Retailers take on massive legacy system challenges one module at a time

Discussion
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Mar 01, 2019
Andrew Blatherwick

There’s a sea change underway in how retailers are thinking about technology solutions. Increasingly, in meetings with even the larger retailers, I hear from executives who are no longer interested in major system replacements. Instead, they’re looking at smaller point solutions to drive change within their businesses. Of course, the choice between best of breed and enterprise systems is not a new question. What is new, though, is a trend toward implementing in parts rather than as a whole, even within best of breed solutions.

Retailers today are highly focused on fast return, and this is most easily accomplished by reducing the scope of the problem at hand. Enterprise resource planning (ERP) implementations present an immense strategic challenge because they touch almost every part of a business. For a successful implementation, a large number of internal stakeholders must buy into the project’s vision, then agree to move in the same direction at the same pace. It’s not hard to understand why ERP projects can be difficult to execute.

A focused project, rolled out in phases, can still affect many departments and stakeholders. However, these projects are far easier to strategize and implement. Companies are able to drill down on an exact need and address it surgically rather than compromising on their vision across the board.

In focusing a project’s scope, retailers address their most pressing concern: the implementation timeline. A full legacy system replacement is a years-long undertaking at best, but niche solutions and projects can be implemented in a much shorter timeframe — even within months.

Closely related to implementation speed is speed to ROI. The retail environment is highly dynamic and does not lend itself to long cycles of change. Short timelines minimize disruption and quickly put optimized processes into play.

As a result, retailers are better positioned to achieve continuous improvement as their business evolves — as it inevitably will. Instead of undergoing enormous change every few decades, retailers can target immediate pain points as they arise, evolving with the industry without falling behind.

When we consider how many companies still rely on legacy systems and how difficult it is to replace such a system in one fell swoop, it’s not surprising that retailers are moving toward a new model to achieve quick return. A strategy of implementing in parts equips retailers to match the unprecedented speed of change we’re witnessing. We should all take note.

DISCUSSION QUESTIONS: How can retailers develop technology strategies that keep pace with the rapid rate of industry change? What are the pros and cons of implementing long-term, company-wide changes vs. faster, more focused projects?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"A wise approach for any retailer, small or large, is to implement a technology upgrade strategy that is agile, adaptable and incorporates the IoT. "
"With the rapid changes in customer expectations and stockholders that are scrutinizing quarterly results, retailers need to act fast."
"I am going to push this one step further. Not only should retailers be looking to implement major new strategies in parts, but they should be sourcing the best-in-class parts."

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18 Comments on "Retailers take on massive legacy system challenges one module at a time"


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Chris Petersen, PhD.
BrainTrust

The most important criterion for replacing legacy systems seems to have been missed – impact on customer experience. While speed and ROI can be important, the race in retail today is to win and keep relationships with customers. If new systems simply “pave the legacy cow path” to make it faster, the ROI will be short term at best. The number one issue for today’s CTOs is how to make the customer experience seamless, faster and more convenient end to end. If the system changes make the retailer more relevant in ways that add value for the customer, almost everything else falls into place, especially ROI.

Kai Clarke
BrainTrust

As technology continues to change, and our expectations and perceptions along with it, it is simply not reasonable to expect that a company-wide change, embracing a different technology, process, system or procedure can be implemented each time. Moore’s Law continues to rule, as does the plethora of software systems to address peripheral issues within the retail universe. This alone mandates smaller changes within the sea change of retailing that many retailers address on a regular basis. When we start looking at larger scale shifts, these demand greater human and financial resources to implement (and check, train and replace) whether these are software, hardware or just physical layout issues within a technology. In the end, smaller is better. Controlled implementation is a requirement. Company-wide change is difficult, if not impossible, within a short period of time.

Charles Dimov
BrainTrust

I am going to push this one step further. Not only should retailers be looking to implement major new strategies in parts, but they should be sourcing the best-in-class parts. Today unified commerce and unified supply chain are both ubiquitous. The truth is that you don’t need this all coming from one vendor anymore. Good systems integration can unify systems that are designed for interconnectivity.

This means retailers can choose the best systems (OMS, POS, ERP, WMS …) from different vendors and connect them seamlessly. That also means they can get the critical parts of the solution in play faster (two to four months, instead of 22 to 26).

