Can cloud WMS catch on big?

The cloud—meaning cloud-deployed applications—is poised to move into more niches of the supply chain execution (SCE) market in a bigger way. Already a relatively common deployment option for SCE categories such as transportation management systems (TMS) or supply chain visibility, the warehouse management system (WMS) market has been more cloud resistant.
On-premise deployment, where user companies run WMS in their own data centers, has been the norm, but expect greater uptake for WMS in the cloud, according to the analysts and suppliers we spoke with for this article. For one thing, most of the established WMS providers now offer cloud options and some pure-play cloud SCE suppliers are adding WMS customers.

The installed base for WMS remains overwhelmingly on premise, says Dwight Klappich, a research vice president with analyst firm Gartner. Fresh survey data from Gartner of about 400 companies found that while only 5% currently have a cloud-deployed WMS, 24% are likely to consider cloud-based WMS in the future, and 19% remain undecided. What’s more, with each round of similar research, the percentage of “likely to” consider cloud WMS increases.

Why has WMS been a bit late to the cloud party? Klappich cites several reasons, including performance concerns given the near real-time nature of many warehouse processes and warehouse automation, concerns about being able to customize a WMS, and also the fact that up until recently, fewer SCE vendors were pushing cloud WMS.

But as more vendors create cloud WMS offerings, and more user companies achieve working cloud-based implementations, the “bias” toward deploying WMS on premise is diminishing, explains Klappich. “I think what is happening is that as we get more and more cloud deployments, it’s disproving some of these concerns,” he says.

SCE software vendors generally agree the resistance toward cloud WMS is less than it was a few years back. “I think more customers today are open to cloud-based WMS,” says Glen Ceniza, group vice president for product management at JDA Software, which offers cloud SCE options, including WMS. “Five years ago, if you tried to sell WMS in the cloud, people were very, very skittish about it.”

Cloud’s benefits
The top benefit touted for cloud-based solutions is that they lower the total cost of ownership (TCO) for a WMS implementation, because the user company no longer has to expend capital budget on servers or data center infrastructure for WMS as well as other information technology (IT) expenses including database administrators (DBAs) to maintain a WMS. While there are variations on cloud and software-as-a-service (SaaS) approaches (see box below), offloading IT worries is a key cloud attraction.

Another related benefit is that cloud providers are able to quickly ramp up IT capacity for a WMS during peak seasons, or conversely, scale back the capacity during times when the WMS isn’t used heavily, says Sean Elliot, vice president of corporate technology with HighJump Software, a SCE vendor that offers cloud-based WMS. “That’s one of the main attractions of the cloud—your provider can quickly scale it up or down to your changing business needs,” says Elliot.

Cloud deployments can also be fast, because the cloud solution provider, or its public cloud partner, typically operates large data centers with plenty of server capacity. They can quickly turn on more capacity for a client, whereas an organization that runs WMS on premise typically goes through an IT provisioning, installation and testing process to add capacity. “Speed of deployment and quicker time to value is a key benefit of the cloud, especially for third-party logistics providers (3PLs) who want to onboard new clients quickly,” says Satish Kumar, vice president of client services and technology at Softeon, a vendor of cloud-based SCE solutions including WMS and distributed order management (DOM).

For Duluth Trading Company, a multi-channel apparel retailer, a cloud-based WMS and DOM from Softeon have brought the benefits of updated SCE software with lower TCO than establishing and running a new system in-house. The company, based in Belleville, Wisc., went live with the software in late July 2015, says Victor Bakunovich, information systems manager for Duluth Trading.

Going to cloud-based SCE eliminates in-house server and DBA chores, freeing up IT resources within Duluth Trading to concentrate on tasks like reporting or configuration changes to the applications, says Bakunovich. With most of its applications, he adds, Duluth Trading is examining cloud where possible, phasing in cloud options over the next few years.

“Part of our reasoning in going cloud was that we didn’t want to keep buying servers and having to manage servers ourselves as we update applications,” he says. “With the movement toward cloud, our thinking in looking for solutions is that if we can do something in the cloud, let’s look at that.”

Softeon uses cloud infrastructure from Amazon Web Services (AWS) in providing the solution for Duluth Trading. The AWS infrastructure has been reliable, says Bakunovich, and involves no tinkering for Duluth Trading to add capacity. “They handle all the updating and management of the infrastructure,” says Bakunovich.

SCE vendor Manhattan Associates sees increasing user interest in cloud-based WMS deployments, and in response, has worked with Microsoft to certify that Manhattan’s SCALE WMS can run on Microsoft’s Azure cloud infrastructure, according to Darryl Barr, director of product management for SCALE. While it’s not a WMS SaaS offering from Manhattan Associates, it does mean that Manhattan has followed Microsoft’s testing and certification procedures to ensure SCALE performs well on Azure, says Barr, and fits with the interest of users who want to deploy systems on a public cloud option.

