JCPenney CTO Kristen Blum Gone, IT Transition Questions Remain
JCPenney CTO Kristen Blum, who was hired to execute the IT side of former CEO Ron Johnson's grand vision for the 1,100-store chain, is out. The retailer confirmed on Wednesday (June 5) that Blum is gone with the standard thank-her-and-wish-her-well statement. But what's left in her wake is a set of questions about how JCPenney (NYSE:JCP) will deal with a massive IT overhaul that it can't really afford but may not be able to reverse.
Let's be clear: None of that uncertainty was Blum's fault. The decision to rip out 500 legacy systems and replace them with Oracle (NASDAQ:ORCL) came from Johnson and former COO Michael Kramer. Kramer was the exec who ripped into the chain's culture and called its systems and IT infrastructure "a mess" last year. Blum's job was to retire systems, streamline processes and push forward into Oracle—and she reportedly managed to do that without creating nearly as many enemies as some of Johnson and Kramer's executive hires.
But 18 months after Blum was hired and 10 months after the Oracle move was officially announced, the big questions aren't about Blum. They're about Oracle. Can JCPenney afford the time (maybe another two years) and money to finish the mainframe-to-Oracle transition? And if it can't, can the chain roll it back?
The second question is easier to answer: A rollback probably isn't in the cards. Aside from the fact that many of those legacy systems really were outdated, too many people are gone and too many revamped processes really have made the old JCPenney IT shop impractical to recreate.
Besides, even though CEO Mike Ullman has been shoring up the chain's finances, there's no money to spare. The new home department in 500 stores is being unveiled this month, and the cost of building these giant showpiece departments—they'll take up one-third of the floor space in some stores—has left less than 10 percent of the chain's capital budget for the year. There's none left for anything IT doesn't absolutely need, and that includes nostalgia for the old IT shop.
What Ullman and SVP of business solutions Scott Laverty, who will be running Penney IT until Blum is replaced, have to do is freeze the technology transition to the degree it's possible—that is, spend as little money as they can—and try to figure out how to keep everything stable while squeezing every nickel.
In some ways, it's the same problem Ullman has in those 500 stores. The big, fancy home departments were already a sunk cost. Johnson's plan was to remake the rest of the stores too—remember the main street and village square and 100 shops-within-the-store?—but there's no budget for that now. Unfortunately, the new home departments look out of place in the old-style JCPenney stores. Ullman has to figure out how to keep out-of-place from looking simply weirdand driving off customers.
In a similar way, Laverty has to keep old and new IT systems talking to each other. The good news: He doesn't have to integrate a lot of new in-store technology initiatives, because there's no money for most of those either.
Ironically, this kind of tight-budget IT was not uncommon in the days before Johnson arrived at JCPenney. Budgets were fairly tight, but the chain was still looking at new technologies ranging from RFID to in-store customer tracking by mobile phone. It was just doing those investigations on the cheap, and trying new tech in skunkworks projects.
In that sense, JCPenney's old IT shop is back after all.