By Brian Kilcourse, Managing Partner
8/19/2008
This year’s NRF CIO meeting, NRFTECH (8/11-12, Broomfield, CO), was at a new venue and had a new vibe. Last year’s meeting was nearly overpowered by general angst concerning PCI compliance; the TJX breach was the talk du jour, and retailers were really angry about what many perceived as some serious “risk shifting” by VISA and its PCI partners. This year’s group of IT executives were focused on what’s ahead for their companies, and how to manage through a time of great challenges and opportunity. As one rep from an event sponsor said to me after adjournment, “this was a good meeting – people were talking about moving forward, not about fixing what’s broken.”
Or, perhaps the meeting was more in line with the Crosby, Stills, Nash, and Young lyric: “Rejoice! Rejoice! We have no choice – but to carry on!”
A Show Of Hands
NRF CIO David Hogan set an optimistic tone right off the bat by asking for a show of hands on how the current economic situation was affecting IT plans. Although no one volunteered that their spending plans had increased, the vast majority indicated that their companies planned to “stay the course.”
As RSR has consistently seen in its recent research findings, retail winners view times like these as an opportunity to pull ahead of the competition, by focusing on technology enabled process improvements that drive bottom line value. Laggards on the other hand complain about the cost of IT and want to scale back, not leap ahead.
JCP’s View: How to Win
The meeting’s opening keynote had an innovative twist: JC Penney’s CIO Tom Nealon interviewed his boss, CEO Mike Ullman about issues ranging from the economy to IT/business alignment. The company’s CEO, who must have known that merely one week later (on 8/18) the company would deliver a dour 3rd QTR forecast to Wall Street and would defer to give a full year outlook based on uncertainty about the economy, had an interesting take on what’s happening with consumers. According to Ullman, “this economic downturn is driven by consumers’ balance sheets, whereas past downturns were driven by their income statements” – meaning, this isn’t merely a matter of getting a paycheck, but consumers’ assets are under pressure.
Ullman described the company’s strategy having three categories of initiatives: to Moderate, to Maintain, and to Accelerate. The CEO openly discussed JCP’s “bridge strategy,” to downsize growth expectations and focus on retaining the best people to successfully execute those initiatives. The company’s acceleration initiatives are built around channel integration and store productivity.
As to IT governance, the executives described the company’s priorities as: 1st, improving service levels of critical systems; 2nd, “flow” – the right merchandise, more frequent deliveries, shorter cycle time; 3rd, channel integration with the e-channel as the hub; 4th, store productivity (visibility, engineered hours, and a customer-facing focus); 5th, PCI.
To achieve these objectives, CIO Nealon talked about the need to get “sacred data” right. For example, according to the IT leader, although next generation merchandise analytics and dashboards have “good functionality,” the underlying data “needs work” to be able to support the business’s strategic objectives. Nealon, who came from Southwest Airlines, drew a parallel between airlines’ need for accurate and timely information, and retail’s.
Ullman summed it all up by discussing “the secret” of turning the company around. “Enable people to make decisions at the point of sale,” said the CEO. Ultimately, those “people” are consumers. According to Ullman, “cross channel shoppers are our youngest, most affluent, and best customers.” So, the company views the e-channel as an “experimental” area where the company can more closely target marketing and build a sense of community around the JC Penney brand that will drive multi-channel performance.
Preaching to the Choir
AMR’s Chief Research Officer Bruce Richardson outlined the results of AMR’s recent Retail IT Benchmarking Study 2007-2008 study. Good news for those who raised their hands for “staying the course” on IT spending this year: AMR’s analysis indicates that IT spending is up a total of 8%, with IT capital spending leading the way at +14%. A big part of that spend is devoted to telecommunications (+13%) as retailers upgrade their digital networks to T1 speeds. Software maintenance is also up +14%, according to the study results, perhaps echoing JCP’s Tom Nealon who said the #1 priority is and must be service levels of critical systems.
But Richardson gave a word of warning: a looming skills shortage in BI and ERP applications and SOA architectures is driving IT salaries up (+9%). RSR’s own research has pointed out that next generation business capabilities and application delivery methods are rising to the top to retailers’ IT agenda.
Speaking of SOA…
Big Lots VP of Technology Greg Wilmer gave the group a rundown of his company’s efforts to implement SOA. “SOA” can be a very technical discussion anytime (just try to explain it to your CEO!), and has been known to put whole rooms to sleep. However, Wilmer’s discussion was focused on how the architectural concept delivers real value to the business. Wilmer is the co-chairman of NRF’s ARTS SOA Blueprint Committee (http://www.nrf-arts.org/) , and so his talk featured the committee’s extensive work to-date. However, when asked by a member of the audience how he convinced his governance committee to fund SOA projects, Wilmer said, “I didn’t,” explaining that the best way to approach adoption of SOA is to review the portfolio of pending projects to find candidate systems to architect with SOA.
But What About PCI, Security, and Information Privacy?
Even though the mood of the meeting was decidedly more upbeat than 2007’s NRFTech when PCI compliance was at the top of the agenda, the issue still lurked beneath the surface. A panel discussion with Mike Machones of Maurices/Dress Barn and Chris Dunning of Staples discussed how Board of Directors’ visibility into the PCI issue has brought “security” and “privacy” together as a strategic imperative.
Later, during a panel discussion about mobile payment solutions that featured Jim Scott of Kroger, Thomas Parker of the Bay Area Rapid Transit System, Mohammad Khan of VIVOTech, and Barry McCarthy of First Data, one audience member raised the question, (paraphrasing) “as we chase after yet another new technology, how do we avoid the same mistakes we made before and create new security risks?.” Fortunately, the panelists knew the answer: technology providers, even more aware that lack of security is an inhibitor to adoption than retailers are, are addressing the issue with new forms of security.
When All Is Said And Done…
The crux of the meeting echoed a “meta” finding from RSR’s recent research: Retailers are at a crossroads as they redesign their businesses to engage a new generation of consumers. The “decision makers” in the new model are the consumers themselves, and their decisions will be driven by information, anywhere and any time. The IT function that supports the new retail model must deliver fast, flexible, and secure capabilities not only to the business, but right into the hands of consumers. Today’s economy doesn’t change that imperative, and retail winners know it.
As the man said, “This was a good meeting.”
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