- 2 Jul
Ellie: Following Retail Week’s recent feature, I’m here today with Retail Assist’s Executive Chairman Alan Morris to ask him some further questions related to outsourcing in the retail sector. Alan, what are some of the key considerations when retailers think about outsourcing IT services? Is cost saving the main reason?
Alan: In my opinion, cost saving is a factor in outsourcing, but it shouldn’t be the main reason for retailers to outsource. The primary reason should be in line with a retailer’s longer term strategy when looking holistically at their business. The traditional view of a retailer outsourcing an existing internal team, keeping the same people and processes, yet still expecting cost savings can be impractical. Retailers have to look at things differently if they want to make these savings.
Ellie: What are some of the main areas that retailers can look to outsource? Also, how should they go about making the decision?
Alan: Fundamentally, it is possible to outsource any service. IT is obviously one area; logistics and distribution are others. Outsourcing works best when it concerns a service that is not one of the retailer’s core competencies. IT for example is not a core competency, however it supports the retailer’s core competencies, so is a cornerstone of the business. For somebody thinking about setting up a retail business, IT would be incredibly important in driving this forward, but it would be unlikely to be one of the first factors that they considered. Instead, they would focus upon designing or sourcing products initially.
Ellie: What are some of retailers’ main worries about outsourcing?
Alan: I believe that the primary worry for many retailers is losing control of certain functions. They might think that there is a value to their business in maintaining an internal team because they believe this can be more flexible. A key fear for retailers is that every time they make a request, they might be billed for this, instead of simply paying the wages of an internal team to be on hand whenever needed. People used to worry that their data might be compromised if their outsourcing company had multiple clients in the same field. However since technology has moved on and this outsourcing model has been proved, the security fears have lessened.
Ellie: When would you not recommend outsourcing?
Alan: If the retailer only wanted to cut costs and that was their only motivation to outsource, I would recommend against it. Unless of course the retailer in question was mindful that there had to be a significant change to their existing IT model in order to drive the expected cost savings.
Ellie: How does scale affect outsourcing?
Alan: If the outsourcing model has been designed correctly, scaling a service upwards or downwards should not affect the core provision. This is because scaling should have been built into the initial contract from the beginning. Retailers are always moving forward and developing, so if a supplier is currently providing x and y to a retailer, the reality is the retailer will inevitably want them to provide z at some point in the future.
Ellie: That’s great, thank you Alan. If any readers have questions for Alan related to the subject of outsourcing, please post these below, or email firstname.lastname@example.org.