Written by Glynn Davis
All too often the power in an industry lies with the larger operators whose sheer muscle places them in a stronger position than their smaller rivals. But in the case of data warehousing and Business Intelligence (BI), it is the newer and slighter retailers that are proving to be much better positioned, says Glynn Davis
Unlike their larger compatriots, these companies do use lots of ageing legacy systems that operate in silos, holding them back from utilising shared data across their businesses that can ultimately provide valuable company-wide insight.
Nick Felton, general manager of corporate performance management at COA Solutions, says: "Larger retailers have core systems and business operational systems that have not been integrated. They typically have lots of legacy systems that need changing in order to bring the data together."
In contrast, he says newer retailers have grown up in a market where they've
created an infrastructure where information can be stored in fewer systems. This makes it easier for them to build a data warehouse and BI solution that takes in data from these various systems.
There is certainly a desire by merchants of all sizes to implement such solutions
as Felton says they increasingly recognise the need to make more real-time decisions, which can affect many parts of their businesses. And most do not currently have the necessary BI to predict the full ramifications of their actions.
This requirement for real-time decisions is being driven by a number of factors, including the move by retailers to more dynamic pricing, and the growth in multi-channel retailing. The latter is highlighting to retailers that any action in one channel needs to be co-ordinated with the others if their multi-channel model is to be fully leveraged. There is also the focus by the large grocers on loyalty programmes that require data to be pulled together from all channels within their businesses.
Other drivers for implementing BI solutions are related to the volume of data within retailers' businesses, which is now an operational concern, and the
costs of such solutions no longer being prohibitive. According to Alister Jones, business intelligence manager at K3, five years ago implementations from the likes of Business Objects and Cognos would have cost hundreds of thousands of pounds whereas today £10,000 will get a retailer a server with substantial data warehousing capability.
"For £50,000 you can get a BI solution in front of 20 to 30 users. These solutions are no longer niche," he says. This pricing will include both the analytics tool that sits on top of the warehouse and the expertise required to construct the architecture of the warehouse.
The structure of the warehouse and the data it holds are acknowledged as the
most important aspect of any BI solution. The operational systems used within any retail organisation are likely to comprise complex tables with different 'keys'. These need to be simplified, the data flattened, a consistent naming convention introduced, and third party data links taken into consideration, in order to create the right architecture for each specific retailer's data warehouse.
This initial structure of the warehouse is only part of the consideration as they should ideally be configured for the future. Jim Kelly, general manager of retail markets at Netezza, says: "What's unique with data warehousing is that it changes. You build to an initial requirement and then model the data but then the users see how to use it and all their requirements will then change. And they are not always easy changes, so you need to plan for this."
He says the Netezza solution, Retail Analytic Appliance, is sufficiently flexible for change as there are specific spokes that can be added to a 'foundation' layer. Although this flexibility means the initial outlay is more than some other solutions that are optimised for the initial design, Kelly stresses that the ongoing outlay
will work out less over the lifetime of the product.
Also helping retailers implement BI solutions - especially those in the mid-tier - is the availability of products that combine the data warehouse with the BI analytics tools. The proliferation of such a variety of solutions has made it much easier for
retailers of all sizes to acquire a BI capability and edge towards the holy grail of
having a single view of their customers.
Another development that further helps retailers jump onboard is the emergence
of BI being sold 'as a service', which can prove very cost-effective to smaller merchants. Sean Jackson, marketing director of Kognitio, which works with Loyalty Marketing Group, the company that operates the Nectar card, says: "It has come about over the last two years as retailers were saying data warehousing is great but we've got to water and feed them. Many do not have the budgets for their own systems and to then keep them up and running. If you are doing huge number crunching then there is an ongoing cost."
Although Jackson says many retailers initially enter the market taking the 'as a service' option and intend to move on to having their own internal system, half of them ultimately stick with it as they are reluctant to switch from something that is costing them as little as £8,000 per month per terabyte of data and is delivering
measurable value to their business.
With such a solution, Jackson says it is up to the individual retailer what front-end BI tools they want to use on top of the data warehouse capability as Kognitio works with a variety of partners who provide various dashboards, spreadsheets and other BI analytics capabilities.
The selection of the front-end tools should not be taken lightly, according to Kelly, because he believes a big challenge for retailers who have implemented BI solutions is to build an environment where the employees in the company will want to use it. He suggests there are always users of mixed abilities and the objective for all companies should be to have as many people as possible benefiting from the intelligence BI solutions can provide.
To help with this Kelly says Netezza has created a series of flexible 'playbooks' that are effectively a series of pre-set reports that can be used throughout a business to increase the value gained from the BI solution. This will no doubt help with the ROI case for those company boards that are still unconvinced about BI solutions. But it is fair to say that, at a time when growing numbers of merchants are recognising the benefits it can bring, it is those that remain oblivious who will become