System downtime for retailers can be disastrous, its effects rippling through the supply chain, so how can cloud computing help, particularly in peak period asks David Jack, CIO of MetaPack.
It is widely acknowledged that the tricky Peak season with its huge demands on retail systems has become a much more efficient operation over the last two years. It’s no coincidence that during that period, more retailers have moved at least part of their IT infrastructure onto the cloud facilitating easier scalability to cope with the rapid rise in order volumes and deliveries.
But in the fast-moving world of technology, where cloud computing has been adopted readily by many market segments, the retail industry has been noticeably reticent.
There are a number of reasons for this, not least what retailers stand to lose from even the slightest glitch in their systems. An hour of downtime for a retailer selling online can result in millions of pounds-worth of lost revenue. With the exception of financial services and high-frequency trading, this is not the case for most other markets, where downtime is annoying and disruptive but not immediately damaging to the bottom line.
In retail, there has been a tendency for organisations to rely on systems that are under their own control and can be managed internally or maintained in a traditional data centre. The perceived stability and security of DC service level agreements and contracts, by comparison with those offered by cloud platforms, was, for a long time, reassuring for retailers.
So, understandably, CIOs have taken an ‘if it ain’t broke, don’t fix it’ approach, unwilling to disrupt the entire operation in order to move from a stable data centre-hosted environment. Without a compelling reason, such as price or better systems integration, why would they make such a major change?
Data storage costs
When serious retail cloud computing broke cover around five years ago, many early adopters were attracted by the seemingly low costs to host their systems. However, when it came to storing or transferring data the same appealing rates did not apply. For eCommerce operations, particularly with the rapid growth in omnichannel retailing, the cost of data storage and movement was, and still is, a huge consideration and this alone skewed the economic drivers for migrating to the cloud.
Data was also a challenge for another reason – residency. For eCommerce retailers operating in mainland Europe or in the UK, data protection regulations, or even their own terms and conditions, dictate where that data can be held and managed. Because cloud platforms can sometimes blur the jurisdictions in which data actually resides, especially during fail over scenarios, there could be serious ramifications for the retailer if they simply can’t be sure where their data is.
So, what has prompted the shift in retailer attitudes that has seen many more migrating their systems onto the cloud in the last two years? Put simply, cloud vendors have pivoted and have developed their solutions to meet the exacting needs of high transaction operations, not just online retailing, but financial trading systems too.
A new generation of specialist cloud application and platform providers are able to offer tougher platforms, multi-level authentication and improved security. They have taken seriously the doubts of organisations with sensitive data and the criticisms regarding insufficient cloud computing contracts. In addition, cloud offerings have matured, so pricing, not just for hosting systems, but also for flexible data storage has become much more competitive.
A secondary market for monitoring, alerting and instrumenting in the cloud has evolved, allowing retailers to quickly identify and address issues that arise, and giving them the control they want to ensure their service to customers is always-on and always delivering optimum performance.
The other major factor is peer and supplier influence. We know from our own experience that when we moved our services out of data centres and onto the cloud, it was challenging to convince our retail customers that it was safe. But they have benefited from our change, and they see other retailers moving in the same direction, and as a result, the conversations we are increasingly having with retailers revolve around them gaining those same benefits for their own operations.
The Peak question
But one of the most convincing reasons we are seeing greater take-up of cloud computing in retail is the Peak season. Still the most challenging time in the eCommerce calendar, those few pre-Christmas weeks of trading require phenomenal levels of agility in the retail supply chain. The difficulties of Black Friday in 2014, in particular, alarmed retailers to such a degree that major changes had to be made. What we have seen over the subsequent two Peak seasons is that those retailers who are on a cloud platform have had the flexibility to scale up their services in the approach to Peak, or to specific promotions, and scale down easily when online traffic falls away. The cloud facilitates retailers’ abilities to manage 100 times the traffic load for a few seconds, in a way that data centre-based systems simply could not.
As an industry, eCommerce is still in the early stages where cloud adoption is concerned. It is still primarily the largest retailers who have made that change, and it is much harder for the smaller operations who are already under pressure to deliver between 40 and 100% year on year growth. Increasingly however, cloud hosting costs will become even more competitive, levels of security will be sufficiently high across the board, and the ability to scale to meet customer demands will be so compelling that it becomes just a matter of time.
David Jack is CIO of MetaPack
Image credit: Fotolia and MetaPack