Outsourced or In-House? A Third Option for Fashion Retail IT

The struggle within rising small to mid-size fashion and apparel retail companies (usually $500 million to $3 billion annual revenue) is to reach a mature level of IT that can support business growth and become a true ally for strategic initiatives. This article is not about the battle of in-house versus outsourced IT but rather how apparel CIOs can benefit from evolving collaborative sourcing (co-sourcing) models provided by IT vendors.

In co-sourcing, retailers no longer must hand over the keys of the "black-box" kingdom as they once did in the traditional outsourcing model. The co-sourcing model offers the best of both worlds, providing an established IT partner that's in touch with ever-changing technology and the ways to help extract the greatest value out of the investment, while maintaining full operational visibility and retaining all of the controls and decision making.

This also allows the retailer's internal, experienced personnel to focus more time on meeting business needs or creating new solutions for addressing business challenges.

The in-house model alone cannot provide the scale, agility and quality of services that apparel retailers are looking for when challenged daily with new game-changing technology that can significantly impact both top-line growth and bottom-line improvements.  Moreover, a co-sourced model allows for extreme levels of flexibility in addition to tapping into a huge investments (made by IT companies) in global best practices, tools, frameworks and methodologies.

Take omni-channel as an example. A few years ago, omni-channel was virtually non-existent in board room discussions as a driving strategy for growth. Just last year, when one specialty retailer went live with an e-commerce platform that provides visibility into inventory across multiple channels to sell a huge stock of marked-down inventory that otherwise could have gone unsold in physical stores, the results surprised the entire business leadership team.

This is a classic example of an effective partnership between an enterprise IT leader, a product vendor and a co-sourcing IT partner that not only creates unique business experience but also provides tangible results for the company.  The close collaboration with a co-sourcing partner, with capabilities on new technologies and global software products, and internal IT and business leaders will become an inherent part of the business strategy for years to come.

Was this all possible in-house?

What if the CIO and her leadership team were still busy running the data center, application support and operations? Was this possible if they tried to complete the entire system integration in-house without using world-class IT partners who can bring CMMi level maturity on the table?

And, we all know what happens when a company outsources a critical project like this in a fully managed end-to-end deployment — we have seen more failures than successes when the entire project is outsourced.

It doesn't matter how big the company or IT department is. There is always a struggle to allocate budget dollars in game-changing transformation programs and that's why innovative technology partners have brought in the new co-sourcing model "ALT ASM (Alternative Application Support & maintenance) that can create substantial incremental value to the business in millions of dollars and have the locked ASM capital available for strategic transformation programs. This model is based on the co-sourcing principle that gives CIOs high control and visibility and provides cost advantages over traditional outsourcing models, freeing up management bandwidth to allow for higher productivity.

Contrary to traditional "keeping the lights on" methods of managing the applications, the ALT ASM model focuses on creating daily incremental value to the business with a global ASM team, and on meeting business KPIs driven by service-level agreements (SLA), rather than traditional IT SLAs. The CIO and her team will now have budget and time to focus on strategic initiatives. They can now access a pool of thousands of technology experts who can work with them to drive these complex programs and contribute to business growth. 

ALT ASM gives fashion retailers the flexibility to reallocate their "run the business" capital to "change the business." Because of its key focus on business KPI's, this model ensures there are no more disconnects between business and IT and helps to avoid situations where, despite compliance with IT SLA's, business still feels dissatisfied.

ALT ASM models not only ensures high levels of cost reduction in the core application support but also  produces multi-million dollars' worth of value ideas and brings in a strong enterprise alignment by focusing on business process KPIs in addition to IT SLAs.

Sumeet Gupta is senior director of Retail & CPG for HCL Technologies.
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