2011 looks set to be another challenging year for retailers.
There’s no doubt that with increases in commodity prices, the fall in sterling, increases in labour costs, and the VAT rise, pressure will be on margins.
Retailers will be looking for ways to reduce costs. Will IT departments be the next target for cost reductions?
IT departments in the client-server world were required for the management of networks, servers, integration of disparate systems, office applications etc, which has all been labour intensive. It is a very fiddly business.
Will the move to browser based, Internet centred applications reduce the requirements for large scale IT departments? A recent set of case studies have shown that based In this world, a ten store retailer could be reaping the benefits of an end-to-end system for the ‘equivalent’ cost of one IT person, a twenty store retailer for the cost of two IT people, and a fifty store retailer for the equivalent cost of three IT staff.
This includes all software, hardware, maintenance, IT operations and 1st, 2nd and 3rd line support costs. You can call this IT on demand, managed services, outsourcing or Saas, but whatever you want to call it, the bottom line is that the case studies show that IT costs will be about 50% lower.
It is also clear that implementation of such systems is easier and faster, so the idea that you need to spend money on IT to get benefits elsewhere is no longer true, the benefits may be within the IT department itself.
So is the IT department as we have known it going to be re-engineered itself? In a cloud driven world, certainly it is hard to see the need for large IT departments going forward. Of course such challenges also create opportunities. Maybe the IT department instead of managing systems, will transform itself into helping businesses use their systems and information more effectively.
Sunday, February 20, 2011
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Definitely the way I see things going.
ReplyDeleteHaving worked for a major IT organisation, I've witnessed at first hand the difficulties internal teams have securing resource from their own IT departments. Well-devised improvement initiatives are cast aside at the expense of BAU issues.
This is stifling and discourages improvement and cost reduction initiatives from within the organisation.
I've recently spent a week with a US software company who are providing web based BPM solutions for major organisations and it certainly opened my eyes to the potential reductions in cost that can be achieved, even when outsourcing complex developments.
Similarly, a colleague of mine runs a small IT support business in Sheffield. He sees it as a lot of hassle, but I've advised him to stick with it, I'm confident there will be new customers knocking on his door in years to come.