Get Ready For the Big IT Spend

Retailers are poised to begin investing in IT at an accelerated rate, as systems and security take precedence over the physical store.

All the big priorities for retailers — mobile, omnichannel and security — require an enterprise-wide investment in IT. Panel discussions and private conversations with executives at the National Retail Federation's BIG Show revealed a very upbeat, almost giddy, forecast for IT spending.

"We see spending in 2014 at the top of the agenda," said Oracle President Mark Hurd, during a round table discussion. Fifty-eight percent of IT budgets this year will increase, with 3.4 percent of revenue spent on IT, according to Oracle.

It's a change in allocation of capital from new store and distribution center openings taking a backseat to IT investment.

"We're seeing retailers thinking more horizontally," said Paul Steinberg, senior vice president, CTO, Motorola Solutions. "It's one of the more profound shifts I've seen — at the show and in the psyche." Retail CEOs are realizing that the bigger the reach IT has throughout their organization, the greater chance of success in reaping the benefits of that technology investment.
CIO's are more in sync with CEOs, as implementing and executing omnichannel strategies fall to IT. "In many companies, IT is coming out of the back room and has a more strategic role," said Colin Haig, SAP's program principal, industry value engineering. "Five years ago, (the mantra) was to take the cost out of everything and IT was a necessary evil. Now, it's how can we use that and allocate resources to help us grow?"
Of course, some of the more innovative retailers invested in IT in 2008 and 2009, when much of the industry was in a holding pattern. "You see those retailers powering out of the recession," said Haig. "The more innovative companies are spending, getting rid of legacy systems and upgrading."

If retailers are transforming into omnichannel players, and it seems as though they must to compete, IT must be a big priority. Said Bob Moncrieff, principal, PricewaterhouseCoopers, the big barriers to retail transformation are imagination and antiquated technology.

Get ready for the big IT spend.

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