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Ten IT and Business Benefits of Cloud-Based Integration

Integration enables business process automation across the supply chain, demand chain, general operations, and more

With today's global and distributed commerce, organizations of all sizes are having to collaborate and exchange information with a growing ecosystem of divisions, partners and customers. Most companies want to communicate electronically and in real time, but beyond email, managing the exchange of data, messages and documents can be challenging and expensive.

Traditional EDI, networks or point-to-point integration systems are not providing the interoperability, agility and real-time information exchange businesses need to compete. In addition, companies need to do more than merely exchange data; they need to integrate complete business processes, such as procurement, supply chain management, eCommerce, benefit claims processing, or logistics, to name just a few.

As with other technologies, integration solutions are moving to the cloud in order to provide this increased flexibility and complexity. Today, there are an increasing number of technology vendors giving customers a choice of traditional on-premise integration - where the company manages the connections, mapping and business processes itself - or cloud-based products with strong self-service or managed service support.

While the cloud may not be appropriate for every company or solution, it is an ideal platform for integration, as it enables seamless interaction and collaboration across communities and systems. From clear economic benefits to increased IT agility to real business impact, a cloud-based integration solution brings value across the IT and business aspects of the organization. Below we've outlined the top 10 IT and business benefits of conducting multi-enterprise integration in the cloud.

  1. Improved partner and customer relations and retention
  2. Increased revenue and margin
  3. Improved order accuracy
  4. Faster time-to-market
  5. Greater competitive advantage
  6. Reduced costs and capital expenditures (CapEx)
  7. Increased operational efficiencies and reduced manual processes, allowing ways to move headcount to more strategic projects.
  8. Extended investments in legacy applications and systems
  9. Aligning IT with business goals
  10. Scalability and flexibility

Let's look at each of these in a bit more detail with real-world examples.

1. Improved partner and customer relations and retention
Companies must make it easy to do business with them - it's no longer realistic to tell suppliers to adhere to a single format, such as EDI, as companies have investments in applications and systems they need to extend. Plus customers have more choices than ever before, so if you make it hard for a customer (or partner) to exchange information with you, they will go to a competitor.

A great example of this is a mid-sized electrical supply distributor, Mayer Electric Supply. An increasing amount of its business was being conducted online, but its eCommerce site and related processes were not keeping pace with customer demands, many of whom were large multinational organizations. Mayer chose to bring its online catalog in-house, having its internal IT team rework the catalog and manage the system, but it turned to a cloud-based integration platform to manage the eCommerce "punchout" and integrated purchase order exchange. This enabled all customers to shop with Mayer directly from their existing procurement systems and incorporate the process into its overall procurement work flow. The result for Mayer was improved customer retention and increased order size.

2. Increased revenue and margin
One of the greatest growth areas for cloud-based integration is in demand chain processes, because companies realize that keeping customers close and improving customer-facing business processes has a direct impact on the top and bottom line. With the companies we've surveyed, all of them have experienced improved metrics around retention, order size, revenue and margin.

Take, for example, Invitrogen (now Life Technologies Corp.), a $3 billion per-year supplier to the global life sciences community. The company wanted to improve its customers' online business experience to increase revenues. By leveraging a cloud-based integration solution, Invitrogen was able to accept transactions from diverse customer procurement systems via its website and rationalize an order management system that encompassed more than a dozen platforms. Invitrogen saw orders rise 29 percent after an account was integrated.

3. Improved order accuracy
Over the last decade, we have seen a significant increase in demand for integrating eCommerce and procurement processes. These include procure-to-pay, order-to-cash and "punchout." By using a cloud-based integration solution, the experience to integrate these processes is seamless for customers and suppliers. One key benefit of this, as mentioned above, is increased revenue, but there is also a secondary benefit around order accuracy. One eCommerce company saw order accuracy improve to 99% after implementing a cloud-based integration process with its customers, improving inventory management and delivery times, and removing manual intervention from the process.

4. Faster time-to-market
Across industries and markets, there is an increasing customer force around the "power of now. Customers want to receive products and services more quickly and with less effort. This is somewhat related to the overall trend around the consumerization of business technology, as business people want the same experience at work that they receive shopping or researching online at home. This requires significant improvements in business agility and in the ability to deliver products more efficiently to meet fast-moving markets. To achieve this, companies must work more closely than ever with suppliers, distributors, retailers and partners.

Cloud-based business integration enables real-time collaboration and the exchange of information surrounding logistics, parts, designs, inventory, customer order trends, procurement and other critical processes. Being able to receive messages in a matter of hours versus days or weeks can make the difference between getting the deal or not.

5. Greater competitive advantage
The ease of cloud-based integration can also help companies win new customers and boost market share, enabling small to mid-sized businesses to compete directly with much larger players. In addition, integration can ensure that companies can seamlessly work with customers and partners by not requiring that all business processes occur in a particular format, which may not be compatible with the format that the customer or partner is using.

For example, Office Depot turned a shortcoming that kept it from fulfilling portions of orders from customers into a competitive advantage. By moving specific transactions to a cloud-based integration platform, Office Depot was able to seamlessly work with a diverse set of customers using many different procurement systems. The result: A "gain in market share with very little investment."

