Comment / Market Insight: DHL GFF, Wisetech & the IT supremacy obsession - is Saas the sassy option for forwarders?

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• NIck Bailey

  April 05, 2019 at 3:04 pm

  But what is the annual on cost for maintaining, augmenting and adding new modules to legacy systems??? Including the cost of maintaining and upgrading hardware, cpu’s etc – especially if you are either running your own data centres or using rackspace in a hosting centre???

  These costs are real and should be factored into any comparisons against the long term costs of any SaaS proposition. This is also why the big Pass providers such as AWS, Azure etc., are beginning to enjoy staggering cost advantages to smaller hosting providers and companies still seeking to maintain their own internal IT operations.

  If the CIA and NSA (amongst others) are outsourcing to these providers (who have passed all the requisite security hurdles) because it’s cheaper to do so, why would any private co’s be able to match them?

  As for losing competitive differentiation, any solutions used by logistics companies is always an amalgam of various services and API’s. No one solution set can (or should) be the answer. Advantage comes from unique operational processes designed in concert with related information solutions. I doubt any of that would be replicated completely on the WiseTech platform (despite the fact that they are trying to acquire all of the pieces on the chessboard).

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• Alessandro Pasetti

  April 05, 2019 at 8:01 pm

  Great comment, guys. Thanks! I am sure Russell will come up with a pertinent reply, but what I can add here is that Panalpina at a roundtable on 28 Feb clearly said SAP was the way forward, for a number of reasons, rather than WTC. The view of PAN CIO Ralf Morawietz here: https://theloadstar.com/supply-chain-radar-united-panalpina-executives-ready-to-rock-on/. He also added a lot of “colour” with regard to operating leverage, sunk capex and expected rising returns from TM SAP at the event in Basel, and why SAP was effectively a superior choice, in their view.

  We know how it ended…

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• Russ Wood

  April 07, 2019 at 10:21 am

  Thanks for the thoughts, you’re right, many of these are crucial to the SaaS and outsourced IT discussion. Before I get to costs, let me just set out some further context.

  Firstly, I’m not saying all SaaS is bad, for many it may be a good option, but what I am saying is that there may be exceptions and I see DHL Global Forwarding as one of these. DHL currently already use SaaS based systems I believe for Sales Automation/CRM, BI/Reporting etc.

  As to costs, whichever way they jumped DGFF would have had to face costs in retiring legacy mainframe systems, so it’s high cost from the outset. Secondly I don’t have their numbers to give precise cost benefit analysis here but there are some key points worth bearing in mind. DHL’s IT Services boast some >4000 employees currently, and there are already synergies and shared services across the group. This includes infrastructure, hardware and associated services. The point being that businesses on this scale already have capacity and critical mass across a range of areas in the IT landscape which mean that it isn’t necessarily a foregone conclusion that there’s a 1 for 1 dollar saving if they outsource.

  Further, there still persists discussion (even debate) about the claimed ROI’s of Saas,Paas and Iaas models ( or blends of these ). Unsustainable intro pricing, price hikes after lock-in etc. Sometimes it works well, other times not so. Dr Will Venters, London School of Economics has done some excellent work on this as have others. (https://www.willventers.com/about/press-mentions/ )
  Gartners Insourcing/Outsourcing Global Survey is also showing mixed results in this area. In recent years, while the trend still favours outsourcing and SaaS, there are persistent upticks in key areas of IT returning “in-house”. A powerful example of this is AstraZeneca under new CIO Dave Smoley’s leadership , who from around 2015, deliberately went from a 70% outsourced model to 30% for business reasons including “control”, “strategic direction” “customer focus” and ironically “cost”. This is detailed in an interview in CIO U.S. here: https://www.cio.com/article/2885140/massive-it-transformation-at-astrazeneca.html

  Which brings me to the most important point, and it’s not cost. After decades of outsourcing, both within IT and other areas, businesses are realising that within the whole process, sometimes something very valuable is lost… deep expertise and detailed forensic knowledge within the organisation is lost when major pieces of the business ( including system design and functionality ) are farmed out. Once that’s gone, it can never be brought back…

  Finally, re NSA and CIA, it makes sense, given that they don’t face an intensely competitive environment, and are Gov’t agencies, that they might take the short term “cost down” approach. (Moreso with the funding issues and ongoing shutdowns).

  I may be wrong, but for the reasons above, especially the more strategic ones, DGFF may rue the day it locked-in to an external solution…golden handcuffs indeed.

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