As many of our friends and colleagues know, both my RSR partner Paula Rosenblum and I are what I’ve jokingly referred to as “recovering Retail CIOs “, complete with our own 12-point program that includes “start a research company ” as a goal. It’s no great surprise that we both can get down into the weeds of IT governance with anyone – but we will invariably thank our lucky stars afterwards that we’re no longer in that role.

In that vein, the last time RSR did a benchmark study about the role of IT in Retail was in 2010 (Pandora’s Box? The Impact of New Technologies on Retail IT, Benchmark Report, November 2010), and at that time we discovered that things hadn’t changed much since either one of us left the CIO role behind in the early 2000’s. To put it bluntly, IT was still thought of as an expensive backoffice function that had to be carefully controlled. Budgets were still getting squeezed even with the emerging importance of smart consumer mobile technologies and the rise of Omnichannel shopping, and project backlogs were getting longer. The 2010 report concluded that, “IT seems to feel a bit like Rodney Dangerfield saying, ‘We just don’t get no respect.‘ “

Since 2010, the challenges for Retail technologists have gotten tougher, and it’s not only because consumers are forcing retailers to push technology front-and-center into the shopping journey; it’s also because companies now have many cost centers making technology investments: Marketing, eCommerce, and other Line-of-Business organizations, in addition to spending controlled directly by the IT department. As Paula opined in a 2015 Retail Paradox Weekly piece, “I suppose it’s somewhat good news that at least shiny new problems have been added to the <project backlog>. But … it seems like the world of the CIO is a really tough one. IT departments are proliferating within large enterprises like bunnies and mid-sized players are following their lead. No good can come of this. Ever. “

But times have changed, and we have learned in our recent benchmarks that retailers are raising technology’s profile inside their companies, both to address consumer expectations and to create new efficiencies. With that in mind, RSR decided that the time is right to benchmark retailers’ IT spending trends, with Paula and me as co-authors.

Here’s a preview!

The study, which is due to be released in February, dispels many myths about retailers’ IT spending. For example, the common perception is that retailers spend something less than 1% of revenue on IT. In fact, when considering all the spending by IT and other operational departments, that number is much higher (Figure 1):

Figure 1: IT Spending (All Departments)

Source: RSR Research, January 2018

But what is really revealing is where that spending is going. Retailers increasingly are budgeting a large percentage of their total IT operating expenditures on “Cloud based ” services (Figure 2):

Figure 2: IT Spending Directed Towards Outside Services

Source: RSR Research, January 2018

Projecting forward, many over-performing “Retail Winners ” expect both capital spending for “raised floor ” assets and expense spending for outside services to rise (Figure 3).

Figure 3: Three Year Projections

Source: RSR Research, January 2018

Looking inside those projections, the benchmark responses reveal that retailers generally are looking for ways to rapidly expand their IT capabilities with cloud based solutions, as a direct response to consumer digital enablement. Fast-moving-consumer-goods (FMCG) and general merchandise (GM) retailers in particular feel that their current IT infrastructure is holding them back. For that reason, they look to “improved IT development tools and processes ” to overcome current limitations.

Retail Winners in particular feel that “the Cloud will help us keep up with competitors “. A clear majority of those over-performers believe that in the next three years, they will spend significantly more on “data security/analysis “, “Hybrid/multi-cloud application delivery “, “mobile device management “, “identity management “, and “microservices-based apps “. These new investments will focus on next-generation analytical technologies (including AI and machine learning), eCommerce, Marketing, and Merchandising.

Look For The Report!

RSR’s new benchmark on IT spending trends will be released on February 16^th. The report is the result of an online survey RSR conducted in partnership with Cathy Hotka & Associates in December 2017. In the report, we will examine the business challenges that are causing retailers to re-think their IT spending priorities, as well as the opportunities that over-performing “Retail Winners ” identify coming from those challenges. We’ll examine the internal inhibitors that stand in the way of retailers addressing the challenges or taking advantage of the opportunities, and finally we’ll examine what technology investments are most important to retailers in the next few years.

As always, RSR’s benchmark studies are free to everyone – so mark your calendar!