The retail sector expects to increase its spending on IT, much of the growth being driven by the purchase of off-the-shelf applications instead of home-grown ones.
It’s part of a worldwide trend. A Gartner survey of US retailers showed 55% planned to increase their IT budgets this year, 33% expected a similar spend to last year and 13% anticipated a decrease.
Progressive Enterprises IT manager Alan Hesketh says “the retail industry is going through a change from grow-your-own to packaged solutions and on that basis, you’ll see more external expenditure [on IT] in the future”.
Hesketh says the IT budget of Progressive, whose supermarket chains include Foodtown and Woolworths, will see “no real change” this year, but says the overall trend in retail is to packaged software.
The Warehouse CIO Owen McCall also plans to reduce the number of custom-built systems at the red sheds, as part of a plan over the next three to five years.
“Our mix will change as we go more towards packaged than custom-built.”
The Warehouse’s biggest custom-built system is Tui, the Unisys mainframe-based retail inventory management system. Others include “a number built around our Teradata data warehouse”.
Some of the company’s off-the-shelf packages are “fairly heavily customised”, such as Tolas, the warehouse management system and the point of sale system, provided by local vendor Input Computing.
McCall says The Warehouse’s IT spend will be flat in the immediate term, but a couple of “significant projects” relating to point of sale are planned early next year.
Gartner’s findings are backed up by US firms. Ajit Patel, CIO at US clothing retailer Chico FAS, says “I’m not a software house”, and that he would choose a packaged product over a custom-built one in most circumstances.
The CIO of a US leather retailer concurred, saying “strive for vanilla”. He says the cost of maintaining custom-built software and integrating it with other systems is too high.
Part of the increase in US budgets is probably due to planned spending on RFIDs, suggests Hesketh.
“RFIDs are beginning to be used within the retail business and there’s an additional cost there.”
Progressive is trialling RFIDs and 9% of the 122 respondents to the Gartner study said they had invested in RFID technology, with a further 26% planning to do so in the next two years.
Hesketh says packaged apps are now at a stage where they can be rolled out to retailers.
“The maturity of retail solutions is good enough for them to be used, rather than writing home-grown ones.”
Many off-the-shelf packages are “optimised for the volume of data and computing power [today] is enough to run optimised packaged solutions and our direction going forward is towards off-the-shelf. We’re in the process of identifying a replacement for our home-grown merchandising system.”
The Warehouse’s McCall is “a little bit” surprised 55% of the Gartner respondents signalled an increased spend, “because retail sales are starting to tighten up generally” in Western economies.
The Warehouse is “starting to look at infrastructure capability” and an RFID trial is planned for early next year. But in the meantime, it will “be watching the big guys spend money on it and seeing where it gets them”.
With Wal-Mart, Tesco and other major retailers getting into RFIDs, “there’s nothing surer than to say ‘RFIDs are coming’ — there are too many players investing in it. It’s a matter of working out how we can make [RFID use] pay.”