The very word “cloud “, when used to describe an IT delivery scheme, invites journalistic snarkiness with such headlines as “Clouds on the Horizon “, “Cloudy Vision “, etc. etc. But as RSR has argued from time to time, the idea of delivering business applications via a cloud is neither to be taken too lightly nor have its value overstated. It’s just a new way of getting IT-driven solutions to the people that need them. Underneath that is a lot of technical esoterica (at least from the CIO’s point of view) having to do with how well applications are architected to be delivered over a cloud (say, as opposed to merely providing a “web services interface to the same-old-same-old application), how well technology resources are managed in the cloud, how to manage service levels, and what the ROI comparison is for owning the technology vs. paying for it on a per-use basis over a several-year period.

For retail line-of-business (LOB) leaders, there’s a more fundamental question- one that should have been asked ages ago when their companies were investing in either ERP, best of breed, or even home-grown, solutions. They need to answer the question, “what is it about your proprietary way of doing business is so important that you can’t modify your internal processes to take advantage of the capabilities of a commerical solution? ” Failure to address that question is at the heart of why companies feel compelled to modify packages – thus making them a future support headache for IT. Just last week, I talked to a consultant who is on a project to modify a tried-and-true commercial package for one retailer who feels that their weird merchandise hierarchy is so important that they have to burden their internal IT organization FOR YEARS with custom code. Really? Are the retailer’s customers willing to drive past a competitor’s store just to experience their unique way of organizing their product data?

We at RSR have argued that many businesses confuse “strategic ” vs. “tactical ” advantage. When we talk to companies about their strategies, we often find that while they may be strategically disadvantaged if they don’t do something well, they are only tactically advantaged if they improve. But “strategic plans ” are often chock-full of projects that do precisely that – they eliminate a roadblock but at the end of the day, the company in question is merely “keeping up with the Joneses “.

To the Cloud

The reason this point is important to bring up is because taking full advantage of a commercial cloud demands that the business use the software the way it was intended to be used. This might be the reason why retail IT’ers are generally not favorable to the idea of putting mission critical functionality into a public cloud – they’ve been hearing LOB leaders for a long, long time insist that their way of doing business MUST be accommodated in the technology. And so “on premise ” (capital intensive) solutions tend to find most favor with IT’ers, because they can then modify the code to suit the peculiar needs of the business. The last time we surveyed retailers on this (December 2010), we found that 61% of Retail Winners (over-performers) believed that on premise “suite ” solutions have a lot of value, while only 12% saw value to delivering those solutions on-demand. For best of breed solutions delivered as a service, 33% of Winners saw a lot of future potential value, but 54% who would like to see those solutions delivered on premises.

From the responses to the survey that we received -which were overwhelmingly from IT decision makers as opposed to LOB leaders, we concluded that there’s a clear disconnect between IT and LOB objectives. IT favors on-premise owned solutions; LOB leaders want results, and the CMO in particular seems willing to bypass IT altogether. Implied in that is the inference that LOB executives are “over ” their insistence that technology solutions conform to their odd ways of doing business. In short, they’re just in too big of a hurry.

Given that consumers’ omni-channel behaviors are changing the very foundations of the traditional retail operational model, it’s no surprise that LOB leaders are in a big hurry to technology-enable new business processes. That’s what creates the opening for “cloud ” offerings from technology providers.

Update Oracle

Back in October 2010, I wrote in a Retail Paradox Weekly article that “if it’s indicative of an agile mind that someone can hold strong opinions about something and later change those opinions based on new data, then Oracle CEO Larry Ellison is one smart person. At Oracle’s 2008 OpenWorld conference, Mr. Ellison said about the enthusiasm for cloud computing: ‘The computer industry is the only industry that is more fashion-driven than women’s fashion. Maybe I’m an idiot, but I have no idea what anyone is talking about. What is it <cloud computing>? It’s complete gibberish. It’s insane. When is this idiocy going to stop?’ … But by (2010’s) OpenWorld event, … Mr. Ellison and company had gotten the ‘cloud’ religion, and they are pushing it hard. “

At this week’s Oracle Openworld in San Francisco, CEO Larry Ellison was totally on-board with the “cloud “, and he wants businesses to get on-board with him. In announcing a new version of Oracle’s database and new hi-speed Exadata hardware, Ellison pressed the point that Oracle is a one-stop shop for everything- infrastructure, database, and business applications. In that statement, he’s taking on Amazon, Microsoft , IBM, and SAP in one swipe. His argument: why mess with those guys? Oracle has it all.

Whether Ellison’s claims are true or not has to be tested in the marketplace. But inherent in the claim is an echo from 2010, when then Oracle Retail-head Duncan Angove argued that the company’s direction is a more-than-tacit recognition of the fact that business change cycles have sped up to the extent that companies cannot afford the time and money to mull over how best to shake out unnecessary costs. I paraphrased Angove’s position in the Retail Paradox Weekly piece: “… the objective needs to be to ‘get on with it’. Oracle is making the case that the best way to ‘get on with it’ is to go with them – soup to nuts. The promise is that with the savings in time and money, companies can move more quickly to the tricky business of innovating. “

The only thing that has really changed since then is that the imperative to transform the retail operating model is more critical than ever. Time is running out, and consumers are pressing retailers to change to accommodate their lifestyle demands. As RSR has said since our inception in 2007, it’s no longer about how retailers want to sell, but how consumers want to buy. The technology implications of that reality are that retailers have to optimize every business process that consumers can’t see, so that they can spend more time being unique in the things that consumers can see. And that turns out to be the strongest argument for adopting commercial cloud based solutions that I can think of.