Six questions every retail executive should ask about cloud computing

Retail executives need to evaluate what cloud computing can do for their business. Asking the right questions is the place to start.
By Michael Mojica, Jeff Stephenson and Alan Healey

No leader in business or government today can afford to ignore cloud computing.1 Many global organizationsincluding Starbucks and Citigroupare already using it to analyze data, provide applications to employees and run special projects.2 Media giants are reported to be working on a cloud-like service that will enable content to be delivered dynamically in multiple formats and on a variety of devices.3

And more cloud services will soon be available, as established IT and telecom providers including Accenture, Microsoft, Fujitsu, KDDI, China Mobile and SingTel join cloud pioneers like Google, Amazon and Salesforce.com.4 Given the momentum behind cloud computing across so many industries, it is not surprising that retailers are beginning to evaluate its potential and capitalize on the benefits it offers. When assessing what cloud can do for their businesses, retail leaders need to take into account the distinct and rapidly-evolving challenges that the retail industry faces today. These include the fundamental and ongoing changes in the way retailers communicate and transact with their customers; capture, manage, protect and analyze their ever-expanding collection of customer data; manage to decrease their IT operating costs while upgrading their capabilities;

and expand into new and emerging markets at low cost. As you will read in this paper, cloud computing has the potential to deliver significant benefits in all these areas. However, even with the optimism that surrounds the potential of cloud computing, its entry into both commercial and government sectors generates difficult questions. While cloud can undoubtedly bring significant benefits to retail businessessignificantly reducing the required capital investment in infrastructure, while also opening up new opportunities to reduce operating costs and work in new ways questions and concerns remain about issues such as the security of customer data, a feared loss of control over business-critical applications, and the reliability of cloud technology for retailers most critical customerfacing systems. Also, while cloud

computing promises to deliver a wide and powerful range of capabilities, the technologys disruptive and pervasive impact makes it hard to evaluate its longer-term costs and risks, and its potential uses are exceptionally broad and difficult to foretell. What is clear is that cloud will affect how computing strategies are developed and managed, how information is controlled, and how the economics of business technology are applied in retailing. Experience to date shows that the significance and effects of the cloud vary widely between different industries, and even different companies in the same industry. Faced with such uncertainty, it is all too easy for decision makers to succumb to analysis paralysis or the temptation to leave all decisions to the IT department. But cloud computing is too important for such a hands-off approach.

Cloud computing is a massive trend in IT. Broadly speaking, whats disruptive is how much lowering the cost side will accelerate movement into the cloud and make it easy for retailers to try new things.
Neeraj Agrawal of Battery Ventures
Source: Caught in a Cloud: Technology Revolution Reinventing Retail, Womens Wear Daily (WWD), 20 January 2010

Executives in retail businesses face different challenges from their counterparts in other industriesand need to scrutinize their decisions about cloud computing through a different lens. Specifically, they need to take into account the impacts on their business from the following six industry-specific factors:

3. Analytics
Customers expect better and differentiated services based on the valuable data they are providing. Retailers not only need to collect this valuable information but must also analyze it in combination with sales, marketing, and supply chain data, to better serve and communicate with their customersthereby improving both their top and bottom lines.

5. Data security
Companies and customers need to know that their data is safe. Given the vast amount of data retailers possess, it is paramount that their corporate data and more importantly the data their customers entrust them with is safeguarded.

1. Customer
The model for communicating and transacting with customers is evolving from anonymous cash transactions to customer-identified loyalty transactions executed in-store, online or via mobile phones.

6. Emerging markets
Retail is one of the fastest growing industry segments in emerging countries, where proprietary retailers need access to highly scalable capabilities at a low cost of entry.

4. Capabilities and cost reduction

Retail is traditionally a low margin industry with limited capital to invest. Combined with the fact that most retailers are operating with increasingly antiquated systems, they are looking for low cost opportunities to upgrade their capabilities, while decreasing the operating costs of those that will remain.

2. Data
Retailers manage an immense amount of data between their customers, products, stores, sales, marketing, and supply chain. The cost of capturing and maintaining this ever expanding data is expensive on traditional architectures.