6. Reduced costs and capital expenditures (CapEx)
Traditional integration solutions can be costly, often require a specialized and expensive skill set from workers, and are prone to break at the slightest change in format or schema. Furthermore, IT departments are usually under pressure from the business side to improve IT operations and help drive greater revenue or business impact, but rarely are given the additional resources to do so.

Integrating existing systems through cloud-based integration helps companies avoid or delay the costs of replacing infrastructure. The Software as a Service (SaaS) subscription pricing model allows funds for integration to be moved from the capital budget to the operating budget, making integration easier to fit into the IT budget, and enabling IT to spend capital on other more capex-intensive projects.

7. Increased operational efficiencies
Some of the greatest gains in operational efficiency come from transitional manual processes to automated ones. As we know, this also tends to reduce costs and improve accuracy. With cloud-based integration, fewer people need to manage connections and transactions, as it enables frictionless system-to-system business processes automation.

While every IT team needs to show operational improvements, nearly everyone we talk to is worried that cloud or SaaS-based solutions will mean a reduction in IT staff. We have not had one customer experience where this has occurred. On the contrary, what we have seen is IT staff moved to more strategic projects or to working on new innovations to drive business growth.

A great example of this is with the consumer products division of Cisco, which uses cloud-based business integration to help manage and automate key processes across a growing, global distribution network. While the company says the move to the cloud saved it the costs of two full-time staff, the IT team that had previously managed EDI connections and translations were moved to manage partner relationships and strategic projects.

The same is true for Whirlpool Corporation, whose North American CIO emphasizes that IT people are focused on managing strategic relationships and projects, and the company leverages the cloud and technology partners to manage much of its infrastructure and integration requirements.

8. Extended investments in legacy applications and systems
Integration can extend the life of legacy assets by enabling all members in the integration community to work from existing systems. With cloud-based solutions, there is no "rip and replace" required, and there should be minimal to no software or hardware required behind the firewall. This is a great way to upgrade business processes or improve efficiencies without having to invest heavily in solutions or migrate processes to a new system. This interoperability and extension of systems is a critical reason many companies are turning to cloud-based integration solutions.

9. Aligns IT with business goals
How many times have IT leaders heard it's all about "business technology" and making sure IT impacts the business? Wouldn't it be nice to find a solution that provides this alignment with little effort? Business integration is one of those areas that is truly a win-win. Oftentimes, it is the line of business that discovers the need for improved integration, such as the logistics, procurement or eCommerce manager, where there is a clear pain and a need to improve processes. By working with the business on integration challenges and using cloud-based solutions to manage it, you can quickly achieve business impact without negatively impacting your IT budget or goals.

10. Easy scalability and flexibility
During the recent economic downturn, it was more important than ever for companies to have the option to scale back on IT and in some cases integration costs. With an on-demand integration solution, companies can quickly and easily increase or decrease connections, transactions or the number of companies in their integration community, and then scale back up when business requires it. In addition, one of the greatest benefits of cloud solutions is the ability to start small and expand as needed, when you are ready.

These are some of the top ways companies can see measureable IT and business benefits from a SaaS-based integration solution, many of which are realized in a matter of weeks or months. Integration enables business process automation across the supply chain, demand chain, general operations, procurement, eCommerce and other business areas. A SaaS-based integration solution can also help remove the challenge of traditional business integration methods while delivering substantial business and IT value.

Beyond the transaction, it can provide visibility into business processes, partner operations and customer needs. Benefits are realized across an entire organization, from business units to IT to the CIO, providing predictable costs, greater operational efficiency, higher margins and revenues, and automated business processes. For these reasons and others, business-to-business integration should be a key element of consideration for any company's overall strategy.

More Stories By Tim Clark

Tim Clark is a partner in The FactPoint Group (www.factpointgroup.com), a Silicon Valley research, consulting and publishing firm. He was the lead analyst on The FactPoint Group’s Web services research, which interviewed 50 enterprises and surveyed nearly 800 corporate users in collaboration with Outsource Research Consulting (ORC). More information on the research is available at http://www.factpointgroup.com/webservices/. For five years, Clark was a reporter and e-commerce columnist for CNET Network’s News.com and for [email protected] Week. He can be reached at [email protected] ORC is a full-service marketing research firm that can be reached at www.orconsulting.com.

More Stories By Margaret Dawson

Margaret Dawson has more than 20 years of experience in global leadership for both start-ups and Fortune 500 technology companies, including Microsoft and Amazon.com. An avid speaker and technologist, she is a frequent author and presenter on cloud computing, data management, network security, integration and other business and technology themes, and is on the Cloud Connect Advisory Council. She is currently Vice President of Marketing for Symform, a cloud storage and backup provider. Prior to Symform, she ran product management and marketing for Hubspan, a B2B cloud integration provider. While at Microsoft, Dawson led a product management team for two network security products. She is also an active member of CloudNOW, a non-profit consortium of the leading women in cloud computing.

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