Hosted WMS gaining traction

A couple of weeks ago, I spoke to SmartTurn, a provider of on-demand warehouse management software (WMS), also known as Software as a Service. In a SaaS model, the application is loaded on the providers server and accessed by the user over the Internet. Instead of licensing fees, the customer pays a monthly fee until the subscription period is up. Normally, that’s a year. After that, you’re free to renew your subscription, or move on to something else.

TMS was the first supply chain application to gain traction in an on-demand model, followed by supply chain collaboration platforms. Now, WMS is trying to make headway. 

SmartTurn has targeted the small-to-mid-size facility with relatively simple inventory management and order fulfillment requirements. There are literally hundreds of thousands of those locations in the U.S., and that doesn’t include storerooms at big box retailers, hospitals, or service parts organizations.

But what if you need best-of-breed functionality? That may be another matter, says Bob Kennedy, vice president of business development for 7Hills, a systems integrator and provider of Tier 1 supply chain solutions in a variety of models, including a SaaS solution.

“We’ve been selling software for the past two years, beginning with traditional licensing arrangements,” says Kennedy. “About 18 months ago, we moved into the SaaS world.”

Kennedy says the effort is meeting expectations, with three implementations going live just in October, and interest in on-demand WMS is on the rise.

That said, Kennedy adds that if you’re looking for best of breed functionality, the SaaS model is not for everyone. Who, then, is a candidate? Kennedy sees the following happening in the market today:

The market is global, not just domestic: “In the U.S., we’re focusing on the small-to-mid-size business market,” Kennedy says. “In India and Southeast Asia, we’re competing against the RedPrairie’s and Manhattans for larger companies.” 

It’s about growth, not industry vertical: When it comes to functionality, WMS companies have traditionally set themselves apart from the competition by developing expertise in an industry vertical, say retail or automotive service parts. When it comes to Saas, Kennedy says that business growth is more of a factor. “A lot of smaller companies and supply chain providers are either experiencing growth in their business, or they have to offer new services they didn’t offer before,” says Kennedy. “Saas is ideal for them.”

Price counts: In the Tier 1 world, pricing is certainly an important component of any deal, but it’s just one component of the deal. “Our SaaS users are driven by the price,” says Kennedy. “They don’t have to buy the hardware upfront. They don’t need an IT staff to support the application. And, in a subscription model after 12 months if they want to do something else, they can do something else without spending a lot of money.” 

Who isn’t a candidate? In part, Kennedy says, the answer to that question is psychological. Some customers feel more comfortable with a server at their location. In part, the number of transactions, the number of on-site users and the extent of materials handling automation in a facility also plays a role. “If you’re dealing with ten or fifteen RF guns or voice units in a facility, that’s not a big deal,” says Kennedy. “Above that, you want to watch. And, if you have conveyor and sortation systems that need a quick response time between the WMS and the warehouse control system, you want to have the software on your own server. After that, we look at it on a case-by-case situation.”

While Kennedy expects to continue to do a mix of licensed and SaaS deals, the interest in on-demand solutions is clearly growing. “About 70% of the inquiries we’re getting today are for on-demand solutions,” he says. “Last year, it was just the opposite.”