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Retailers often use the term ‘technological debt’ when their systems become increasingly misaligned with their business. The term implies that their IT foundation suffers from missing functionality, poor speed, low data accuracy, and inability to access information in real-time. Retailers then start thinking that they need to introduce a new system, or add more parts to the existing one.


Yet, the actual source of technological debt often stems not from what’s missing but – paradoxically – from an excessive number of systems running in the enterprise. Like living in a cluttered room, moving around becomes increasingly awkward every time you buy something new. Eventually, even the good parts can’t work well in the crowded space.

Such tangled IT doesn’t appear by accident. Invariably, it originates from flaws in strategic thinking.

One of the key strategic objectives in retail must be the cohesive management of information. This can only be attained and, more critically, sustained when all retail systems in the enterprise use the same corporate database. In the absence of an IT strategy focused on maintaining coherent systems, real-time and accurate enterprise-wide data capture won’t be possible. Neither will fast and easy information retrieval.

A wise man once summed up the essence of strategic thinking by equating it to the ability to say NO. In other words, long-term vision and planning require clarity about what to do and, more importantly, what not to do. Repetitively failing to say NO to system changes that erode data unity inevitably leads to a complex, inefficient and ineffective business.

But, you might say, “We do have a solid IT strategy; we pursue a ‘best-of-breed’ model. So, why do we still have technological debt?”

Truth be told, ‘best-of-breed’ doesn’t qualify as a strategy. On the contrary, such an approach leads directly to technological debt. The cost of using a mix of systems goes beyond the considerable expense needed to build and maintain interfaces between the various applications. It also includes inaccurate decisions stemming from delays in data transfers and data errors as well as the need to reconcile the separate systems and occasionally bulk-synchronise them.

In a fragmented systems environment, even if you reach a moment of accurate and timely data, it will vanish as soon as you try to change, or even update, one of the applications or interfaces. The more you bolt on, the more fragile the entire system becomes.

In the ever frugal world of retail, any interface required to make your systems work must be seen as avoidable waste. Data transfer delays, occasional errors, rejected transactions, regular reconciliations and the monitoring of the interfaces all conspire to reduce business efficiency and consume resources that could be better spent elsewhere. Retailers need next to invisible IT, so that they can focus on being retailers rather than becoming system integrators.

Preventing such entanglement seems to be the real challenge for retailers. Add-on systems continually appear on the radar and proliferate because they have strong sponsors within the business who don’t want to wait for IT or insist on choosing the systems themselves. These may appear to address the immediate need but don’t be fooled: they cause permanent structural damage to the enterprise. Once your systems lose coherence it becomes costly to undo the damage.

Helping retailers realise that such a trap exists has been a taxing task. Most have simply drifted into a difficult place because they didn’t recognise early enough the strategic value a single, enterprise-wide, real-time and coherent data repository can provide.

But, if the business manages to make the strategic shift in both mindset and actions, their dreams about live global inventory visibility, a single view of customers, shared transactions, consolidated sales analysis, etc. can become a very profitable reality.

Once you make the strategic decision to change technological course, enterprise-wide consolidation will gradually be restored. The first step in this process should be to conduct an audit of your existing systems to determine which one, if any, fits into your new strategic system architecture.

If you have a good system at the core, then embark on a program of progressively moving functions from the add-on components to the main platform. You will find that as you reduce the proliferation of systems, even your core system will begin to work better.

If you don’t have an asset that can be used as a core, you will need to deploy a more capable retail platform – initially to replace your central system, then progressively to migrate all add-on functions to the core.

Retail Directions has always remained focused on providing retailers with a single end-to-end platform that runs all the retail functionality with a single repository of business data across the enterprise. Our clients who take full advantage of this unique architecture enjoy significant benefits such as small and effective IT departments providing rich and connected functionality, which is something their complex ‘best of breed’ competitors can only dream of.

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ABOUT THE AUTHOR
Andrew Gorecki, MD of Retail Directions, has worked with the retail industry since 1985. Industry insiders appreciate his strategic advice and insights, as he lives and breathes for the industry. Andrew received a nomination for the Australian Entrepreneur of the Year Award in 2010.
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