Why consider cloud?
Manufacturers are opening up to the cloud. As our The Subtle Shift to “Why not Cloud?” post explains, industrial companies are starting to consider cloud solutions for their product innovation and engineering needs. Why? Our research shares benefits in five different areas:
- Implementation Benefits
- Operational Benefits
- Business Benefits
- Unique Benefits for Engineering Software
- Strategic benefits
While some of these are the same benefits companies already enjoy in other solution reas like CRM or ERP, our Cloud Engineering Software: More than Engineering Software on the Cloud explains that the cloud offers additional value unique to engineering needs.
How to justify the cloud transition
With all of the value available, it’s no wonder that companies are moving to the cloud. How do they support the decision shift to cloud solutions? Some may justify the change solely on infrastructure cost savings. We believe, however, that the most important thing about justifying the switch to cloud engineering software is not to do it at all. What!? To be clear, the point we’re trying to make is “don’t justify cloud engineering software, justify engineering software deployed on the cloud.”
Maybe we’re mincing words, but there’s a clear message to our advice. Before justifying cloud engineering software, understand the value the solution can provide and make sure you get the right engineering software. Only then should you start to think about the right deployment option. Yes, cloud implementations can save money, but saving money on the wrong solution is counterproductive at best. The right solutions can drive higher revenue and improve product innovation and engineering productivity. That value should be the priority before looking to save money on implementation and operation.
Driving top-line improvement
Our research clearly shows that companies are taking more of a “solution first” approach to engineering software selection than a “cloud first” approach. This strategy is critical because the potential benefits of improving product innovation and engineering likely outweigh the benefits of a cloud deployment.
Many companies look at engineering software as a way to improve engineering productivity. However, the top-line benefits likely go well beyond those. A product innovation platform improves product development through better collaboration, resulting in higher sales, better margins, and improved market share. It also streamlines innovation along the digital thread to get products to market faster and take advantage of first-mover margin premiums. In addition, it can drive higher levels of quality through simulating and optimizing the digital twin to create a product performance advantage.
Beyond these benefits, our research shows that companies recognize that a product innovation platform is required to support digital transformation. This can open up lucrative, new business models like product-as-a-service or help create new business opportunities using predictive service using the IoT and analytics to improve service revenue dramatically. These opportunities help grow the top line even further.
Realizing efficiency gains and cost savings
Engineering software is unique in that it can support both top-line and bottom-line improvements. The most common metric used to justify a new solution is engineering productivity. Our research shows that only about 50% of an engineer’s time is spent on product design and innovation. A holistic platform also streamlines product development and reduces the wasted time companies need to translate and fix designs between steps. Improving these issues, even a small amount, helps companies save money or grow without having to hire and train as many new engineers.
In addition to improving engineering efficiency, engineering software allows companies to reduce quality issues that cause wasteful rework, repairs, or recalls. Beyond that, getting designs right and effectively transferring them to the shop floor reduces errors and wasted time ramping up manufacturing.
These are just examples. There are many ways that engineering software can help depending on a company’s needs and goals. The key point is to focus on the business first and then the cloud as a support mechanism. You’ll save more money by improving processes than you can from changing the way you deploy software.
Making the ROI more attractive with the cloud
Once the hard work of understanding how to improve the business is done, it’s time to find the right software solution to support it. Only then is it time to determine the best deployment option for it. That’s where cloud benefits come in. The cloud makes software acquisition and operation more accessible. Cloud reduces or eliminates the need to install infrastructure, hardware, operating systems, and application software resulting in a lower acquisition cost. It also shifts costs from a capital procurement to a recurring expense item. Implementation costs, not to mention time and risk, are much more attractive with a cloud deployment.
Cloud benefits don’t stop after the implementation but continue to provide long-term dividends. Cloud deployments also allow operating costs to be shared across companies as common services. Daily tasks like performance tuning, disaster recovery, backups, software patches, upgrades, and more are executed as shared services resulting in lower cost and demand for internal IT resources. Further, companies enjoy business benefits like the ability to scale users up or down, so they only pay for what they need. The net result is that the cloud does offer an attractive cost structure.
We’re not suggesting that you ignore the financial benefits of the cloud when you look for a solution. We are, however, recommending a “solution first” approach. It’s critical for companies to understand the business value that new solutions can bring and ensure their solution has the capabilities needed to realize them.
Once the right solution needs are addressed, companies can turn their efforts to potential cloud savings. Of course, these benefits are not only financial. Companies should recognize that the cloud also impacts time to deployment and reduces risk. The cloud is compelling, but it has to be delivering the right capabilities in addition to the right performance, security, and other cloud KPIs.
About the author:
Jim Brown is the founder and President of independent research firm Tech-Clarity. Jim is a recognized expert in enterprise software for manufacturers, with over 25 years of experience in application software, management consulting, and research. He has extensive knowledge about how manufacturers use Product Lifecycle Management (PLM) and other enterprise applications to improve business performance.
Jim is actively researching the value available from new initiatives and technologies including cloud computing, digitalization, product innovation platforms, smart manufacturing, AR, VR, and the IoT in addition to his core research areas which include PLM, quality, service, manufacturing, and more.