Digital transformation underway as manufacturers turn to public / private clouds

While traditional IT spend is on the decline, manufacturers must update their cloud roadmaps to ensure their investments benefit the business.

The transition to "cloud also" or "cloud first" is well under way for manufacturers around the globe, according to new survey results from IDC.

In fact, in Asia Pacific specifically, 49% of manufacturing respondents are using cloud – public or private - or intend to use cloud, based on the 2014 IDC Manufacturing Insights Asia Pacific Business and IT Priorities Survey.

According to IDC, the advantages of cloud computing for manufacturers are significant, as line of business leaders and their IT organisations increasingly rely on cloud to flexibly deliver IT resources at the cost and speed the business requires.

Consequently, traditional IT spend is clearly on the decline, and manufacturers must update their cloud roadmaps to ensure their investments benefit the business.

Key findings from this new report show that a majority of manufacturers worldwide are currently using public (66%) or private cloud (68%) for more than two applications while “cloud also" remains the most common strategy for new and replacement IT investments in the public cloud.

Meanwhile, 61.6% indicated their company's posture for net new IT services is "cloud also", and the number is only slightly lower for replacing IT existing functionality (56.8%).

IT operations are the primary benefactor today from manufacturers' cloud strategy, and only 30 – 35% of respondents indicate operations, supply chain and logistics, sales, or engineering expect to benefit.

And only 41% of respondents believe giving business units more direct control over sourcing their own IT services is a top 4 driver for moving to the cloud.

Cloud services and cloud architecture's share of the annual IT budget allocation is going to increase 27% in the next two years for manufacturing respondents in the 2014 IDC CloudView Survey.

Furthermore, cloud computing will become the de facto standard for new operations (through organic or acquired growth) over the next 10 years for manufacturers that want to operate and serve customers globally.

Manufacturers will increasingly rely on enterprise and industry clouds for access to information, technology resources, and operational support. To prepare, manufacturers will also need to review their underlying network and communication infrastructures.

“Manufacturers are in the midst of a digital transformation, in which 3rd platform technologies are absolutely essential to the way they do business and in the products and services they provide to their customers,” says Kimberly Knickle, research director, IDC Manufacturing Insights.

“Consequently, a strategic approach to adopting cloud is absolutely essential.

“Because of cloud's tremendous value in making IT resources available to the business based on business terms –speed, cost, and accessibility- manufacturers must ensure that the line of business and IT management work together in defining their requirements.”

According to the report, one of the ways in which cloud will bring significant value to the business is in allowing manufacturers to more easily make use of the data that will be connected from sensors throughout the manufacturing operations with IP-based connectivity and the Internet of Things.

Essentially, data from sensors on connected products, on equipment in use in the plant, and on assets and inventory in the supply chain, is most valuable if that data can easily be accessed and analysed by various organisations within the enterprise or even by partners in the value chain.

In the short term, IDC Manufacturing Insights expects that manufacturers may opt for private clouds as a means of extending internal IT infrastructure without raising significant concerns over data security, for the cost saving and operational agility.

However, capacity will likely shift to more cost-effective public clouds for noncritical efforts and even more over the long term as confidence (and technology) increases in security via the public cloud.

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