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Front of mind

Front of mind

Technology must provide a seamless point-of-sale experience or customers will be lost. But there's much to manage in the process.

Sydney's Museum of Contemporary Art relies on five major applications to manage its collection, website, functions business, and other key

operations - but one seemingly small element gives chief operating

officer Euan Upston the greatest number of headaches.

"Our retail operation would be the most time-consuming part of all our

software," says Upston, who recently worked with long-time partner

Nexus to manage a major server consolidation designed to pave the way

for a coming museum expansion that incorporates an extensive IT

investment.

The retail application made the jump to a virtual server without a

hitch, but stability problems have caused more than their share of

headaches as Upston works to keep the MCA's $1 million-a-year sales

operation functioning seven days a week, 12 months a year.

Those headaches come from small incompatibilities, which often plague

point-of-sale systems when their developers fail to keep up with

software upgrades and hardware changes that break the carefully

refined integration between till, barcode scanner, touch-screen

interface, printer, Eftpos machine and the controlling PC.

The problem is often an issue of scale. Many POS vendors are

relatively small, with limited resources to test and update hardware,

which leaves their solutions vulnerable when changes are made.

"The problem is you get a lot of downtime because upgrades are always

coming through," Upston says. "[Yet] shops are a significant revenue

driver for most galleries and cultural institutions."

Any shortcomings have direct bottom-line implications. Nexus

principal Sean Murphy says that although the POS system is one of the

MCA's smaller applications, it consumes as much of his organisation's

resources in a week than all the other museum applications require in

a month.

"Even the museum's digital asset management system is easy to manage

compared with the retail system," he says.

"The device count for retail systems is four times that of any other

executive function, and this means you end up with a bunch of big grey

endpoints."

These require constant care and feeding to keep working.

The MCA's experience is hardly unique. Thanks to years of

fragmentation and competitive infighting, the coherence of the retail

systems industry is still far from ideal. A preponderance of smaller,

local POS developers established a footprint through the 1990s,

meeting immediate needs but lacking the resources to keep up with the

pace of technological change - often creating support nightmares for

companies that just want to keep their businesses afloat.

Upston, for one, recalls a disagreement with another POS vendor that

sold the Sydney museum an integrated bundle of retail software and

printers that didn't work as intended.

The vendor told Upston he had bought the wrong printers, even though

the museum had ordered the devices from that organisation.

For retailers who just want to sell their products, dealing with

niggling driver issues and the impact of operating system patches is

well outside their comfort zone. Yet keeping technology still is ever

harder these days, especially with vendors pushing the merits of Web

2.0 technologies and interactive retail applications such as digital

signage, wireless hand-held information terminals, internet

protocol-based security cameras, and the like.

Applying these technologies to your average retail environment can

deliver significant improvements to the customer experience, making IT

an intimate part of the shopping experience. Enhancements such as

video conferencing and multicasting make it easier for merchants to

deliver product training directly to sales staff across a large number

of branches, while multimedia security systems leverage IP networks in

novel ways to help companies improve stock handling and react more

quickly to security breaches they may face.

Some merchants recognise the possibilities. Gerard Florian, chief

technology officer with Dimension Data, says most of his company's

discussions gravitated to the possibilities of the network,

specifically with wireless and video.

"Often [retailers] have had a phone but it hasn't been able to do

anything else," he says. "The wireless device needs to go beyond being

a basic voice handset, to doing a bunch of other things like

maintaining data and enabling quick look-ups on back-end inventory

systems."

However, although retailers may see promise in new technologies,

introducing them into mission-critical front-of-shop environments is

another thing.

A recent Forrester Research survey suggests one reason why. Overall,

retailers are trimming their expenditure on new technology. More than

half (58 per cent) of surveyed businesses in the United States

projected their IT budgets would be lower or similar in 2008 compared

with the previous year. The proportion among slightly more bullish

Asia-Pacific region retailers was only 46 per cent.

