COVID-19 was a tipping point for businesses, highlighting obvious gaps in supply chain processes, outdated logistics systems, and insufficient digitalization.
According to a Cleo report, 96 percent of global logistics companies surveyed said they lost most of their revenue during the pandemic since their on-premises systems didn’t provide smooth visibility of supply chain processes and had integration issues. This has prompted companies to change their business strategies for 2021 and focus on moving to the cloud.
C-level logistics executives might have been thinking of moving to the cloud for years. So why are they doing so now?
Previously, we mentioned the benefits of migrating to the cloud and provided a step-by-step migration guide. But cloud adoption isn’t a quick-impact project, and the benefits are not easy to quantify. Data security improvements led by moving to the cloud won’t bring a quick jump in revenue. On the contrary, significant migration costs might overshadow the benefits a company will get after a while. This is why senior management, including the Chief Information Officer (CIO) and the Chief Information Security Officer (CISO), may hesitate to pull the trigger.
But is the lion so fierce as he’s painted? We decided to dig deeper and find out the most common concerns logistics companies have about transitioning to the cloud.
Concern #1. The unexpected cost of migrating enterprise workloads
At the beginning of a cloud migration project, a company typically already has a budget and knows the approximate project cost. However, top management understands that the cost can increase. Reasonable questions arise: How much will migration to the cloud actually cost? Will it pay off? Will our company get ROI, and how much?
Migrating to the cloud is much more than moving systems and databases to the cloud. It would be unfair not to mention several factors that can significantly affect your costs. They include:
Rewriting the application architecture to adapt it to the cloud
Investing in extra IT specialists for successful migration
Conducting employee training to adopt a new system
However, even knowing the actual costs of migration, the ongoing software funding process can hinder cloud adoption. More often than not, the CFO prioritizes funding for functionality that the business is currently requesting. But each time you invest in new business functionality without using an advanced cloud architecture, your technical debt increases. Consequently, it becomes more difficult and costly to implement additional functional modules in the future.
Undoubtedly, the great benefit of cloud migration for companies is that they don’t have to buy expensive server hardware and spend money maintaining it. Additionally, operational costs are reduced by eliminating the need for sysadmins and DevOps specialists to maintain or back up hardware and software.
One example of how cloud migration can be profitable is the experience of LEGACY Supply Chain Services, a third-party provider of warehouse, distribution, and transportation solutions that operates in the US and Canada. In 2018, LEGACY replaced their traditional Electronic Data Interchange (EDI) process with Microsoft Azure Logic Apps in the cloud. This step allowed the company to communicate faster with its warehouse management system (WMS) and enterprise resource planning (ERP) modules. As a result, over three years, customer service efficiency increased by 70 percent and operating costs decreased by 50 percent.
Concern #2. Inability to migrate legacy software to the cloud
To pursue daily work activities, your company may rely on a variety of applications like a WMS, labor management system (LMS), and transportation management system (TMS). In case one or several of these modules are antiquated, they may not be compatible with cloud architecture.
This means you may have to replace or remove all legacy components before moving to cloud infrastructure. This fact scares CEOs and CIOs, as deploying cloud software can be time-consuming or result in failure.
To illustrate how IT specialists can migrate legacy modules, let’s look at a table with common cloud migration strategies.
You can discover more cloud migration strategies and how Yalantis applies them in our article on the six R’s of cloud migration.
Which strategy works best for my business?
Richard Watson, the research director at Gartner and one of the first technicians who shaped cloud transition concepts, says that “none of the migration strategies is a silver bullet.” Before choosing a strategy, you must:
determine the scale of components you are going to transfer to the cloud
assess and minimize the risks you may face during and after cloud migration
evaluate the technical side of your outdated software
Based on the data you receive, you have several migration scenarios:
Rehosting or replatforming
Legacy software stifles growth and innovation due to its monolithic nature and legacy code. But sometimes, there’s no need to immediately abandon such software as long as it’s still running and doesn’t interfere with the productivity of your logistics business.
If the software technology stack is cloud-compatible, you can apply a rehosting or replatforming strategy. These strategies allow you to migrate to the cloud quickly, without major changes to code and at a lower cost.
