The next generation of cloud native computing could change the way supply chain does business.
Executive Summary
Wherever your company finds itself on the technology adoption spectrum, you’ve probably already concluded that cloud computing has taken over the world, or you’re preparing for that eventuality in the near future. In this article, we’ll examine the rapid rise of cloud native technologies, and share why we believe they have massive, positive implications for supply chain management — especially for those who respond quickly.
Cloud Computing is “Eating The World”…of Business
In 2011, entrepreneur and investor Marc Andreesen wrote an article for the Wall Street Journal titled, “Why Software is Eating the World.” Ever since, this article has been widely read — and perhaps even more widely referenced.
Now, ten years later, no one would argue with the idea that software has fundamentally changed the way the world works. However, a couple of quick updates may be in order. First, those who’ve always held that “distribution is king,” would like to be acknowledged; and secondly, those who foresaw the massive influence of big data might also want a nod of acknowledgment. What’s important to the matter at hand, is the way these two mega-tends have combined, along with further software advances, to bring us to a modern day update of Andreesen’s prediction:
“Cloud computing is eating the world.”
Combining big data, advanced software, and ubiquitous and immediate distribution of both, cloud computing has been changing the game of business for some time now — and its benefits have already been significant. Cloud computing led to the birth of software as a service, and all of today’s largest enterprise SaaS companies are firmly rooted in cloud platform technologies and processes.
But even with this widespread success, cloud migration isn’t slowing down. In fact, this migration has become much more of a stampede at this point. Below, a few historical and forward-looking metrics that illustrate just how apt the “stampede” metaphor really is:
- 61% of businesses migrated their workloads to cloud-based computing in 2020.
- SaaS processes are estimated to account for 75% of all workloads for the year 2021.
- 70% of companies using the cloud plan to increase their cloud-computing budgets in the future.
- By 2024, enterprise cloud spending will make up 14% of IT revenue globally.
- By 2025 the public cloud computing market will be worth an estimated $800 billion.
The upshot is pretty simple for companies:
If you are still evaluating whether or not to embrace cloud migration, you are already behind 90% of companies, according to a study by 451 research… In today’s world, by not moving to the cloud, you run the risk of falling behind your competition and losing your competitive edge.
- Marius Mihalec, Forbes Technology Council via forbes.com
We’d ask you to bear in mind the force of this statement as it applies to business domains (like supply chain) — and we’ll return to that idea shortly. First, let’s examine the breadth of success for cloud computing services.
Cloud Computing Providers Have Become Giants
As you certainly know, the largest cloud providers have now become household names, and their business footprint is…well…essentially ubiquitous. This is due in no small part to the fact that these solutions are applicable to businesses of almost any size or maturity: startups, the Fortune 500, small and medium sized companies, solo entrepreneurs, and the general public are all storing docs, running their calendars, getting and sending their email, and doing every other conceivable kind of business function, with cloud-stored, accessed, and manipulated data.
For those dedicated to the idea of following the money — no surprises here, you’re right again: cloud computing is estimated to be 40x more cost-effective when compared to in-house IT systems for small businesses. That’s a LOT of blue sky.
This ubiquity of access and utility is why the biggest players have become as big they have. Here are some representative metrics from a few of the titans:
Amazon Web Services had a 34% share of the enterprise cloud adoption in 2022.
Microsoft Azure is in use by 95% of Fortune 500 companies.
Google’s Cloud Platform, which generated $6B of revenue in Q2’22 (up 35% year-over-year), is widely regarded as the premier cloud for AI.
Snowflake, focused on building the data cloud for the world’s data warehouses, was 2020s biggest IPO and already serves 48% of the Fortune 500.
The Rise of Cloud-Native Tech
Going back to Andreesen’s world-shaking (or at least, pundit-stirring) prediction, what has been interesting to see of late, is software solutions having to play catch-up. This hunt has been on for some years now, so we’re now seeing a steadily increasing number of business solutions built with the awareness that public clouds are here to stay. And the cloud is also “staying” in a very fundamental sense: it’s not only offering accessories for the cutting edge businesses of the digital economy — rather, it’s offering a foundation for an entirely new technological ecosystem.
