INDUSTRY FOCUS: RETAIL SECTOR

The retail sector provides one of the best examples of how cloud computing can make an organisation more agile.

The typical retail enterprise is a large-scale, fast-moving business, focused intently on product and customer satisfaction, and one in which IT often plays second fiddle.

Retailers tend to have large and complex legacy applications and infrastructure, which they have built up over many years to meet their business requirements, yet none of which rise to today’s challenges. IT-based equipment is frequently mismatched and outmoded, which adds to the perception of IT becoming something of a bottleneck, holding back change.

“If you look at the average age of, say, point-of-sale equipment in stores, it’s probably seven to 10 years,” says Andy Taylor, Fujitsu UK and Ireland’s Director for Client Engagement and Consulting in the private sector. “I know of one retailer that kept equipment working for 18 years and was buying spares on eBay.”

Taylor adds that with IT budgets also under pressure, Chief Information Officers (CIOs) are expected to deliver far more for a lot less.

“The first thing, then, that cloud offers in this scenario is what might almost be seen as a ‘get out of jail free card’ for retailers trying to better serve their customers, improve the customer experience and face the challenges of newer forms of retailing,” says Taylor.

He believes however that it’s early days in retail and says that like most industries, it is sceptical about anything that involves rent.

The on-demand nature of cloud computing is absolutely critical to its uptake and appeal.

“Imagine a fashion retailer where every season it will be doing a range review,” explains Taylor. “Fourteen months before the product hits the shelf, it will work out the financial model – including a range and space plan and so on. All of these activities use specialist niche applications, which historically, the retailer would have to buy and integrate – and potentially use perhaps two or three times a year. And they all cost £200,000 to £500,000 each time to implement, as well as take nine months.”

If, says Taylor, the same functionality could be provided on a rental model, for a few months at a time and with only a couple of days’ or weeks’ notice to be up and running, then the retailer would get access to the functionality very quickly. In fact, by the time they actually come to pay the bill, they will have got the value out of the service. Taylor likens it to the car rental model.

Data demands

The data processing demands on retailers, as in other business sectors, is on an upward trend, partly through technological progress, partly due to legislation.

“What’s particularly challenging for retail at the moment,” Taylor continues, “are areas like PCI (Payment Cards Industry) compliance that regulates the handling of credit card data. Each retailer needs to certify that their end-to-end IT systems, from the PIN pad through the till, all the way up to their headquarters and their connections to the banks – that all of these meet standards, many of which are increasing every year. But if you were to buy into a service on the cloud computing, all of the above automatically upgrades as part of the service, so it’s someone else’s problem.”’

Another little appreciated benefit of cloud, especially from a longstanding supplier such as Fujitsu, is that large companies can – and do on a large scale – use not only major software suites more economically, but also take advantage of myriad clever software applications developed by small companies. These perform a niche function especially well, but a major organisation might be loath to risk buying and using this off the shelf.

Tried and tested

Clever bits of software developed by the company with five or six people who really know their stuff are often attractive, but understandably, major retailers don’t like investing in them even though they incorporate the latest thinking. But Fujitsu can bring large company scale and reliability to small, clever IP. In effect, such useful software is almost rebranded by Fujitsu, with the added benefit of it being fully checked and tested and with the code held in escrow, so if anything goes wrong with the originating developer, Fujitsu can continue to deliver the service.

As Jeremy Worrell, Director of Cloud Computing, Private Sector, for the Fujitsu UK and Ireland, explains, cloud is especially useful to the retail sector because of the seasonal nature of public buying patterns.

“What retailers are doing at the moment is providing enough IT for those peaks all year round, which is an enormous waste of resource,” says Worrell. “External, rented IT is a far more economical solution here.”

And, as he points out, there are yet more hidden benefits for the retailer. “One such is knowing the customer better by being able to afford to perform more analytical experiments with customer data,” he adds. “It’s hard for retailers to launch a new range if the market isn’t adequately tested. The millions sometimes spent on a new project is a big risk, so a vastly lowered capital expenditure can allow much more freedom to experiment in your business. Cloud helps companies use the typically agile thinking of a small organisation.”

One personal finance company, says Worrell, had a problem recently after testing a new product at just 30% capacity and then going live with it.

“They took an educated risk and it backfired on them,” he says. With cloud, they could have rented 100% capacity for a short period, with zero capital expenditure.”