From legacy systems to cloud: a roadmap for retail

Accentures ongoing Retail Technology Vision research program1, together with our continuing engagements and contacts with retail clients and their consumers, has enabled us to build up a clear picture of the challenges and imperatives retailers will face in 2020. Cloud computing can make a major contribution to their efforts to meet these. Why? With capital already tied up in IT infrastructure, the next decade will teach retail supply chains to augment existing solutions with evolving, albeit proven, technology that will keep them flexible and successful going forward. The retail industry has already proven to be adept at adopting and capitalizing on innovative technology solutions. To date, these innovations have included mobile applications, advanced analytics and digital receipts. In our view, cloud computing represents the next step in this progression and its adoption will be supported and accelerated by three important catalysts: Pervasive global penetration of the Internet Higher broadband penetration, enabling faster and easier Internet access The ongoing rise in bandwidth connectivity speeds Retailers are already capitalizing on these shifts to move towards cloudtype solutions, by using cloud at the application level under Software-as-aService (SaaS) models, with customer relationship management (CRM) and supply chain management (SCM) as the initial preferred targets. But this is just the start. As Figure 1 shows, the processes being targeted for current and future SaaS implementations include merchandising, payroll, multichannel order management and HR.

1. See information panel on page 17 [Retail Technology Vision]

Figure 1. Processes targeted for current and future SaaS implementations Percentage of respondents CRM Supply chain procurement and fulfillment Merchandising, pricing and promotions Enterprise payroll Multichannel order management and fulfillment Enterprise HR Point of service in store Labor management in store Inventory management in store Enterprise finance Other 14 29 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70
Gartner, Inc. Source: Survey of Retailer Use of Software as a Service September 15, 2009

68 57 39 36 32 32 25 21 21

Furthermore, other studies show that retailers are more interested than companies in many other sectors in adopting cloud-based solutions or services (see Figure 2). Private clouds use cloud computing technologies but are ring-fenced within an organizations internal network or with trusted partners, with the aim of delivering some of the benefits of cloud computing while alleviating concerns over data security, corporate governance and availability. Companies in many other industries are also taking this phased approach, testing out private clouds before considering a move to public or external clouds. However, while the direction in retail is toward adoption of cloud computing, there are still some bumps in the roadas shown in the accompanying extract from a Forrester Report.

Forrester expects that firms that choose to compete on price leadership will continue to seek success through standardization of everything in the IT stack. But for firms that pursue product and service innovation or customer intimacy, CIOs will develop skills in orchestrating services in cloud and on-premise to support colleagues in pushing the boundary of process-based differentiation.
Distributed Enterprise 2.0, Forrester Research, Inc., July 2009.

Figure 2. What is your company's highest level of awareness or interest in building and operating an internal cloud or pool of pay-per-use virtual servers? Retail and wholesale Utilities and telecom Business services Manufacturing Finance and insurance Public sector Media, entertainment, and leisure 21% 21% 21% 25% 22% 25% 31% 37% 39% 31% Not interested Implementing in the next 12 months 25% 31% 30% 28% 15% 20% 19% 28% 23% 21% 27% 20% 17% 12% 6% 11% 5% 4% 8% (N=81) (N=93) (N=154) (N=256) (N=144) (N=161) (N=55)

12% 4% 4% 4% 13% 3% 12% 1% 6%

7% 4% 5%

Not aware (includes dont know) Interested and planning budget for it

Interested but no budget for it Already Implemented

Base: North American and European enterprise handware decision-makers (percentages may not total 100 because of rounding)
Source: Cloud Infrastructure-As-A-Service: Interest And Adoption By Industry, Forrester Research, Inc., May 2009

Barriers to SaaS Adoption

Despite all the talk, large Tier 1 retailers still have a long way to go before they will put their money where their mouths are. These retailers always had concerns about ceding control to the provider of SaaS solutions, and inhibitors to adoption of SaaS by this market include concerns about: Maturity of solutions and credible implementations Complex integration with onpremises applications and follow-on effects of ongoing upgrades to the SaaS solutions or the on-premises applications

Data security, particularly of sensitive customer information Levels of investment that may be needed to set up, oversee and maintain the necessary safeguards of data, particularly where there is regulation and statutory compliance to data privacy laws, which can vary from country to country Vendor credibility Vendor viability regarding ability to deliver and manage large-scale implementations Quality and availability of the service

Six key questions

As with most technologies, the significance of cloud computing differs widely from industry to industry. Accenture has identified six key questions that retail decision makers should ask about this still-new phenomenon. By focusing on these questions, executives can narrow their inquiries and start to identify opportunities and risks that will impact their own companies. We will now examine each of these questions in turn.