The percentage of users opting for a public cloud deployment is still small, says Barr, but there is growing interest, especially among 3PLs. And as public cloud offerings such as Azure and Amazon’s AWS gain more verifiable successes in WMS environments, and major SCE vendors certify offerings for public cloud, the uptake for the cloud should grow, says Barr. “I truly think that within the next two to three years we are going to see a much more widely adopted cloud infrastructure within our customer base,” he says.

Perceived barriers
So if cloud WMS can offload IT tasks and expense, is quick to deploy and easy to scale, why isn’t it further ahead? One reason is the vendor landscape, says Klappich. Until recently, most of the larger, established SCE vendors were “dragging their feet” with cloud solutions. A second reason, he adds, is that the lifespan for a traditionally deployed WMS may be 15 years or more, so if a company has a working on-premise installation meeting functional needs, it probably won’t be looking to make a change for a while.

The bigger concerns from the user perspective are typically around being able to adequately customize a cloud solution as well as performance and latency concerns, especially when it comes to being able to communicate effectively with automated materials handling equipment and/or warehouse control system (WCS) software that sits on premise.

The concern about being able to customize a cloud solution remains legitimate, but may be minimal, depending on the specific vendor solution, says Klappich. That’s because some WMS vendors have an architecture that accommodates customization without altering core code, and some pure-play cloud SCE vendors typically have utilities that allow for some customization.

The No. 1 perceived barrier remains system latency concerns. In people-driven warehouses where the cloud WMS talks to users over RF devices, the latency concerns have been proven unwarranted. However, in automated warehouses, there is legitimate concern to how well cloud WMS will communicate to WCS or controls in the cloud or for processing label printing.
However, notes Klappich, if the user has adequate telecommunications bandwidth into the cloud system, and the vendor has designed the solution for fast interaction with WCS, or uses a print server on site to handle high volume bar code printing, the latency concern can generally be mitigated.

Vendors agree that cloud WMS can perform adequately in most warehouse situations, but they don’t discount the need to evaluate latency concerns and make sure the cloud system is designed in a way that mitigates those concerns. “WMS is a near real-time, execution type of system, so a lot of thought has to go into looking at the latency considerations, making sure you have very low latency with WCS and for wireless handheld activities,” says JDA’s Ceniza. “So there is careful attention that needs to be placed on it, but it’s addressable.”

Pure-play cloud SCE providers say there are ways to design a deployment to work well with automated materials handling. Softeon’s Kumar says its cloud WMS uses a “socket mechanism” to communicate rapidly with automated systems such as conveyors.

Bill Gibson, CEO of Deposco, a cloud-based SCE vendor, says cloud WMS can perform without latency problems, even in automated facilities. In the more automation-intensive warehouses, he adds, it may be desirable for the cloud vendor to offer a ‘hybrid” approach in which the WMS functions as well as higher-level warehouse execution functions are cloud based, but a small data table or a lightweight optimization algorithm is stored on premise to ensure instant communication with WCS and automated materials handling.

The bigger concern for users, Gibson contends, is that companies facing omni-channel pressures need the type of centralized optimization, visibility and execution functionality that is best handled in cloud systems, even if small slice of logic or data is stored locally to address real-time communication with on-site automation. “You need to address omni-channel fulfillment from a centralized perspective,” Gibson says. “You don’t want all these localized implementations, and hope they will somehow come together holistically.”

Customer preference
Cloud WMS solutions aren’t ideally suited to everyone, some SCE vendors claim. Companies with a lot of sophisticated materials handling systems that need to interact with WMS on a tight “heartbeat” basis aren’t the best candidates for cloud WMS, says Vishal Minocha, product director for SCE solutions with Infor.

Infor offers cloud WMS, but the ideal cloud customer has less of a need to tie cloud WMS to sophisticated automation. Such integration can be done, says Minocha, and is not a major concern when it comes to certain systems such as a pick-to-light system in which a set of order requirements gets sent down from WMS in a batch “hand shake,” and then the automated system executes the work using its own logic.

Other types of automated systems can also link to cloud WMS effectively, Minocha says, but ultimately, it comes down to what a customer is comfortable with as a deployment option, what suits the environment, and its existing IT assets. Some customers already have smooth running data centers for their DCs, and sophisticated automation and WCS deployed on site, so they may prefer to stick with on-premise WMS.

“I think interest in cloud is growing, but it’s a transition, with different customers in different phases of transitioning particular systems,” Minocha says. “Some are going to want to keep their mission-critical, high-performance execution systems in-house in a data center, and some of their other systems they will put in the cloud.”

Companies mentioned in this article

• Deposco
• Gartner
• Highjump Software
• Infor
• JDA
• Manhattan Associates
• Softeon