Merged Channel Is Good, But Keep IT Units Channel-Centric
Written by Evan SchumanMerged channel is all the rage—as it should be—but one key analyst is arguing that retailers must merge their channels, not their IT groups.
The problem is that most IT functions in-store are behind-the-scenes. To put a finer point on it, argues Nikki Baird of Retail Systems Research, is that in-store IT is not usually creating things that are customer-facing. There are certainly exceptions (self-checkout, digital shopping assistants, kiosks, etc.), but the rule still holds.
With E-Commerce, on the other hand, just about everything is customer-facing. This matters because retailers like to prioritize IT projects based on traditional ROI spreadsheet metrics, which rarely apply to new ideas for customer interactions.
Baird argues that an IT group dedicated to the E-Commerce unit would likely have its own budget, at the discretion of the E-Commerce department head. If IT is centralized and shared across all channels—which would be the egalitarian merged channel way—it’s not going to work. It will be engrossed in a never-ending "budgetary process and committee meetings where the group will need to do a business case and prove ROI" and the E-Commerce need will end up losing to some supply chain improvement or CRM tweak.
"For customer-facing online needs, you don’t know how customers are going to respond. You have to go out and try and see how they react," Baird said. Merged IT and E-Commerce will make retailers "have a bear of a time. They won’t be able to get anything done."
-Marc
September 25th, 2008 at 8:21 am
It is matter of company culture and business philosophy. Where in the organization does the corporate CIO report– to the CFO, to the COO, to the CEO? Does the company senior management team make business decisions based on strategic parameters and metrics/targets tied to those parameters/objectives or does it run based primarily on “gut instinct” (i.e. I’ve been in this business 25 years and I anecdotely know what works). Will the head of this IT group within the channel be part of the leadership team of the team running the channel?
In general, the skill set of the IT team working on a behind-the-scenes technology vs. customer-facing technology is different, however, there are definitely business philosophies as to why you want to have a centralized IT– such as consistent architecture, purchasing power, and the like. Having separately run IT organizations only opens the company up to having a higher cost structure than what is warranted.
But then again- if the eCommerce channel is kickin’ butt and the other channels are lagging– then they would probably be able to afford to have a separate IT…..