There is never a downside to getting to market faster with the right systems. The problem I see today is too many retailers thinking they need to drop their entire existing infrastructure, or a long term (think painful) process with a questionable ROI.

Bethany Allee
BrainTrust

This is why technologies like SD-WAN have seen extreme growth over the past five years. Solutions in this tech segment offer a cost-effective, dynamic platform for retailers to quickly implement new business applications and address/stay in front of rapidly evolving customer requirements/demands.

Bob Amster
BrainTrust

This is one of the most challenging decisions that heads of IT have to make. Ideally, all the component applications of an IT portfolio should be highly integrated, as there are very few business areas that can truly stand alone. But the reality is that some components exist only as point solutions. The best approach to implementing such a solution in a fraction of the time that it would take to replace a massive suite of applications is to select point solutions that provide application program interfaces (APIs) which reduce the amount of interface design that has to be done in order for point solutions to interface to the rest of the systems network.

Zel Bianco
BrainTrust
I really hope this is true. So many companies have taken the approach of implementing these years-long ERP system replacements so that nothing else gets done, to the detriment of sales solutions and other critical applications that effect the top and bottom lines. That’s not to say that ERP and other internal systems don’t need attention, they do, but when other solutions take a back seat to them, the only ones that seem to win are the big legacy software companies that are glad to keep the retailer paying out big dollars because there is no way to turn back. This same scenario goes for the internal IT projects that promise to deliver ROI and then a year and sometimes two years later produce very little to show for the money spent. Point solutions do work and do produce ROI in many cases, faster and at far less cost than can be accomplished internally. I have witnessed this to be the case over the last 25 years in this business many times.
Cathy Hotka
BrainTrust

In order to compete going forward, retailers need agile and adaptive technologies, which means leaving behind the technologies that took years to deploy. CIOs are ready to make the change; retail boards of directors should give them that ability.

Bethany Allee
BrainTrust

Agile and adaptive – amen!

Karen S. Herman
BrainTrust

Retail technologies are continuously evolving. Along with this fact, we have new technologies constantly emerging that can be excellent future solutions for today’s retailers. A wise approach for any retailer, small or large, is to implement a technology upgrade strategy that is agile, adaptable and incorporates the IoT. Targeting pain points is the first step and determining niche or small point solutions is next. Having a dedicated team to implement and educate is key. No technology can work effectively unless employees know how to use it.

Harley Feldman
BrainTrust

It is not surprising that retailers want to focus on projects that can be done more quickly and provide benefits faster. In today’s fast paced retail world, those that can provide better service more quickly can be the industry leaders. The trick is to create data standards usable across the organization and use tools such as cloud computing where the data is accessible from a shared platform more easily. By doing this, long-term company-wide changes can be implemented more smoothly and shorter-term projects can be done in isolated portions of the IT architecture.

Rob Gallo
BrainTrust

We are simultaneously in a major upgrade cycle for many existing retail applications and in the adoption phase for many new ones. Old tech has held up these cycles longer than necessary and still remains a headwind depending on the retailer. Many retailers have customized their solutions so significantly that it has become expensive to support and much harder to move away from. Business sense aside, these legacy systems and the IT resources that they tie up coupled with the lessons of the past are contributing to the lack of appetite for large-scale solutions. Less intrusive solutions are gaining appeal simply because IT can support them without adding resources.
We are seeing instances of point solutions being poorly scoped and ultimately underutilized. The implementations that go well have senior-level support, cross-functionally designed and approved requirements and the project management resources to keep everything on track.

Ken Morris
BrainTrust

With the rapid changes in customer expectations and stockholders that are scrutinizing quarterly results, retailers need to act fast. Most retailers don’t have the budget or time for a “rip and replace,” multi-year ERP implementation project. There are new options to achieve the advanced features of a connected enterprise, even if you have legacy systems. Implementing middleware platforms that can connect disparate systems is often the fastest and easiest way to offer retailers real-time visibility to information and systems across the enterprise. With the middleware in place, retailers can quickly deploy best of breed applications that have quick ROIs and offer significant operational and customer experience improvements.

