The cloud is merely a metaphor for the Internet. It brings together a lot of technologies and domain concepts, and offers IT as a service. Any industry that benefits from such attributes – connectivity, elasticity, etc. – is bound to adopt the cloud quickly. It must be noted that standing in the way of quick adoption is merely the conservatism in IT policies.

The auto/auto component industry is a good example where the benefits of connectivity may be reaped. Consider the following facts. Auto OEMs (Original Equipment Manufacturers) plan production, based on actual dealer demand and forecasts. They in turn outsource many of their spares/production parts from auto-component vendors. These component vendors, in turn, outsource their fabrications, logistics, and basic materials (metals and rubbers) to other vendors.  

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At each stage, connectivity is important. Auto OEMs may communicate with their suppliers and advice them on the level of supply expected, and these suppliers can communicate their requirements to their vendors. Each of them operates on a Bill of Material (BOM). The total demand for vehicles is broken up into a BOM, and each vendor supplies against the demand specified in the BOM

Another factor in the auto-industry is that, the structure (III or IV Tier depending on how you view it, starting from the dealer – OEM – Auto-Component Manufacturer – Ancillaries) is practically the same across the globe. This indicates a high level of standardization in processes, resulting in economies of scale.

Industry level associations (such as ACMA in India) are lobbying for further standardization – uniformity in taxes and reporting formats. These actions show that the industry actually builds on the extant of standardization and automation.

All this implies two significant points – the ability to systematize due to high standard processes – which means ERP systems will work in this industry. The need for connectivity is also implied and hence the cloud is significant.

This industry has gains to have from the elasticity also. OEMs may have acquired ERPs through capital expenditure. Component manufacturers, their ancillaries and subsidiaries may not have to do the same. Cloud ERPs' elastic commercial model can benefit them. Cloud ERPs can help in implementing a dealer or vendor system for their own supply chain sustenance, too.

Supply chains won’t remain the same as they are today. As electric cars evolve, a new battery industry and retail/consumer outlets to charge these batteries will evolve. Cost structure advantages also keep changing as Western and Japanese OEMs will depend on the Indian ancillaries industries to supply spares/parts where they themselves have lost the cost structure advantages.

All this implies rampant emergence of new industries, readjustments in the supply chain, and new players. Deep investments into monolithic ERP and inflexible systems will clearly be the bane of this industry. Low-cost sourcing which is a strategic advantage in this industry will prevail. It is expected that it will play out in the IT field as well and hence the cloud’s elasticity will play a major role in enabling this adoption.

K. Shyaam Sunder is the chief knowledge officer at Ramco Systems. The views expressed in this article are his own.