- 10 Feb 2011
Today’s Retail IT Outsourcing Outlook
By Alan Morris, Managing Director of Retail Assist
A recent study by the Everest Group revealed that outsourcing in the UK’s IT sector could increase by 600 percent over the next ten years. The report highlighted that the UK had the largest and “most evolved” outsourcing market in Europe and that the market grew by 36% between 2004 and 2009. Supporting reports from the likes of EquaTerra have suggested that the uncertain economic climate has increased the demand for outsourcing in the UK. With this is mind, I’d like to explore the reasons why a retailer might choose to outsource their IT provision, and the considerations that must be part of this process.
At a time when it is imperative to gain footfall, generate revenue and save costs, and in a world where technology is increasingly embraced by retailers and their customers, IT support is ever more important. The decision to outsource IT as a service is not an easy one, but there are a number of reasons why retailers might consider this. The following ‘top ten’ reasons for retailers to outsource reveal that there is a need or desire to:
- Control operating costs within the business as a whole or within specific departments.
- Narrow the business focus by outsourcing functions that are not central to the retailer’s core offering.
- Enable a structure geared for future change and growth, with an expanding or retracting pool of resources on hand for as long as the retailer needs them, but no longer.
- Reduce operational risk by gaining access to a wider gene pool of capabilities.
- Free up internal resources for other purposes or projects.
- Gain access to resources that are not available internally, with none of the costs associated with recruiting or training qualified staff.
- Accelerate business re-engineering benefits.
- Improve a function that, for varying reasons, is proving difficult to manage.
- Invest in IT environmental management.
- Elevate the IT Director from day-to-day operational management to a more strategic role.
Whilst the reasons for a retailer to outsource are relatively straightforward, finding an outsourcing partner who understands both the IT and retail sectors can prove more challenging. It is therefore important for retailers to select a partner who:
- Understands the customer demographic, and the technologies used to serve that market.
- Naturally fits in with their culture and values.
- Has a high calibre of support staff and accolades, and an excellent track record of support.
- Is accredited to recognised national and international bodies and standards.
- Can support future strategies and grow alongside the company.
- Can be agile, adaptable and flexible to accommodate business change.
- Is capable of working to support, and maximise the ROI, in the retailer’s legacy systems, whilst introducing and helping to exploit new technologies that can deliver competitive advantage.
When preparing to outsource, it is important for the retailer to set clear and realistic targets and ensure that they tie in with the company’s corporate objectives. Once the retailer has taken the decision to outsource, the relationship between in-house and supplier staff needs to be explained and clarified as soon as possible.
Choosing a partner with whom the retailer feels comfortable will ensure a smoother transition period for all parties. An outsourcing partner who has specialist sector knowledge, and can work to the structures and timetables imposed by retail – such as overnight processing, out-of-hours support, pick schedules, and quick response and resolution in the busy operating periods – offers obvious advantages. The retailer’s IT systems could potentially cost the business millions through lost sales should they malfunction, so quick issue resolution is vital. In addition, an outsourcing partner who is able to work proactively on prevention of problems before they occur is a valuable attribute to any retail business.
It’s critical to ensure that the outsourcing relationship remains effective over time, and is flexible enough to cope with the demands of the ever-changing retail environment. This is helped by both parties agreeing the business objectives that need to be measured and constructing realistic and aligned Service Level Agreements (SLAs) and Key Performance Indicators (KPIs).
Working with a professionally-accredited partner is also advantageous, as they will operate inhouse to valued standards and be used to achieving high service levels. This also ensures that the provider is continually working towards the business objectives of the retailer, so remains focused yet agile and adaptable to any changes in the industry.
With retailer outsourcing agreements on the rise, the outlook for retail is positive and is set to see more and more partnerships develop in the future. In an increasingly technology-enabled and dependent world, creating the correct IT outsourcing relationship is imperative.