Six Degrees Minimising IT Risk in Retail presentation

8 February 2018
Welcome to
Minimising IT
Risk in Retail

Where is tech headed
in retail?
John Ryan
Stores Editor, Retail Week

Customer facing tech - touchscreens, iPads and
‘interactivity’ is actually on the decline, because
shoppers don’t want it.

Zara online store, Westfield London

• The human touch – shoppers are not there
to be processed and they are not digital.
• They remain human. Digital is a means
to an end

All of which means there is more data than
ever flying around in retail, even if this may not
appear to be the case.
The question for the shopper becomes
one of confidence.
“How can I be sure that my details,
data will be safe?”

…and for retailers:
“How can I be sure that the company who helps
me manage the data I have is secure?”
Analogue or digital, the questions are the same.

MARTEC International
Risk Minimisation for Retailers
Key Findings
Fran Riseley
Martec International
8th February 2018

Helping retailers do business more effectively. Helping vendors sell to and partner with retailers.
MARTEC International©
Background to Research
Follow up to 2015 study
Interviewed 35 mid sized UK retailers (sales >£20m)
We targeted the person responsible for IT and risk
reduction in each retailer, generally the CIO or IT Director
Refined our benchmark for UK retailers
Ongoing process

Key Findings

There is increasing and
almost universal
interest in cloud
computing in retail
94% of those interviewed
are happy to use cloud
based systems, up from
87% in 2015
Use of the Cloud is Almost Universal in Retail

Loss of Sales Remains Biggest Perceived Risk in
Event of Critical Application Failure
94%
91%
71% 69%
66%
54%
97%
90%
57%
70%
57%
50%
0%
20%
40%
60%
80%
100%
120%
Loss of sales/
inability to
trade
Loss of
customers
and impact
on customer
service
Negative
impact on
company
morale
Time spent
firefighting
rather than
doing
something
productive
Damage to
internal IT
department
reputation
Cost of fixing
the problem
now and in
the future
%ofCompanies
2017
2015

Outsourcing of Business Critical Applications –
Most Popular for Ecommerce
57%
46%
34%
22% 21%
16%
55%
22%
7% 8%
3%
25%
0%
10%
20%
30%
40%
50%
60%
Ecommerce/
website
HR and
payroll
Merchandise
management
Finance ERP Marketing
and CRM
%ofCompanies
2017
2015

Outsourcing
“We took the strategic
decision many years ago to
outsource and not host
applications ourselves and we
have pretty much stuck to
it….. We outsource virtually
everything now.” Head of IT,
Large Format Specialty
Retailer

Cost Outweighs Risk When
Deciding Whether to Outsource
46%
31%
14%
3% 3% 3% 0% 0% 0%
42%
45%
0% 0% 0% 0%
7%
3% 3%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Cost Risk Mixture of
cost and risk
Flexibility Functionality Decided by
the group
Vendor can
offer services
we can't
Allows us to
focus on our
core business
Better service
levels
%ofCompanies
2017
2015

The Cost Vs Risk Conundrum
“It’s the removal of the day to
day management of this that
allows us to focus on more
value add activities.” CIO,
Small Format Specialty
Retailer
“Cost is the main one at the
moment because of the amount
that has been invested in
systems internally. Outsourcing
doesn’t seem viable at the
moment, but it is changing.” IT
Manager, Home Shopping
Retailer
“It’s all about security and
managing the risk. Though
reducing headcount is key
too.” Head of IT, Small
Format Specialty Retailer

Retailers’ experience of
outsourcing of
outsourcing IT is good
and getting better
Average is 7.1 out of 10,
up from 6.3 in 2015
Probably because
experience of
outsourcing has
become more common
Experience of Outsourcing is Good,
Especially for Business Critical Applications

Increased Confidence in Outsourcing
“It’s all about how you
manage them; a lot of people
blame the third party when
it’s not fair.” CIO, Small
Format Specialty Retailer
“We’ve had good experiences
across multiple companies.
We go through an evaluation
process with due diligence
and a formal tender process.”
Head of IT, Small Format
Specialty Retailer

Only 6% of those
interviewed said
nothing would
persuade them to use
a private cloud
provider
Their concerns are
that they have already
made a large
investment in on-site
infrastructure and
facilities and are also
not convinced of the
cost benefits
Only 6% Would Not Consider Using a
Private Cloud Provider

Retailers feel they have
done a thorough job
evaluating the risk of
critical application
failure (7.4 out of 10)
The larger retailers
(sales >£100 million)
score higher than
smaller ones (7.7 vs
6.7 out of 10).
Retailers Feel They Have
Thoroughly Evaluated Risk

Reasonable Confidence in Risk Evaluation
“We look at this on a cyclical basis –
review, action, review, so it’s
something we do as a matter of
course. We do a quarterly review
and it is part of the day to day
function of IT. Gone are the days
when you could just spend £30 or
£50k on this and be done with it.”
Head of IT, Grocery Retailer
“We understand the impact, and
that it would have a significant
impact, but we haven’t done a
detailed review yet.” IT
Manager, Large Format
Speciality Retailer

Retailers are very
confident in the current
performance,
availability and stability
of their business critical
applications (7.6 out of
10)
But may be over
confident given that the
average retailer’s
position on the
benchmark is at level
2.0, “some exposure”
Larger businesses are
more confident than
smaller businesses in
their assessment of IT
risk, 7.7 vs 7.3 out of
10
May be because of the
greater budget and
resources available in
larger retailers
Retailers are Confident in The Stability of Their
Business Critical Applications

