Is JCPenney Dumping The Datacenter?

JCPenney's IT layoffs announced on Tuesday (July 10) aren't just the next shoe dropping after the 1,100-store chain's COO publicly shredded its IT operations in May. The job cuts also signal that the retailer is preparing to dump a huge part of its current IT operations—especially anything with a whiff of legacy big iron to it—without necessarily having anything ready to replace it with.

The purge also sets the stage for the chain's "new technology platform" that CEO Ron Johnson said will be announced in August. From all indications, the focus will be on mobile and in-store, not the datacenter.

The layoff announcement was skimpy on details, and the company refused to elaborate on how many of the 350 jobs cut were in IT or to identify what functional areas will take the hit. (Finance, product development and sourcing also shared in the layoffs.) But sources inside JCPenney said that about 100 IT staff were laid off this week, which is on top of about 130 who were sent packing in April. All told, this amounts to at least 25 percent of JCPenney's IT staff.

In a statement, Johnson said, "We have simplified processes, removed unnecessary work and reduced layers to help us make better and faster decisions."

That would sound like the usual downsizing boilerplate except for comments that COO Michael Kramer made at the May earnings presentation, when he described JCPenney's IT as "a mess." He also said its portfolio of 492 major applications should be cut to 100, with a minimum of customization to cut maintenance costs.

That gives the CEO's statement a new implication: JCPenney is ripping out everything in the headquarters datacenter that's not essential to keeping the stores open and replacing the remainder with off-the-shelf systems. It will be up to store managers and associates to figure out and conform to the new "simplified processes" that the off-the-shelf systems dictate.

That's not a bad thing, in principle. In fact, it's what JCPenney should have been doing all along—streamlining processes, retiring legacy systems and rationalizing the application portfolio. But that's not what the chain's previous management was willing to spend money on, so it didn't happen a bit at a time. Now IT will have to make a major transition fast, and with fewer warm bodies to smooth the process.

But it also means there's no chance that IT at the datacenter level will give any significant help to the turnaround effort at JCPenney. IT will be too busy with rip-and-replace-or-don't projects to provide any competitive advantage. Once that work is done, the remaining non-customized applications will offer pretty much what any competitor that buys the same products will be able to do.

Where will the focus shift? IT in the stores, on the Web and mobile. Even after the layoffs, the chain still has job postings for an E-Commerce project manager and a Java developer—a good indication of where its efforts will be focused.

All that makes sense—in theory. In practice, it's useful to compare JCPenney with another big, struggling retailer with an oversupply of legacy systems in its datacenter: Sears. Stuck with legacy systems that took far too long to run pricing models, Sears CIO Keith Sherwell invested in "Big Data" analytics that could crank through huge amounts of transaction data in a fraction of the time. (In April, Sears commercialized that effort in the form of its MetaScale subsidiary—no other retailers were invited to be customers.)

Now that's a commitment to the value of the datacenter, even as legacy systems are rolled out the door. (In fairness, there's no indication that the shiny new Big Data technology has saved Sears—it seems to be struggling as much as ever.)

Should JCPenney be making Sears-like forays into new datacenter technology? Maybe it should. But that's looking increasingly unlikely. CEO Ron Johnson is calling the shots, and he believes in the store experience. He's also clearly an Apple true-believer, which suggests his view of technology is from the small-device end of the telescope. COO Michael Kramer is a sometime CFO who's focused on the numbers, and datacenters look awfully expensive.

That leaves CTO Kristen Blum, who now fills the CIO role. Her resume (CIO at Abercrombie & Fitch, supply-chain and retail-store IT director at Apple) makes it clear she understands there's a lot that the datacenter can do for a big retailer when it comes to innovation.

Whether she'll have the budgets and resources to do anything useful at JCPenney remains to be seen.