As we noted earlier about the ubiquity of uptake, the public cloud evolved rather quickly from being an “exclusive-access” capability, reserved for the benefit of start-ups and software companies. Instead, it has already (and will continue to) become something like a global data and intelligence utility, embraced and used by enterprises large and small. This is one of the macro factors that have shaped a world in which ever more data is now being sent to the cloud, and faster than ever before — a trend that shows no signs of slowing down.
Why Cloud Native Matters So Much
For connected companies of all kinds, the key new fact is that it’s not just their own data that will be in the cloud — but everyone else’s data too. The term “cloud native” refers to the concept of building and running applications that take advantage of the distributed computing and data model offered by cloud delivery. Oracle states that cloud native apps are “designed and built to exploit the scale, elasticity, resiliency, and flexibility the cloud provides.” (Oracle for sure, gets the data side of this whole equation.)
With cloud-native architectures, companies can deploy and adapt faster, more reliably, and more efficiently. Business can grow (much) faster with decentralized administration; rapid, user-executed process-creation and configuration; and through instantaneous provisioning of new users. These business-building capabilities are all critical for enabling the emerging model of enterprise service management. Cloud native architecture allows companies to take full advantage of data- and process-sharing — not only across the enterprise, but also with partners, vendors, carriers — and with customers outside of the enterprise as well.
The flying car may be a few years off, but a data and process connected business-world is already flying down the tracks.
Supply Chain: The Perfect App(lication) for Cloud Capability?
We use the parentheses above to emphasize a dual meaning for the word application. It’s a reminder that the term “App,” now synonymous with software, also has a broader and more neutral general sense, the meaning embedded in phrases like “applied mathematics” and “applied engineering.” That is, the idea of operationalizing new ways of thinking and doing to solve real-world problems.
When we think through the full breadth of the supply chain problem domain — and its many present-day and future challenges — our own judgment is that it could be one of the biggest winners of the cloud native (r)evolution. Truth be told, we think that it could actually be the biggest. For those of you who have been following our chronicling of the challenges facing supply chain today, we need hardly add: and just in time, too.
One of the greatest advantages of cloud adoption has been the much more broad and immediate accessibility of business data. Industries like Sales, HR, and IT have been transformed with the transition from on-premise solutions to cloud-based, SaaS solutions. Companies like Salesforce, Workday, and ServiceNow have made real-time data accessibility and collaboration part of their solutions — and, very quickly, they’ve become part of everyday business life.
Higher Hurdle: Supply Chain Data Challenges
Supply chain, however, hasn’t experienced such a transformation, yet. Much of this lag is due to the fact that supply chain data sets have proven to be much more difficult to get-at, and to structure, manipulate, and use. Unlike in Sales, HR, and IT where an enterprise’s data is largely owned by that same enterprise, in supply chain, the story is completely different. For supply chain, data:
- Is owned by many different parties: suppliers, carriers, distributors, customers, etc.
- It’s also stored in different formats (ie there’s not data standard like ITIL in IT).
- Finally, it’s usually intermixed with the data of other customer and suppliers.
Not one high hurdle, but three… enter cloud native applications:
For Supply Chain: Cloud-Native Has Become an Imperative
The cloud has made it easy for companies to put their data in one place, and make it accessible. But on its own, cloud-computing didn’t solve the problem of accessing data from different places, normalizing that data, and sharing only those pieces of data that are relevant for each party.
That takes…software. Cloud-native software, to be exact.
With cloud-native applications, the whole paradigm shifts…migrates…and we believe it will soon stampede — into a much more productive model. With all data being accessible within the cloud, companies will gain the ability to share information without requiring a tech-batallion to construct or monitor custom integrations. With companies like Snowflake, the transformations and sharing of data, securely, has and will continue to become, much easier.
The Future is…Brightening
Up to now, supply chain has been tethered by the complexity of its vast and variegated data-surface, requiring monumental integrations and on-boarding projects that have often cost years and millions of dollars…and still fail to meet expectations. With the cloud native application model, finally, supply chain has the potential to truly operate with real-time data. And with that data comes end-to-end visibility, multi-party collaboration, and real-time insights. Better yet, all the ingredients are there for true ML and AI.
Sound too good to be true? If you’ve been in the trenches of this battle for the past couple of decades, we know you’ve heard promises before (and we’ve discussed some of those in detail). But from our own experiences with leading customers, we’re certain that this heavy door is about to swing open: and the key has been (and will be) starting with software built on a cloud native architecture.
From there, the sky — and the cloud — may be the only limit.
