Guest Column: For a competitive edge, embrace the cloud

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Guest Column: For a competitive edge, embrace the cloud

By Jonathan Woodforth - 09/17/2019
With the 2019 holiday season coming up fast, more retailers are investing in cloud technology to gain an advantage over their rivals.

During this strategically critical sales period, retailers are turning to cloud solutions to boost their efficiency and agility, scale faster, and serve shoppers better. We’ll see why the cloud is evolving into a business necessity for retailers to improve productivity and the customer experience, especially to stay competitive during the Black Friday and Cyber Monday sales season.

Soaring costs convince retailers to rethink how they do business
To see why retailers are looking ahead to the cloud, let’s look back at the factors that have precipitated this change. Traditionally, retailers have kept their IT power nearby. They have stored and managed all of their processing power and data (from retail transactions, orders and financial information) by themselves – and the costs have piled up.

Typically, managing their own data meant retailers would incur a seven-figure capital expenditure on computer equipment and premises to host information, and ensure their retail processes worked across large, complex systems. From day one of installation, retailers incurred the massive costs of depreciation, plus employing an IT team to monitor and maintain the equipment.

Although having these large powerful assets on premises under their direct control may have reassured retailers, the results were expensive and unwieldy. If the retail company grew quickly, it would need to invest heavily in new infrastructure.

Now, to cut costs and complexity, more retailers are turning to the cloud. Cloud computing involves the delivery of computing services—servers, storage, databases, networking, software, analytics, and intelligence to gain faster innovation, flexible resources, and economies of scale.

As McKinsey & Company states, “To stay competitive, retailers face tremendous pressure to deliver new business capabilities faster,” which explains why more retailers are taking cloud computing seriously and building it into their business strategy.

The cloud influences and improves retail business models
As the retail industry has expanded with new entrants, retail business models have evolved to stay relevant and competitive. Retailers have flocked to both private clouds and public clouds like those run by Google, Microsoft and IBM.

Rather than employing a capital expenditure (CapEx) model, retailers have transitioned to an operational expenditure (OpEx) model to avoid substantial CapEx costs or employment costs. Now more retailers are partnering with technology experts to host and manage their complex retail platforms, which gives retailers greater flexibility and cost savings because they pay only for the space and computer power they use.

The cloud strengthens retailers’ holiday sales strategies
Until recently, businesses had to scale their data centers to cope with maximum levels of customer volume and payments during a specific hour each year – especially on Black Friday or Christmas Eve.

Obviously, retail transaction volumes during those major annual sales events far exceed sales on a cold weekday in January. Before the cloud, retailers had to ‘size the church for Easter,’ meaning they would build or buy the maximum space and processing power they needed. While this approach helped during the holiday sales crunch, retailers kept paying for all of those capabilities all year round.

With public cloud today, retailers can embrace a more beneficial model that scales elastically – by the second – so they only pay for the space and digital firepower they actually use. When sales slow, their bills decline.

Data sovereignty is another way retailers benefit. As regulations and consumer expectations continuously change, public cloud gives retailers the agility to ensure their data is held in the right place to comply with local laws.

Accelerating retail processes with the cloud
Retailers are excited about the cloud because deployment is easy. For instance, one retailer’s five-week deployment phase now takes a mere five minutes and the click of one button thanks to the power of the cloud.

The cloud also makes it simple and fast for retailers to test integrating a new customer relationship management (CRM) capability or e-commerce system – without needing exorbitant equipment expenditures.

This speed of integration and ease of experimentation are vital as retailers move to modern, microservices-based commerce platforms in the near future. As innovations come quicker, the “fail-fast” proof of concept is now a reality to help retailers stay agile and competitive.

Since the holiday season is critical for retail success, more retailers are adopting cloud technology for swift deployment, lower costs and greater efficiencies to improve the customer experience in time to delight shoppers on Black Friday and Cyber Monday.

Jonathan Woodforth is Global CTO, at PCMS Group