These are turbulent times for retailers. Customers’ shopping habits and expectations have changed almost unrecognisably over the last decade, leaving the sector out of sync with exclusively online competitors who have stormed the market.
Tech-savvy customers want seamless and personalised interactions with stores and brands across the many physical and digital touchpoints and devices they now use. To adapt, retailers should look to the cloud and its many advantages, including its ability to deliver an omnichannel customer experience.
Core retailers have operated on our high streets for centuries, weathering recessions and changing fashions, but they have never been in such a state of crisis as they are today. With the news that an average of 14 stores are closing per day in the UK, it’s important that retailers adapt and evolve.
Unfortunately, many retailers are being held back by their IT infrastructure. The ageing and heavily customised legacy systems that were once the backbone of the industry are, in some cases, acting as barriers to modernisation. While sectors such as finance are investing heavily in their IT with seven per cent of revenue, retail is spending a mere two per cent, highlighting a fundamental difference in the perceived importance of IT. This difference could be costing retailers their bottom-line.
Retail should consider all options when contemplating its IT infrastructure. The decision to extend IT operations to a cloud provider is not one to be taken lightly, and has to have the backing of the C-suite who will require answers on everything from how well applications will perform in the cloud to the overall cost-effectiveness of migration.
So what are the questions that retailers should be asking themselves when considering a migration to the cloud?
Question 1: ‘Are we going to save money?’
While 59 per cent of retailers say they are concerned that legacy technology would be cost-prohibitive to replace, according to a study by the Cloud Industry Forum (CIF) and Ensono, retailers should consider the revenue that migrating to the cloud could add to their business.
In today’s competitive retail environment, the cloud offers retailers the potential to significantly reduce costs. As businesses gain massively scalable processing capabilities and the ability to shift at least a portion of their computing costs away from capital-intensive infrastructure, the expenses of a cloud become more manageable.
Enterprises of varying shapes and sizes are experiencing the bottom-line benefits that result when users are able to outsource storage, computation, and other services through a pay-as-you-go model. Upfront costs for hardware, software and IT are all but eliminated.
An eyes-open cost-benefit system is required to review the potential costs and savings of a cloud migration. Some of the vital outgoings include:
- Data Transfer Costs – The cost of moving data to the cloud. Besides the initial movement, during busy periods for retailers, such as Christmas, there will be costs for spinning additional resources to support these bursting environments.
- Storage Costs – Cloud storage costs are often a fraction of storing the data onsite. While substantial data growth could mean hiked lifecycle costs in the long run, the private cloud lets you provision the exact quantity of storage required and charges accordingly.
- Labour Costs – Managing a large number of cloud services is similar to managing onsite physical servers, but internal management costs are significantly offset by not having to provision and replace onsite servers. These costs are built into the monthly fee for cloud computing services.
There are inherent efficiencies in the cloud model. However, cost savings will be driven by how the technology is utilised. The possibilities of the cloud are great, but it should not be seen as a quick fix way to prevent retailers from losing money on their IT infrastructure.
Question 2: ‘What applications should we start with?’
More than a fifth of retailers globally have already moved their core business applications to the cloud, according to Forrester, and the benefits of this are clear. However, not every application is a suitable candidate for the cloud. Some specific legacy applications that run on unique hardware platforms may not always be appropriate choices.
That said, the increased resources offered by public cloud computing often lead to performance improvements. Automated scaling of resource in a public cloud environment can benefit applications that spread their workload across multiple servers. Public cloud orchestration tools can be used to monitor and dynamically scale resources to match current demand without any human interaction.
It makes sense to start migrating applications that were intended, or purpose-built, for the cloud. A lift-and-shift migration strategy may be more appropriate for legacy applications, as this approach requires minimal code changes.
Just remember, there is no rush to move everything immediately to the cloud. Perform a thorough analysis of workloads, consider what you would like your IT staff to focus on, and then use that as a guide for mapping how to best leverage cloud computing.