1. What is cloud computing, and how does it work?

At its most basic level, cloud computing allows users to obtain computing capabilities through the Internet, regardless of their physical location. Computing clouds are in essence online, supersized data centers containing hundreds of thousands of servers hosting web applications. Cloud services from raw infrastructure to complete business processes can be purchased through web interfaces and turned on and off as they are needed. The characteristics of cloud services include: Little or no capital investment Variable pricing based on consumption; buyers pay-per-use Rapid acquisition and deployment Infinitely scalable Lower ongoing operating costs For business people, cloud computing can seem too good to be true; plenty of computing power and no expensive IT infrastructure. Cloud computing lets organizations bypass the expense and lead time of buying, installing, operating, maintaining and upgrading the networks and computers found in data centers. Instead of licensing software, users tap into a service when its needed for as long as its needed. All that is required is a broadband Internet connection and a mobile device or personal computer with a browser to access and activate the cloud service. As with most utilities, organizations pay by the kind and amount of services used, plus any additional fees. Once the cloud-based service has been initiated, the data processing is done on the back end in the remote data centers. Clouds are designed so that processing power can be added simply by attaching more servers; everything is virtualized so that software can be run on any available server with excess capacity. And because everything is hosted in the cloud, users can run processes, build applications and more without loading each and every tool onto their computers.

"The combination of affinity analytics and cloud computing is already having a fundamental impact on the retail industry. Because of the flexible and scalable nature of affinity analytics distributed via the "cloud," retailers can identify and analyze customer behavior patterns across hundreds of millions of records (including individual purchases, product categories, stores Web site clicks, and demographics) at a fraction of the cost of traditional analytics software. Affinity analytics is leveling the playing field between large and small retailers, giving every retailer access to the sophisticated tools they need to improve their business results.
Brian Kelly, CEO of Quantivo
Source: What you dont know can hurt you, Retail Merchandiser, January-February 2009

The basic technologies are well established and can be duplicated by any organization. This makes it possible for retailers to potentially build private clouds, restricted infrastructure that uses cloud computing technologies but is only shared by approved organizations. Private clouds can be used within single companies or possibly be shared with business partners. Clouds the size of those run by Microsoft, Amazon and Google require additional technologies so they can support many millions of users around the world without becoming sluggish.5 Given the specific challenges that retailers face around securing personal identifiable information (PII) and payment card information (PCI) establishing a common, secure infrastructure for processing this information is a critical requirement. In addition, unique cloud services and applications specific to retail are beginning to emerge. These are rented on a capacity or per usage basis and range from merchandise financial planning applications to customer analytic business process outsourcing services.

This description barely touches the underlying complexities. But for business leaders, it gets at the crucial point: with cloud computing the provision of IT power becomes someone elses problem. Cloud computing opens the door to new capabilities including new business processes and new application solutions that are retail industryspecific at a price point that is remarkably lower than traditional solutions implemented only 1-2 years ago.

2. What benefits can cloud bring to my company?

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Figure 3. Initial opportunities for using clouds Accenture has identified many different possible uses for cloud computer
New businesses Provide IT support for new ventures

Easy

Business continuity (storage) Extensive storage Backup and recovery

Ease of Implementation

Batch and data intensive applications One-off applications that dont rely on real-time response Software development and testing Data and high performance intensive applications Software development and testing environment (financial risk modeling, simulation, Performance testing data compression, graphics rendering) Non production projects New back-office applications R&D activities Desktop productivity Reduced time to market Web 2.0 applications Peak load demands Workgroup applications Geographic expansion New business activities Office suites Replicate standard processes in new Applications w/ peak-loads Email and calendaring locations and branches. Seasonal websites Applications with scalability needs Sensitive applications Mission critical applications Regulation-protected-data (HIPAA, SOX, PCI)

Hard

Legacy Specific existing infrastructure Complex legacy systems

Value to the Enterprise

Source: Accenture Technology Labs

High Value 2

The three top benefits of cloud computing talked about today are cost, flexibility and speed to market. However forward looking companies are thinking about how cloud technologies will change the face of their operations (see question 5).

Flexibility
Clouds offer extraordinarily flexible resources because of their technical design. Clouds can be summoned quickly when needed, grow by assigning more servers to a job, then shrink or disappear when no longer needed. That makes clouds well suited for sporadic, seasonal or temporary work, for finishing tasks at lightning speed and processing vast amounts of data, and for software development and testing projects. Clouds can also supplement conventional systems when demand for computing exceeds supply. And since they are an operational expense, cloud services can often bypass the capital-expense approval process, and thus be quicker to procure than conventional systems. In the case of the pharmaceuticals company mentioned above, using clouds shaved three months off the IT budget and approval process, resulting in faster time to market and $1 billion in opportunity costs avoided.

Speed
Cloud technology has the potential to empower a programmer to create a software service using free or low-cost development tools, and quickly make it available to all. This capability can help organizations to become more agile and responsive, as well as increasing their ability to impose a standard set of applications or processes enterprisewide. For those applications that require a great deal of IT infrastructure (servers and storage), cloud can significantly shorten the lead time to procure, deliver, and install the service. Overall, a properly implemented cloud architecture can mean the time and costs of provisioning an innovative IT service have never been lower.