However, such approaches are short-lived. Remember that your business needs will grow as technology continues to evolve. Gartner predicts that artificial intelligence (AI) and Internet of Things (IoT) technologies will only strengthen their roles in the automation of logistics processes in 2021.
If your company is interested in using cutting-edge technology, reprogramming and rehosting strategies can quickly fail to meet your business needs. In this case, IT professionals will have to re-implement the cloud migration, spending twice as many resources on it. Consequently, these approaches work if the company considers them a temporary solution before making more significant architectural changes to the system.
If after analyzing your obsolete modules it turns out your existing system is in no way compatible with the cloud, you can follow the refactoring strategy. It allows your IT team to match your actual software requirements to cloud infrastructure and re-engineer the architecture of your legacy components.
Refactoring is more expensive and time-consuming compared to the two previous approaches. But it’s leaner in the long run. The simple truth is that after refactoring, your system will be divided into microservices, making it more flexible so you can improve it in the future.
Thus, refactoring provides for seamless migration to the cloud and integration with all kinds of IT solutions (financial systems, mobile devices, etc.). These solutions can provide real-time collaboration and complete process visibility, which will have a tangible impact on your company’s productivity.
John Galt Solutions provides forecasting and demand planning services. One of the company’s clients who specializes in ice production and delivery has integrated a machine learning algorithm into their supply chain system. Using datasets, the company was able to predict ice demand and plan shipping routes ahead of New Year’s Eve 2021. According to Matt Hoffman, vice president of customer service at John Galt, the changes resulted in a 75 percent reduction in unnecessary shipments and a 20 percent increase in productivity.
By analyzing a portfolio of existing software, you may find that your organization can avoid significant cloud migration and customization efforts by replacing legacy modules with off-the-shelf commercial solutions from third-party vendors that can be purchased directly with the software as a service (SaaS) model.
However, this path isn’t always as easy as it seems at first glance. The question to ask yourself when choosing a repurchasing strategy is Should I look for a ready-made solution or develop a module from scratch?
1) Search for a ready-made cloud module. Out-of-the-box modules can significantly reduce licensing, maintenance, and security updates. But despite such impressive advantages, this approach has its disadvantages.
The functionality of ready-made SaaS solutions may not cover all your business needs. In this case, you will still have to seek help from an experienced development team and supplement the module with necessary functions. In turn, this entails additional costs.
Typically, SaaS solutions don’t provide a pay-as-you-go business model. Vendors such as Tecsys, Oracle, and SAP provide non-replaceable sets of functionality that you can integrate into your software. After integrating such a module, you may find that you’re using only a couple of the available functions. Consequently, as long as you use this software solution, you’ll be overpaying for unused functionality, which isn’t cost-effective in the long run.
When integrating a ready-made module with an existing system, a compatibility conflict may arise. In this case, you will also have to reach out to the provider or in-house development team and find the root of the problem. This can entail additional costs for fixing bugs and downtime since the system isn’t working correctly. You can discover how to successfully integrate new functional modules into your logistics software in this post.
2) Build the missing module from scratch. If modules need to be customized and enhanced to meet the specific needs of your enterprise, then off-the-shelf SaaS solutions are not always the best option.
Imagine that your company needs functionality to automatically calculate a vehicle’s maximum cargo capacity. However, there is no such solution on the market. In this case, you can develop a functional SaaS module from scratch. Such a module can subsequently be transferred to the cloud and integrated with existing software.
The Yalantis team has experience developing a custom TMS as a SaaS platform.
Our TMS client turned to us because ready-made solutions either didn’t meet their business needs or were poorly integrated with the system they already used. Based on these facts, our technicians decided to develop a TMS as a SaaS solution from scratch.
After analyzing our client’s business processes and ready-made solutions, we found the following drawbacks:
Ready-made solutions are too complex, and it takes a lot of time to set up and start interacting with them.
Logistics managers spent a lot of time building delivery routes, which affected the company’s productivity.
Managers spent a lot of time manually fixing exceptions.
Taking all these drawbacks into account, we created a solution that killed two birds with one stone. Our client received:
an effective solution for their own business needs
an additional income source, as the developed SaaS solution allowed other logistics companies with similar processes to use it for a fee
Find out more about our SaaS TMS solution here.
