ROI & the IT Squeeze
May 3, 2016
A series of events have occurred over recent weeks that got me thinking about ROI. First off, we concluded a blog series by Dan Smith, former CIO Saks Fifth Avenue about RFID. Let me share how Dan opened his last in the series post:
“I can’ t tell you how many retail executives I have spoken to about RFID. They all know what is at stake and they all know that I have seen 7 successful implementations. I ask them why then they haven’ t gotten on board yet and I hear many derivations of, ‘ too expensive, too much on our plate right now, no room for another Capital expenditure’ . I always, very politely, tell them that they can get started for under $50k and…They don’t believe me!
With 1 successful pilot, they can prove the concept, create the infrastructure and begin to measure success beyond the obvious stats that have proven themselves time and again”:
Inventory Accuracy – 99% item-level accuracy vs. 65%-70% of items being off by at least 1 unit
Out of stock – reduction 50% and sales lift 2%-7%
Loss prevention – 70% reduction of internal shrink
Locating product – sales lift 2%-7%
The key take-away here is ‘stats that have proven themselves time and time again.’
Next in the series of events that got me pondering: One of our long time clients (I mean decades) said that we need to get more specific about our metrics for measuring ROI for our software projects. Hmmmm
In the first case, we have a technology with a proven track record and retailers who are still finding excuses, oops, I mean obstacles, why not to do it. In the second case, we have retailers who need to find more and better stats to prove the business cases for projects. “Me thinks we doth protest too much!”
This took me strolling down the long and wind-y road that IT has been on over the years and wondering just where have we landed? Has IT become lodged between the proverbial rock and the hard spot? It was then that I was reminded by Nikki Baird, RSRResearch, in her piece ‘ Justifying the Infrastructure Investment’ that IT has always had to struggle getting new technology approved. Mostly because other executives simply don’ t understand the cost and vitality (def: capacity for survival or for the continuation of a meaningful or purposeful existence) of the right infrastructure.
Back some 20 years ago when IT spending began shifting over to the business, new technology expenditures were often hidden or buried under existing infrastructure costs and maintenance. That cat is out of the bag because now days almost every project requires new technology. New technology that can’ t be supported without new infrastructure investments. IT is now being placed in the position of having to say No to projects or require jumping through hoops to get anything approved and done.
What does this mean? It means, just like everything else in this new day and age, we need a new model! While IT can’ t say No because they built a strategy around particular hardware decisions, they also can’ t say Yes to a one-off project with costly underpinnings. Just like retail has acknowledged that every retailer should have someone who ‘owns’ the customer, retail must also have someone who ‘ owns’ the infrastructure strategy. And I don’ t mean just the IT component.
In her article above, Nikki uses the case of IoT as an example, so I will too. If only one department is looking at an IoT strategy, can it be justified? Maybe not but, if the case is strong, might it be worth that retailer’ s time to look into other potential use cases? While we all know it is time to de-silo the business
processes of retail, perhaps it is the time to silo infrastructure components so we can make better business decisions going forward? What do we need for an IoT strategy, digital store strategy, or RFID? Can we justify with one use case or will we need three? Do we have three?
Going back to what Dan Smith had to say about RFID. I just wonder how many of those retailers who knew the score but were still not moving forward with RFID were simply being caught in the squeeze?
This is an area we would really like to start some conversation in. Are you game?