BrainTrust Query: Cloud Computing - Can Retailers Rise to the Challenge?
The National Retail Federation's ARTS (Association for Retail Technology Standards) division has been working on a white paper on cloud computing for release in January 2010. The goal is to give both business and technical people in retail several perspectives of how this new technology model will affect them. The potential benefits of cloud computing are significant. Technology delivery costs can be reduced 10 to 40 fold as centralized computing resources delivered over the internet replace proprietary implementations. But there are also challenges to achieving these results.
The ARTS paper describes two major types of cloud environments. Technical clouds are strictly infrastructure and system software services delivered over the internet. By sharing these resources, the retailer avoids the internal personnel and training costs for maintaining their technical environment and frees up the office space. The capabilities of these clouds are limited by physics and the state of the art in technology at a particular point in time. Vendors supplying technical clouds are thus forced into a standard that is defined for them.
But as great as the technology benefits may seem, the even bigger opportunity is the benefit to be achieved from clouds that offer Software as a Service (SaaS). These clouds include the technical environment and also offer the actual applications. At this point SaaS clouds have generally addressed "commodity applications," those applications with wide acceptance that require little integration with existing applications or business processes. Companies can use Google applications for email, word processing, spreadsheets, etc. and avoid needing to maintain application software on individual PCs. If they don't want to use Google, there are cloud vendors supporting email servers from a variety of software vendors.
The final piece to be covered by cloud computing may have the most benefit but it will also be the most difficult to achieve. This is where cloud vendors begin to offer retailers specific software services that directly address retail operations. These include price management applications that recommend and execute price changes; distribution applications that plan, monitor, and control the flow of inventory, etc. The challenge is that without the same constraints that standardize technology clouds, the SaaS clouds may provide custom solutions that can only be used by a small number of retailers. The whole premise of cloud computing is that shared resources are cheaper than custom. But if the services are developed in a vacuum, without conformance to any standard, the benefits are missed. This is the challenge for retailers.
Discussion
Questions: Can retailers collaborate on common standards for critical retail
applications? Will the full potential of cloud computing be achieved without
standards?
[Author's Commentary]
Retailers really need to step up to the plate. One of the other projects
ARTS has recently completed was a paper on SOA (Service Oriented Architecture).
This is the first step in defining a standard set of business services
that are needed by retailers. If retailers are going to achieve the benefits
of cloud computing, they need to standardize their business practices so
that different software vendors can address the requirements. This will
spur competition and give retailers service provider options.
Standards don't mean retailers won't have their individual operating modes. Some retailers will continue to use gross cost with allowances and some will use net cost, some will be everyday low price and others will be high-low, some will have all their sale retails end in 00 and others will use 99. What matters is that cloud based service providers have the options in their applications that allow retailers to achieve their goals.
I think the potential benefits are so huge, that retailers cannot miss the opportunities presented by cloud computing. This will make organizations like ARTS even more important for the future of retail. A few large companies may continue to run their own internal IT development, but the vast majority of retailers should be looking to the cloud for IT services.