Capitalizing on the Cloud: How Migrating can Benefit Retailers

A growing number of companies are moving data and business applications to the cloud with the potential of increased flexibility and decreased costs through diminished need for infrastructure, staff and software. The benefits are clear – moving from capital based expenditures (Capex) to a fully-loaded, usage based (Opex) model provides predictability and scalability for budgeting purposes while reducing time-to-market for new services.
Typically, 18-24% cost savings can be realized in non-optimized IT environments. This is particularly important as typical IT budgets require 70-75% allocation to “run the business” activities, leaving little budget to engage with business leadership to develop new products.  The cost pressure continues to mount as senior management struggles to maintain margins in a hyper competitive environment.
By design, with cloud technology information is stored in a central repository, allowing multiple locations to access data and information through a single portal. Several cloud strategies could potentially make sense for retailers, although the right timing and implementation strategy are always key considerations.
These technologies have matured and are being adopted by enterprise large and small.  Strategies typically consider three levels of cloud offerings:

  1. Software as a Service (SaaS) – applications delivered to the end-user directly from an external host provider over the Internet (POS, Back Office Systems, Office 365, etc)
  2. Platform as a Service (PaaS) – external host vendor provides for the support of the entire application environment – development, testing, deployment, run-time, hosting, delivery (Microsoft Azure, AWS, Oracle, Verifone, etc)
  3. Infrastructure as a Service (IaaS) – the delivery of infrastructure resources computing, storage, network – as a service by external vendors (Datapipe, Ensono, Rackspace, etc)

It is important to realize that these offerings are building blocks with IaaS as the foundation (as depicted below).  IaaS can be procured as a separate service but is included if you contract for PaaS or SaaS services.  Similarly, IaaS and PaaS are included if you contract for SaaS services.
 
Cloud
 

Software as a service (SaaS)

A SaaS solution allows companies to purchase software and utilize software on demand in the cloud. Several very robust traditional and retail-centric applications have been developed that can be purchased and deployed as cloud-based solutions. These cloud applications also reduce the amount of IT staff and infrastructure needed to maintain the solution. Upgrades are handled remotely and only a Web browser, router and Internet connection are needed to access software from a warehouse, office or retail location.

Platform as a service (PaaS)

PaaS solutions facilitate the hosting and operation of custom applications in the cloud, as companies ‘rent’ the back-end software licenses that are required for use. For example, licenses can be obtained for Microsoft SQL or Orcale to host a custom application. Operating systems, server systems, the database and other technical components that are a part of the application or required to make an application run, can be provisioned through the cloud via PaaS solutions.

Infrastructure as a service (IaaS)

IaaS platforms provide companies with virtual storage and hardware, deploying systems in a public or private cloud environment. IaaS allows you to redistribute your IT resources that are dedicated to in-house on premise infrastructure. In addition to gaining additional resources, this strategy also enables quick and easy seasonal fluctuations as your needs scale. Organizations can implement more servers or disk storage without needing to place an order for hardware.

Key Observations:

Flexibility to provision as the business evolves

Mergers and acquisitions are continuing to occur in the industry and new products and services are essential to retain market share. Cloud-based solutions are often more affordable rather than buying perpetual licenses up front. Under a cloud solution, usage can be dialed up or back as necessary – this capability gives you more agility to adjust your IT footprint, based on the current needs of the business.

Timing is critical

It is important to time your move to a cloud environment to coincide with significant business initiatives and/or technology capital investments (ie technology refresh, core system replacement, etc).  The reason is you will not realize immediate payback if you have sunk investments that will for example, require you to purchase additional software licenses when you may have already purchased perpetual licenses and/or technology that has not achieved end-of life. An optimal time to move to the cloud is when you are planning a major transition, such as replacing your point-of-sale or back office solution.

Develop a Roadmap

Inventory, assess and understand your current environment.  Identify critical data and where it currently resides. Understand your Total Cost of IT (TCO) – sounds fundamental but most organizations have hidden IT costs that increase the savings possibilities. Prioritize the opportunities for savings/service improvement and Develop a Roadmap to guide decisions over the next 2-3 years.

Security & Risk Management must be top of mind

The evolving threat environment means that all organizations are at risk. It’s not a question of “if” but when any given organization will be breached.  Budget allocation to maintain compliance (PCI, PII, ISO) continue to increase while actual risk management is the business imperative.

Conclusion
Migrating to the cloud presents a host of potential benefits for retailers including cost savings, increased collaboration and reductions in IT staff and infrastructure. The per-use cost model of the cloud and remote storage and maintenance allow organizations to reallocate funding and resources to other integral functions of the business, rather than IT. However, companies must know when to act to obtain maximum financial benefits and must understand available (and proven) cloud options to implement the right solution.
This is the first post in a series where we highlight cloud adoption and evolving best practices.
For further information, contact Dean at devans@wcapra.com

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