Retailers Are Marching Toward the Big Data Analytics Cloud

Did you know that two in three retailers are already leveraging or plan to leverage the cloud for big data analytics?

Only technology companies have a higher ratio, and retailers’ willingness to adopt the cloud outpaces other industries such as finance, manufacturing and healthcare, according to a study by Gigaom Research recently commissioned by our team at Cazena. This should come as no surprise; of any industry, retail arguably has the most to gain from the data-driven decision-making that can emerge from big data analytics.

Take Ozon, Russia’s equivalent of Amazon, as an example. The retailer recently analyzed more than 15 years of shopping data to discover that books were seeing a massive sales jump each winter. Now, as Russians prepare to cozy up with a novel to wait out the bitter winter, Ozon bolsters its book recommendations and, as a result, its revenue.

These and myriad other opportunities await retailers that can put their massive amounts of data to work. But why are so many looking to the cloud to conduct this analysis, and why is the retail industry in general more comfortable with this approach than other industries?

Retail’s biggest drivers of big data analytics in public cloud adoption are cost reduction and agility. The industry’s thin margins mean retailers typically work with limited resources, including IT staff. There is a strong need for cost efficiency, and committing millions of dollars to support a quickly aging big data infrastructure with costly hardware and software goes against that.

There is also a constant need to be more responsive, especially in the face of escalating consumer demands for elevated levels of service that are increasing as fast as big data evolves. While the current big data infrastructure is slowing retailers down and cutting into razor-thin margins, the cloud has the potential to reduce costs and speed business results across all functions and lines of business.

Security is a key barrier to adopting the cloud for big data workloads for all industries; however, retail is less concerned about it. Only 44 percent of retail respondents said the potential for security breaches is a key blocker, compared to a 66 percent average from other industries (finance, tech, healthcare and manufacturing).

While the recent highly publicized, cloud-based hacks at Target and The Home Depot indicate keeping the bad guys out should be a top priority for every retailer, over three in four retailers (77 percent) said they have not experienced a security breach. Cloud security is certainly a concern for the industry, but not an overwhelming one.

Retailers are more comfortable with moving full migrations of mission-critical apps to the cloud. Twenty-six percent of retail respondents said they plan to action such projects in the next 12 months; whereas, on average, only 11 percent of respondents from the other four industries plan to move such big data workloads to the cloud in the same timeframe.

Retailers’ willingness to move business-critical apps (e.g. POS systems, inventory tracking, shipments) to the cloud provides them a richer set of data for analysis. It is also generally more secure. Alert Logic reports that on-premises environments are still more likely to be attacked than cloud environments; on average, on-premise customers suffer nearly twice the number of incidents compared to cloud hosting customers (153.3 to 85.8).

One additional reason the retail sector may be more willing to go “all-in” is because retailers do not have to deal with regulation as stringent as financial services firms face with the Gramm-Leach-Bliley Act or healthcare providers have with HIPAA.

Retailers have been sharply criticized for being behind the curve when it comes to consumers’ rapidly changing expectations in the age of smartphones and tablets. However, if this data is any indication, the industry is working hard to embrace the cloud and push itself ahead of other industries.

Prat Moghe is the CEO of Cazena.