Cloud-Technology-for-Retail

Eight reasons Retailers should be moving to the Cloud, and one consideration

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10 mins

We all have heard the saying, “You cannot teach an old dog, new tricks”, but for those retailers that have decided to move their IT infrastructure to the Cloud maybe the better adage is, “don’t count us out.” Cloud computing has not only dramatically changed the cost of IT infrastructure but has reduced the risk and time to innovate and support the creation of new agile solution development processes. Yes, this is an IT revolution.

I remember years ago having dinner with the CEO of a well known women’s apparel brand and he quizzed me on something new he just read about, “The Cloud”. My answer back excitedly was “you don’t need to buy servers anymore!”

Well unfortunately he is not CEO anymore, but there are a few more reasons Retailers should be looking at the Cloud. Through our experiences of implementing cloud solutions ( Oracle, AWS, Google & Azure) for several retailers we have defined eight key advantages to moving to the cloud:

  • Reduction in IT infrastructure costs
  • Support transaction growth: scalability
  • Empower Agile Development
  • Provide One source of truth
  • Secure IT ecosystem
  • Agnostic data accessible from anywhere
  • Reduction to downtime
  • Lower maintenance cost

While the above are often the benefits we see with our clients, there is an additional factor that some Retailers must consider:

  • Cloud computing is typically an operating expense vs. legacy on premise hardware which is a capital expenditure

Reduction in IT infrastructure costs

The easiest benefit on moving to the cloud to define is the cost related to acquiring hardware. Most retailers have some sort of seasonality in their business. For apparel retailers, changes in weather and Holidays provide seasonal sales volume lifts and drops. Few if any retailers see no seasonality in their traffic. Some retailers may see up to 75% of their revenue and transactions in just the 4th quarter. The problem in the past for legacy retailers is that they would need to buy enough IT hardware (servers, etc) to support peak business times, but for rest of the year that excess capacity sits idle. Going to the Cloud allows a Retailer to create a service contract with a cloud provider, to accommodate for the peaks and valleys in their capacity needs. In addition, if unexpected traffic occurs (think winter blizzard approaching), Cloud solutions can quickly scale up for un anticipated demand. In essence, Cloud Computing gives you that IT capacity “on demand”.

With all that said, in the past some Retailers have found unique ways to use excess IT capacity so it is not wasted. For example, Sears introduced the Discover Card as they realized they had countless servers that ran batch operations at night but were available in the daytime to process credit card transactions.

Supporting transaction growth/scalability

When a Retailer moves to the Cloud, because capacity is available on demand, they will never have to ask the eternal conundrum when purchasing IT hardware: “Did I buy enough capacity?.” On-demand capacity removes the need to estimate extent of life and corresponding deliberations. As Retailers continue to innovate to execute strategic objective and meet consumer expectations and needs, transaction volume should increase. Or, in a more negative scenario, if the volume of transactions decrease because of external factors (recession, natural disasters, changing trends, etc.) you will not be stuck with excess capacity that would take years to write off.

Empower Agile Development

In a cloud computing environment, Developers have access to the additional storage to create instances and environments on “the fly”. Gone are the days of provisioning additional hardware to simply experiment. So much of development is still trial and error, with the additional capacity, Developers have more liberty to be agile in their development process as the business’s trends or needs change. According to Salesforce, Information Week conducted a survey and a majority of respondents (65%) responded that this was the number one reason they moved to the Cloud.

Provide One Source of Truth: Data integrity leads to better decision making and productivity

When Retailers move major applications to the cloud they can now sit on the same Cloud Platform. Some cloud enabled applications have prebuilt interfaces that allows for better access to other applications’ data. This improves a company’s ability to analyze their business. Ideally, an integrated Cloud solution will empower the business and IT to create a data management strategy so team members have access to the same data when making decisions. Having access to the same data will improve team collaboration and productivity.

Secure IT ecosystem

One common deterrent holding folks back from moving to the Cloud, is the fear of handing over their data to another company, or even potential competitor (Amazon). However, Cloud Platforms may be some of the safest places to store your data (as opposed to a closet on the second floor). Large Cloud platforms invest heavily in securing and monitoring their systems with tools, processes and people. Individual Retailers, would have a hard time assembling this triad of protection. Essentially, hosting other business’s data is their sole reason for existence. Hence while a Retailer will be concentrating on creating the right promotion to increase in store traffic, the Cloud hosting platforms are fully dedicated to monitoring new security threats. In addition, data is typically encrypted when being shared across applications. 94% of Cloud Users feel their data is more secure in the Cloud Environment, according to a survey by RapidScale as cited by Salesforce.

Agnostic data accessible from anywhere

Legacy systems were built to be used on proprietary platforms and hardware. 20 years ago, not many folks could imagine checking out a customer for a $8k sofa on a phone, and heck tablets were not created yet. As new technologies develop, a Cloud-enabled Retailer can rest assured that their existing data will be available. This new data “openeness” leads to reimagine whole new ways to interact with the customer and truly enables Modern Commerce. Customer and Associates can easily access data anywhere, improving customer service.

Reduction in Downtime

There have been reported incidences over the last couple of years of major cloud platforms being down. However, these platforms have been able to “quickly” recover because they have readily available additional capacity to consistently “backup” your primary data. These “backups” greatly reduce the time to bring your system back to operations. Hopefully, because the Cloud platforms have dedicated teams, they can avoid or mitigate common reasons for downtime: corrupt data, data loads not balanced, and external security risks.

Lower Maintenance Costs

A Retailer should see lower overall maintenance costs from team, hardware and process perspectives. Obviously, a Retailer will not need to administer countless servers that usually support an on-premise Retailer. This reduces organizational costs. Not having to own and fix multiple servers reduces the maintenance costs associated with your hardware. The processes to maintain and secure on premise servers will no longer be needed, hence reducing time and the costs associated with holding these responsibilities.

And one additional consideration: Capex vs. Opex

Typically, on-prem solutions will be a capital expenditure while cloud platforms are operational expenses. Many businesses prefer taking the income tax write offs associated with operational expenses, rather than depreciating an asset over many years as a capital expenditure. With technology and needs changing so quickly end of life for any capital expenditure can be unpredictable. The last thing any business wants is to be constrained in innovation because they are tied to hardware decisions made years before when needs and requirements were different. Retailers exploring moving to the Cloud should engage their financial departments to understand the accounting ramifications of making any move.

Conclusion

SkillNet has helped several Retailers with their analysis of why, when, and how a retailer would move to the Cloud. We are certified with the top Cloud partners: Oracle, Amazon, Microsoft, Google. Please feel free to engage SkillNet where ever you are on your decision-making journey. Our cloud services start from creating an initial Cloud and Data Strategy, building a Return on Investment (ROI) case, to migrating and deploying chosen platforms. The many potential benefits of Cloud computing should help you become a Modern Commerce Retailer.

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About the Author


sachin-shah

Sachin Shah

Senior Director Consulting, SkillNet Inc

Sachin Shah, has over 30 years of being a thought leader for companies and clients such as Target Stores, Vera Bradley, Dick’s Sporting Goods, Tailored Brands, Smart and Final, and Vitamin Shoppe.

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