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There is a clear transformation happening in the IT landscape for retailers. Systems are opening, innovation is increasing, decision-making authority is shifting, and cross-functional implementation teams are forming. All of this is delivering greater business benefits and reducing the total cost of ownership (TCO).
Retailers are often viewed as late adopters to new technology. Almost 60 percent of respondents to the 2010 Retail Technology Study conducted by Gartner and RIS believe their organizations are "late adopters" of new technologies. There are several reasons for this. Specifically, high SKU counts, fragmented store locations, extended supply chains, and complex distribution networks all contribute to an operating model that does not lend itself to large-scale IT implementations. As a result, retail management does the best that it can with the tools available but largely lags behind other industries in leveraging new and emerging technology for strategic gain.
The good news is that there is a technology transformation taking place - one that has the potential to change all of this. Three key trends are driving this transformation. First, IT standards are becoming more open (i.e., becoming easier to integrate). Second, today's solutions are designed with a focus on supporting cross-functional business flows and solving specific business problems. Finally, IT management teams are broadening beyond the CIO's office to include better representation and participation from across the entire organization.
Historically, systems integration has posed the greatest risk of any IT implementation. Simply making the systems talk to each other has often implied major consulting investments, redundant systems and unmanageable system architectures. Over the last several years, a trend toward open architectures has helped standardize and simplify systems integration. This new open technology offers several clear benefits for retailers. First, complexity and scope become substantially more manageable with an open approach to integration. By replacing permanent, hard-wired, point-to-point integration with flexible, plug-and-play integration, implementations can be managed on a process-by-process or module-by-module basis. Second, open technologies mean greater options for retailers. Historically, retailers looking for integrated technologies had no other choice than a full ERP suite - most of which were not pre-integrated as advertised. Retailers were forced to sacrifice functionality (best-of-breed) for integration (ERP).
Today, retailers should expect their solutions to have an open architecture that can easily integrate with other systems. Retailers now have the opportunity and the flexibility to mix and match as they choose. Finally, open standards support greater innovation. As is often the case, consolidation within a market sector hampers innovation. This is the case within the IT sector as industry top dogs like SAP and Oracle have consolidated the market, shifting R&D investments from functional R&D to integrating acquired technologies. Open standards will allow point-solution vendors and even user groups new access to innovate and move the industry forward.
In the pre-networked era, technology investments were centered on business functions and departments. The objective of solving the unique business challenge of an individual department made integration projects easy to scope and manage. Purchasing, for example, was a function that might have its own requirements and IT solutions. While this was good for the department, it was not good for the enterprise, as it sub-optimized the business impact. Today, however, management has a much better understanding of how technology can be leveraged to address cross-functional business flows. Organizations might consider purchasing as a set of operations within a broad business flow, such as "Forecast to Deliver." By doing this, management is able to fully optimize a range of decisions and activities - for example, material availability, volume discounts, price hedging, transportation costs, warehouse capacity and inventory investment -rather than a single, disparate departmental need.
A key innovation to enable the business process mindset is workflow. Specifically, workflow has become the governance framework that allows effective decision making across a broad set of managers working across departments. Despite the advances in business process management and workflow, many organizations continue to struggle because of inadequate change management. As a result, new systems and new processes don't always deliver new mindsets. Retailers in particular, who have highly diverse and distributed workers, must focus on the role of change management in order to get the most value from new IT implementations.
A big part of the IT transformation is the evolution of decision making and the shift in roles and responsibilities. With the introduction of large, enterprise applications, decision-making responsibility consolidated from functional leaders to the CIO. This narrowing in focus helped to drive clear accountability and consistency. ERP systems were relatively unstable and implementations so complex that the only way to effectively manage the effort was though command and control. As a result, however, the business was left with very little input or choice in IT implementations, and often new technology failed to support larger business objectives.
Things are changing. A new generation of tech-savvy business leaders is entering the organization at a time when there is greater flexibility and choice in IT. As a result, fewer managers are willing to simply accept IT decisions that don't completely solve their business problem.
As retailers begin to see increased expectations from functional leaders in marketing, supply chain and store operations, they may also be challenged to once again distribute decision making to the business owner. As a result, they can look to open technology, improved business flows, and the evolution in decision making and ownership to help ensure the success of their IT implementations.
Source: Manhattan Associates
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