SaaS manufacturing shows impressive growth, survey says

According to a survey by Mint Jutras, manufacturers aren't lagging behind with SaaS adoption -- they're leading the way.

In spite of the proliferation of cloud computing discussions -- or perhaps because of it -- there is still an enormous amount of confusion and misperceptions about Software as a Service (SaaS) manufacturing deployment options for enterprise applications. Nowhere are the misperceptions more rampant than in the manufacturing sector.

This confusion prompted research company Mint Jutras to conduct an online survey to assess the level of understanding of SaaS and determine preferences for deployment models for a variety of enterprise applications. The survey collected responses from more than 300 companies, half of which were manufacturers. This allowed us to run a comparison between levels of understanding in manufacturing and those in all other industries.

SaaS manufacturing gets a bad rap. Some in the IT industry may assume manufacturers are slow to understand and use this technology to support the business. While it is true many would prefer to spend more of their technology budget automating their shop floors rather than supporting either front- or back-office processes, we found that they are more -- not less -- savvy about SaaS than those in other industries.

Defining SaaS technology

First, we should clear up the confusion over terminology. Many IT professionals equate the terms cloud and SaaS, but they really are not the same. The distinction needn't be so complicated if you describe it this way:

  • Cloud technology refers to accessing computing, software and storage of data over a network -- generally the Internet. A company may have purchased a license for the software and installed it on its own computers or those owned and managed by another company, but access is through the Internet and therefore through the cloud, whether private or public.
  • SaaS technology is exactly what the acronym stands for: Software as a Service. Software is delivered only as a service. It is not delivered on a CD or other media to be loaded on a company's own computer. Companies access software over the Internet and generally pay for the service on a subscription basis.

Using these definitions, we can confidently say that all SaaS is cloud computing, but not all cloud computing is SaaS.

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Much of the discussions over SaaS enterprise applications focus on whether the SaaS applications are single- or multi-tenant products. In spite of the high level of chatter about this, 57% of our survey respondents admit they did not understand the difference between the two. But manufacturers are better informed. Only 49% of manufacturers did not understand, compared to 66% in all other industries.

Percentage of business software that is SaaS today

Percentage of business software that is SaaS today

Because subsequent questions asked about preferences when it comes to single- and multi-tenant SaaS technology, it was important to present definitions of both. Mint Jutras kept it simple and did not lead the survey respondents to believe that one is better than the other. Some industry observers passionately insist SaaS solutions must be multi-tenant in order to be "true SaaS," and some offer a laundry list of conditions that must be met before they call a solution truly multi-tenant.

Here are much simpler definitions presented to the survey takers:

  • Multi-tenant SaaS: Multiple companies use the same instance of hosted software. Configuration settings vary per company and data is protected from access by other companies, or tenants.  
  • Single-tenant (or multi-instance) SaaS: Each company is given its own instance of the hosted software.
Percentage of future business software that is SaaS

Percentage of future business software that is SaaS

Even among respondents who professed to already understand the difference, the majority of manufacturers -- 64% -- agreed completely with our definitions and another 32% generally agreed, but might slightly modify or add some further restrictions.

It appears that the brouhaha over multi-tenancy is just that. It might be a major focus for industry pundits, but it's not for those making the decisions in manufacturing companies. Instead, the focus is on saving money, relieving the burden of the cost and effort of upgrades and the perceived benefits of SaaS manufacturing. The ability to support distributed environments and remote locations was also a key element in SaaS enterprise application decision making, along with eliminating the need to purchase and maintain hardware and reducing the number of IT staff members. If these benefits can be delivered, then manufacturers, for the most part, don’t care about all the elegant technical definitions. They don’t really care what you call it.

There is also the perception that manufacturers will be slow to launch themselves into the cloud. But our data dispels that myth. What percentage of their business software is SaaS-based today? Only 30% of manufacturers have no SaaS solutions today, compared to 42% for all other industries. On average, about 22% of business software installed in a manufacturing company today is SaaS, compared to 17% for other industries.

What about the future? Will all business software be SaaS any time soon? Probably not. There is simply too much on-premises software currently installed for that to happen in the foreseeable future. But if we look out five to ten years, while other industries project 35% of their business software will be SaaS, manufacturers project that percentage to be 45%. While the percentage of business software deployed as SaaS will grow steadily, SaaS will still not dominate for many years to come. However, it appears that SaaS manufacturing will lead the way.

Cindy Jutras is principal of the Windham, N.H.-based ERP consultancy Mint Jutras.

Follow SearchManufacturingERP.com on Twitter @ManufacturingTT.

This was first published in October 2012

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