There is an Elephant in the room!

We hear everyday about all the great innovations that are available today and the need for retailers to be “omni-channel” ready. The truth is most retailers would just like to get out of the twentieth century! What I see is that most retail businesses (especially mid-market) are still being run on legacy systems. What that means is the companies information is all over the place and getting a single view of your information especially in real-time is almost impossible. Over the past five years or so as I have talked about what is needed to be customer-centric with most retailers telling me they have bigger and basic issues to solve. What is this? I hardly hear much about these kinds of basic issues needing to be resolved in the press or blogs? All I hear and see is the need for omni-channel, mobile, smartphone payments, etc.  The past few years have been filled with a significant consolidation in retail where the successful retailers and VC’s have been buying up slumbering businesses that did not make it through our last economic downturn. This is great for those companies who are doing the acquiring, but the problem it also creates is how do you put all these disparate enterprise systems together to run one efficient business?  Not only are many retailers dealing with their own antiquated IT systems, but also in in light of these acquisitions, the management of multiple antiquated systems. These retailers are scrambling to bring all of their disparate information and processes together so they can respond to the needs of a complex and highly connected set of requirements for today’s market. I know there are many retail companies out there that have overcome these issues, but not as many as you may think.

A “house of cards” is one way to characterize this situation. It is also further injurious because quarterly results are driving decisions for revenue and profit, not a long term vision.  This is the “elephant in the room”. How do I upgrade and get my infrastructure and applications into the twenty first century and not kill the company? Is the answer to this problem the ambiguous solution called the “Cloud”? I think so if you believe and trust in the notion that someone else can be responsible to make sure your system never goes down, provides high speed performance, ensures your information is secure and gives you control over how you use it. When speaking to retailers many want to get out of the IT business, especially mid-market companies. By going to SaaS based systems you can move from a capital intensive and internally complex business model to one where your costs are now operational, predictable and much simpler, sort of.

So is this a good idea, outsourcing your systems and applications? The answer in my opinion is yes, but only if you do it in a thoughtful and cadenced march having a very precise map to where you are going. The challenge is you can never give away control. In the past you had to rip and replace to go from an old system to a new one (think ERP). Now with these “Cloud” based offerings you can off load applications by simply shutting the old ones down and turning on the new ones, discarding your old hardware investments. This journey is obviously not quite that simple and does take a lot of time. The good news is you prioritize and choose what you want to shut down and when.This may be the only reasonable and fiscally responsible way to go.

I believe this is the future and that over the next ten years you will see service based business solutions becoming mainstream for most everything a retail company does. That is precisely why the Microsoft’s, IBM’s, Oracles, SAP’s, etc. are investing billions in this infrastructure.