13 April 2006 | Anusha Bradley

The popularity of on-demand supply chain tools now exceeds subscription-based licensed software, according to research by the Aberdeen Group.

Researchers quizzed 180 supply chain managers from global firms and found more than half (51 per cent) now use or are considering using on-demand tools. The need for fewer IT resources, fast implementation and business process support were cited as the advantages of on-demand. Improved collaboration was also a factor (see chart below).

The On-Demand Tipping Point found adoption rates were expected to "rise significantly" in the next year.

Of those currently using on-demand, 69 per cent believe it is cheaper than traditional software and 65 per cent expect a return on investment within a year.

Supply chain and logistics were the most sought-after on-demand applications, followed by procurement solutions.

Concerns about data security (64 per cent) and integration with existing systems (60 per cent) were found to be the biggest barriers to further adoption.

But report sponsors Wesupply and GXS told SM their portals used the same encryption standards as banks and defence organisations.

Brian Marsden, Wesupply chief executive, added that its applications integrate with more than 250 software tools used by clients.

Andrew Bartels, analyst from rival research firm Forrester Research, disputed the findings.

He said spending on supply chain solutions reached $2 billion last year, and estimated only 5 per cent of it was for on-demand.

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