This is Part 1 of a Retail TouchPoints series focused on Creating Winning Cloud Strategies. The multi-part feature will define the three main types of cloud computing, and offer insights and opinions from leading industry analysts about trends and developments in implementations. It also will look closely at actual cloud applications in retail, and the associated benefits, as described by executives from those retail organizations. Part 2 of the Creating Winning Cloud Strategies feature will appear in the November 13 newsletter.
Retailers intent on avoiding IT expenses, increasing efficiency and flexibility, gaining quick access to data and speeding time to market inevitably face the option of cloud computing, which offers these benefits and more. The strategy especially helps retailers adapt to today’s changing consumer habits, market cycles and selling windows, such as holiday shopping seasons.
Accelerated Interest In Cloud Computing
The maturity of cloud-based solutions available today ― over just a few years ago ― rapidly is accelerating interest in and comfort with SaaS and hosted approaches in particular, Brian Walker, VP and Principal Analyst for Forrester Research, told Retail TouchPoints in mid-October. “Businesses today would rather work with a SaaS or hosted solution than one that is on-premise or internally supported ― if their needs are being met and the solution is economical. Particularly when executing an omni-channel or agile commerce strategy, retailers and brands are turning to these cloud-based solutions to increase flexibility and reduce time to market.”
However, many companies also remain skeptical of cloud-based tactics: They are looking for proof that these solutions will adapt to their business needs over time. “There certainly is concern over the vulnerability of cloud-based implementations,” said Walker, “as companies become ever more reliant on commerce solutions for a majority of their businesses.”
Since consumers’ omni-channel behaviors are changing the very foundations of the traditional retail operational model, it’s no surprise that line-of-business leaders are in a big hurry to technology-enable new business processes. This has created a wider opening for cloud offerings from technology providers. But taking full advantage of a commercial cloud demands that a retailer use the software the way it was intended to be used.
“When we talk to companies about their IT strategies, we find that many confuse ‘strategic’ and ‘tactical’ advantage: While they may be strategically disadvantaged if they don’t do something well, they are only tactically advantaged if they improve,” declared Brian Kilcourse, Managing Partner, RSR. “But ‘strategic plans’ often are full of projects that do precisely that ― they eliminate a roadblock but at the end of the day, the company in question merely is ‘keeping up with the Joneses.’”
This may be the reason why retail IT departments generally are not favorable of putting mission-critical functionality into a public cloud ― they’ve been hearing line-of-business leaders insist that their way of doing business must be accommodated in the technology. Therefore, on-premise, capital-intensive solutions tend to find more favor with IT teams, so they can modify codes to suit the peculiar needs of the business.
Based on feedback from IT decision makers, as opposed to LOD leaders, “we concluded that there’s a clear disconnect between IT and LOB objectives,” Kilcourse said. “IT favors on-premise owned solutions, LOB leaders want results, and the CMO in particular seems willing to bypass IT altogether. This scenario infers that LOB executives are ‘over’ their insistence that technology solutions conform to their odd ways of doing business. In short, they’re just in too big of a hurry.”
A Larger Component Of The IT Retail Strategy
Meanwhile, the hard-to-ignore benefits of cloud computing have encouraged retailers to make the cloud a larger part of the IT toolset. A recent survey from IDC Retail Insights, titled: IDC Global Technology and Industry Research Organization IT Survey, 2012 found that nearly 65% of retail respondents were at least evaluating cloud technology, and 36% either were up and running, or implementing within the next year. “Retailers see the economics of cloud as very conducive to the up and down nature of consumer cycles and shopping seasons,” said Robert Parker, Group VP for IDC. “In fact, we expect to see the retail industry start to adopt cloud even more aggressively.”
So what is holding buyers back? The biggest reason is security: More than 30% of IDC survey respondents saw this as an issue and, when drilling down with retailers in more depth, “we saw a real concern over protecting consumer information as well as avoiding fraud,” Parker stated. “The second biggest hurdle is not having a well-articulated roadmap for cloud investment, which is very straightforward to overcome.”
Parker shared the following chart from the 2012 IDC IT survey:
Security concerns may linger, but as retailers become more familiar with the pros and cons of the three cloud solution avenues, Parker noted, trust should build over time. “We expect to see growing use of cloud technologies in the retail industry as these issues and relevant costs are better understood. In the near term, retailers will continue to take advantage of various cloud opportunities, like storage and computing services, simple applications such as e-mail and word processing, and support of transient initiatives like a cloud-based POS application for pop up stores during certain seasons. Over time, early investments in the cloud will build confidence and pave the way for even broader adoption.”
SaaS Business Intelligence
SaaS BI has become an established and viable part of the spectrum of possible BI solutions, according to a September 2012 report from Aberdeen, titled: Pervasive Cloud BI: Analyst, Advocate, Problem Solver ― All In One.” In addition to the economic advantages, flexibility and agility of cloud BI, as previously reported by Aberdeen, this newest study examined how cloud BI deployments can make analytics usage more pervasive and widespread throughout the company.
Two broad types of organizations are using SaaS BI, according to the report: Smaller companies attracted by the economic and cost benefits of SaaS, and divisions of large corporations wishing to obtain the advantages of analytics with little or no assistance from corporate IT resources.
“One thing is clear,” stated David White, Senior Research Analyst, BI, for Aberdeen, in the report. “Organizations taking advantage of SaaS capabilities are able to provide BI to a far greater proportion of employees than those that do not.” He said 21% more employees had access to BI tools when SaaS was used as the deployment option. In addition, compared to non-SaaS users, the report found that SaaS users are 25% more likely to use managed reporting; 40% more likely to employ interactive dashboards; and 37% more likely to utilize visual data discovery tools.
On The Horizon For Cloud-Related Retail Technology
From an overarching point of view, what trends are next for cloud-based technology for retailers? “APIs,” asserted Walker. “Having a full suite of APIs will give business leaders more flexibility over who supports their customer experience and marketing innovations as well give them opportunities to partner creatively without impacting their core commerce technology infrastructure. In many ways it is still the early days for APIs, but we will see these mature significantly over the next 12 to 24 months.”