand SCM as a
short-term way to exploit technology and functionality innovations not yet present in that
ERP system. This may be an elegant way to meet specific customer mandates, fix chal-
lenges in certain product lines, or gain a needed jump on the competition without having
to upset the internal IT applecart.
Recommendations for Above Average Supply Chain Performers

If your company is an above average performer and is looking for new areas of innova-
tion, then on-demand SCM should be high on your list of considerations. Supply chain
innovators using on-demand SCM today report that it has brought a valuable new dimen-
sion to their IT portfolio and has let them accelerate the velocity of IT value.
For current on-demand SCM users, continue to ask your vendors to provide more, such
as in the areas of community benefits and shared best practices. Push your traditional “li-
cense and install” vendors to innovate hybrid on-demand models to create brand new
value from your existing investments.
In addition to considering on-demand technology, also look at how other aspects of the
“supply chain as a service model” can keep your company in the lead. This can include
using managed services and other business services from technology vendors and third-
party logistics partners to exploit external expertise and resources, as well as synchroniz-
ing the financial and physical aspects of the supply chain.
Featured Sponsors
E2open is the leading provider of software and services to manage inter-company proc-
esses such as inventory management, order management, demand/supply forecast syn-
chronization, material composition declaration for WEEE/RoHS, and multi-tier visibility
-- integrating trading partners across multiple tiers of distributed global supply and de-
mand networks. Over 12,000 companies worldwide currently use E2open for greater
supply chain visibility and control through accurate, timely and cost-effective access to
information. E2open offers the only solution to combine inter-company process man-
agement functionality, event management tools, performance management capabilities
and an open system-to-system integration platform delivered in a software-as-a-service
model, resulting in lower total cost of ownership and shorter deployment cycles.A pri-
vately-held company, E2open's largest customers include Agere, Hitachi, IBM, LG Elec-
tronics, Matsushita Electric Industrial (Panasonic), Seagate Technology, Solectron, Tyco
Electronics and Wistron.
GXS is a leading provider business-to-business electronic commerce and on-demand

supply chain management solutions. Founded in the late 1960s, GXS today combines the
best practices and security of traditional e-commerce networks with the agility and re-
sponsiveness of the Internet. The Company’s principal products and services enable cus-
tomers to electronically exchange information together to optimize cross-enterprise busi-
ness processes, regardless of geographic location or technical competency. Leveraging
industry standards, such as Electronic Data Interchange (EDI) and Radio Frequency
Identification (RFID), GXS helps customers manage and extend their global supply net-
works, improve and optimize product launches, optimize overall supply chains costs, and
better predict and understand customer demand. With over 40,000 customers, including
more than 75% of the Fortune 500, GXS and the GXS Trading Grid™ help customers
achieve the perfect balance of supply and demand.
Featured Sponsors
LeanLogistics is the premier provider of On Demand Transportation Management Sys-

tems. The LeanLogistics product, On-Demand TMS™, is a complete, seamless, end-to-
end system that effectively blends traditional and collaborative functionality for custom-
ers’ maximum economic benefit. The LeanLogistics multi-tenant, hosted delivery model
reduces costs, maximizes ROI, and aligns costs with benefits. Implementation is rapid
and trouble-free. Most customers experience a payback in less than one year – a Return-
on-Cash™. LeanLogistics’ customers include companies such as Unilever, Procter &
Gamble, Barilla America, Dean Foods, PepsiAmericas, Meijer, Pinnacle Foods, Chiquita,
OrangeGlo, Cemex, and ES3.
Mitrix, Inc, a subsidiary of Mitsui & Co. (U.S.A.), Inc., offers revolutionary, On Demand
Supply Chain Management (SCM) technology delivered via the Internet. Mitrix has de-
veloped the first ever powerful, affordable and scalable On Demand supply chain solu-
tion for the small to mid-sized enterprise (SME) market. Its flagship product, SCM Live,
offers functionality previously unavailable to the SME market, enabling SMEs to dra-
matically improve the performance of their supply chains and create new revenue oppor-
tunities. Headquartered in Irvine, CA, the company manages complex supply chain trans-
actions across eight countries.
Featured Sponsors
Wesupply is a leading provider of on-demand collaborative and intelligent supply chain