Cost
Low prices on cloud services are a big part of their allure. For example, a major pharmaceuticals group was reported to have paid Amazon Web Services only $89 to analyze data on a drug under development a job that would have required its researchers to buy 25 servers to perform in-house.6 Add the savings from eliminating the cost of servers, software licenses, maintenance fees, data center space, electricity and IT labor, and the benefits of replacing a large up-front capital expense with a low, payfor-use operating expense, and the financial appeal of cloud computing is obvious.

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Cloud Computing Solutions are an Excellent Fit for Retail Operations

Figure 4. Basic core functions of a retail business Human resources
Sourcing and new product development Product lifecycle management Category management Range planning Space optimization Price optimization Promotion optimization Markdown optimization

Supply

Supply chain management Inventory planning, forecasting and replenishment Warehouse management Transport scheduling and optimization

Customers

Retail and channel management Store clustering POS (fixed and mobile) Stock control Loyalty card management Labor scheduling and training Sales kiosks Website and social networks Loss prevention

Marketing spend analytics Advertising and communication

Demand generation

Source: Accenture analysis

Finance

The capabilities of cloud computing are ideally suited to running retail businesses, given retailers core functional activities, and their constant need to manage supply and demand proactively throughout the value chain: Figure 4 sets out the basic functionalities inherent in the retail industry. Accenture industry templates for all of these functions already exist, and each of them can beand are beingdelivered as a service to clients. At the same time,

the increasing complexity of retail operations, including the need to keep track of Stock Keeping Units by store, is demanding ever-greater processing power, data storage and bandwidth. Mid-tier retailers in particular face challenges in findings the cash and the skills to develop the capabilities they need to thrive.

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3. How can cloud computing help address the specific challenges my company faces?

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Leveraging social networking on mobile handsets If retailers want to harness the power and reach of mobile devices and social networking tools such as Facebook, they cannot ignore cloud computing. Both of these options utilize cloud technologiesso if a retailer does not embrace cloud, these opportunities will not be available.

The retail industry has faced tremendous change in recent years, probably more significant than at any time in recent history. Companies are having to readjust to the new business environment to survive and thrive in what has become a truly multichannel world: Relentless focus on customers and bringing them back to the center of decision making in marketing and merchandising Integrating data and processes across the organization to dismantle the business silos that exist today Re-assessing the high costs and brittle operations of their technology platforms Equipping operations to deliver in a multi-channel environment It is our view that cloud computing has the attributes to help companies in the retail industry make these changes through the combination of low capital investment costs, standard

applications and platforms, quick deployment and lower running costs. Here are some of the changes to IT that we think many companies will need to make and how cloud is part of each solution:

applications across the businessare massive undertakings, and cloud solutions can offset costs and speed implementation.

1. Platform consolidation, rationalization and virtualization

Many retailers are looking at massive consolidation and transformation of aging applications and antiquated platforms in order to realize the benefits of both private virtualization and cloud, while reducing infrastructure costs from the data center to the desktop. More generally, if retailers want to continue to innovate in their systems, they cannot afford to ignore cloud computing.

3. Ubiquitous customer touch points

Customers are choosing to engage with retailers through multiple channels to become omni-channel consumers, driven by convenience, location, ease of use, availability of technology and other factors that were not taken into account even a few years ago as many core retail systems, processes, and capabilities were being developed. These new customer engagement models are changing rapidly, driving retailers to adopt more innovative solutions quickly and cost effectively. To support and enable this change, many emerging solutions in this space are cloud-basedleveraging capabilities and infrastructure that are not installed within a retailers data center. Whether its social media platforms, e-commerce engines, search optimization services, or mobile computing solutions, these capabilities
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2. Data Centricity
Many of todays applications operate within silos (e.g. product, departmental) with hard coded business functions that are antiquated and narrowly focused. Building or upgrading enterprise data centers and building new data centric

all exist "in the cloud" and can enable a retailer to engage with its customers in unique and novel ways without the level of capital investment typically required to build and support a new channel.

4. Global Expansion
As a growing number of retailers expand across national borders and become multinational organizations, they face the daunting task of standing up the technology infrastructure to support their new global operations. Cloud can substantially impact the related costs and speed to deliver. Put simply, if retailers want a global footprint, cloud is now the way to deliver it.

power. Retailers will need to have access to massive computing capacity to handle the periodic demand for analytic processing power and the traditional spikes in seasonal consumer demand. In addition, as new analytical business processes become available as a cloud service, retailers will further benefit from not just computing capacity but also on demand business capabilities.

into standard applications where more control can be maintained.

