To Host or Not to Host
By David Dorf on Apr 28, 2009
On the heels of my posting regarding cloud computing for retail, I found an interesting article on A.C. Moore's hosted merchandising implementation. A.C. Moore, an arts & crafts retailer with 136 stores and 60,000 SKUs, knew it needed to improve operations with a merchandising system, but also knew it didn't have the IT staff to support one. So they turned to OLR to host their systems.
Not only did the hosted approach help accelerate the implementation of the applications, but it also enabled A.C. Moore's information technology group to stay focused on other strategic initiatives vital to grow the business. The model also helped eliminate A.C. Moore’s need to make capital intensive purchases for its data center and offered a leveraged support model that mitigated the risks associated with finding, attracting, and keeping application support resources.
OLR uses IBM servers running Oracle Enterprise Linux and has a dedicated T1 from their data center to A.C. Moore's headquarters. Clearly software-as-a-service (SaaS) has a place in mid-market retail. But how does a CIO choose the right model? There are three choices:
Traditional - retailer's hardware and software maintained by the retailer. High initial cost with medium ongoing costs. Has the most control (less risk from an outage and security perspective).
Cloud/IaaS -- vendor's hardware but retailer's software maintained jointly. Avoids capital expenditure for hardware, but allows for customized software. The cloud vendor maintains the hardware, OS, middleware, and database but the retailer maintains the applications. This is what web hosting has been doing for years. Very popular with start-ups b/c they don't have capital.
Hosted/SaaS -- vendor's hardware and software maintained by the vendor. This is basic outsourcing of applications made famous by SalesForce.com. Low startup costs, but possibly larger ongoing fees with less control regarding upgrades, etc.
I don't think there's an easy formula as the best solution depends on the starting point. But in general terms, the table to the right represents a good beginning. And of course, I'm interested in other people's perspective -- so leave a comment.