Retail IT Spending Priorities for Digital Transformation
It is no secret that the retail sector is going through a major transformation. Brick-and-mortar stalwarts, some over a century old, are filing for bankruptcy or disappearing entirely. E-commerce and the digital customer experience are taking an increasing part of the shopping dollar. And all of that was happening before the COVID-19 pandemic forced major restrictions on brick-and-mortar shopping. Traditional retail is in a “change or die” mode, and the transformation of IT is going to decide who survives. What to do? If at all possible, insurers should keep spending. The need for digital transformation has never been greater.
This Research Byte is a brief summary on IT spending trends in the retail sector. The full report is available at no charge.
Because nearly everyone these days has experience with online retailers, it is a common perception that retailers must be at the forefront of digital disruption. But this is far from the case, believe it or not, even with retailers that have significant online sales. With the exception of those “born in the cloud” retailers such as Amazon, eBay, Etsy, and Overstock.com, both traditional retailers and online retailers are struggling with many of the same IT problems. In fact, some born-in-the-cloud retailers have customer-facing systems that are state-of-the-art but back-end systems that are held together with bubble gum and duct tape.
Figure 1 shows the net percentage of companies increasing budgets in key initiatives for the cloud and digital transformation. The highest priority is cloud infrastructure, where a net 76% of companies plan to increase their spending. Second is cloud applications at 71%. Not surprisingly, other priorities include systems/data integration, disaster recover/business continuity, and data analytics. Somewhat surprisingly, only a net 12% of retailers plan on increasing budgets to upgrade legacy systems. That might be explained simply by the fact that upgrading legacy systems is one of those things that, in light of more strategic priorities, is often something that can be put off for another year.
The retail sector has definitely been increasing its IT spending the last few years, making up for a lack of attention to IT, especially in regards to the cloud. It isn’t entirely clear what took so long. But whatever the reason, every retail organization needs a strategic roadmap for IT and business transformation, based on their specific situation in terms of their application landscape, business opportunities, and competitive threats.
The bottom line is that the competitive landscape is changing, and the pandemic has just accelerated the pace of change. Ironically, the very technologies needed to cope with the pandemic—cloud, digital transformation, improved security controls—are also critical to surviving in the new competitive landscape. If the pandemic forces retailers to accelerate their adoption of these technologies, the pandemic may prove to have had a silver lining.
“Our definition of retailers includes restaurants, leisure activities, casinos, and other non-traditional retail,” said David Wagner, senior director of research for Computer Economics, a service of Avasant Research, based in Los Angeles. “These types of retailers are especially in need of a major digital upgrade as their business models are being disrupted by more nimble competitors.”
The full report analyzes the IT characteristics of the retail sector with its various sub-sectors, such as tradition brick-and-mortar retail, online retail, restaurants, resorts, casinos, and movie theaters, along with the competitive threats posed by digital disruption. Based on our latest benchmarking survey, it provides key metrics for retail sector IT organizations:
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Current adoption of cloud systems in the retail sector
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IT investment priorities, including legacy systems modernization, cloud systems, digital transformation, data integration, disaster recovery, data analytics and business intelligence, and data center automation.
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IT spending priorities in the retail sector, including information security and privacy, business applications, networking, IT personnel, data center, and end-user technology.
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The impact of the coronavirus pandemic on retail sector IT organizations
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We conclude with the outlook for increased retail IT spending in the coming years.
This Research Byte is a brief summary on IT spending trends in the retail sector. The full report is available at no charge.
Computer Economics, a service of Avasant Research, is the leading source of IT spending and staffing metrics for the retail industry. Our annual report includes dozens of IT budgetary and cost metrics, including IT spending as a percentage of revenue, IT spending per employee, IT spending per desktop, IT staffing ratios, and a variety of IT cost metrics. The full report, or individual chapters, are available to subscribers, or may be purchased from our website.
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