Retailers Are Confident in the Stability
of their Applications
“I’m absolutely happy with
this. I came into work this
morning expecting everything
to be working and it does.”
Head of IT, Large Format
Speciality Retailer
“We are better than some
companies and worse than
others, but you can’t spend all
your time planning for a
disaster, you have to do some
real work!” Group Insurance
and Resilience Manager, Small
Format Speciality Retailer

High Satisfaction That IT Spend on Running
Business Critical Applications is Delivering the
Best Possible Service
7.1
7.6
6.8
6.4
7.1
6.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
All retailers Retailers with sales of
<£100m
Retailers with sales of
>£100m
Marksoutof10
2017
2015
Not at all
satisfied

Increasing Satisfaction With Value for Money
“We are good at getting value
for money. It’s a buyers’
market out there. Plus we have
great people, for example in
service management.” Head of
IT, Small Format Speciality
Retailer
“We are renegotiating some of
our contracts and once we have
done that it will be a 9 or 10.” IT
Service Delivery Manager, Large
Format Speciality Retailer

Retail IT Risk Minimisation Benchmark

We have
established a
benchmark for
risk minimization
in retail
Retailers at level
2 still consider
risk and security
to be an IT only
issue
The average
retailer was at
the same level in
2015
May use the
cloud for some
non-core
applications
Have some
nervousness
around system
stability
Have done some
ad hoc
evaluation of risk
reduction
Average Retailer Has “Some Exposure” to IT Risk

Exposed (1.0) Some Exposure (2.0) Advancing (3.0) Benchmark out of 4.0
Trading • Occasionally interrupted due to
HQ, network or store issues
• Only ever interrupted in a few
stores or online
• Very, very infrequent
interruptions in stores or online
• Can’t remember the last time trading was
interrupted anywhere
Risk Level • No in-house or outsourced risk or
security specialists used
• Lot of time spent firefighting
• Worries about our risk level
• Risk and security considered an IT
only issue
• Little use of specialist vendors or
resources
• Moderate concerns
• Starting to involve the rest of the
business outside IT in risk
management
• Higher proportion of strategic
projects
• Whole business involved in risk management
• Sensible balance of in-house and outsourced
resources
• Culture of risk management in the whole
business
Technology • Legacy systems
• Poorly documented
• Fragile operating processes
• Limited or no people with
knowledge on site
• Reliance on in-house
developed and interfaced
rather than integrated systems
• Some documentation
• Some people with knowledge
on site
• Mix of packages and custom
developed applications
• Properly documented
• Migrating to common platforms
• On site knowledge
• Aapplication integration strategy in
place
• Truly integrated modern systems to streamline
core processes
• Common, easier to maintain technical
architecture
• High service levels
• Easy to manage
• Iintegration stragey fully implemented
Use of Cloud • Don’t use cloud, except perhaps for
payroll
• Some use of cloud for non core
applications, e-commerce and
marketing
• Starting to use for individual
applications
• Always evaluated as an option as part of the IT
strategy
Use of
Outsourcing
• Only for non critical applications
• Culture of in-house development
and support
• Outsourcing mainly selected on
basis of price
• No single strategic supplier
• Some use of outsourcing to support
key applications, where suppliers
have specialist expertise
• Always evaluate outsourcing as an option and
adopt it where it will add value
Disaster Recovery • No formal DR plan • Have done some evaluation of
key risks
• Annual plan and review
undertaken, but does get put on
hold when other priorities come up
• Detailed annual plan and assessment
undertaken
• Process is taken very seriously and is checked
and reviewed
• Occasional dry run
Stability of
Business Critical
Applications
• Fragile
• Users remember failures
• Some applications no longer
supported by supplier
• Nervousness around stability
• Service level achievement below
targets
• Regular reviews and assessments
• Regularly achieve service level
goals with occasional failures
• Back up plans, specialist resources and technical
architecture used to create most stable
environment possible
• Routinely achieve service level goals
• All applications supported
Effective Use of
Budget
• IT spend higher than average for
sector
• No allocation for DR or risk
management
• Average IT spend for sector • Average to lower IT spend for
sector
• DR and risk management is a
budgeted item
• Lower than average IT spend for sector
• Regular evaluation of risks and use of specialist
reviews
Benchmark for Retail IT Risk Minimisation

Conclusions
Benchmark your risk minimisation performance
against other retailers and see where you can
improve
Don’t leave it until you replace your systems to
make changes
Involve the whole business

Questions?
www.martec-international.com
frances_riseley@martec-international.com
01823 333469

Which of the research
results has the greatest
impact for you?
And why?

Paul McKeown
Countrywide Farmers

Founded in 1992, eCommerce pioneer
Public Company
German engineering with global footprint (EMEA, US, APAC)
340 employees
€ 34,2m revenue in 2016
17% of revenue invested in R&D

15 Billion Euro B2B revenue per year in
51 countries and 17 languages
300 clients, 1500 sites, 90 countries,
50 languages, 250 million products,
715 million page views, 1.3 million orders and
€ 210 million revenue… per day

De-risk project by focussing on minimum viable product (MVP) requirement
How not to build a minimum viable product
How to build a Brilliant Basics product

Integration - Synaptic Commerce
Integration framework
 RESTful Web Services
 SOAP Web Services
 Web hooks/Events
 Import/Export (XML)
 Micro services
 Integration Service
Management
 Product Data Feeds
Omni-Channel-
Management
Analytics &
Reporting
Operational
Excellence
Experience
Management
Product
Information
Customer Management
Transaction
Management
Organization
Management

Thank you for your attention!
Intershop Communications AG
Toralf Lahs
T.Lahs@Intershop.com

What do you see happening
in the future regarding risk
minimisation in retail?
What needs to happen for us
to be future-proof?

Thank you
www.6dg.co.uk
connect@6dg.co.uk

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