Question 3: ‘How do we keep track of our resources?’
Unlike managing a traditional, static-server environment, the public cloud is dynamic and complex. Automatic provisioning and rapid elasticity mean that anyone in your organisation can turn resources on and off, minute by minute. There are often several different accounts started by business units across the organisation with a variety of resources provisioned.
On occasion, the same ease of deployment that makes cloud services so attractive creates organisational issues. Such risks include limited security visibility, limited availability of resources, overspend due to overprovisioning, and software compliance challenges.
To avoid these, retailers should consider governance and operating models, which may include new processes internally or specific hires to track what is running, and make the appropriate adjustments to over or underutilised services. Without this monitoring, there is a risk of creating a graveyard of long-forgotten applications that will still be billable. Teams should also be tasked with reviewing monthly invoices for accuracy and addressing any discrepancies. Many of this can be automated through the use of tools, but someone in the organisation should be accountable and have this as a focus.
Resource management is vital when migrating to and maintaining the cloud as every underused resource wastes money and defeats the cost saving benefit. Managing that complexity can be challenging, and external specialist service providers should be considered to help bridge any gaps of knowledge.
Question 4: ‘How do we secure the environment?’
Moving applications and data to the cloud does not alleviate retailers’ responsibility for ensuring their protection. Data breaches are on the rise and it is more critical than ever to ensure that customer data is protected.
With the introduction of the General Data Protection Regulations (GDPR) in May of last year, all organisations now have an extra duty to report certain types of data breaches to the relevant supervisory bodies, and could receive fines of up to £10 million or 2 per cent of global annual turnover. This exponential rise in fines and scrutiny could make moving enterprise data and applications outside the firewall seem daunting.
The leading public clouds provide robust physical security and protect everything from the virtualisation layer down. With an army of full-time engineers to help support you and your data, you will still need to deploy the built-in security capabilities that they offer. You should be aiming for a consistent solution that ensures security is the same across all applications, so make sure their capabilities are in sync with your current security policy.
No cloud provider will fully protect your data, as that is ultimately your responsibility as the owner of the information. However, their support can help the migration process and add another level to your pre-existing security.
Question 5: ‘How do we ensure oversight and governance?’
By introducing an application to the cloud, you introduce new risks that require new models of governance. Without proper governance, these risks include everything from cloud sprawl and shadow IT to unauthorised cloud activities that expose organisational risks. It is imperative that, in the rush to migrate applications to the cloud, organisations do not bypass IT and leave sensitive information vulnerable.
Good oversight, governance strategy and operating model will address the challenges posed by this trend through providing standards-based, policy-driven cloud services in a cost-effective manner. Given the dynamic nature of the cloud, traditional governance processes may be too slow. Governance in the cloud typically requires automation of some kind, and so it is likely that pre-existing strategies will need to be updated.
With the answers in hand, the final hurdle to public cloud adoption may simply be to ask ‘what is going to provide the confidence your organisation needs to make the move to the cloud?’ Without proper reassurance and support, the C-suite is unlikely to approve the overhaul of a pre-existing IT infrastructure.
Now is the time for retailers to evolve, and take advantage of the technologies available to keep up with their online competitors. Cloud computing is not only about moving conventional IT systems to cloud-based computing, but also about taking advantage of the wide range of ready-to-use services and resources without the hassle of having to procure and deploy traditional infrastructure. In some instances, it will require retails to think differently about IT, what it can do, how it will be managed, how it interfaces into the business, how it can enable the business and in some instances what will they now stop doing because of cloud.
Cloud offers the personalised customer experience and services, the improved supply chain visibility, and the insights into business and merchandising decisions that all retailers crave.
While it may not instantly save retailers money, it gives them the flexibility and agility to increase their business growth in the long term and scale costs more in line with revenues.
Melanie Humphries, European VP of Client Engagement, Ensono
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