Cheapest SOBs on Planet
Looking down from 30,000 feet we can see retailing divided into three groups - Leaders, the main Herd and Stragglers. While the same might be said of other industries, retailing has a unique characteristic that makes it different. Namely, retailers have consistently under funded investment in IT for the past 10 years.
In fact, one analyst I know who has studied this phenomenon calls retailers the cheapest SOBs on the planet. Communications, distribution, finance, banking and almost all other industries have consistently spent six percent of annual revenue on IT, and every year they record double digit improvement in productivity. Retailing spends one and a half percent and productivity has barely budged over the past decade.
I mentioned this to a retail CIO the other day and he thought my retail figure was high, commenting he wished he had one and half percent to spend. And this from for one of the brightest stars in retailing.
Under funding IT investments has produced a huge gap in retailing between the Leaders group and the other categories. Where does your organization fit in? Here's the category breakdown:
The Leaders group has traveled far down the road toward aligning business with IT strategy. They have retired most legacy systems and proprietary applications. They have sound IT governance policies, compliance and control systems, and an architecture based on interoperable industry standards. They also have deep integration of logically associated applications and a single instance of data across the enterprise.
The Leaders group has traveled far down the road toward aligning business with IT strategy. They have retired most legacy systems and proprietary applications. They have sound IT governance policies, compliance and control systems, and an architecture based on interoperable industry standards. They also have deep integration of logically associated applications and a single instance of data across the enterprise.
The Herd is comprised of retailers in the wide bulge of the bell curve. They have one or two key IT pieces in place, but are missing big chunks. Typically, they are using legacy systems that have exceeded their useful life, critical data resides in silos, infrastructure can't support growth and new software, and core applications require dollar-draining support and maintenance.
The Stragglers, of course, are in the most difficult position. They recognize the need to modernize, but can't do it until they first take several big steps, typically upgrading networks, servers, databases and middleware. And since these steps are invisible to others in the enterprise, getting budget from the cheapest SOBs in business is difficult. So most Stragglers today are falling farther behind the Herd and Leaders.
It's the law of jungle in retailing and the big cats are always looking for stragglers.