Cloud Solutions in the Electronics Industry – Why Now?
March 16, 2021
This blog combats prejudice against the cloud, by providing technical, easy-to-understand insights into cloud solutions, and explaining their benefits and why they play an inevitable role in the future of the electronics industry.
This article has been updated in May 2023.
Digitalisation has been in full swing for years, and yet its effects are only just beginning to become visible. The Covid-19 pandemic has made these effects specifically noticeable for the electronics industry as, even years later, electronic manufacturing service (EMS) providers find themselves in a competitive environment, where margins are being squeezed, quotes need to be faster and supply chains need to be more flexible.
To master these challenges, internal processes and external collaboration must become more efficient. Cloud solutions offer entirely new possibilities and are therefore almost inevitable. In a study conducted by KPMG with various German companies, 70% of the respondents named collaboration between departments internally and with third parties as the area that benefits most from cloud services.
Sensitive data as a reason for doubt
Cloud means that internal company knowledge is no longer stored in filing cabinets or on individual computers, but can be accessed from anywhere and at any time on central servers. This causes concerns about sensitive data, especially for EMS providers who are in the middle of the electronics value chain and interface with various customers and distributors. We want to counter these concerns by combating the three most common prejudices.
Thanks to modern encryption, cloud solutions are at least as secure against external attacks as traditional “on-premises” infrastructure. Cloud providers employ whole teams of experts who ensure that data security is maintained and improved on a daily basis. As long as you don't employ IT security specialists yourself, confidential information on prototypes and high-tech developments will be more professionally protected with cloud providers than in your own managed infrastructure.
Loss of data and control
Cloud solutions have extensive backup systems built-in to guarantee seamless storage at all times. In addition, the complete return of all current and past data can be guaranteed in a contract. This means that, in contrast to on-premises storage, having your data in the cloud secures its complete availability and is never lost, even in the event of a device failure, a storage error or a desired change of provider.
Unprotected access rights
The so-called “multi-tenancy architecture” prevents the data of different customers from being mixed up, even though they use the same software. The principle is comparable to an Excel file in which not all data of all customer accounts are managed in one table, but each account is managed separately from the others in its own tab.
What makes cloud solutions indispensable
As a result of the Covid-19 crisis, decentralised working, often in the form of home office, has become the norm thanks to digitalisation. But, what does it mean to EMS providers, whose work revolves around the collaborative quotation process? The cloud enables efficient collaboration without misunderstandings via centrally managed information and automatic distribution of access rights, so that all stakeholders involved in the quotation process can access customer data and internal price information, as well as are aware of the current progress of their team members at all times to avoid duplication of work.
The cloud also has benefits regarding time management. There is a shortage of skilled workers in the electronics industry. Cloud providers take over a large part of the administrative work, which gives employees more time for core tasks, therefore increasing competitiveness. Specific advantages include greater flexibility in the allocation of tasks and a lower dependency on certain people and their individual knowledge, which further strengthens productive collaboration even in the case of staff shortages.
According to a McKinsey study, advantages of cloud applications, such as increased productivity through a more flexible and digital way of working, hardware savings and better data analysis options, have a direct impact on costs and turnover. Purchasing, supply chain management and manufacturing in particular benefit from the cloud, as McKinsey states that the largest share of all cost savings (up to 20% per function) is in these business areas. And those cost reductions have a two to three per cent impact on EBIT for each of these areas.
Collaboration with experts
In summary, moving to the cloud is inevitable for long-term success, since efficient collaboration between experts is at the core of digitalisation. Securely sharing data within one's own company as well as across the entire electronics value chain and developing it into actionable ideas is a prerequisite for being future-proof. Building the foundation for real-time data collection and distribution yourself would cost an unviable amount of time and expertise, while cloud services already provide this.
As Luminovo, we understand the challenge and scepticism around the cloud, having witnessed it during our consulting days in various industries and now encountering it again when working with EMS providers. However, we have also found this scepticism can be fought through the transfer of knowledge.
Companies that embrace the topic of cloud earlier have a competitive advantage in both the short and long term. That's why we help EMS providers better understand the cloud technologically, security-wise and process-wise. Many EMS providers are already realising that it's not a matter of if they will embrace cloud solutions, but when. Those who do not want to be left behind soon are advised to face the issue.
We provide a deeper insight into our own cloud solution, the Luminovo Software Suite, in the form of live demos, which you can book directly via our website. You can find out more about how we use the cloud for process optimisation in electronics here.