8. Enterprise Risk Management

Almost all retailers are still facing significant upgrades to their enterprise risk capabilitiesin particular technologies that manage data like real time information hubs, complex event processing, business warehouse analysis, etc. Again it is our belief that cloud based solutions may be suitable for many of these services.

6. Sourcing
Cloud can enable dynamic sourcing of IT capacity from multiple vendors with companies able to dial up and down capacity as required based on price and service level.

5. Pervasive Analytics
As retailers continue to increase their reliance on the science underlying retail, analytics will take on an ever increasing role. This focus will create an evolving need for dynamic analytical capacity and computing

7. Automation
Many retailers still have a high degree of manual, spread sheet and other forms of personal processing. New regulations and risk management processes will force this to change (e.g. Sarbanes-Oxley). Cloud solutions can help to move data off the desktop

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Accentures Retail Technology Vision: Retail Challenges in 2020

Consumer challenges
Accentures ongoing Retail Technology Vision research program maps out the future for retail over the next decade and beyond. Our top-line consumerbased predictions for retail in 2020 are that consumers will want more information, more service and more interaction. Specifically, this will mean: Shoppers will choose multi-channel shopping and buying as never before. Shoppers will demand an innovative shopping experienceacross all channels. Consumers making a trip to a physical retail location will be looking for a higher level of service and interaction. Retail locations will be a convenient and enjoyable experience and a social outleta place to try the product, or a place to gather the information needed to make a purchase. Retailers will leverage multiple formats to satisfy various consumer needs and to manage capital investments. Store offerings will be targeted and highly tailored to local market and precision retailing will be required. If these consumer-based predictions come about, we believe they will bring three major implications for retailers IT assets and capabilities. First, the level of data and information passing between stores, head offices and manufacturers will require fat pipes. Second, the level of analytics needed by all surviving retailers means that every retailer will need a full range of optimization engines on top of its core enterprise systems. And third, retailers of all sizes will need to use cloud-based approaches to radically transform their IT delivery approach, so they can substantially re-engineer their cost bases.

Supply chain challenges

In terms of our top-line supply chainbased predictions for retail in 2020, we believe that a new ecosystem of suppliers, distribution and retail will be needed, underpinned and enabled by real-time data sharing and analytics. Specifically, in 2020: Winning retailers will design a supply chain that is predicated on inventory arriving at the store shelf just as the need emerges. Rising real estate costs and space shortages mean that retailers will not be able to carry excess inventory. Shared logistics will be needed, allowing retailers to avoid tying up capital in inventory and to free up labor spend. Tailored assortment selection and space allocation by retail location will become a differentiating and critical capability. Again, these supply chain-based predictions will bring three major implications for retailers IT. Firstly, new business models will be required which redefine the value chain as a value web (ecosystem). Secondly, this ecosystem will require IT systems which share data across all members of the ecosystem. And thirdly, real time analytics processing will be needed to manage the flow of stock through and across the ecosystem.

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4. Can I depend on clouds to save my organization money?

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Cloud computing will reduce retailers need for IT staff. You dont have to run a big data center 24-7. You can outsource a lot of the physical aspects of managing a data center to the cloud and focus on your mission-critical retail systems.
Howard Morgan of First Round Capital
Source: Caught in a Cloud: Technology Revolution Reinventing Retail, Women's Wear Daily (WWD), 20 January 2010

CIOs say they are finding real savings from cloud computing. Accenture estimates its own IT organization could save up to 50 percent of its hosting costs annually by transferring most of its applications to infrastructure clouds.7 Bechtels CIO benchmarked the companys internal data center and storage against those of Google, Amazon and Salesforce.com, concluding he could greatly reduce his per unit costs by creating an internal cloud.8 Clearly, executives should not take the promises and projections of cloud savings at face value. The articles about companies that have saved money rarely explain how these savings were calculated, and several apparently rigorous analyses of cloud savings have been attacked as unrealistic.9 And while Accentures internal IT organization has moved internal applications to the cloud, it has not done so in several cases because the cost of hosting the system internally, in an optimized United

States based data center or in one of its Indian facilities, is less than that of an external cloud service. Executives therefore need to look closely into the costs of cloud computing for their organizations. They should seek rigorous ROI case studies based on actual cloud usage, rather than estimates of anticipated savings. Hardware, after all, is a relatively small component of data center costs. They need to uncover the hidden management, transition, and usage costs that reveal themselves only when organizations start to work with the technology. They need to evaluate the pricing models of different kinds of cloud services. And they need to work with the finance department to develop a consistent and acceptable approach to measuring the costs and return from clouds. Only then can they reliably estimate the savings. In addition, the following factors will be critical for companies to realize the greatest possible benefits:

Adopting common standards that make sharing easier Using standard, "fit for purpose" service levels as much as possible, according to requirements of the specific application Applying security and data privacy restrictions appropriately and, again, standardizing the number of different levels as much as possible Overcoming any departmental ownership issues so as much work can be moved to the shared cloud as possible Taking care to maintain flexibility around procurement to avoid being locked into specific supplier arrangements

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5. How will clouds affect the way my company operates in the future?