Less of this budget is going to new initiatives: in 2008, Asia-Pacific

region respondents forecast that 44 per cent of their budget would go

to new projects, down from 47 per cent a year earlier. Also

significant among Forrester's findings was a low level of interest in

collaboration technologies; a "disproportionate" attachment to legacy

applications; two-thirds of companies spurning IT architecture

redesign; a propensity towards industry-specific packaged solutions;

languishing mobility initiatives; and tighter control of maintenance

costs.

But in the end, reasons for spurning new technologies may well be more

utilitarian than anything else. Once they have a working platform, the

potential risk of a POS outage are so significant most retailers are

loathe to change platforms any more than they absolutely need to.

John Bartlett, IT retail systems manager with beauty products

merchandiser The Body Shop, is well acquainted with the potential for

disaster that comes from retail solutions.

Charged with keeping more than 200 registers in 80 stores running

continuously, Bartlett knows a weak link in the retail solution is a

recipe for disaster down the track.

This is especially the case in The Body Shop's outlets, where POS

computers sit in dusty, hot cabinets, and staff often try using

touch-screen terminals with long nails and fingers smeared with the

store's trademark lotions and creams.

Such working environments led to some interesting testing. During an

effort to revitalise the shops' appearance, Bartlett drove the

updating of the chain's reliable but antiquated NCR POS terminals,

some of which had been in use for 13 years.

"We have a pretty thorough test environment," he says. "We'd hit the

touch screens with pens, bring down girls with sharp fingernails to

try it out, and try it with lotions and dust.

"My job is to get something into stores that will work, and I don't

want to field calls in the middle of the night from someone saying

their printer is broken."

But even after testing was complete the rapidly changing IT industry

proved incompatible with Bartlett's need for consistency and

stability.

Despite the initial supplier's assurances it would provide 100

identical PCs, only the first 20 systems were eventually the same.

Bartlett ended up with five different motherboard chipsets, each

introducing its own set of compatibility issues within the retail

environment.

That environment - running POS software from Retail Directions, Epson

TM-H6000 printers, Elo touch screens and Datalogic barcode scanners -

now runs under Windows XP-based Power POScomputers from DigiPoS.

Bartlett is planning to revisit the environment again next year as

part of The Body Shop's regular four-year replacement cycle, but he's

going to keep the same hardware, and stick with Windows XP.

"Operating systems are one of the things I don't change lightly," he

says. "We stuck with Windows NT 4.0 until I was forced to upgrade,

then went to Windows 2000. When you're talking about POS, the

operating system of the box is very important. The POS system is

written to run on a specific OS, and you can't just change them

willy-nilly.

"There are tweaks and changes to make [every time you change a

device]; it's not just something you roll out. It takes a lot of

change management to work out how you do that."

Some would argue the POS industry has dug its own grave by building

inflexible systems that are highly sensitive to change. Others believe

escaping from this past provides an opportunity for vendors to improve

their game.

"[There are] some real problems in the retail software industry, and

anyone who grabs hold of it and brings up its base code to the level

of understanding that [retail] is an operating-system thing, will make

a motza," Upston says.

SAP, Oracle and other major business application vendors are pushing

their integrated retail suites quite heavily, but the complexity of

their implementations has kept them well out of the reach of the

smaller outlets that comprise the majority of the consumer market.

Not surprisingly, Forrester Research surveys confirm that most

retailers stick with focused vertical retail applications.

One vendor trying to push into the lower end of the market is

Microsoft, which will update its Retail Management System offering

next year.

Although many local POS vendors focus on delivering tightly integrated

solutions, Microsoft is building on its base of back-end applications

- for example, the Dynamics family of customer relations management,

finance and other systems - to push a story that shies away from bells

and whistles, focusing instead on cold, hard facts.

