IT Outsourcing

The need for technology innovation in retail has never been greater, and the proper assets and expertise are not always available in-house.



“Retailers have a lack of insight into consumer behavior,” said Harvey Gluckman, partner at Stamford, Connecticut-based advisory services firm Information Services Group (ISG). “Digital analytics, social media and Internet of Things (IoT) solutions that have become available in the past 24 months can give retailers new understanding of their customers. But they lack the capability to develop and operate the underlying cloud and automation technology themselves.”



Information technology outsourcing (ITO), or the strategic hosting and management of technology solutions, services and personnel by a third-party provider, is a popular way for retailers to quickly increase their technological capabilities, and also lower their IT-related capital expenditure.



Chris Rossi, practice lead at Timonium, Maryland-based independent technology advisory firm Hartman Executive Advisors, discussed some of the benefits of ITO.



“Overall, IT outsourcing can be very effective at improving IT performance, accelerating the speed of technology change, and enabling the evolving needs of the business, often at an equal or lower cost than solely relying on internal resources,” he explained. “Outsourcing can also allow the retailer to deploy new business solutions much faster than using only in-house resources.”



RISK: Rossi cautioned against retailers outsourcing too much of their IT function.



“It is critical that the retailer maintain a core team that is focused on understanding the needs of the business, understanding each of the technology solutions and how they work together, and on managing the outsourced vendors,” he advised. “Completely outsourcing IT to one or more providers without this core team will likely result in significant failures in day-to-day business needs and can disrupt the retailers’ ability to successfully run the business.”



The emergence of cloud technology and hosted platforms have made outsourcing IT operations to offsite providers easier than ever. Benefits can include locating technology assets in regions with lower costs of doing business.



But “outsourcing” can also be performed with solutions and personnel located in-house. Gluckman said retailers need to consider what types of technology are best managed on- and offsite.



“Legacy systems, like HR platforms and CRM systems, can be remotely provided by a service provider as a platform,” he added. “But newer digital solutions should really be managed from an on-site location.”