Hybrid Cloud Opens the Door to Retailer's Digital Transformation

By: Vish Ganapathy, VP, Partner, IBM Industry Academy Member for Consumer Industries

Vish Ganapathy, VP, Partner, IBM Industry Academy Member for Consumer Industries

Retailers are facing increased pressure from competitors abroad, traditional manufacturer brands going direct, and new business models from digitally native startups such as Dollar Shave Club and Bonobos to disruptors like Uber-eats. Beyond market changes, shopping behavior enabled by technology continues to adjust as well. With the cloud, brands can remain flexible enough to meet customer’s ever changing preferences while reaching them quickly and securely, and all while keeping their websites up and running during high traffic times, like the holidays.

In a 2016 study by Russell Reynolds Associates,57 percent of the 2,000 C-level executives surveyed believe there will be massive digital disruption in the retail industry this year. Retailers who are using the cloud will be able to better adapt to this digital disruption because they will have the speed and agility to reduce or expand capacity based on their needs at any given moment. A reliable, flexbile cloud infrastructure is a key differentiator in the success—or failure—of any type or size retail organization.

"For retailers to personally engage customers and meet their needs on the front end while managing the back end cost effectively, they are turning to the hybrid cloud to drive the digitally transformation of their entire business"

Migrating to the cloud does not have to be a hugely expensive investment for retailers either. In reality, the most cost-efficient strategy includes a unique mix of cloud-based applications on both dedicated public and private servers all working in unison with existing IT investments. Coined the hybrid cloud, this dynamic public and private cloud framework operates independently of each other but communicates over an encrypted connection, allowing brands to fluidly switch data and application development models whenever businesses need change.

With the hybrid cloud, larger retailers are able to make fundamental changes ranging across the entire enterprise—from strategy and business processes, to merchandising and supply chain, and even measuring customer engagement and KPIs. These modifications allow brands to work with their existing infrastructure, experiment with new business models, and rapidly deploy apps to improve the customer experience, such as those made for loyalty programs. A recent study published by Markets and Markets found the retail cloud market size is expected to more than double in five years, growing from USD 11.06 billion in 2016 to USD 28.53 billion by 2021. This expansive growth illustrates how cloud has evolved from a luxury to an integral part of the industry’s innovation roadmap.

IBM recently teamed up with VMware to help more organizations scale and create new business opportunities while making the most of their existing IT investments in a hybrid cloud environment. For example, instead of a retailer having to buying more private servers in response to a short-term traffic spike on Cyber Monday, they can use a more agile combination of both private and public servers. This also has cost reduction benefits, since they will only have to pay for the extra compute time when resources are needed during those high traffic periods. How a retailer financially responds to sudden spikes in visitors and transactions can make the difference between a successful or catastrophic quarter.

Benefits of Hybrid Cloud for E-Commerce

Certain retail functions—like e-commerce—are ideal for the hybrid cloud. A hybrid cloud can allow retailers to store protected or privileged data, such as customers’ private information on a private cloud, while retaining the ability to leverage big data capabilities from the public cloud to run certain applications. This hybrid functionality greatly reduces access time and data security risks. Both of these facets of how retailers runare hugely important to their bottom line since a single point of failure on the website or security breach can bring down the normal operations of the entire business.

Pushing product sales orders through the private cloud infrastructure and running analytics on those orders from the public cloud can provide brands with greater insights from other external, unstructured forms of consumer data such as demographics, consumer spending, weather and more. This also enables faster facilitation of information between the people retailers work with across the world including store associates, merchandisers, buyers, employees and more.

For example, Boots, the UK’s leading pharmacy-led health and beauty retailer is using Sales Assist, an IBM MobileFirst for iOS app, on the 3,700 iPads across its UK stores. The tool allows store associates, or colleagues, to quickly show product information, ratings and reviews, look up inventory online and make recommendations based on online analytics, all from the shop floor. The app is using Bluemix, IBM’s cloud platform, to link Sales Assist with the company’s applications and data, enabling a high-performance, scalable and flexible hybrid cloud environment. As a result, the company can rapidly deliver recommendations to customers, seamlessly view inventory and more across boots.com, which runs on IBM WebSphere Commerce with integration services from IBM Global Business Services.

Another benefit of hybrid cloud-based e-commerce systems is they not only integrate well with existing IT applications but also continuously evolve with both the business and consumer’s changing preferences. E-commerce sites are consistenly being re-worked, refreshed and augmented by retailers based on what a specific customer is interested in, seasonal shopping like for Christmas, or to feature a brand’s highest selling items on the front page. Many brands look to the hybrid cloud as the ideal platform to constantly make small, iterative changes to their digital platforms. The hybrid cloud technology can keep up with this constant state of flux very effectively both in the store and online.

For example, UK-based Shop Direct sought to extend its digital transformation by deploying a hybrid cloud model for its financial services platform to provide customers with a broader set of financial services options, a more personalized experience and more self-serve options. Shop Direct chose a hybrid cloud solution because it brings together all applications and data from a myriad of its sources, including public and private clouds.

For retailers to personally engage customers and meet their needs on the front end while managing the back end cost effectively, they are turning to the hybrid cloud to drive the digitally transformation of their entire business. As that journey progresses, the hybrid cloud can create an operationally sustainable, seamless, and engaging in-store and online experience that inspires brand loyalty to keep shoppers coming back for more.

The digital shopping transformation is here and hybrid cloud opens up the door to retailers to maximize the opportunity—or risk falling behind their competition.