TBR: Large Retailers Facing Major IT Dilemma
According to a recent survey of large North American retailers by Technology Business Research, over the course of the recession a lot of them let their IT adoption lag. “Now that consumer spending is beginning to recover, they’re facing increased competition from some of the smaller retailers that were continuously investing,” said Stuart Williams, Director Software and Cloud Practice, TBR.
However, in addition to a spending recovery, the market has also changed substantially, he said. There’s been a shift to mobility – smartphones and tables – and the use of social networks, which has “really changed the way consumers make purchase and what their expectations are.” They’re really forcing these large retailers to re-examine their IT infrastructure, to enable mobile shoppers, and leverage social infrastructure.
That is driving big investments back into retail IT, but that’s another challenge, said Williams. “This would be great if they had unlimited money to spend, but they don’t.”
TBR reports that these retailers – more than 1,000 employees – are increasing their total IT spend 5% to $43.9 billion in 2013, but a good chunk of that (30%) is tied up personnel and overhead. “So they’re really constrained in trying to catch up to smaller vendors.”
Williams said retail is going to change and we’re already seeing stress on some of these vendors. “A lot of change in the industry is going on. It’s not just a one-year event. We look at this as a big shift in the industry that’s going to take time to work out.”
Key findings of the survey – 247 respondents, representing $12.6 billion, out of the 1,070 firms in this segment – included line-of-business buyers will invest in mobile point of sale, e-commerce, consumer insight and application modernization, while IT will drive vendor selection for supporting technology and infrastructure. Mobile POS represents the ‘point of transformation’ for driving IT modernization investments to address shifting customer behavior, said TBR.
Professional services are expected to account for $4.3 billion; infrastructure will be $7.4 billion; systems management $3.5 billion; software $3.5 billion; BI/analytics $2.6 billion; productivity applications $2.6 billion; business applications $3.9 billion; and industry applications $2.6 billion. Discretionary projects aimed at business growth and efficiency requirements are the top priority, said Williams. This discretionary spend of $9.9B (32%) will go to professional services ($3.3 billion); infrastructure ($1.9 billion); systems management ($492 million); software ($775 million); BI/analytics ($830 million); productivity applications ($897 million); business applications ($944 million); and industry applications ($683 million).
The top priority workloads are: retail POS (top of mind vendors-IBM, Micros Systems, Apple, Toshiba); retail e-commerce/mobile commerce (PayPal, Amazon, SAP); inventory management solutions (CAM Commerce, SAP, Oracle); BI and analytics (Microsoft, IBM, SAP). The largest core IT workloads are: ERP (Microsoft, SAP, Oracle); data mining (SAP, IBM, Microsoft, Oracle, Tableau Software), HRM and SRM (HRM-SAP, Kronos, Oracle; SRM-Oracle, SAP, Infor); and transportation management (Oracle, SAP, JDA Software Group).
Because retailers have such tight margins, Williams said managing their expenses is critical, and “things that optimize against selling opportunity are very important… and that involves change management.” There are broad changes transforming this sector, from consumer perceptions to corporate culture, and retailers who think that just implementing a technology solution will make it happen, those will be the less successful companies, he said.
Retailers offering ‘just as good’ will see their margins pressured, said Williams. It’s always best if you can establish a premium around your brand and have the appropriate back-end systems to ensure that that premium pricing isn’t wasted, he added. “I think it was true a thousand years ago and will be true a thousand years from now because it’s a human nature piece.”