Will the chemical industry be one of the first adopters or fast followers in transitioning to the Cloud? Read on to learn the latest Cloud technology trends in the global chemical industry.
Chemical companies across the world are going through a genesis. Three factors are forcing decision makers to re-examine their IT strategies—Cloud technology, data proliferation and mobile adoption. Data proliferation, also known as Big Data, is providing companies the ability to better understand and analyze their data, while mobility is providing increased flexibility and simplification. But Cloud is having the largest impact as it is a technology shift similar to that of client servers and the introduction of the PC. Cloud as a platform will revolutionize how Information Technology is deployed.
The chemical industry is at an early stage in the adoption cycle. Considering current market dynamics, Cloud adoption is inevitable and the pace of adoption should increase over the coming years. The transition will occur in a well-planned and phased manner.
Disrupting Technology – Why Cloud?
Chemical companies have been conducting business with on-premise enterprise ERP and associated systems for the past decade with reasonable success and stability. Migration to the Cloud is a disrupting event, especially for the IT and business functions. So, why do it?
At a macro level, business trends, cost pressures, globalization and new technology capabilities are fueling the shift to the Cloud. At a micro level, there are several reasons why a chemical company is compelled to migrate to the Cloud:
Resistance is Futile
While the chemical industry may be slow when it comes to Cloud adoption, the transition is inevitable. Companies are taking a systematic approach of minimizing the impact of change on their business units. Many progressive companies have invested in Cloud applications but few have ventured into putting their ERP or operating systems on the Cloud. Why?
Security risk and application maturity are the two leading factors that are slowing the adoption of Cloud-based ERP and other mission-critical applications. The industry is wary of data breaches and security leaks and is not comfortable moving key data and systems outside their firewall.
The second issue is the lack of functionality of Cloud applications as compared to their current systems.
As more companies embrace Cloud ERP, applications and risk strategies will mature along with businesses and change management models that will help reduce their concerns and improve adoption.
Hosted ERP – In the longer term, ERP systems will be hosted in data centers that specialize in hosting and data management. These outsourced operations can aggregate customers to reduce costs and improve performance. Additionally, chemical companies will adopt a strategy where they will move non-operational systems to a hybrid Cloud environment.
Moving to the Cloud – A Phased Approach for Chemical Companies
The evolution to the Cloud is expected to take several years. Most companies will follow a crawl, walk, and run approach.
This is how a typically well-planned phased Cloud deployment will look like for a chemical company:
Initial Phase – the basics
Intermediate Phase – getting ready
Deployment Phase – let’s get going
Benefits of Cloud Adoption
Cloud adoption by chemical companies is yielding significant results that are being noticed by management teams. Overall, infrastructure cost improvements in the range of 10% to 20% are normal. Cloud based applications can cut software deployment cycles by months and lower associated implementation fees. By transitioning to an OPEX model, working capital reductions of 5% are not uncommon. Overall, there is significant upside benefit to transiting to the Cloud.
Many CFOs and CMOs are dedicating budgets and getting involved in creating Cloud Strategies. By leveraging the Cloud, chemical companies are taking full advantage of the lower costs and resource requirements, enabling their IT departments to add value to their businesses. Most of all, Cloud platforms will change the way technology is being developed and deployed. Stay tuned! It is a new frontier out there and we are boldly going where no chemical company has gone before.
Tim Niziol,Global Head of Chemicals
Tim Niziol serves as the Global Head of Chemicals at Wipro Technology. He is a 30-year chemical and energy industry veteran splitting his experience between operating companies and software and service providers.