IT: Retails Detailed Agenda

Ever since the economic slowdown of 2008, companies across sectors in India have been implementing cost-rationalization exercises to prevent the erosion of their margins. While operational elements such as inventory and supply chain were key focus areas for cost management, companies largely ended up rationalizing their IT expenditure to cut costs.

India has seen speedy recovery over other global economies since and organizations have regained their momentum on the growth trajectory. Organizations are embracing new IT initiatives to support their growth strategies. CIOs echoed this sentiment during the Enterprise IT Investment Trends Survey, 2010.

Organizations are responding to this challenge of simultaneously enabling business growth and containing costs by adopting a three-tier strategy: Improve IT operational efficiency and performance, enhance information security and particularly addressing confidentiality and the availability of information, and maintain the momentum for cost-rationalization drives.

These insights, collected from CIOs across key industry sectors, form part of the Enterprise IT Investment Trends Survey, 2010, conducted by Ernst & Young in association with the CIO KLUB.

The survey has provided insights into key IT expenditure and strategy, plans, priorities, and initiatives of the CIOs to address the dual challenge of improving organizational efficiency while reducing costs.

The survey covered eighteen sectors and companies with annual revenues ranging between less than `1 bn and greater than `10 bn within the CIO KLUB community.

Around 10% of the respondents belonged to the Indian retail and consumer products industry, serving in various capacities related to the implementation and management of key IT frameworks for their organizations.

Using IT to Focus on Process and Performance Improvement

CIOs plan to focus on process and performance management improvement, with almost 52% of CIOs across companies listing it as most important.

Retail in India, undoubtedly, ranks among the most competitive business verticals. Regardless of format or distribution channel, successful retailersbe it department, speciality, discount, catalog or the Internetare constantly identifying new avenues for process and performance improvement, riding on the wave of emerging IT trends such as cloud computing.

For a retailer, utilizing IT to improve business and process performance is a competitive necessity, as it tends to reduce cycle time, streamline operational practices, increase profitability and eventually trickle down to customer satisfaction.

Implementing IT Process Frameworks

The role of implementing IT processes and frameworks such as BS 10012, BS2 5999, ITIL, ISO 27001 or COBIT is paramount to ensure that IT can be leveraged appropriately to drive performance improvement.

Companies that interacted as part of the survey continue to consider leading practices, standards and frameworks as foundations on which to benchmark internal processes.

The need to acknowledge the importance of IT process frameworks for data protection, business continuity management and IT services management has emerged among CIOs in the retail industry.

These needs reflect the changing nature of IT usage within a retail framework. Companies now need to acknowledge the power of data being captured across their retail networks. Similarly, with dependence on IT systems for day-to-day business operations growing, retailers need to acknowledge the need for business continuity planning to guard against adverse impacts of a crisis. Nearly 70% of the CIOs from retail and consumer product companies indicated that they plan to develop and implement one of the above mentioned IT frameworks, with 50% of them preferring to opt for ITIL/ISO 20000.

Spending on IT Security

Following on the trail of business continuity planning, CIOs interviewed through the survey also emphasized on the need for sustaining expenditure on IT security. Half of all CIOs interviewed planned to increase their IT security expenditure by 1% to 10% this year.

For the retail sector, safeguarding IT assets is not merely a localized activity, but rather extends to every element of a companys retail footprint, including point-of-sale (PoS) systems, store based servers, and data warehouses at the headquarters.

Spending on information security relates to programs planned to secure the organization from both internal and external threats. Some portion of this expenditure may also be attributed to regulatory compliance requirements, which has been a top priority for several organizations.

Technical Consultation for Support and Implementation

More than 60% of the CIOs surveyed across industries planned to increase their consulting expenditure for support and implementation.

A strong correlation was also observed between consulting expenditure and the implementation of customer-centric and business intelligence applications (CRM/BI/DW), information security, business continuity planning/disaster recovery planning and process/performance improvement.

Adopting New Technology Initiatives

Virtualization: Virtualization offers attractive options to business leaders to strengthen operations, enhance IT efficiency and cut costs. Potential savings from virtualizationessentially a more efficient pooling of IT resources, including networks, servers and storagecan be significant.

Advancements in technology now allow companies to improve the efficiency of their current systems, reduce their total cost of ownership of IT assets and improve business continuity and overall speed-to-market.

Virtualization technologies are being applied across multiple aspects of a retail companys IT infrastructure, including presentation, application, operating system, storage, and network. Such technology also helps retailers save costsfor a retail chain with a number of stores, adding one server or application per store is a significant investment. Therefore, virtualization is an attractive alternative.

For retailers, adapting to virtualization technologies also means saving energythe rising awareness of green energy initiatives as well as the increasing power required to operate data centers, are encouraging retailers to adopt such technology.

Of the surveyed retail companies, 67% currently employ virtualization, while 33% are either considering or evaluating the potential of using virtualization in FY10.

Cloud Computing: With the maturing of outsourcing and shared services models, business and IT leaders have initiated exploration of outsourcing computing capacity to third parties, through cloud computing.

This emerging technology is expected to benefit companies by cutting costs related to power, storage, hardware, personnel, and even real estate in a few cases.

For sectors such as retail, cloud computing, and Software-as-a-Services (SaaS) options offer the flexibility of scalability on demand, flexibility to business, reduced IT spends and access to skills. However, the aspect of information security within cloud computing would have to be addressed prior to its large scale adoption.

About 83% of CIOs in the retail sector have indicated their preference for evaluating investments in cloud computing for the year 2010.

Companies now perceive information technology as not just a cost head, but a key enabler which helps organizations achieve a competitive advantage. While the economic slowdown of 2008 may have prompted companies to reduce their IT costs, our survey findings suggest that companies have resumed making strategic investments to improve IT performance and processes..

The retail industry, although badly affected by the slowdown, is likely to spend on IT to achieve a competitive edge and operational efficiency. The industry is also adopting new technologies such as virtualization and cloud computing to gain an edge over its peers in terms of innovation.

This focus on the power of IT bodes work well for Indian retail, as the diffusion of technology is expected to help improve service delivery and achieve cost competitiveness.

Extracts from Enterprise IT investment Trends Survey 2010, conducted by Ernst & Young in association with the CIO KLUB