solutions delivering real-time visibility and improvement in business performance and
customer services. Wesupply allows enterprises to enable innovative and collaborative
real-time supply chain processes across their organization, taking the complexity out of
the supply chain by providing simple solutions to complex problems within a framework
of efficient transactions and information sharing. Wesupply has seen phenomenal growth
since its establishment and now has a portfolio of some of the largest global organiza-
tions. The company has offices in the UK, North America with Imag Australia Pty Lim-
ited as Partner representing Asia Pacific.
Sponsor Directory
E2open GXS
E2open, Inc. GXS
1600 Seaport Blvd., 5th Floor 100 Edison Park Drive
Redwood City, CA 94063 Gaithersburg, MD 20878
650.381.3737
Tel: + 1 800-560-4347
Tel: + 1 301-340-4000
www.gxs.com
www.e2open.com
sales_us@e2open.com info@gxs.com
LeanLogistics Mitrix
LeanLogistics Mitrix, Inc.
3347 128th Avenue 17 Goodyear
Holland, MI 49424 Suite 125
616-738-6400
Irvine , CA 92618
866.MITRIX 1
www.leanlogistics.com
info@leanlogistics.com www.mitrix.com
info@mitrix.com
Wesupply
Wesupply Limited
Westwood House, Westwood Business
Park, Coventry CV4 8HS,
United Kingdom
Tel: +44(0)8700 706670
Fax:+ 44(0)8700 705570
info@wesupply.com
www.wesupply.com
Author Profile
Beth Enslow
Senior Vice President, Enterprise Research
AberdeenGroup, Inc.
Beth Enslow is senior vice president of enterprise research for AberdeenGroup. Enslow
benchmarks and advises companies on how they can reshape their supply chain, global
trade, and transportation processes and technology strategies to drive business value.
Prior to joining AberdeenGroup, Enslow was senior vice president of strategic develop-
ment for Descartes Systems Group, a global supply chain software company. At Des-
cartes, she led initiatives in such areas as RFID, wireless-enabled delivery, and inventory
performance management. Before that, Enslow was research director at Gartner, Inc.,
where she ran its supply chain planning and logistics advisory practice on a global basis.
She has worked for a number of other research and consulting organizations, including
the Conference Board, a leading business think tank and economic forecasting organiza-
tion. Enslow is also a lecturer on transportation technology at the Center for Supply
Chain and Logistics Management at York University’s Schulich School of Business in
Toronto.
Appendix A:
Research Methodology
I n March 2006, AberdeenGroup examined the SCM on-demand processes, experi-

ences, and intentions of 180 enterprises. Respondents completed an online survey
that included questions designed to determine the following:
• The degree to which on-demand SCM is impacting business and IT strategies,
operations, and financial results
• The benefits of the on-demand SCM model over traditional “license and install”
software
• Current and planned use of on-demand SCM technology
Aberdeen supplemented this online survey effort with telephone interviews with select
companies, gathering additional information on on-demand SCM strategies, experiences,
and results.
The study aimed to identify on-demand SCM usage trends and benefits, as well as pro-
vide guidance to companies on deployment models and opportunities.
Responding enterprises included the following:
• Job title/function: The research sample included respondents with the following job
titles: CEO, CFO, COO, CIO (25%); vice president (13%); director/manager (44%);
and staff and internal consultants (18%).
• Industry: Consumer goods manufacturers, distributors, and retailers represented 52%
of the sample. Discrete product manufacturers and distributors accounted for 27%.
Process industries accounted for 10%. Services and public sector organizations ac-
counted for 11%.
• Geography: Two-thirds of study respondents were from North America. About 20%
were from EMEA, and the remainder from other countries worldwide.
• Company size: About 24% of respondents were from large enterprises (annual reve-
nues above US$1 billion); 40% were from midsize enterprises (annual revenues be-
tween $50 million and $999 million); and 36% of respondents were from small busi-
nesses (annual revenues of less than $50 million).
Appendix B:
Related Aberdeen Research & Tools
Related Aberdeen research that forms a companion or reference to this report includes:
• Supply Chain as a Service: The Next Big Thing?, February 2006
• Best Practices in International Logistics Report: Case Studies of Success, Janu-
ary 2006
• The New Buying Guide for Trade Compliance Technology, December 2005
• Best Practices in Transportation Management; June 2005
Information on these and any other Aberdeen publications can be found at
www.Aberdeen.com.
About
AberdeenGroup
Our Mission
To be the trusted advisor and business value research destination of choice for the Global
Business Executive.
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ness value from technology-enabled solutions. Through continuous benchmarking and
analysis of value chain practices, Aberdeen offers a unique mix of research, tools, and
services to help Global Business Executives accomplish the following:
• IMPROVE the financial and competitive position of their business now
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their business
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Aberdeen also offers selected solution providers fact-based tools and services to em-
power and equip them to accomplish the following:
• CREATE DEMAND, by reaching the right level of executives in companies where
their solutions can deliver differentiated results
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tion and arming the sales team with fact-based differentiation around business impact
• EXPAND CUSTOMERS, by fortifying their value proposition with independent
fact-based research and demonstrating installed base proof points
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tangible value to executives trying to advance their businesses with technology-enabled
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independent research and analysis of the dynamics underlying specific technology-
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or portions of reports may be underwritten by corporate sponsors, Aberdeen's research
findings are never influenced by any of these sponsors.
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Boston, Massachusetts business executive. AberdeenGroup has over 100,000
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© 2006 AberdeenGroup, Inc. and services.
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The On-Demand Tipping Point in Supply Chain

