4 Issues Blocking Retail Digital Transformation
April 2, 2024
5 min read
April 2, 2024
5 min read
The race for retail digital transformation was well underway prior to 2020, but the pandemic accelerated it to a breakneck pace. Companies found themselves navigating severely disrupted supply chains, reduced profit margins, and unprecedented online traffic/sales. Many of today’s most successful retailers are thriving based on quick decisions they made to counteract the sudden changes they encountered.
In many ways, however, the retail digital transformation process has only just begun. With 2020 well in the rearview, it’s a good time for retailers to capitalize on the smart decisions they made and double back on choices that have come to prevent business growth. In this update we’ll explore business issues surrounding digital transformation in retail, with an eye on your current software’s ability to inform, guide, and improve your transformation process.
The dramatic shift to online spending isn’t changing, and retailers recognize the need to manage their legacy IT portfolio to work alongside newer in-store and online technologies. This requires knowledge that encompasses both legacy practices and newer technologies, a unique skill set that grows more difficult and expensive to find as the IT skills gap widens.
Even among other high-tech industries, advancement in retail IT is heavily dependent on the smart use of new and historical data. Top innovators are often noted for their ability to do new things with old info, such as finding correlations or obscure patterns in shopping data that lead to higher conversion rates. Companies that shed legacy software too quickly in the name of transformation can quickly end up putting themselves at a disadvantage simply because they can’t find or afford the skills to manage a mix of legacy and new technologies, leading them to dismiss valuable data and systems that could optimally be integrated with incoming tools/processes.
So, what’s a transforming retail enterprise to do when moving too fast is as painful as failing to move forward? Simply put, strategic partnerships are essential to finding a viable middle ground. Expect specialized third-party software maintenance (TPSM) providers to play an increasingly large role in IT estates across the industry as innovation leaders seek the skills to keep old and new systems working together without friction. TPSM providers like Origina employ software experts who have years of software knowledge and the relevant product background to successfully maintain and support retail IT estates. In some cases, digitally transforming retailers end up working with the same people who wrote the source code for the software they use.
Managing a retail business’s transforming technology grows more complex, costly, and difficult with every change or new system brought to the estate. At the ground level, it’s another problem that seems to present a lot of impossible choices. Legacy software often needs to be reconfigured to handle new challenges and maintained once the changes are made. But with time split between maintenance and new initiatives, retailers struggle to find the funds and the capacity to move their strategic plans forward.
End of support (EOS) software and the policies surrounding it can pose a burden for transforming retailers because they take control of the software roadmap out of the business’s hands. What do you do when you want to keep a certain percentage of current software products indefinitely, but the vendor says it will no longer support them unless you undergo an expensive upgrade your business doesn’t need? And on the other side, customers that keep OEM support are typically required to pay a growing premium for that privilege with every renewal, costs that make it more difficult to innovate without throwing out systems they could otherwise use indefinitely.
For retailers struggling with a variety of maintenance issues, looking beyond the software vendor can lead to partnerships that make integrating and maintaining your current software far less stressful, uncertain, and expensive. For example, when U.K. retail giant Sainsbury’s overcame serious Black Friday crashes and poor performance IBM couldn’t adequately resolve, they sought outside expertise. As a result of that process, they saved tens of millions of dollars and stopped the performance issues in their tracks without IBM’s influence. Today, the partnership continues to give their estate the high performance it needs during peak season.
Retailers are a favorite target of cyberattackers and must take great care to mitigate and defend against active digital attacks. In 2023, 99% of all attacks against the retail sector were motivated by a desire to illicitly earn money, according to Verizon’s most recent Data Breach Investigations Report (DBIR). Large web app footprints and the need to store payment card data make retailers potentially lucrative targets.
Legacy software has a reputation of being more difficult to lock down, and vendors are quick to claim that upgrading is the most effective means of securing legacy software estates. A large part of this misperception comes the fact that EOS software doesn’t usually receive security patches for emerging threats. Additionally, open-source components embedded within large software vendors’ products often introduce a disproportionate amount of risk; though they employ the components, many large vendors don’t keep on hand the resources needed to improve their security.
Because of this, retailers undergoing digital transformation might feel they have to patch or fully upgrade software they would otherwise be able to use indefinitely. But in reality, patching is an inherently reactive practice that fails to consider the customer’s unique environment, and upgrading routinely introduces new vulnerabilities even as it addresses others. By contrast, methods like hardening existing software, which mitigate flaws attackers target, are applicable to all software versions, including those that have been moved to EOS status by the vendor.
At the end of the day, retail businesses undergo digital transformation to meet customer expectations. Even changes that don’t directly affect customers often impact the user experience. Any number of trends, external factors, and unpredictable social changes can have an instant and drastic effect on what customers demand.
For retail organizations with an omnichannel strategy and the budget to support it, the tendency is to investigate and eventually incorporate any relevant new technology to support customer-centric functionality. The industry’s push for generative AI- and AR-enhanced experiences are two recent examples, with global leaders like IKEA bringing virtual showrooms to any shopper with a smartphone and Sephora using generative tools to let customers try on makeup without ever visiting a store.
The strategy is common for a reason. When retailers creatively use the technology at their disposal, they stand to make a lot of money and produce experiences that draw new customers in the door. But it can also result in companies doing away with working software before they really need to, often because they believe they need to upgrade portions of their estate to make it work with the new tools they’re integrating.
Upgrading your current estate isn’t the only way to take friction out of the integration process. While vendors themselves aren’t likely to point out ways to make old solutions work with new ones, collaborating with an experienced independent partner can help you find ways to save money that can be reinvested in innovation, keep software that works, and integrate the cutting-edge solutions your customers want, with little or no compromise needed.
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