IT Investment Intelligence

Jul 30, 2008 8:59 PM  By

Pondering an investment in technology? First consider these eight questions:

–Are you meeting or exceeding management’s IT expectations?
–How can IT facilitate change as a higher percentage of sales moves to e-commerce?
–Where can IT improve the synergy between channels?
–What investment is required to stay competitive in the e-commerce channel?
–Where can you make an IT investment that reduces costs and improves productivity?
–What systems improvements will manage inventory more profitably and provide higher customer service?
–What are your company’s requirements in terms of flexibility and scalability of applications?
–As your business changes rapidly, how does IT need to help facilitate the change?

Keep in mind that some applications have higher ROI than others. Here are a few more things to think about when contemplating IT expenditures:

Build vs. buy

One of the key variables that determines your IT cost as a percent of net sales is whether you develop your own systems or use commercial software. Many merchants today take a hybrid approach to build-vs.-buy.

For example, one of our $3 billion direct clients is taking on commercial systems for call center, warehouse management and POS, yet the company has more than 150 IT personnel on staff.

We believe more than 50% of direct businesses are internally developing and/or maintaining order management systems to some degree, but this is changing. Most accounting applications are commercial systems, while e-commerce solutions are a split between commercial systems and inhouse development.

Even companies with commercial systems have added a person or two with an IT background, often to write specialized functions in a user-controlled library in conjunction with the commercial system. These staffers also write reports, train users and maximize the use of the system.

Licensed inhouse vs. Software as a Service

SaaS is becoming more common for e-commerce, order and warehouse management, and specialized systems options. One benefit: the SaaS vendor becomes the IT department. As most revenue models rise and fall with the transactions or dollar revenue processed, it becomes a variable expense.

One thing you give up with this model is immediate control to make changes; you are at the mercy of the vendor. Depending on the service supplier, you may be waiting for the next release of the software for your enhancements.

Replacing order management systems (OMS)

Some merchants have to replace aging OMS with commercial systems on more up-to-date platform technologies (e.g., dot.net, C++, Java, etc.). Other companies are looking for open source software with the intent to develop further to their specific requirements.

With service oriented architecture (SOA) it is now quite commonplace to share functionality and data between software applications and multivendor commercial systems.

Marketing/creative

As e-commerce becomes more predominant in direct companies, planning campaigns and products across channels is crucial. Some of the key marketing system functions companies are developing include synergy between channels; event tracking; marketing and continued from page 45 promotion calendar systems across channels; e-mail and affiliate marketing; content management (digital assets); data mining; and inhouse list processing.

Internet

Direct businesses now average more than 50% of their demand coming from the e-commerce channel. Much of this is a transfer of sales from phone orders. Some areas worth investing in for e-commerce include loyalty clubs across channels; mobile/electronic coupons and gift certificates across channels; in-store pick up; real-time store inventory; and drop-ship vendor inventory availability.

Customer contact center

Many companies that have high customer service standards are putting more emphasis on the customer experience rather than the length of time for an order. Key functions clients are adding include upsell and cross-sell capabilities; click-to-call; CTI; live chat; skill-based routing; and address verification. Supply chain and fulfillment.

More merchants are working to optimize the supply chain in terms of cost reduction as well as providing visibility end-to-end, from the vendor through the entire fulfillment process. Some of the technology to consider here: voice picking; Web-based drop-shipping; foreign quality assurance and freight consolidation; robotics systems; barcode processing; and labor management systems.

Curt Barry is president of F. Curtis Barry & Co., a multichannel operations and fulfillment consultancy.