How Enterprises Are Gaining Faster Time to Value with On-Demand or

Quantifying the Benefits from On-Demand SCM

Figure 1: On-Demand SCM Outperforms Traditional “License and Install”

Ease of upgrade process 16% 19% 66%

Return on investment 3% 32% 64%

Implementation time and effort 9% 34% 57%

Customer service from vendor 7% 47% 46%

0% 25% 50% 75% 100%

Finding the On-Demand Sweet Spot in SCM

Current Buying Trends

Recommendations for Enterprises Considering On-Demand SCM

Executive Summary .............................................................................................. i

Chapter One: Issue at Hand.................................................................................1

Chapter Two: Key Business Value Findings for On-Demand SCM.......................5

Chapter Three: On-Demand SCM Deployment Strategies................................ 10

Chapter Four: Recommendations for Action ...................................................... 17

Sponsor Directory .............................................................................................. 23

Author Profile ..................................................................................................... 24

Appendix A: Research Methodology .................................................................. 25

Appendix B: Related Aberdeen Research & Tools ............................................. 26

About AberdeenGroup ...................................................................................... 27

Figure 1: On-Demand SCM Outperforms Traditional

Figure 2: Supply Chain Applications Match Sales

Figure 3: Why Enterprises Want to Adopt On-Demand SCM ...............................2

Figure 4: Tipping Point Indicators for On-Demand SCM ......................................4

Figure 5: Current On-Demand SCM Users

Figure 6: On-Demand SCM Outperforms Traditional

Figure 7: Attitude Toward On-Demand SCM, by Role in Company ......................8

Figure 8: Top Supply Chain Performers Use More On-Demand SCM..................9

Figure 9: Enterprise Preferences for Type of On-Demand SCM Vendor ............ 10

Figure 10: Firms Split on if On-Demand SCM Is Interim or

Figure 11: Total Cost of Ownership Expectations ............................................... 14

Figure 12: On-Demand SCM Sweet Spot .......................................................... 16

Table 2: The Five On-Demand Deployment Options Explained ......................... 12

Figure 2: Supply Chain Applications Match Sales Force Applications in On-

Supply chain or logistics application 51%

Sales force automation application 47%

Purchasing or sourcing application 43%

Financial application 29%

0% 10% 20% 30% 40% 50% 60%

Drivers for On-Demand SCM Adoption

Figure 3: Why Enterprises Want to Adopt On-Demand SCM

Fewer IT resources required to implement and

Seeking faster implementation and ROI from on-

Enables support of unique business processes for

Better trading party collaboration because of shared

0% 20% 40% 60% 80%

Assessing the On-Demand SCM Tipping Point

Figure 4: Tipping Point Indicators for On-Demand SCM

Plan to Use Within 12 Months

“Supply Chain as a Service” Trend Is Accelerating On-Demand Interest

• On-demand applications outperform traditional “license and install” SCM applications

in numerous areas, including fast implementation and ROI.

Implementation Time with Time to ROI with

4 to 6 months, Less than 3

How On-Demand SCM Performs Against Traditional Applications

Figure 6: On-Demand SCM Outperforms Traditional “License and Install”

Ease of upgrade process 16% 19% 66%

Return on investment 3% 32% 64%

Implementation time and effort 9% 34% 57%

Customer service from vendor 7% 47% 46%