This slowdown doesn't mean fashion retailers have time to stop innovating. On the contrary. In this environment, everyone is looking at how to become more efficient, expand their online presence, improve processes and find new ways to keep customers loyal. Many of these initiatives need IT systems to support them, and yet the very climate that demands a rapid response is making organisations understandably wary of capital spend on IT, and of the infamous business disruption so often associated with IT projects.
Sam Jackson, Chief Executive, Prologic explains how a new method of purchasing and deploying business software, SaaS (Software as a Service), takes the risk and the capital cost out of realigning IT systems to cope with the recession.
Things keep changing
Given the state of the economy, it is no surprise that fashion retailers are looking at initiatives to drive down costs and increase sales opportunities. For example, according to recent research by Martec undertaken on behalf of Prologic, almost two thirds of companies (64%) are planning to expand their web site and home shopping capability. Indeed, for 49% of companies, web site and e-commerce systems come out top in terms of investment priority.
Other priorities are loyalty systems to strengthen links between the customer and the brand; better promotion systems at point-of sale; and a better integration of systems across the store and the web. Furthermore, half of the respondents are still opening new stores, while many are looking at international expansion through franchising or using the increasing flexibility of landlords to acquire new stores in target towns or malls.
The ability to continuously adapt to rapidly changing circumstances is essential, not only for survival, but also to be in the right place to take full advantage of the upturn when it comes. But with a tight lock down on capital expenditure how are organisations to acquire and change the systems and technology they need to underpin these objectives?
New model
There is growing awareness that the traditional model of expecting a static software solution to support a business for upwards of seven years is unrealistic. Not only does this model fail to deliver the flexibility required to support change, but organisations are often paying for large user licenses on modules that may become obsolete due to changing business needs or advances in technology.
Software as a Service (SaaS) is designed to address these shortcomings. It allows companies to invest in systems on a pay-as-you-go basis, and because the software is delivered over the internet, the systems and infrastructure are already in place and being looked after by experts. This new model allows organisations to pay for just the software required at any given time, ensuring there is no risk of spending money on software licenses that are never used or become unnecessary.
Some organisations may perceive SaaS to be leasing by another name, but this is not the case. SaaS gives businesses the flexibility to change the shape of a system, not just defer payment on it. It enables organisations to invest in new software on demand to reflect the success or otherwise of a new business models. For example, a branded fashion business might decide to pilot a Far East franchise strategy. With a SaaS model, they rent and rapidly implement the necessary systems to support the initiative. If the pilot doesn't deliver the hoped for returns, they simply switch off the software and stop paying for it.
This ability to flex the software investment in line with operational demand and performance ensures there is no wasted IT investment – a fact that not only reduces cost, but also takes a lot of the risk out of IT projects.
Economies of scale
From a technical perspective, much of the IT infrastructure in any organisation is under-utilised. Most hardware servers, for example, are under-utilised for 90% of the time – but the additional capacity is required to ensure peak demand is met.
Under the SaaS model, the software application is hosted by the vendor and delivered via a secure, private internet connection.The SaaS model leverages virtualisation technology, whereby server resources are effectively shared, to deliver far more efficient computing – enabling the supplier to maximise economies of scale and drive down the cost of delivery.
Organisations often have concerns about running mission critical systems over the internet because there is no SLA, no guarantees that information will be delivered immediately and security. However, increasing numbers of companies are adopting private networks (e.g. BT's MPLS service) which provide both the required level of security and performance guarantees.
Minimise risk
Critically, this is a low risk model. For too long, organisations have had to invest heavily in software that, in many cases, has failed to live up to expectations. Yet businesses have felt compelled to use that software for years because they are both financially (and emotionally) unable to take on the upheaval of a system migration – often despite the clear business imperative.
A SaaS approach transfers much of the risk from the customer to the supplier. If the supplier is failing to meet its SLA or the software is not as functionally rich as promised, it is a far simpler process to move to another SaaS based provider. There are no major implementation challenges to overcome and far fewer migration concerns to address.
And while today’s choice of vendors offering software via the SaaS model remains limited, most analysts predict that within five years most software will be delivered this way. To retain customers in future, software suppliers will have to deliver far higher levels of both customer service and innovation.
Conclusion
Change is key to success for the fashion retailer. However, in the current climate, expansion plans are undoubtedly tempered by a strong requirement to review operational processes to drive down costs and improve efficiency. The challenge is to create a flexible, adaptable organisation that can streamline operations whilst also delivering effective multi-channel retailing.
Organisations need to simplify the business and focus on core skills. By opting to purchase technology via the SaaS approach, fashion retailers can achieve expansion objectives whilst controlling costs and minimising corporate risk.