GXS Insights

Strategy and Execution

SaaS for the Supply Chain 101

By Steve Keifer, Vice President, Global Marketing, GXS

When most people think about SaaS, applications such as CRM, ERP and SFA come to mind.  But there is an emerging trend towards SaaS models for supply chain and B2B software. In fact, there are a number of factors which may drive supply chain applications to become the leading category of SaaS in the near future. Supply chain applications are unique in that they are used by a community of business partners rather than one individual enterprise. The multi-company nature of supply chain applications introduces a number of challenges not easily solved by traditional software models. For example:

  • Costs ─ A supply chain application may be used by hundreds or thousands of trading partners around the world. Who among the community of supply chain partners pays for the software application? Or are the licensing fees somehow divided? The same questions apply for support. To enable a supply chain application, some group must be tasked with design, development, testing, training, deployment, administration, maintenance, upgrades and security of the application. Who provides and funds this ongoing maintenance and support?
  • Participation ─ The challenge of end-user adoption is complex within an individual enterprise even when there are executive mandates to enforce the deployment. However, the challenges of end-user adoptions are further compounded when an application is distributed across an entire community of hundreds of businesses. How do you ensure that all members of the supply chain community will use the application? 

SaaS provides answers for these supply chain application dilemmas.

SaaS offers an excellent model for equitably distributing licensing and support costs among a community of trading partners. The channel master, or buyer hub as they are often referred to, may elect to fund a percentage (e.g., 50%) of the overall technology budget. The remainder of the cost may be divided among the trading partner community. The use of a third party, neutral vendor facilitates the distribution of costs within the trading partner community in a manner that avoids unpleasant negotiations between buyer and supplier.

SaaS can often yield end-user participation rates that are much higher than comparable licensed software applications. A key factor is the “network effect” that is created as more trading partners join the community. Consider the case of large OEM or buying organizations in the process of deploying a new supply chain application. With traditional software, the buyer would have to contact each supplier to onboard them. The process is time consuming and could take several years to complete. With SaaS, the buyer can make one connection to the application and gain immediate access to an entire network of trading partners. As many buyers share suppliers, the odds are good that many of the trading partners may already be using the application. As a result, the buyer gains faster time-to-market and a cost savings advantage through the use of SaaS.