The Most Overlooked Cloud Opportunity

There are many value propositions associated with cloud (or software-as-a-service) solutions, but the two most cited are lower upfront costs and faster time-to-value as compared to on-premise implementations. While these benefits are real and significant, there is an even bigger opportunity and value proposition that many software vendors and users still don’t get, especially when it comes to cloud solutions focused on supply chain, logistics, and other cross-enterprise business processes. Simply put, the big cloud opportunity is less about the software and how it’s paid for and more about the network — that is, the community of companies linked together on a common platform, much like people are on Facebook and LinkedIn, and the business intelligence and analytics possible with all the data flowing through the network.

It’s the value proposition found at the intersection of software, B2B connectivity, and social networking, which I’ve been calling Supply Chain Operating Networks for more than a decade. And just like Facebook with its social graph, Supply Chain Operating Networks have the opportunity to create a commerce graph, as Sangeet Paul Choudary wrote about last week in a thought-provoking Harvard Business Review blog post, The Rise of Social Graphs for Business. Here are some excerpts:

All businesses operate within their own networks of vendors, partners, clients, competitors, and other entities — the favored term these days is to talk of their “ecosystems.” Wouldn’t that be a valuable space to map?

This is the next step in the evolution of the social graph — let’s call it the emergence of the “commercial graph” — and it is happening now. Commercial graphs depict relationships between businesses, based on their actual interactions as they are captured digitally…Commercial graphs will help businesses manage their own partner relationships better, and also help third parties to those ecosystems understand them and spot ways to make targeted offers to those within them.

When aggregated across an industry, these data add up to commercial graphs which can help companies assess the performance of their business relationships vis a vis industry averages. They help managers identify new partners and suppliers who are likely to outperform current ones. And they help companies benchmark their own performance against peers.

I first wrote about commerce graphs more than two years ago in Facebook Graph, Through a Supply Chain Lens. Here’s what I wrote back then:

Graph Search is also a big deal when you think about applying this technology to existing and emerging Supply Chain Operating Networks, like those managed by Descartes, Elemica, LeanLogistics, GT Nexus, E2open, Ariba, and others that are the Facebook equivalents in the supply chain and logistics realm. “Graph Search takes us back to our roots and allows people to use the graph to make new connections,” says Facebook in its press release. And the same opportunity to make new connections exists in the supply chain realm, if you were part of a Supply Chain Operating Network and could use Graph Search to conduct queries such as:

  • Battery suppliers in China my industry peers have liked
  • 3PLs with warehouses in Nevada and Tennessee with Automotive connections
  • Professionals with S&OP experience in retail who speak Spanish and live in Canada
  • Trucking companies in Utah with more than 10 refrigerated trucks with the most likes
  • Companies my Tier 1 suppliers are connected to in China, India, and Brazil
  • TMS and WMS software applications my connections like

Simply put, the ability to discover and establish new business connections, either company-to-company or person-to-person, is a key value proposition of network-based solutions.

I wrote about it again two months later in Ariba: At the Intersection of Social and Business Networks, where I discussed how at the Ariba LIVE 2013 conference, Sanish Mondkar, Executive Vice President and Chief Product Officer at Ariba (now at SAP), “highlighted one of the hidden values of a business network: the creation of a Commerce Graph, which maps the business relationships between companies. Ariba believes that Commerce Graph-aware business apps are inherently more intelligent than traditional applications, and they will drive the next wave of business productivity and effectiveness.” Watch my video interview with Sanish for more details.

And Art Mesher, the former CEO of Descartes, touched upon this topic in one of the most watched episodes of Talking Logistics: The Next Big Thing in Supply Chains: The Rise of Entrusts.

And yet, when I talk about B2B networks and communities and commerce graphs to many traditional software vendors, especially those that are finally coming around to embracing cloud, their typical response is, “We’re software vendors, not B2B network providers — we have partners who provide EDI and connectivity services.” They do not see, or get, or believe that software, B2B networks, and social networking are converging, unlocking new opportunities for innovation and value that software alone cannot provide.

Third-party logistics providers (3PLs), with their existing networks of customers and trading partners, have a great opportunity here too to differentiate themselves and provide new services and greater value to customers, yet they fail to see it too. “It’s not what we do,” is their usual response.

And many software users also have a short-sighted perspective of cloud, viewing it simply as a procurement option, no different than deciding between buying a car or leasing it.

Choudary ends his post with these words: “Keep watching this space. In a world where commerce flows on networks, and business people increasingly devise strategies with an eye to their broader ecosystems, the rise of commercial graphs will be rapid. We need them to create the layer of intelligence for more efficient market interactions and healthy business relationships.”

I’ll put it more bluntly: Software vendors, 3PLs, and users that dismiss the rise of Supply Chain Operating Networks and commerce graphs will be at a severe disadvantage to those who see the opportunity to transform their supply chains and embrace it.

For related commentary, see:

Note: Descartes, Elemica, GT Nexus, and LeanLogistics are Talking Logistics sponsors.