Even in those businesses doing well, IT departments are being asked to do more with less. This year’s Retail IT Summit gave retailers the chance to get together and discuss how they are approaching what they euphemistically describe as a challenge. Joanna Perry reports.
Pulling in the same direction
Aurora Fashions’ Mike Shearwood, who last week was promoted to chief executive, and group IT director John Bovill both took to the stage during the summit to talk about the growing importance of technology in their business.
Shearwood recalled his early days of retailing when “the IT guys were constantly getting beaten up by retailers”, because they couldn’t deliver the flexibility that the businesses wanted.
But the pervasive nature of technology means IT teams have come to interact with every bit of the business, and the development of the internet has thrust them further into the spotlight.
Shearwood said the internet has changed the world of retail completely, and the web means IT departments are also directly serving end customers. He explained of the web: “A lot of retailers buried their heads in the sand. The customer could now interact with retail technology – and retailers didn’t really like it. Retail IT is now being dictated by customers, not the retailer.”
And Shearwood said that Aurora’s IT department at least, has rise to the challenge. For the first time, technology has caught up and even overtaken business needs, he said. “IT is bringing opportunities to the table.”
John Bovill expanded on this, talking about how IT has been aligned with the rest of the business. This means that any project involving technology must improve the customer experience, create effective and robust supply chain systems and deliver shared services cost efficiency across Aurora’s brands.
Its brands are determined to deliver multichannel services to their customers. One small step has been the release of an iPhone application – a very customer-facing development. However, he warned that Aurora must give its customers the option to opt-in or opt-out of a relationship, or the retailer will ultimately destroy its brands.
IT and ecommerce in sync
On the day Blacks Leisure’s group IT director and ecommerce director spoke, the retailer was announcing store closures. But their positive message highlighted how by working closely together they have been able to double the group’s web sales, and make the direct business profitable for the first time.
Blacks Leisure group IT director Chily Fachler and its ecommerce director Giles Delafield had worked together before at DSGi. Their partnership approach there proved a success, and they both joined Blacks last year.
Since then, by maintaining a close and mutually supportive relationship, the two have been responsible for replacing Blacks’ ecommerce platform – with an interim system at present – and have a vision for the multichannel services they could deliver in the longer term.
Delafield said that when he joined in April last year the platform was performing poorly, and web sales were down 20% on the previous year. He was surprised when Fachler suggested the tactical move of introducing an interim platform, while they worked on a longer-term plan for an integrated platform that could deliver on customers’ multichannel demands.
But the seemingly quick fix has been a success. Delafield forecast that web sales will double this year, and the direct business is making a profit for the first time.
He said that the mutual respect for the other’s skillsets, as well as a pact not to undermine each other in public, has created a culture that runs down through their respective teams.
Concentrating on what’s important
When Waitrose systems director Kevin Berry arrived to run the grocer’s IT he found 150 “long, thin projects”. Creating a simple way of prioritising and tracking projects has reduced this to 50, and the business is benefiting as a result.
At Waitrose, if you ask any member of the management board what projects are under way in the business, not only will they be able to tell you, they’ll be able to show you as well.
After deciding better business alignment and prioritisation was required to maximise the potential of the work that was taking place, the grocer introduced “the funnel” – a single diagram documenting all projects, the stage they are at and top-level information about them.
This allows everyone involved to quickly review when projects will be delivered, their cost and expected saving. More than 90% of the discretionary time of Berry’s staff is directed to projects in the funnel.
Individual projects have been grouped into programmes this way, and projects that have not been signed off by the board and are not in the funnel are not considered a priority. Berry said that this rule “has made people want to play the game”.
He added that controlling demand in this way gives the IT department a bit of breathing space to organise itself to effectively deliver the projects that are most crucial to the company strategy.
Where outsourcing has a place
One IT director asked whether his problems in creating a business case for outsourcing were because he is with the wrong supplier, or because he isn’t trying to outsource enough to make it cost effective to deliver that way.
Carpetright Group IT director Ian Woosey said that his business does selectively outsource, but goes through similar conversations. He said: “Offshore gives a good return, but you have to get the specifications right the first time.” He added that Carpetright will look at what it outsources in the UK because of the management overheads involved.
Several retailers that attended the outsourcing panel session agreed that they had offshored work to an outsourcer, and particularly development, not just because of the cost benefits but also the skills available.
However, Woosey warned that there can still be risk associated with the ongoing support of an application, whether you handle it in-house or have an outsourcer doing it for you. He said unless the service provider has enough people trained you will be in just the same unsupported boat if staff move on.
Co-operative Group director of food retail information services Mark Hale said that he is one retailer actually bringing jobs back from India to the UK as part of the systems changes that are taking place following Co-op’s takeover of Somerfield.
Somerfield was one of the few perceived success stories when it came to major retail IT outsourcing deals. Hale explained that the relationship with Tata Consultancy Services will continue, although not in the same form.
Another retailer that spoke positively about selective outsourcing was Carphone Warehouse managing director for IT Matt Peers. He said that this model works well for the retailer
because of the investment that it has made in vendor and partner management capability.
Carphone Warehouse’s IT department has faced two years of 10% reductions in operating costs, and seen its capital expenditure budget halved. Delivering on the business’s needs with so much less cash has led to the retailer questioning suppliers on their maintenance charges, and now questioning the number of different suppliers it has in general.
Carphone has outsourced to the point that 25% of its IT is onshore, and 75% offshore, and Peers thinks that it is possible to push this further; to get to a ratio of 12% onshore and
This might seem too extreme to many retailers, but it has allowed him to reduce costs while retaining flexibility in the way the business needed.
He concluded: “If we had continued to grow the internal IT team, the IT bill this year would have been £8m or 25% higher than it is.”