This middleware strategy coupled with an Agile implementation methodology has achieved ROI in weeks rather than years. Implementing a minimum viable product strategy (MVP) with short cycle Scrum framework and Kanban lean methods applied to packaged implementations has worked extraordinarily well for our clients. The days of big expensive retail ERP implementations are numbered.

Ricardo Belmar
BrainTrust
The most important question to address in any legacy system change or upgrade is how it impacts the customer and their shopping journey. The goal should be to maintain a customer-first approach and from there determine what legacy systems stand in the way of great customer experience. Sometimes, this will point to non-obvious systems that need to be addressed. For example, deploying mobile POS as an upgrade to a legacy POS system is not only a payment processing system upgrade, but also potentially a wi-fi upgrade and store network upgrade to ensure the best performance. Adding a slow mobile POS would defeat the purpose of improving the customer experience. It’s true that for retailers who have been around a long time, it is much more difficult to enact system-level enterprise-wide technology changes as compared to a young startup retailer with few stores. Youth has its advantages in enabling quick technology deployments where fewer legacy systems are involved. For mature retailers, this will always require planning and it makes sense to break such projects into phases… Read more »
Sterling Hawkins
BrainTrust

This is more of a people question than a technology question. The most effective way to keep pace with technology is to build a culture of innovation. A team of people that can first embrace the change that’s happening and then step out ahead of it to create. Any technology (both long and short term) should be the result of great people working in service of each other, the business and the consumer.

Michelle Covey
Guest

Keeping pace with rapid change now requires a renewed focus on collaboration, industry standards, and external data sharing. Regardless of the size of the implementation, standards are needed to ensure accuracy and consistency in the data that feeds into new technology and systems—otherwise we risk perpetuating the same old errors and mistakes that ultimately frustrate consumers. The most forward-thinking retailers have found that standards are a core part of effectively meeting demand and to managing the growing and changing nature of trading partner relationships.

Dave Nixon
BrainTrust

The danger with this approach is the handoffs and disparate data that needs to flow to make faster decisions to improve the Customer Experience, where operational systems have a much bigger impact than people think. I agree with breaking down behemoth old legacy systems into more nimble infrastructure, but there is a risk of reduced scale and velocity across disparate systems. Data is the connective tissue between them. Don’t break that valuable chain or your CX will suffer.

Oliver Guy
BrainTrust

Retailers, as is the case with companies in many industries, lack the freedom to innovate and change fast enough in rapidly changing world. One factor behind this is that for the retail business model had not really changed for 150 years until 10 years ago — but now it is evolving at a phenomenal pace such that the disruptors now themselves face disruption.

New technology strategies need to go hand in hand with new cultural strategies to enable rapid learning, experimentation and change. Just like the cultural approach, the technology strategy needs to be agnostic of other technologies yet scalable and no longer be a constraint. It needs to give the retailer the freedom to change, the freedom to move and the freedom to support new business models and customer interactions that do not mean the retailer is constrained by the development roadmap of their software providers.

NAVJIT BHASIN
Guest
3 months 11 days ago

It is a perfect storm for most retailers trying to maintain constantly demanding service standards in a hyper competitive arena. The annual race to cajole a legacy system to perform new tricks and installed in time for the November lock down is a logistics and budgetary dash. The alternative, total ERP replacement, is a daunting economic and organizational undertaking. Everyone is no doubt familiar with multiple tear down and rebuild horror stories.

There is of course no magic solution. The ultimate path is different for every business with multiple variables to consider. The best clarifier in this fog is the constant flow of empirical data and feedback from one’s customer base coupled with ROI evaluations. If quick, incremental gains can be made via the plethora of “bolt-on” solutions available – let customer data prioritize what projects need to happen. At the same time, in the background, a strategic plan to overhaul legacy systems needs to be ready to go when incremental changes are no longer possible or uneconomic.

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Braintrust
"A wise approach for any retailer, small or large, is to implement a technology upgrade strategy that is agile, adaptable and incorporates the IoT. "
"With the rapid changes in customer expectations and stockholders that are scrutinizing quarterly results, retailers need to act fast."
"I am going to push this one step further. Not only should retailers be looking to implement major new strategies in parts, but they should be sourcing the best-in-class parts."

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