Concern #3. Data insecurity
The issue of data security in the cloud is probably one of the most pressing concerns in the logistics industry. When enterprises first started using cloud infrastructure, security was an issue in the transition to the cloud. But with technological advancements, the quality of cloud security has improved.
According to the latest Infosys Limited cyber readiness report, most enterprises with on-premises software aren’t ready to protect themselves from cyber threats. Fifty-five percent of transport and logistics companies surveyed worldwide are ill-equipped to detect and respond to serious cyberattacks.
Cloud service providers like AWS and Azure have changed the rules of the game and provided more advanced security. They ensure that connections to their endpoints are protected from unauthorized access. Besides this, most cloud providers have invested heavily in security to protect customer data from cyberthreats. They also offer compliance with an extensive portfolio of standards, laws, and regulations including ITAR, DISA, HIPAA, CJIS, and FIPS.
Additionally, cloud service providers offer robust solutions to help protect your data as you move to the cloud. However, you must have experienced DevOps engineers and a security team who can make the necessary adjustments and ensure the long-term security of your cloud-based data.
For example, data protection regulations such as PCI DSS and GDPR require logistics organizations to demonstrate that they restrict access to protected information (for instance, credit card and customer account data). This may require creating an isolated portion of your organization’s network that’s accessible only to employees who have a legitimate need to access this information. To do this, you will need the help of an in-house or external DevOps specialist.
Concern #4. Decreased software performance
After interacting with your local logistics system for years, you have been able to customize and sharpen your technology stacks so your business processes run smoothly. However, when migrating to the cloud, system performance can be degraded. This depends on many factors: low bandwidth, incompatibilities of existing systems with cloud architectures, incompatible technology stacks, a large number of users, etc.
There are several steps you can take to mitigate the risk of a logistics software performance crash. Take them into account before migrating to the cloud.
Assess your software’s technical side. Analyze if your application’s architecture is compatible with the cloud. If it isn’t, you must first re-engineer it and only then proceed with migration. Besides that, you should determine which technology stack you need to apply and set dependencies between modules and the data they need to receive and deliver.
Deploy a small project and monitor performance. Once you become familiar with the technical side of your software and cloud, take advantage of the pilot to gain experience in new technologies. This will help you make sure the application is working smoothly or identify bottlenecks that need to be removed.
Use a load balancer. When deploying a pilot, you can use a load balancer. Google Cloud Load Balancing, for example, provides a trial period during which you can test performance at a lower cost. Run some tests. The load balancer can provide you with metrics so you can determine which test version is slower and which is faster. In this way, you will determine which technology stack and workload are optimal for the performance of your system in the cloud.
Concern #5. Business downtime
Top management of logistics companies fears a long migration to the cloud, since a long process entails downtime. Based on the annual revenues of leading logistics companies, we have compiled a table that shows how much each company loses during a minute and an hour of downtime.
These statistics may seem daunting. After all, the first thing that comes to mind when you decide to migrate to the cloud is that you have to put a job on hold until the migration is complete.
However, as with every business, we should emphasize the importance of a well-planned data migration strategy. Precisely defining the amount of data to migrate, the number of users, and data dependencies will help IT professionals minimize downtime during data migration.
One strategy is known as live migration. It’s an approach that allows you to move to the cloud while your business is running. The main disadvantage of live migration is that it can take longer than if you were transferring the entire database in one go. But in this case, you don’t need to stop business transactions. You can start the migration process by migrating small functional modules that work with the same database. Step by step, you’ll gradually advance and move on to larger modules.
Also, if you’ve chosen an AWS cloud provider, you can use the AWS Database Migration Service. This tool transfers commercial and open source databases, allowing the original databases to remain fully functional during migration. This way, you can minimize downtime for applications that use these databases.
Cloud migration is a complex and deliberate process with many risks. Not surprisingly, every business owner may have concerns about migrating to the cloud. However, we cannot deny the benefits of doing so, such as simple scalability, improved automation, and availability. Cloud computing can indeed open up even more opportunities and make the supply chain more flexible and compatible.
The Yalantis team has experience delivering successful cloud migration projects, building modern microservice architectures, and providing extensive data security expertise. If you still have doubts, contact us to consult with our specialists.