StorefrontBacktalk: To Survive, Retailers Need to Kill the IT Budget and Burn the Boats
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If a retailer really wants to compete with Amazon and the changing realities of today's retail environment, it needs to kill the IT budget, disband the IT Steering Committee and throw away the IT project list. It's time for IT to be moved out from under the CFO's reigns.
Amazon is eating the lunch of brick-and-mortar retailers for one simple reason: It invests in its business in ways that traditional retailers don't. Some brick-and-mortar retailers are unwilling to upgrade systems that are 10 years old, and Amazon spent three-quarters of a billion dollars on a robot company to further refine its warehouse efficiencies.
Never has there been a time in my career when the need for IT resources (dollars and people) was not dramatically outstripped by demand. Almost all departments are starving for more technology and yet the entire system has been set up to ensure that doesn't happen.
The bureaucratic systems were often put in place during the dog-days of ERP implementations. Seeing dramatic increases in technology spending throughout the organization, many organizations made the decision to move the CIO under the CFO in the reporting structure to better manage it as a "controllable expense." Consequently, IT was put under the person least likely to say "yes" to a budget increase.
But times have changed. More of the way retail operates is dependent on technology. It's less about big, costly year-long (or longer) projects and more about small projects that require quick turnarounds. Although big problems with big answers still exist, most problems have been broken down into smaller pieces with vendors attacking much smaller "chunks." With many applications being offered via the cloud or as a service from providers, companies can enable business improvements without the hassle, aggravation or expense of the past.
It's time to stop trying to plan out IT needs for an entire year at budget time and let IT scale and shrink to meet changing business demands. I think I speak for almost every CIO out there when I say that they want to be given the responsibility and accountability to fix things, without having the "we don't trust you" strings attached.
What's the worse that happens if you decentralize IT budgets and let the CIO run IT like a business unit? What happens if the supply chain unit decides to spend 30 percent of its operating budget on technology improvements? Is that really a bad thing? What if IT has to triple its staff size to meet the demands? If IT meets its financial performance targets, does it really matter?
Any retailer could have made similar (or even better) decisions as Amazon and achieved similar results. I keep coming back to the notion of retailers being afraid of technology. They have been burned too many times in the past. Too many failed projects, too many missed budgets. Too much dated technology weighing them down. But if retailers don't come to grips with the fact that technology will also be their salvation, then they might not ever be saved.
Todd Michaud runs Power Thinking Media, which helps retailers and restaurants tackle the convergence of social, mobile and retail technologies. Formerly, he was VP of IT for Focus and Director of Retail Technology for Dunkin' Brands.