Thoughtful outcomes through experience

Do retailers know the true cost of IT ownership?

The ‘back-in-the-day’ of Information Technology is actually less than 10 years ago. Before the advent of hybrid Cloud architectures, outsourced systems and applications and the dilemma of balancing on/off premises investments,  CIOs worried about Return On Investment (ROI), Total Cost of Ownership (TCO) and other relevant Three Letter Acronyms (TLAs).

Ten years ago, the retail sector's IT leaders brooded over IT landscapes of Tower Services, secured safely behind corporate Firewalls.  Now they fret over determining the cost of IT service provision and delivery on an almost minute-by-minute basis and demonstrating IT cost of ownership to a Board that is expecting its corporate technology to be driving value to the business overall.

A cloudy outlook

In today's retail industry, business-critical decisions often bypass the  twin gods of TCO and ROI.   They are still in the room,  but have less and less influence.  This may sound dramatic, but the question of proving business value has shifted from huge business case studies commissioned at Board level, to a focus on daily business outcomes.  The new environment also highlights the need for value-for-money decisions to be assessed on the business 'frontline'.

The investment question

So, in this brave new world, the questions retail's IT leaders need to be asking is whether IT investments are being spent wisely; how often they need to be assessed and whether the value-for-money claims of IT providers match the reality of actual cost of ownership.

Peru’s recent experience in the Retail IT sector makes it clear that many businesses find the task of answering these questions a significant struggle, particularly in keeping an accurate fix on the suite of ever-changing cloud services. The Peruvian mantra is: use laser-like monitoring and inspection regimes and track costs relentlessly.

The TCO of services

The key to success is ensuring the inclusion of  the Total Cost of Services (TCOS).  Simply looking at long-term lifecycle costs and bills from Cloud Service Providers no longer works. What's needed is detailed service delivery costs specifically allocated and apportioned, which are then mapped directly to service usage, transactional volumes and specific business areas.

In today's fast-moving retail environment, measured and evaluated TCO is critical in ensuring daily business demands are met by the IT infrastructure and services and can drive value back into the business.

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Kim Ainsworth is a Principal Consultant at Peru Consulting and specialises in IT Strategy. She has worked with organisations including H&M, Coca Cola, Liberty, DHL Retail Distribution and Morrison's.

You can download the Peru Retail Technology Report here.

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