By Nikki Baird, Managing Partner
November 17, 2009
At Retalix's Synergy conference last week in Dallas, the customer panel, moderated by Michael Sansolo, offered some fantastic insights that I just had to share. The customers on the panel included representatives from Love's Travel Stops, Big Y Foods, and Roche.
The Economy
None of the panelists has yet to see a softening in the economic downturn. In fact, Love's almost serves as an early indicator (if by early, you mean the two-weeks-after-the-month reporting of comparable store sales) - the Love's trucking customer doesn't have a lot of product to ship if there aren't a lot of consumers buying product. All the panelists confirmed that average transaction value, average units, and even the mix of basket (heavy lean toward private label) indicate that consumers still do not feel confident to return to any previous level of spending, and none of the panelists look for a return in the first half of 2010.
Priorities
With that kind of environment hanging over their heads, the panelists shared where they are continuing to invest today, and where they are looking to invest in the near future. For some, it is a case of investing to prepare for the return of consumer spending - in one case, a panelist reported that they have nearly completed a full refresh of their entire systems portfolio. For others, it's about focusing on the customer experience, either through more targeted loyalty and promotional offers, or through a consistent, quality customer experience in the store. Business Intelligence - "mining our enormous data resources" in the words of one panelist - is also a priority. Actually, BI and analytics emerged as a theme over and over at the conference.
Getting Tech Implemented
However, the most direct (and sage) advice that the panelists offered was around IT and the business. While they all agreed that their business counterparts need to lead projects ("Quit calling it an 'IT' project. It's a business project that involves IT"), they also said that implementations fall down the most when the business process change is the least. The best technology in the world, flawlessly implemented, makes no difference if it's business as usual. In between the lines, I heard an echo of what we've heard in our own surveys: IT understands the business well enough - not to run it, but at least well enough to know what they don't know. They have learned to better leverage the expertise of their business counterparts when looking at business and technology change. But the business side? Another story altogether. It now seems to be the business side that is holding up technology effectiveness, because business leaders don't understand well enough how technology enables the processes they manage. It's no longer about IT's alignment with the business, it's about the business's alignment with IT.
They also had some advice for technology vendors, and of everything they said, this bears repeating the most. After two months of a user group or tech conference once a week or so for me, what they said is a theme I've heard no matter who the vendor or what the conference - or who the customer for that matter. Three points:
Listen to me: On more than one occasion, I've heard from customers that vendors need to do more to listen to their customers. I don't think any vendors that I've encountered lately do a bad job of this, but there are two separate trends that I just recently put together that I think explains this plaintive cry.
One, RSR heard from one vendor that their own sophistication in SOA and service buses has exceeded their clients - and they're not an integration provider, so this is surprising. The vendor's explanation? That retail IT teams are more comfortable with traditional integration points, and they don't understand SOA technologies well enough to feel comfortable adding risk (in their minds) to an implementation project by tackling a new technology while they're at it. So retailers aren't leveraging SOA architectures as much as they could or should.
Two, vendors who are going down a SOA path are starting to clean up their own architectures, and aren't letting their customers get away with bad behavior, like hard-wiring customizations that lock them out of the benefits that SOA provides. So they're starting to push back on modifications to base code and starting to insist more and more that customers implement 'vanilla' implementations.
Bring that all together, and you've got customers who complain about getting forced into vanilla configurations, but without the skills to get what they want in custom work. Naturally, they're a little frustrated. The lesson to be learned? For vendors, it's not enough to hear what your customers are saying they want. It's far more important to understand why they are saying it. Is this a real business process gap? Or is this more a gap in understanding how to take full advantage of the technology they've purchased? For retailers, it's back to the section above titled "Getting Tech Implemented": business is going to have to fund a retailer's voyage into SOA at some point. Believe me, sooner is better than later. See below under "TCO."
Quality product: Software is complex and has become more so. So testing is only getting harder and more complex, not easier. It doesn't matter how clean your architecture or how thorough your test plan - if you are a vendor, you need more. I heard this time and again. Unlike retailers, who seem to manage to avoid getting caught up in product quality issues for the products that they sell, vendors - especially when their brand is on the label - get knocked extra hard when quality is an issue for their customers. It's not about time or cost, necessarily. Even the vendors that are ultra-responsive have customers irritated by being unwilling guinea pigs or unknowing testers.
Here's my analogy. Bear with me. When my first child was born, my husband and I suffered from the irrationality that grips all new parents at some point, and we bought the Mercedes SUV. We probably would've bought a Hummer if they were more available and we could afford it. As it was, we could barely afford the Mercedes, but it was the "safest" big tank we could get our hands on. And their service department was wonderful. However, it didn't make up for the fact that I spent far too much time IN their service department, rather than enjoying my car. It doesn't matter how high end you are, and it doesn't matter how well you serve customers, if there shouldn't be anything wrong with your product in the first place. Vendors, if you want to invest in an area to improve customer satisfaction, this would be it.
TCO (Total Cost of Ownership): Related to the discussion of SOA and vanilla implementations, retailers are nearly completely fed up with an unintegrated or "loosely" integrated suite from their vendor partners. It's not just about any kinds of expectations that these things should work together, it's about total cost of ownership. It appears that it's finally sinking in for retailers that not only is extensive integration work expensive, it makes future integration work even more expensive and time consuming. Having reached the point where their infrastructures are nearly vapor-locked by past integration sins (whether their own or their vendors'), IT executives certainly appear to be beating the TCO drum quite heavily.
To get out of this corner, retailers are going to have to fund some SOA projects - or at a minimum, 'architecture' projects of any stripe - in order to get ahead of their internal integration burden. The sooner a retailer can accomplish this, the sooner they can break through the "I don't know it" barrier that SOA currently seems to entail, and start leveraging it more heavily across all of their projects. Writing point to point integrations today - no matter how cheap or expedient - is a big mistake.
So, until the spring conference season begins, business leaders in retail, listen up - if you fund some architecture projects now, you'll find future projects easier, faster, and cheaper. Technology solution providers, if you want to avoid version-lock and all of the long-term risks that entails, it's time to get your "suites" working seamlessly together. Sooner or later, retailers will find a way to put that internal integration burden right back into their vendors' laps, hopefully for good.
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