Inside Outdoor Spring 2015

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Wave of Innovation
Historically, retailers have spent 70 to 85 percent of their technology budgets on
the upkeep and maintenance of IT systems, according to retail technology research
and advisory firm IHL Group. That means only about 15 to 30 percent of IT depart-
ments’ time and money could be used for driving new sales and innovation, while the
vast majorities have been spent just “keeping the lights on.”
No so much anymore, say retail chief information officers.
As might be expected, surveys of retail CIOs show an intense concern over data
security, “but retail CIOs also expressed a strong — and equally compelling — need
to work closely with their line-of-business colleagues to create more business value
and foster innovation,” explains George Lawrie, vice president and principal analyst
at Forrester Research. Indeed, 59 percent of CIOs surveyed by Forrester said the
proportion of budget used for value-generating innovation was a top five concern, up
from 40 percent who said the same in 2013.
This desire to transition emphasis from maintenance to innovation is partly due
to the recent emergence of “shadow IT” or “rogue” technology investments, whereby
line-of-business managers outside of the IT department, such as marketing and
operations, invest in everything from location technologies and home-grown mobile
apps to software-as-a-service business intelligence solutions without the guidance or
even awareness of IT departments. In 2015, for example, effective IT governance was
named a top five concern by 78 percent of retail CIOs, up from a mere 24 percent in
2014 and just 20 percent in 2013, according to Forrester Research.
Of course, behind the rise in rogue IT spending, and the ultimate reason for the
focus on innovation, is the need to deliver a true omni-channel experience. In other
words, CIOs, along with their C-level counterparts, understand they must move past
purely product-centric and transaction-based technology strategies to ones that put
customer shopping behaviors at the center of the planning process.
“CIOs will link arms with CMOs and other business peers to create a comprehen-
sive business technology innovation agenda that focuses on solutions that help win,
serve and retain customers,” Lawrie predicts. “The agenda will support line-of-busi-
ness, marketing and in-store innovation, as well as innovation in the data center.”
The upshot is a rapid, and sometimes disruptive, evolution in retail technol-
ogy and the capabilities retailers offer their customers. This is especially true
when considering a 2014 study from the National Retail Federation and Arizona
University, which found that 70 percent of retailers plan to refresh aging POS
software during the next three years to satisfy the demands of increasingly con-
nected consumers. You can be sure that when making those POS investments, as
much consideration will be placed on facilitating omni-channel innovation as it
will be on facilitating transactions.
Ultimately, however, this all can be seen as encouraging news for smaller and
specialty retailers, as innovative IT will center on improving customer service and the
customer experience, both of which typically are competitive advantages for smaller
retailers when competing with larger, big-box competitors.
Those that fail to make the transition, meanwhile, simply will be left behind.
–MV
Inside Outdoor | Spring 2015 6