January 2016 | Sponsored | Knowledge Base

It’s All About Risk: The Case for the Cloud

Tags: Cloud Computing, Logistics, Technology , Supply Chain

Use cloud software, buy enterprise software, or write your own—which is the best choice for your company?

Companies in the transportation business traditionally bought enterprise software or built their own. That has changed. Over the last 10 years, cloud software has become a popular alternative, and for good reason. It's the choice that exposes your company to the least risk.

Of course some transportation people have built their own systems with great success. Jeff Silver of Coyote Logistics is one example. But to say Jeff is exceptionally experienced, knowledgeable, and talented is a considerable understatement. There are very few Jeff Silvers out there.

Most people who try to do it themselves seriously underestimate the challenge. Even in the best-case scenario, software will take at least a few years to develop and will more than likely run many times over the original budget. Yes, in the end the software may be good, and it might even be great. On the other hand it may be no better than off-the-shelf software. Worse, it could be a total disaster.

If you do build your own software, even if it is great and "only" takes two years to build, you're already two years behind. It's the catch-up factor. During those two years, software companies added changes and features—sometimes features that customers quickly learn to expect. To meet customer expectations in the broad marketplace, you have to keep up with those changes and upgrades.

Established software companies are in the business. Their development budget is supported by hundreds of transportation customers. You, on the other hand, have only yourself as a "customer," and you're not even in the software business. You're at a serious disadvantage. None of your software development costs will be shared. You pay 100% of everything.

Unless your business is extremely specialized, writing your own software is probably not a risk worth taking.

Enterprise software—software you buy or "invest" in—is the next riskiest path. First, you spend hundreds of thousands of dollars to buy software, servers, equipment, and licenses. Only then do you learn if the software works as well as you have been led to believe.

It's curious that enterprise software is sometimes described as an investment. Investments should pay dividends. But when you purchase software, it's the opposite. That "investment" will require expensive upgrades, support, and maintenance for its entire useful life. And for all the money you'll spend upfront, no one can say how long that useful life will actually be.

By far the least risky option is cloud software. It's faster, better, and cheaper.

First and foremost, you have no big up-front expenses. That takes a whole lot of risk out of the equation.

When you build your own software, you commit your company to spending money for years before you get any benefit. When you buy software, you financially commit to something that when it's finally rolled out, may or may not meet your need. Cloud software is different. You will know quickly if it's going to work for your company or not.

If it does not work, or if for any reason you don't like it, you can leave. It's never convenient to change business software, but when that software is hosted in the cloud you can change quickly and without losing tens of thousands of dollars at the very least.

One more thing, when deciding among home-grown, enterprise, or cloud-hosted software, companies often overlook security and backups.

Are you an expert on computers and hackers? With an enterprise system or homegrown system, you better be. Your system will be on the Internet and there's a war going on out there. You will have hackers trying to get in your system every day, 365 days a year. One day you're doing fine, the next you can have foreign hackers sending millions of spam emails from your system. With an owned system you need to be extremely vigilant about protecting your data. Cloud systems, on the other hand, have full-time administrators focused on security all the time.

With homegrown or purchased software, you may have to pay for a full-time tech person focused on keeping hackers out. Cloud systems enable you to spend that same money on an extra dispatcher whose focus is to make you more money.

When you add up all the pluses and minuses of the different systems, cloud software is the least risky choice. Beyond that, cloud software is faster to get started with, includes more frequent upgrades, and costs less overall.

Faster, better, and cheaper: Important words for companies working on tight margins.