Cloud Computing Rains Cost Savings, Productivity Benefits

These are optimistic times for managers in manufacturing companies. With demand growing again and profitability returning, managers in many plants are cautiously focusing on ways to scale up operations, rather than cut back. As they increasingly turn to technology to help them continue to run lean organizations, many business and IT decision makers are reaching to the cloud.

The clouda collective term for online applications and services that either replace or supplement the software traditionally installed on servers, desktop computers and laptopsis enabling manufacturing companies to innovate and grow while providing a competitive edge, according to a new Microsoft commissioned survey of 437 information technology decision-makers (ITDMs) in manufacturing organizations across the United States.

The results indicate that the cloud is helping industrial organizations operate in leaner fashion and build the next generation of manufacturing companies. For example, six out of 10 (59%) of manufacturing IT decision-makers (ITDMs) are planning to implement, or have already implemented, cloud-based collaboration tools, which range from document sharing to unified communications that allow global organizations to work across time zones and in the most remote of locations to create, edit and share documents and to conference via audio or video as easily as sending an instant message.

Nearly the same proportion (57%) have implemented or plan to implement cloud-based productivity applicationsfrom word processing and spreadsheets to presentation software and e-mail. Most of the survey respondents also indicated they are turning to the cloud for tools to manage their security and networks, for file storage and backup, and for customer-relationship management tools. And nearly half (49%) of manufacturing ITDMs are planning to implement, or have already implemented, cloud-based e-commerce platforms.

How the cloud helps managers cuts costs
Why are so many manufacturers suddenly embracing the cloud? One reason is that, over the past year, software developers have released a significant number of productivity and other business tools that once needed to be installed on computers or servers but are now accessible via the Internet.

The cost advantages are clear. Instead of buying additional servers and storage devices that are used only a fraction of the time, plus additional licenses of software that may be used sporadically by employees, manufacturers can enable workers to use cloud versions of those same applications and only pay for the amount of time actually used. These metered cloud services allow companies to use a broader range of capabilities without incurring the costs associated with implementing these systems and applications within their own IT departments. In all, 44 percent of those manufacturing ITDMs surveyed said the key benefits of cloud computing were cost savings and an improvement in the bottom line.

One manufacturer that has realized cost reductions due to the cloud is Sensata Technologies, a global supplier of sensing, electrical protection, control, and power management solutions. The Massachusetts-based company employs more than 9,000 people around the world. In examining ways to improve the efficiency of its technology and processes, Sensata's IT department decided to move its e-mail messaging into the cloud. Using Internet-based e-mail would slash the costs of its on-premises messaging infrastructure while actually improving reliability and scalability.

Over a four-month period, Sensata migrated 5,000 mailboxes to the cloud. Employees gained the additional benefit of instantly upgrading to the most current version of the e-mail application, since the software is constantly maintained and updated by the provider in the cloud.
The move to an online e-mail platform cut Sensata's e-mail costs in half, trimming $500,000 from its IT budget and freeing up IT staff to focus on higher-value tasks.

New lines of business from the cloud
Beyond cost savings, however, cloud services are enabling innovators to create a new business, a new line of business, or an opportunity to level the playing field with larger competitors through diversification. With its pay-as-you-go model, the cloud reduces the need for up-front capital outlays, so start-ups do not need as much capital to launch new businesses. Nearly a quarter (24%) of the manufacturing ITDMs in the survey said they used cloud services to help start a new business, discovering new ways to grow and to bring additional lines of profit into their organizations. Just under half (48%) indicated in the survey that investing in IT increased their company's profitability during 2010.

The cloud also is shining a new light on the competitive landscape for industrial companies. These organizations realize that often their best weapon against competitors is their IT department. With cloud computing, IT can help manufacturers move products quickly and efficiently by accelerating and improving processes ranging from design and production to logistics, accounting, customer contact and marketing. IT departments are looking more strategically at cloud computing for ways to address business process issues (76% of those surveyed) and quality control (71%).

These benefits often derive from the ease with which colleagues, customers and suppliers can collaborate and communicate in the cloud. For example, Medway Plastics, a Long Beach, Calif. company specializing in custom injection molding and manufacturing, has employed the cloud to improve productivity. Previously, repair staff could spend several days traveling to a production location and repairing a machine or replacing a part.

Now Medway uses a cloud-based videoconferencing application to show remote workers the parts that need attention and the way to repair them. The company saves the travel expense and time for the maintenance personnel and the overnight shipping costs for parts by enabling workers in the remote site to conduct the repairs themselves. Instead of a machine being down for two days while waiting for maintenance, it can be fixed and back online in the time it would take just for repair personnel to travel to the site.

While the cloud offers businesses numerous benefits, one key opportunity for today's business leaders using these technologies is having the power of choice across in-house and online tools, which allows organizations to move at their own pace and integrate cloud computing as appropriate to their business needs.

For managers, the cloud has become a new engine for innovation, revenue growth and competitiveness. Its ability to improve collaboration, communication and cost-cutting is providing an ever-expanding silver lining for IT operations in manufacturing organizations.

Craig Hodges serves as general manager of Microsoft's U.S. Manufacturing and Resources Group.