Given the economic difficulties of late, the director of business

applications with Microsoft Australia, James Simpson, believes

businesses may be particularly receptive to POS systems that work with

back-end applications to deliver better views of overall sales

performance.

"Times of downturn and challenge are when retailers talk to us about

invigorating their infrastructure," he says.

"We see a deepening of the sophistication at the POS terminal, a

broadening of the scope, and a growing demand for real-time analytics.

Retailers want the terminal to update the back end as transactions

flow through the register, and granularity of data is critical."

This greater granularity enables better data analysis by helping

merchants spot purchasing trends that may help them improve future

performance, for example, which products are often bought together,

and which ones are usually bought at specific times of the day.

Simpson sees particular value for improved sales systems in franchise

operations. For example, franchisors can offer franchisees detailed

analytics capabilities as part of the franchise arrangement.

With such capabilities on tap, he believes franchisors can add value

to the overall brand, enabling branches to use the analytics to become

more successful without requiring ongoing head office support.

"There's definitely a differentiation in providing franchisees a

sophisticated view of the transactions going through their store, but

without the franchisee having to get involved with the technology,"

Simpson says.

"In the long term, those stores that do not have the capability to

analyse the business will ultimately perform worse than those that

do."

But retail technology isn't just about improving revenues. Multiplier

effects in sales activities mean that small improvements in technology

- even something as pedestrian as installing faster printers - can

deliver big bottom-line benefits by reducing operational costs,

minimising lost sales and processing customers through store checkouts

faster.

Over time, this adds up to a significant figure. One US retailer

Forrester surveyed estimates it can add $US1 million to its bottom

line from every second it shaves off each POS transaction.

Body Shop's Bartlett is equally optimistic. "Our new printers are a

lot quicker than the previous ones," he says. "If we save five seconds

on every receipt we do, that adds up to a significant figure."

If the battle for retail IT is being fought by the visionaries and

realists, Anne McDiarmid falls somewhere in between.

As CIO of fabrics and craft outlet Spotlight, she recognises the importance of a robust retail and

analytics system. The company operates nearly 1000 POS terminals

across 121 stores throughout Australia, and in New Zealand, Hong Kong

and Singapore.

This makes Spotlight an enormously complicated enterprise in which the

desire for hardline POS adherence needs to be tempered with

recognising that new architectures offer significant benefits.

"When I joined the company, we had no documentation, architecture or

business process documents," McDiarmid says. "It was time to say, 'I

think I know where we want to be'."

McDiarmid has worked with IBM to centralise all processing for the

region through the retailer's Melbourne data centre.

Spotlight works closely with industry, process and IT experts to shape

a common vision built around an evolving SAP infrastructure within an

IBM WebSphere service-oriented architecture.

Spotlight focuses on sales action

Fabrics and craft retailer Spotlight's point-of-sale upgrade was only

one part of a major implementation covering a broad range of back-end

functionality - yet those terminals became a focal point: a gauge by

which the success or failure of the project could be measured.

By building that project around a full-blown service-oriented

architecture, the company's chief information officer, Anne McDiarmid,

believes the upgrade - with accompanying back-end infrastructure - has

put Spotlight in excellent shape to continue its expansion, adding new

stores and offices with relatively little incremental effort.

Equally important, the comprehensive business process review that came

as part of the project has helped clarify Spotlight's long-term

information technology direction, and the processes that will get it

there.

Yet while the project may have reinforced Spotlight's identity as a

retail organisation, McDiarmid is quick to point out it wasn't all

wine and roses.

Old business and IT fault lines were encountered, evaluated, and

crossed with sometimes interesting results.

"All of a sudden, the project was bringing the technology gurus into

the world of buying and selling," she says.

"This was a real eye-opener for us.

"There are a lot of nerds in the dungeon [laughs] who like to play

with the technology but don't necessarily want to worry about whether

it's a true end-to-end process.

"But IT is now business IT, rather than being IT in a business.

"And we have an absolute understanding of each part of our business

processes."

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