To Survive, Retailers Need To Kill The IT Budget And Burn The Boats

Written by Todd L. Michaud
September 4th, 2012

Todd Michaud runs Power Thinking Media, which helps retailers and restaurants tackle the convergence of social, mobile and retail technologies. He spent nine years delivering technology platforms to more than 10,000 retail locations as VP of IT for Focus and Director of Retail Technology for Dunkin’ Brands.

If a retailer really wants to compete with Amazon and the changing realities of today’s retail environment, it needs to kill the IT budget, disband the IT Steering Committee and throw away the IT project list. It’s time for IT to be moved out from under the CFO’s reigns. It’s time to let go of the past and start thinking about IT as a business enabler, unleashing its full potential to the organization.

It’s time to stop trying to plan out IT needs for an entire year at budget time and let IT scale and shrink to meet changing business demands. Smart retail organizations will give the CIO the tools necessary to solve the problems at hand, rather than trying to make sure no one runs with scissors. I think I speak for almost every CIO out there when I say that they want to be given the responsibility and accountability to fix things, without having the “we don’t trust you” strings attached.

Amazon is eating the lunch of brick-and-mortar retailers for one simple reason: It invests in its business in ways that traditional retailers don’t. Some brick-and-mortar retailers are unwilling to upgrade systems that are 10 years old, and Amazon spent three-quarters of a billion dollars on a robot company to further refine its warehouse efficiencies. If that doesn’t say it all, I don’t know what does.

Never has there been a time in my career where the need for IT resources (dollars and people) was not dramatically outstripped by demand. I’m not talking about needing 10 percent more; needing 300 percent more seems to be true-to-life. Technology has become an integral part of all aspects of retail. The business, in almost all departments, is starving for more technology and yet the entire system has been set up to ensure that doesn’t happen.

I firmly believe that to be successful and to truly compete with the likes of Amazon, retailers must stop thinking about IT like other “controllable expenses” and start thinking of the department as a service provider. They need to start thinking about how technology can enable other parts of the business. Unless you want to fail, the C-suite should not be creating IT strategy, budget and direction as a group. If you want to take your business to the next level, give your technology budgets back to the respective business units and give your CIO P&L responsibility and strategy accountability.

Within most retail organizations, typically arcane processes are in place that say IT needs to budget for a set number of projects and a set staffing level for each year. The team is typically led through some sort of multi-functioned steering committee that convenes on a regular basis to determine whether the focus and attention of the scarce IT resources need to be adjusted. These functional groups often battle over who is getting attention and who is not.

If the marketing chief, for example, identifies an important opportunity to take advantage of some new trend in social media, she may be stuck because the technology resources are already committed to overhauling an outdated supply chain system that should have been replaced five years ago. The CIO is left basically saying “no” to anything new that shows up between budget cycles.

Some organizations actually plan out “spare” capacity to handle “pop-up projects.” But, typically, any spare capacity is almost always eaten up by over-runs in existing projects. This leaves everyone frustrated, especially the business owners and the CIO. I’m not sure about you, but that doesn’t exactly strike me as nimble or competitive.


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