To Host or Not to Host

acmoore.jpgOn 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:

table.JPGTraditional - 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.

Comments:

I worked for a fairly successful retail pricing company and this table represents exactly what we saw. The large companies definitely want to get everything hosted on their site. They are not interested in SaaS or even in a co-hosted solution.
Though on the smaller companies, i really think there is not much of out of the box solutions for that cater to their needs. Its a hard sell when it comes to tier 1 to demonstrate value and justify ROI especially with enterprise products. The market is still mid to large retailers at this point.
If someone can come up with pay as you use service, i can see tier 1 companies jumping in. but i dont know of any such, so far.
thoughts?

Posted by retailTech on May 01, 2009 at 06:06 AM CDT #

There are a few SaaS companies like NetSuite that are focused on hosted-ERP, and as far as I know, they are doing well with mid-market but don't have much penetration in tier 1. But I don't know of any retail software vendors that have an end-to-end offering.

Posted by David on May 01, 2009 at 06:24 AM CDT #

I think companies will look at Cloud or Hosted models more from what is their core versus enabling applications. Retailers no matter their size would like to host core applications (planning, inventory, pricing etc) and will start looking towards low cost solutions for supporting/enabling applications like(HR, Payroll, GL, DW&BI etc).

Posted by Phani Kumar on May 17, 2009 at 06:06 PM CDT #

Post a Comment:
  • HTML Syntax: NOT allowed
About


David Dorf, Sr Director Technology Strategy for Oracle Retail, shares news and ideas about the retail industry with a focus on innovation and emerging technologies.


OpenWorld


Stay Connected
Blogroll

Search

Archives
« July 2014
SunMonTueWedThuFriSat
  
1
4
5
6
8
10
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
  
       
Today