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Companies that have built massive clouds are already transforming the nature of competition. Googles advertising-supported search engine and tools and Amazons online retail operations are all made possible by the computing clouds created by those companies. Cloud-based consumer applications such as Facebook and iPhone applets are driving innovation in unpredictable ways, and we may see retail companies making similar leaps that leverage cloud computing. Examples include:

Cloud computing holds great promise for retail, perhaps finally fulfilling the objectives of the data utilities promised 20 years ago by Ma Bell and Allied Department Stores. There are some risks to be minimized, of course, and multiple implementation strategies to consider.
Richard Mader, Executive Director of ARTS (Association of Retail Technology Services)
Source: Clouds on Retails Horizon Stores, September 2009

5. Statements and Reporting

Production of customized reports based on cross-platform organizational data may be served by cloud-based solutions. As with benefits, it is difficult to fully gauge all of the ways in which the cloud will change how retail companies will operate. Decision makers will need to perform a thorough assessment to understand how clouds can help them. In particular, strategists must investigate what new services should be pursued using cloud computing, while CIOs must track the evolution of the technology and the market for cloud services, to ensure that strategic ambitions do not outrun the capabilities of the technology. CIOs will also need to mature their systems management and operations tools and processes to seamlessly manage a heterogeneous traditional (non-cloud) and cloud environment, which needs to co-exist in the future. More generally, retailers that fail to embrace the cloud may find their IT options and ability to contain costs become increasingly limited over time. There is a growing view that if retail businessesor indeed those in other industrieswant to continue to take advantage of packaged software application in the future, they may find that most of this software is written only for the cloud, and that if they havent created a cloud-friendly or cloud-relevant IT environment they will not be able to benefit. This view is supported by the fact that venture capitalists investing in the software industry are increasingly focusing on funding new entrants who are building their applications for the cloud.
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1. Customer Interaction
The nature of how retailers communicate and transact with their customer is changing. Delivery of offers to consumer in real-time at point of need/relevance is essential. Cloud based solutions that deliver relevant offers to customers through appropriate channels prior to and during the customers shopping trip will be valued. Mobile solutions already exist today that leverage locationbased capabilities of mobile phones to engage and promote to the consumer based on their specific geographic location.

2. Customer Analysis
Efforts to segment and market to specific customer groups require a great deal of data and computing power and may be well served by cloud based solutions.

3. Real-time Analytics
Scenario modeling, what-if analysis, and forecasting, which are "lumpy". data-intensive processes, are great candidates to be served by cloud based solutions. Customer programs, marketing, merchandising, and pricing all stand to benefit greatly from such capabilities.

4. Faster Access to Capabilities

As software vendors continue to build capabilities on cloud architecture, retailers will experience faster implementation and access to software and technology at lower cost.

6. What about assurance of security and data privacy?

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Various surveys tell us that security and data privacy remain prime concerns for cloud implementers in the retail sector. The fear of their data being in the cloud is often the single greatest hurdle that leaders must overcome to build trust and gain the benefits from cloud computing. CIOs are concerned that their data could be stolen or compromised by hackers, mixed with data from their cloud providers other customers, or released by mistake. Any of the above could expose companies to compensation claims, public embarrassment, lawsuits and "brand damage". Many companies today have very specific challenges in areas of security and data privacy. Their existing IT estates consist of highly fragmented landscapes of security and data privacy approaches and policies taken across different departments. This in turn carries a lot of risk and cost. Using the move to cloud computing to drive more consistency and automation in security and data privacy may actually provide a catalyst for driving greater security and reduced costs. Companies need to adopt a very practical approach to thinking about security and data privacy in the cloud. Data comes with different levels of sensitivity, from low level (published widely and no restrictions) to ultra secure (highly confidential customer financial information). In the same way companies will need to design their cloud to have similar and appropriate security built in, through a managed combination of both private and public clouds. So, for example, low level data and access may well be suitable to go onto a public cloud infrastructure service with simple password access, whereas ultra secure data may require dedicated secure servers housed in ultra secure data centers with strong authentication required for access. There will be several different levels of security in between. Building and managing a secure and flexible infrastructure cloud using a combination of private and public services will provide the key for companies to gain the enormous benefits that cloud computing can provide.

