The credit problems that have dominated business and consumer agendas have had a dramatic impact on consumer spending and retail growth in the Western world.
The situation gives rise to a financial paradox that all retailers must overcome if they are not only to survive, but also grow in an environment where it is becoming tougher to compete. That paradox is balancing increasing demands with a restricted supply.
Even a basic understanding of some of the raw drivers of consumer behaviour lets us quickly determine that, in this economic climate, Mr and Mrs Joe Average will be thinking harder about how much of their cash they spend – and how they spend it.
For retailers, this means a less confident, more discerning consumer base tightening their belts and spending less across the industry through reduced basket sizes or transaction volumes. At the same time, these same forces put pressure on retailers’ and manufacturers’ costs, forcing margin reductions or price increases – which cause further consumer anxiety.
Doing nothing is a recipe for disaster; competitors will almost certainly refine or reinvent their propositions. Reworking the proposition – whether that be through new products, lower prices, better availability, an improved store environment or service-based store technology, the list goes on – is actually more important in times of increased competition.
Change costs money, time and manpower – all of which are in short supply. Store refurbishments and new technologies require access to capital, which is harder to come by. Such things need to have been rolled out yesterday, so time is never on our side.
When it comes to manpower, in most lean retail organisations, the best people are focused on making sure the business is running as effectively as it should be, not on infrastructure changes. In addition, recent US government statistics predict a 38 per cent increase in demand for IT professionals between 2006 and 2016, but a decline in computer science graduates of 17 per cent. This begs the question: from where do we get the best people?
Injecting time, talent and capital
Clearly, we all need to be creative about plugging the widening resource gap and, again, that’s people, capital and time. The rationale behind working with organisations that have the capability and people power to add value to what retailers do, and for every retailer to involve outsourcing as part of its IT strategy, has never been stronger.
In reality, how does an outsourcer help with capital issues, or skills, or time to market?
In our experience, outsourcing is by no means a complete solution; the final formula for success will depend on many complexities – not least the retailer’s specific situation and future direction. It is vital that the retailer and IT outsourcer work together every step of the way to ensure any project is geared for success and tailored to the retailer’s needs.
The benefits of working with the right outsourcer can include lower costs, and best practice in infrastructure management and modernisation. It can lead to IT innovation – as seen with many of the companies at Retail Solutions – more rapid return on investment and predictability of costs, to name a few.
A successful outsourced operation is founded on senior-level sponsorship, good governance, aligned and motivated teams and strong people. EDS’s long and wide-ranging experience has enabled us to learn the different ways in which to make outsourcing work for each client, from scope and duration through to commercial framework and delivering the solution. Our involvement with clients ranges from niche-level data centre provision to full-scale IT modernisation and management.
Demand for outsourcing does not appear to be abating. Technology analyst Forrester recently predicted further evolution and uptake of IT outsourcing by organisations needing to become the best at their business supported by the best IT – and quickly.
Forrester predicts that these same organisations will draw on the broader benefits mentioned above to ensure that they remain efficient and successful. It also warns against more of what it calls “tactical outsourcing” – poorly thought-through knee-jerk initiatives with the single objective of slashing IT costs.
EDS was delighted to sponsor the 2008 Retail Solutions conference and exhibition and its debut at the ExCel conference centre in June. We believe passionately that the benefits we continue to bring to retailers and other organisations, in both the UK and abroad, will be heightened as we take a step forward into these uncertain times of increasing competitive consumer pressure.
We’re ready to step up to the challenges that you, as retailers, present to us and look forward to supporting you in the exciting and challenging months and years ahead.
Siôn Roberts is director of consumer industries and retail at EDS. E-mail: sion.roberts@eds.com
Forrester recently predicted further evolution and uptake of IT outsourcing by organisations needing to become the best at their business
Siôn Roberts, EDS
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