By Brian Kilcourse, Managing Partner
5/27/2008
Among some of my retail tech friends, a favorite debate is over what lasting contributions the various technology firms have made to industry (it helps to be having this conversation over a beer or two). The proposition is usually framed around the question, “Imagine that a solutions provider disappeared tomorrow – what would it be remembered for 50 years from now?” For example, IBM will always be remembered for giving rise to commercial computing with the development of OS/360 (wonderfully described in Frederick Brook’s book, “The Mythical Man Month”).
When the discussion turns to Microsoft, the discussion can get contentious. Many of my “CIO” acquaintance have complained about the high cost of owning Microsoft-based solutions, with operating system upgrades that force hardware replacements, backwards compatibility issues, constant patch management issues, etc. etc. None of this is new or newsworthy. What all can agree on is that Microsoft was the premier marketing machine of the late 20th Century, with its ability to commercialize personal computing and create an indomitable “earnings” engine. But back to the debate: will anyone (aside from the many millionaires that Microsoft helped to create) care 50 years from now?
Of course, the truth is complicated, as two news items pointed out last week. The first news item points to Microsoft’s tendency to take an idea and put their own spin on it, this time in the form of the Live Search “cashback” program. This is pure “marketing” aimed directly at Google. One market analyst (Jeffrey Lindsay of Sanford. C. Bernstein & Co.) noted that the move is “more of a competitive challenge than a truly disruptive new pricing model.” However, retailers will like the fact that they only pay for the promotion when a customer buys a product rather than when someone merely clicks on the ad (as with Google). A quick look at the search site shows that several well known retailers have already signed on to the program, including Home Depot, Zappos, Sears, Barnes & Noble, and Overstock.com.
The second news item about Microsoft is more interesting, because it lets us peek into the “innovation” side of the business. Last week, the company let the public into its Mountain View research lab, showing some of its most innovative projects to SF Bay Area high school students and teachers, venture capitalists & university professors, and even its competitors. Among the exhibits that these people crowded around to see was what Microsoft is doing about securing sensitive customer information typically stored in corporate databases.
We’ve been studying the issue of “customer data security” since 2005, and have persistently made the point that retailers should take extraordinary measures to protect all the customer-specific data stored in their operational databases, not just the payment information that the PCI DSS standard addresses. This is important because retailers are increasingly using the customer dimension of information to optimize assortment, price, and promotion. To that end, business intelligence solutions have moved well past product movement analyses to help retailers understand true demand.
As for securing that data so that it can be used while still ensuring the consumers’ privacy and security – that’s another issue. It’s a safe bet to believe that data thieves will continue to improve their toolkits just as fast as technology companies improve encryption and “perimeter” data security schemes. An alternative to these types of security measures might be something built into the structure of that database or the query engine technologies themselves. For example, The IBM Privacy Institute has been investigating something called the “Hippocratic database”, a concept where the “purpose specification” (i.e. the rules of use) are embedded within the data itself.
The Microsoft research facility is hard at work on the problem too, as last’s week’s demonstrations revealed. The company is working on commercializing a concept called PINQ (“Privacy Integrated Queries”). Roy Levin, director of the lab, said, "we believe (this) is a very powerful idea for building systems that guarantee privacy in a provable, mathematic sense. There are benefits to sharing data, but you may not want it revealed." Microsoft seeks to leverage its Language Integrated Query (LINQ) and Differential Privacy technologies to enable queries to sensitive data in aggregate, where the queries are checked against certain rules to insure no individuals could be identified based on the results.
There’s a nice symmetry to the notion of Microsoft helping to solve the “customer data security” issue, since the ubiquitous spreadsheet is one of the ways that sensitive data can be and often is compromised. Indeed, in our study last November on the customer data security in retail, RSR revealed that adhoc access to customer-specific data is common, especially by retailers’ Marketing/Merchandising departments, and the most frequently utilized tool by a wide margin is … (you guessed it) … the spreadsheet.
It’s unreasonable to think that retailers will stop using the tool even in the face of data security concerns. After all, according to my fellow debaters the spreadsheet is one of Microsoft’s greatest contributions to the business world. If the company that fostered mass acceptance of one technology can also guarantee the privacy and security of the data that the technology manipulates, that will be a truly big contribution… and me and my tech friends can find something new to debate about.
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