"Gartner projects that cloud-based online retail payment acquiring services will grow from $3.2 billion in 2009 to $5.3 billion by 2014, a CAGR of 10.5%."
Source: Forecast: Cloud-Based Online Retail Payment Services, Worldwide, 2010, 10 March 2010, Gartner

It is also important that as companies choose cloud service providers they include security and data privacy capabilities as a major part of the selection criteria. The key to understanding security in cloud computing is to realize that the technology is not a break with the past. Instead it represents the logical next step in the outsourcing of commodity services to many of the same trusted IT providers that have been leaders in the field for years. We recommend that companies take the following into account: Work with your provider to determine its attention to security, privacy, and compliance with data laws in all relevant jurisdictions. Make sure the provider can achieving parity or better levels of security, privacy, and compliance with law than you have today. Remember that the security of the cloud should be equal to the most risky client that is serviced by the provider. Rigorous risk assessment is a complex undertaking that represents the key to effective security in the cloud. Require your cloud computing partner to provide you with its risk assessment and how it intends to mitigate any issues found. If the cloud provider does not have a seasoned Privacy Officer and a client-facing CSO, CISO, or equivalent security role, be very careful. It is a sign that the provider doesnt take security seriously enough. Schedule mandatory monthly discussions with the cloud providers top privacy and security people. This discussion should flow both ways with no hidden items.

The cloud provider should have the ability to map its policy and procedures to any security mandate or security/privacy/compliance driven contractual obligation you face. Pay attention to your cloud providers adherence to secure coding practices.

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Taking the first steps

Retailers need to consider how to take account of and plan for cloud computing services such as:

Services
Cloud services including new business processes such as analytical services are rapidly becoming available for retailers to leverage. The ability to achieve a step-change in capability through these cloud services offerings enhances the competitiveness of retailers and enables more timely innovation. As we highlighted at the start of this paper, cloud computing is too important a technology to leave entirely to technologists. While the work of migrating from conventional to cloud computing is likely to fall on the shoulders of the CIO, other senior executives have important roles to play. To make sure an organization maximizes benefits and minimizes risks, executives must:

Infrastructure
CPU, memory, and disk capacity available on demand, real time, and usage based will be a big driver of benefit.

Architecture
The technology architecture for the retail IT organization can be evolved to take greater advantage of cloudrelated services. This is an important step to taking advantage of emerging capabilities and services available in the cloud.

Ask hard questions and demand data-based analyses regarding cost savings. Dont assume automatic and substantive cost savings. Do an ROI analysis. Consider conversion and ongoing costs as well as savings. Dont be intimidated by the jargon. Experiment or pilot on low-hanging fruit such as workgroup applications, or on a non-mission critical, nonintegrated application. Then be ready to scale once youve proven the benefits are worth it. Establish a clear governance structure for cloud computing. Many organizations have rules and structures in place that govern how IT decisions are shared between departmental leaders and IT executives. Use them (and if they dont exist, create them) to decide who inside and outside the IT organization should be engaged in decisions on cloud computing, and what decision-making rights and responsibilities they have.

Applications
Commercial cloud-based retail applications that provide industrialstrength functionality are emerging and growing rapidly.

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 Keep cloud efforts on track: Make sure cloud computing receives the focused thinking, planning and followup it requires. Use the answers to these six questions to identify and address both immediate and longerterm business needs and opportunities that lend themselves to cloud computing, to develop a plan for using public and perhaps private clouds, and to gain the capabilities the plan requires. Make sure the organization senses and responds appropriately to the impact clouds are having on their operations. Set the standards for success: Provide the necessary oversight to the IT organization. Make sure goals and deliverables are well understood, and projects are well aligned with business needs. Clarify how the value from cloud computing is to be determined: which quantitative and qualitative benefits are sought? And consider what else constitutes success besides value achieved and projects completed: skills developed, partnerships established, and risks addressed.

Provide the necessary support: Besides financial resources and technical talent, support other activities that will underpin the success of cloud initiatives. For example, organizations may benefit from a community of practice or a cloud program office to develop the skills and share the experiences of people engaged in cloud projects. Buy cautiously, appraise frequently: Its too early to predict who the major cloud providers will be in a few years, what capabilities they will deliver, when they will deliver them, and how well. So when selecting cloud providers, carefully consider whether they have the potential to be a desirable partner in the future. Even after they are chosen, evaluate your partners on their financial stability, as well as their ability to improve functionality and service levels, to integrate data across different technology platforms and cloud services, and to deliver on their promises.

