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IT Trends in Retail Like the rest of the global economy, the retail industry has suffered over the

last 24 months. Persistent unemployment and consumer debt have changed consumer behavior and reduced spending. While some retailers, notably high performing discount retailers, have benefitted from these changes, most have experienced conditions that are somewhere between "a challenge" and "a crisis." The industry's reaction has been somewhat predictable: expense reduction (including staff reductions), reduced capital programs, and increased focus on inventory control and pricing. What have these changes meant to retail IT? Alvarez & Marsal (A&M) conducted qualitative interviews with current and former senior information technology (IT) and non-IT executives in the retail sector. These individuals represented more than a dozen companies ranging from grocery to specialty retail to "big box" retail. A&M's interviews focused on 1) IT's role within the organization, 2) emerging technical trends and 3) IT priorities in today's environment. IT's Role Most executives observed that companies now view IT as a "strategic enabler" rather than a "necessary evil." Notably, the only respondent to report that IT was still viewed as a "necessary evil" works for a company currently experiencing a crisis. While it would be incorrect to blame the company's struggles solely on IT, most respondents would agree that IT is poorly positioned to make a difference if they aren't "at the table" and viewed as true business partners. In fact, most respondents shared the view that retailers today realize very little can be done without the input of technologists and collaboration between IT and "the business." The change in how IT is viewed carries significant implications. Being "at the table" means IT must have a strong understanding of the business and the enabling role of technology. One executive described this as "being less of an order taker and having more of a consultant mind-set." Furthermore, this business understanding must be pervasive in IT. "Even (IT) architects need to have a deep understanding of the needs of the business." Clearly, IT organizations must recruit and develop professionals differently. The days of hiring a COBOL programmer with the expectation that he will be a "heads down hard coder" for his career are over. Today's retail IT professionals are technologists, but they're also business analysts / consultants, project managers, and contract negotiators / managers with a global reach and retailers increasingly depend on these capabilities. Emerging Technical Trends A few executives acknowledged relevant emerging technologies (e.g., loss prevention solutions, cloud computing solutions), however, most did not see a new "killer app" for retail. Some mentioned that this was a departure from just a few years ago when new technologies, such as RFID, appeared poised to be game changing for the industry. That isn't to say the executives don't see opportunities for new technologies. On the contrary, they expressed real

excitement about categories of technologies for which they had difficulty identifying specific technical solutions, such as multi-channel integration and business intelligence. Executives were clear about one thing: "Customers are shopping for experiences. They compare their experience in other service industries and wonder why we can't offer the same thing. It's not good enough to just know the products or product characteristics they want. We need to know them." This statement typified executives' views of the urgency of multi-channel integration and its dependency on effective business intelligence, but these sentiments were often balanced by views that few organizations had meaningfully defined multi-channel integration for their organizations. Business intelligence also was raised outside of the multi-channel integration context. While retailers recognize process efficiencies are still critical in a fast-paced, globally sourced retail environment, IT is even more valuable as a way to reach and understand customers and business partners. Most of the business-oriented executives A&M interviewed expressed an interest in business intelligence and data/information strategy, recognizing that such technologies can help retailers understand customers and their preferences, which could be game changing in both the near and long term. IT Priorities "Compliance" - including PCI, HIPAA and broader security considerations - was a clear technical priority for many of the executives. And potential reporting requirements and tax structure changes led interviewees to speculate about future changes to POS and financial reporting solutions. The importance of smart IT investment also emerged as a priority. While A&M expected many executives to report a "do more with less" approach, nearly all respondents indicated their companies planned to make strategic and, in some cases, sizable investments in technology - despite economic challenges. Their focus is not "how can we spend less money?", but "how can we invest more wisely in IT?" The implication is that another high priority for retail IT will be to establish governance mechanisms through which IT and its business counterparts can identify the best IT investments. Conclusion All-in-all executives were upbeat about the outlook for the retail industry and the opportunity for technology and retail IT organizations to make a significant difference for the industry. Executives believe that IT needs to be "at the table" now more than ever and investing wisely in IT is a key priority. At the same time, while there may be "no killer apps" on the horizon, customers are driving the emergence of sophisticated technologies that could be game changers. These ideas bode well for the retail IT profession, which, in the span of 20 years, has gone from being a necessary evil to a key strategic enabler and business partner in most organizations.

IT has an opportunity to not only make a difference in today's challenging environment, but also to change aspects of how retailers understand and provide for their customers. One executive shared a cautionary note, however. "While we're rightly working hard to find new and innovative ways to connect with and understand our customers, we need to take care that our new technologies don't get between us and our customers. We can't allow technology to commoditize our interaction with customers or 'dumb-down' our understanding of them."

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