The cloud move, like last fall's quadrupling of the number of Best Buy IT project managers, is an effort to control IT costs without rolling back IT initiatives—absolutely critical in the face of Dunn's inability to stem the chain's loss of sales to Amazon. Amazon, ironically, is among those that Best Buy is writing checks to for its cloud efforts.
Forrester E-Commerce Analyst Sucharita Mulpuru said the outages were to accommodate a "major cloud migration." Mulpuru also said that Best Buy officials told her the chain was "hitting a wall" in regards to "their ability to process orders."
(Related story: Best Buy's Last Hope: A Radical Reversal On Customer Service And Credibility)
Unlike most chains, Best Buy has developed a fairly advanced IT governance system for cloud projects, which it created after Best Buy software developers had been using the cloud on their own for several years. With governance in place and years of cloud experience under IT's belt, shifting the E-Commerce site out of the datacenter is still a major effort, but it's no longer a Herculean task.
In December 2011, Thomas Kelly, Best Buy’s enterprise architect for cloud services, described the chain's plans for cloud deployment and its plans to use Amazon's cloud offerings.
"We laid down the requirements for a core repository, an ETL2 dataview, mandates for atomic service development. We brought in a really powerhouse gateway with L7. We selectively take advantage of pretty much all of the Amazon data services, for example," Kelly said at the time. "We run an L2-backed EMS bus to our back-end datacenter, so our cloud is actually now becoming a hybrid cloud where we're directly connected for localization to our back-end bus."
Kelly also laid out the case for moving Bestbuy.com to the cloud. "We are legitimately in a situation where we can be doing as much as 10 to 15 times the amount of volume on our data systems in November than we are in the middle of the summertime," he said. "We were always building out to Black Friday. However, Black Friday is one day a year, and you have to pay for software and hardware and everything else all year long."
Despite the irony of using an Amazon service to more effectively fight Amazon, the move makes a lot of sense.Despite the irony of using an Amazon service to more effectively fight Amazon, the move makes a lot of sense. First, only a handful of cloud service providers can scale up to support a BestBuy.com. And second, security issues are an Amazon advantage. Last year, for example, some QSAs were telling merchants that they would not sign off on the cloud for payments unless it was not only using Amazon but using a specific high-end Amazon cloud offering.
It's not clear exactly how much day-to-day cost the cloud operation will drive out of the E-Commerce site. But Best Buy, like all big chains, needs a lot more capacity a few times a year, particularly during the holiday selling season. When capacity runs short, problems are a lot more likely.
This past holiday season, those problems were catastrophic for Best Buy. First, there was a major foul-up in a promotion for loyalty customers the week before Black Friday. Then there was a high-profile failure in which the Web site took and confirmed orders with guaranteed Christmas delivery, then had to cancel some of those orders as late as a few days before Christmas.
Best Buy had to endure a huge wave of terrible pre-Christmas publicity, and that can't have helped to pull in either last-minute shoppers or post-Christmas spenders. If the cloud's capacity flexibility can keep Best Buy out of messes like that, it could provide a major boost where the retailer really needs it.
Bringing control of Best Buy's IT projects back in-house has the same potential to cut costs by reducing risk. The perpetual problem with outsourcing (and Best Buy outsources a lot of projects) is that the outsourcer's first loyalty is to its own profits. Hiring hundreds of project managers to oversee those projects—managers whose loyalty is to Best Buy—should keep projects out of some blind alleys and align them much better with what the retailer needs.
Of course, the fate of these efforts is now uncertain. Best Buy CIO Jody Davids was brought in by Dunne in 2010, and it's clear Dunne supported her in IT investments that weren't guaranteed to pay off in the short term. A new CEO might decide that chopping 300 recent, expensive hires is a fast way to cut costs and reduce headcount, both things Wall Street likes.
And rolling back the cloud effort, even if it's well underway, might look attractive, too. After all, those racks of servers in Best Buy's datacenters are already paid for. The cloud will be an ongoing cost. And having to pay others, including rival Amazon, which must be galling, doesn't help.