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The retail industrys migration to cloud: not a question of if, but when
While it may take time for companies to transition to cloud computing, beginning the journey early can deliver some substantial financial benefits. Executives are still grappling with its risks, possibilities, and the cost of writing off current IT investments. However, for several companies the transition to a hybrid cloud environment is already under way. The capabilities and potential savings from clouds are too great to ignore. In addition, software developers and venture capitalists will be drawn to this new market. The low development cost, short development cycle, and quick return on cloud services are irresistible. This means future IT advances and innovations are much more likely to be based on clouds than conventional computing. The critical issue isnt whether cloud computing will become a fundamental technology in the next decade. It is how successfully companies will profit from the capabilities it offers. Managing the new cloud capabilities with all the existing legacy systems in a way that is seamless to business units and users will be critical to achieving the benefits and managing the risks.

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Reference
1. What the Enterprise Needs to Know About Cloud Computing, Accenture Technology Labs, October 2009; Gartner Identifies the Top 10 Strategic Technologies for 2010, Gartner, Inc. press release, October 20, 2009; 2009 (Cloud Computing in 2009 Forum dossier), Chinese Institute of Electronics Cloud Computing Experts Association, http://server.it168.com; The Cloud Wars: $100+ billion at stake, Merrill Lynch, May 7, 2008; Avenade 2009 Global Survey of Cloud Computing, http://www.avanade.com; Laurianne McLaughlin, Cloud Computing Survey: IT Leaders See Big Promise, Have Big Security Questions, CIO Magazine, October 21, 2008. 2. Eric Auchard, Salesforce.com Signs Citigroup Deal, Reuters.com, November 15, 2007; Salesforce. com Powers Starbucks Campaign to Mobilize Americans in National Service, Salesforce.com press release, January 21, 2009, http:// www.salesforce.com; Ron Condon, The Opportunities and Risks of Cloud Computing Services, SearchSecurity. co.uk, February 23, 2009. 3. Ethan Smith, Disney Touts a Way to Ditch the DVD, Wall Street Journal, October 21, 2009. 4. Ben Worthen and Justin Scheck, Tech Giants Ramp Up Their Online Offerings, Wall Street Journal, June 22, 2009; Cloud Services/SaaS: What Telcos Are Doing, IDC Technology Assessment, October 2009; China Mobile Enters Sphere of Cloud Computing, Interfax, November 17, 2009; Bernard Golden, The State of Cloud Computing in Japan, CIO.com, November 5, 2009; SingTel to Help Establish Singapore as a Regional Cloud Computing Hub, SingTel press release, July 14, 2009; Chris Preimesberger, Fujitsu Launches Cloud Services in North America, eWeek. com, December 8, 2009. 5. Luiz Andr Barroso and Urs Hlzle, The Datacenter as a Computer: An Introduction to the Design of Warehouse-Scale Machines (Morgan & Claypool Publishers, 2009). 6. Condon, ibid. 7. Pressure Performance: 2009 IT Report, Accenture CIO Organization, November 2009. 8. CTO Roundtable: Cloud Computing, Communications of the ACM, Volume 52, Number 8 (2009), Pages 50-56 http://queue.acm.org; Gray Hall, Bechtel Harnesses the Cloud: Case Study of an Enterprise Cloud, Cloudstoragestrategy.com. 9. Cloud Coockoo Land Computing, dotfuturemanifesto.blogspot.com; Andy Greenberg, Deflating the Cloud, Forbes.com, April 15, 2009

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About the authors

Michael Mojica works in Accentures North America Retail practice, and has over twenty years of experience in IT strategy, systems and technology, and complex program delivery. Throughout his career, Mr. Mojica has worked closely with clients across industries to align technology strategy and program execution with organizational business goals and imperatives. Mr. Mojica is based in Chicago, IL. michael.mojica@accenture.com Jeff Stephenson is a Senior Manager in Accentures Retail practice. Mr. Stephensons focus is bringing innovative solutions to businesses leveraging his industry experience, business and technical background. He has extensive experience leading large analytical and IT projects. jeffrey.m.stephenson@accenture.com Alan Healey is the executive responsible for leading the Cloud Computing Program for the Products Operating Group within Accenture. Retail is an industry sector within the OG. Alan has 25 years experience in outsourcing and managing large programs of work. He has operated across multiple industry sectors, managing several of Accentures most significant long term contracts, covering also areas such as transformation change, commercial management, and service management as well as technical delivery. He has held a variety of management roles within Accenture. He is based in London. alan.healey@accenture.com

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