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Strategic thinking

Written by Liz Morrell
29/11/2010

Liz Morrell casts an eye over the developments and trends that are forcing retailers to take an in-depth look at their IT and networking infrastructures and the use that they make of them.


Networking and IT infrastructures have long been the backbone of a retailer’s business - ultimately, for all that retail is about the simple art of transactions, for multiple retailers those transactions wouldn’t be processed, stores wouldn’t be replenished and goods wouldn’t be delivered without the networking and IT infrastructures that enable such things to take place.

Traditionally such things have simply been seen as an enabler for business. The IT infrastructure grew with the business with extra functionality added as and when required and meanwhile, sometimes in a separate part of the IT department completely, began the development of retailers’ e-commerce strategies. “A few years ago retailers didn’t put a great deal of value to what technology they had in-store so long as they had the connection to stores, but now it’s a more information intensive environment and it is now the timing of that information that allows them to be more of a proactive force in terms of their sales structure,” says Gary Newbold, regional director for UK and Ireland at network provider and Cisco rival, Extreme Networks. He cites the example of customer Kingfisher, owner of B&Q and Screwfix. “We have seen a change with them in terms of their ability to deliver information to the customer. That has been increasingly important for them.”

In today’s world two things have happened which are forcing companies to look long and hard at their IT and networking infrastructures and the use that they make of them. Due to the rapid growth of many retailers and the importance of the IT backbone to the business, they are focused more on managing that infrastructure and ensuring it supports the business, rather than how to exercise that backbone to perform at its best both in terms of efficiency and cost effectiveness. Lack of opportunity or lack of necessity to integrate systems to improve efficiency and return on investment means that many retailers have dedicated significant resources to managing rather than exploiting systems to create value within the business. But as IT budgets were slashed during the recession, they have been forced to look at how they can make their networks and IT infrastructure as agile as possible to remain competitive, whilst the move to true multi-channel retailing is also requiring that the two sides of the business are no longer operated in IT and business solos but are truly integrated parts of the business.

“Retailers have had a tradition of buying a point solution to solve a particular problem. They have then realised that what they need to do is to get these disparate systems to integrate but the cost of integrating them can be more expensive than buying a whole new system,” says Russell Dorset, sales and marketing director at Maginus. “We are finding people that would like to replace all of their systems but can’t afford it in terms of time or money and others that have a mend and make do policy. However, the clever ones are choosing a platform and have a long-term strategy to gradually replace those disparate systems. As they do that they will realise there is some redundancy of systems so their infrastructure will be much more streamlined ultimately and they will get massive operational benefits."

Matthew Bain, principal consultant at IT service provider Servo, says that many retailers have been trying to run their networks and infrastructures for as long as possible both to save money but also to ensure they future proof because when they do upgrade IT capabilities, but more particularly the needs of multi-channel, are evolving requirements so rapidly. “I’m currently working with a major department chain and we have recently won the contract to refurbish all their network infrastructure,” says Bain. “They have got some really old equipment there and it was failing. They hadn’t done it before to try to save money as they hadn’t seen the justification to replace but it’s only when it’s started to affect the reliability of the store they have had to look at it."

And with the upgrade will come new capabilities. “They are looking at wireless to have iPads on the shopfloor to bring the shop assistant closer to the customer. The fixed network is what enables the basic reliability but it’s the flexibility and mobility of wireless that is really needed,” says Bain. And he says the situation is largely typical of many retailers. “People have just tended to cut corners because it’s cheaper but having that strategic view does bring advantages." Dorset believes that retailers need to make the move to upgrade infrastructures now. “If they don’t start on the path today they will be left behind."

Martec International’s annual IT in Retail report, sponsored by BT Expedite and published in August, seems to support the view, showing that 23 per cent of retailers hoped to replace store systems as ageing store and merchandising systems struggle to keep pace with the ever changing demands of multi-channel. With budgets cut, retailers and their IT departments have to ensure they are getting the most of their infrastructures now. “Previously the IT director would receive a budget and spend it each year but not neccesarily spending it in the right places. A lot of IT budgets are spent on maintaining your systems and you are left with a very small pot of money for innovation but you can’t do that,” says Dorset. He notes that retailers are also putting pressure on their suppliers to save costs as well as taking out non value-added services and rationalising systems to realise efficiencies in their infrastructures.

Outsourcing IT

At online retailer eSpares it is the company’s rapid growth that has meant looking after its IT itself wasn’t an option and as a result the company outsourced it to Telecity Group. “We outsourced our IT and since then it has grown adhoc but that has worked in our favour because it was outsourced all those sorts of things could be done very quickly,” says eSpares systems director, Jason Duffett.

Around 18 months ago, the retailer undertook a review of its infrastructure following its rapid growth to make sure it was getting best use of its systems and is now undergoing a further infrastructure review with its outsourcing partner and other suppliers to understand where it needs to be with the next generation of its infrastructure. “PCI compliance is a big factor but it’s also about general growth. We are becoming quite a big concern and where, if we used to have half hour of downtime it was upsetting but we could deal with it, now it has a lot bigger impact because of our size so the infrastructure needs to be more flexible and resilient,” says Duffett. He says the company is looking at options such as how to spread loads across the network and redesigning applications to improve efficiency. He admits, however, that in the past the temptation may have been simply to chuck more servers at the problem.

Retailers can today be looking at how they get the most out of existing infrastructures and networking but now is also the time to look to invest for the future as eSpares is doing, suggests Bain. “The good news for retailers is that the cost of lots of this equipment has come down. It’s a good opportunity to review their infrastructure and strategic plans and get good deals."

“We are trying to stay ahead of the curve and trying to design the infrastructure that we will need in 12 months time. We have some big plans on our radar including pushing more into Europe and internationally, so my job is to make sure our infrastructure can handle that and to stay ahead to ensure we don’t make kneejerk reactions just because we hadn’t planned the infrastructure properly,” says Duffett.

DFS realised the need to upgrade its existing IT infrastructure and implemented a new network solution from Servo which allowed it to support the information flow needed for the retailer. The system provides a wealth of data including sales and stock information to more than 50 stores around the UK. The upgrade was also futureproofed to allow future deployment of Voice Over IP Services - allowing the company to take advantage of new and emerging technologies as and when required. Upgrading the infrastructure can expand into warehouses too where moves such as saturating a warehouse with wireless technology allows for future mobile initiatives such as mobile scanning and RFID, according to Servo’s Bain.

And it can also save money. Extreme Networks allows greater control of systems - such as automating power delivery to each of the network’s switches enabling information flow to be prioritised as well as managing power and therefore cutting costs. “Our ability to manage the power output to switches is key. We have the ability to shut down power output through our switches to all the devices that are also on the network - such as footfall counters and CCTV - so have the ability to dynamically manage the environment so it works from an information point but also from a cost point of view,” says Newbold.

Virtualisation and consolidation of datacentres is also a common theme as outfits such as Kingfisher look to streamline their networks and infrastructures. “It’s becoming more apparent that the underlying infrastructure is critical to the retailer’s business now,” says Paul O’Kelly, technical director for UK and Ireland at Extreme Networks.


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