A victim mentality seems to be sweeping through the retail industry. Every day, good retail organizations make horrible decisions (or, in some cases, do not make a decision) that even they know will have a long-term negative impact on their business. "Tech Titans" don't exist in retail. There are simply those who willingly embrace IT as a core part of the their business and their overall value proposition and there are those who live with outdated sensibilities about IT's role.
If your organization is spending too much time and money maintaining legacy systems, it's because you either made poor decisions in favor of short-term gains or lacked long-term vision. If your IT leader (I won't even assume you have a CIO) is trapped working for your CFO or your IT budget is based on a percentage of your sales, you deserve the spaghetti diagram that is your IT infrastructure. Showrooming is a self-inflicted wound. These problems aren't new. You have been watching them build like a slow-moving train for at least a decade. Changing CIOs every three years hasn't really worked either, has it?
When I first joined the retail industry about 10 years ago, I came from the high-tech world. I used to joke with my techy friends that you could be a superstar in retail technology as long as you were up on technologies from 10 years ago. How retail was so far behind in its "best practices" that you had to "unlearn" things to keep from going crazy with frustration. How a franchise organization was basically a collection of small businesses whose owners would rather pay a mobster for protection than invest in technology for their stores.
And while that description always got a laugh, it really wasn't funny. Not much has changed in the last 10 years. Every day, retailers make decisions that save them time and money in the short term but just add to their technical debt. Every day, business units sign contracts with third-party providers in an effort to remove the roadblocks set up by their IT department's bureaucracy and project prioritization process. This forms a new type of technical debt that I call "Cockroach IT." Somebody turns on the lights, and everyone is left wondering where all this IT came from.
Recently, there was a lively debate over at RetailWire with several retail industry experts about my thoughts on IT budgets. It seems like most of those involved in the debate disagreed with my prescription on how traditional retailers need to behave to compete with the likes of Amazon and others. I am truly surprised by anyone who believes that small adjustments to existing systems are really the answer. It is time to adapt or die.
Anyone who has spent even a week working in retail technology will tell you that the entire system is more than just broken in the sense that all "IT is broken." One of the biggest problems is that technology expertise is quickly becoming a four-horse game. For the longest time, it made sense to have traditional IT (like corporate infrastructure and finance/accounting support) separated from retail technology (like POS and inventory management). But as E-Commerce became a larger part of a traditional retailer's world, many organizations carved out IT staff specifically to support this function. Today, we have the emergence of a fourth concentration of required skills: marketing technology.Several industry analysts have stated that they believe the CMO will have a larger technology budget than the CIO in the next seven years. I personally think that is a false argument. First, I don't believe you can say that the CIO has a budget if it is a set percentage of sales ever year or if the CIO reports to the CFO. In this case, I would say that the CFO has a technology budget, not the CIO. Second, it implies that the two organizations will remain separate silos, which is not a practical reality.
With the greater technology budget will come additional technology resources. The CMOs will not just be given a check to purchase technology from anyone on the street. Some rules will still need to be followed when it comes to guidance about corporate security, data portability, service levels and pricing/costs. These are all things CMOs and their teams are not equipped to deal with today. This migration of budget from "Traditional IT" to "Marketing IT" will bring with it an influx of technologists working for the marketing department.
These resources will be more like Business Analysts than Network Engineers. These folks will need to be expert at vendor management (dealing with all the cloud providers that the marketing team is going to want to use), service-level management (making sure all those startups realize they have to build reliable, highly available infrastructure that can scale to meet the retailer's needs), data architecture (so they can figure out who will both share data with these new providers and pull the new data back into the corporate infrastructure) and contract negotiations (almost everything sold with the new breed of cloud-based providers is "per-store" or "per-user" based, which can lead to ridiculous costs when scaling to meet retailer needs compared to traditional on-premises solutions). Even those worried about information security have to admit that dealing with PCI compliance is a heck of a lot different than dealing with SOX compliance.
I personally believe that we are rapidly approaching a time when IT will fracture into the distinct customers the department supports. Although I do believe that building a strong relationship between the CMO and the CIO is important, the idea that a cross-functional steering committee gets to determine if an operations project or a marketing project is the one to get the limited company resources is ridiculous no matter how you look at it. I imagine a world where satellite IT organizations are created within Operations (for retail technology) and Marketing. This approach would leave traditional IT within the finance and accounting organization, which is as good of a place as any considering the department's new, reduced function.
The core technology that needs to be put in place for this vision of the organization to work is an enterprise service bus (ESB). Companies need to define and design an information architecture (IA) that supports a distributed IT environment. Once a good IA is put in place, it will enable organizations to manage their data portability and sharability (the number-one challenge retail IT organizations will face in the next decade).
Not ready to blow up your IT organization? Can these distinct groups work if they roll up to the CIO, rather than for each business unit? I think it would be possible if two things are in place: First, the CIO cannot report to the CFO and must be an equal member of the C-suite. Second, each department within the CIO's organization must be given the ability to run as separate P&Ls with a "zero-based budget". For this to work, I think each business unit needs to have dedicated resources to meet its needs.
What do you think? If you disagree (or even, heaven forbid, agree), please comment below or send me a private message. Or check out the Twitter discussion on @todd_michaud.