Cloud can also enable a different type of agility by enabling very small-scale special projects to take place.

“This is the idea of setting up and tearing down pop-up stores,” adds Worrell. “Maybe you’ve got something like Glastonbury or Glyndebourne and you’d like to set up a retail shop for two or three weeks. The IT to accommodate that sort of thing could be wholly prohibitive, but with cloud – along with mobile connectivity – the IT for customer-delighting pop-ups can become relatively easy to deploy.”

INDUSTRY FOCUS: RETAIL BANKING

Banks today are pulled in two directions.

They are acutely aware of the need to be more agile and offer ever more attractive services to clients. They also know only too well that they need to continually drive down costs.

Andy Stewart, a Partner for Global Financial Services in leading cloud supplier Fujitsu, explains that these two apparently divergent requirements need not be mutually exclusive.

Cloud computing, he argues, offers banks the platform they need for the swift launch of innovative, competitive products, while cutting costs substantially.

“The obvious advantage is cost,” Stewart says. “Banks are looking for efficiencies, for capex to opex shifts. In financial services, there’s also a huge challenge around regulations compliance. With things like Basel 3, banks are required to have more money readily available, so anything that saves on capex, as cloud does, is positive. Plus, of course, they’re looking for enhanced agility.

“And I think the banks that will be really smart about this,” he continues, “will be the ones that are thinking, ‘Well, yes, we can get the cost and efficiency-type benefits, but actually, cloud allows us to create new business models, new ways of interacting with our clients, so that we gain a much more intimate relationship with the end customer’.

“They’re seeing that cloud can secure sustainable competitive advantage, and I think that’s where the really clever advances will lie – with finding ways of using cloud to improve the interaction and interface with the end customer.”

“They’re seeing that cloud can secure sustainable competitive advantage, and I think that’s where the really clever advances will lie – with finding ways of using cloud to improve the interaction and interface with the end customer.”

“If you think about what banks are trying to do, they’re trying to attract and retain their customers. They’re trying to sell product. So if they can use cloud services to launch more product, to launch new products more quickly and to make the products more customisable to the individual based on what they really want, they could go on to offer much more variability and flexibility in interest rates, for example, around credit cards and payment terms, or offer enhanced loyalty and reward programmes.”

Andy Stewart’s colleague, Jeremy Worrell, Director of Cloud Computing, Private Sector, for the Fujitsu UK and Ireland, points out that banks are already becoming keen on VCS (Virtual Client Services), meaning virtualised desktops and applications.

“Banks tend to have lots of large, expensive premises where half the desks are empty half the time,” Worrell says. “And part of the reason for that is that every employee needs a desk and each desk needs a desktop PC on it, with a customised set of applications installed on it.

“As they move people’s desktops into a centralised cloud-type service, those desks become more agile and perhaps they need only a fraction of the desks they previously needed.”

Worrall continues, “They used to give everyone a laptop, so you carried your desk around with you, but actually the cheaper way of doing it is just to have the desktop downloading stuff across the network.

“As a result, banks are divesting themselves of their over-expensive property by using things like our virtual cloud services. Other organisations could do that, but banks seem to be the ones who really seize on this aspect of cloud.”

Overall, Andy Stewart describes the sector as being in “planning mode” for cloud – well aware of the technology and its potential advantages, but a little unwilling to take the plunge fully.

“Banks are generally risk-adverse. Understandably, they’re not going to do something until it’s well-proven and already exists,” he explains.

“The banking sector is concerned with the security aspects of Cloud, as well as issues over some regulatory matters. But I do think these are concerns rather than restrictions. People are getting their heads round how to make it work and how you can manage the issues over where data sits and those sort of things.

“My perspective is that Cloud will happen in banking and that it’s only a question of time before the banks start adopting it for their core processes. Once the big banks are using Cloud, then the others will follow.”

INDUSTRY FOCUS: THE PUBLIC SECTOR

Cloud computing is especially well suited to very large IT demands, and none come larger than those of government organisations, which typically need the capacity to serve millions of people within a short space of time.

Jon Wrennall, Fujitsu UK and Ireland’s Chief Technology Officer for the company’s UK Government Division, has held several senior roles in government IT services, including for HMRC and the Valuation Office Agency. With Fujitsu, he is one of the leading evangelists and protagonists for cloud technology in public service.

“We’re all significant stakeholders – we’re customers of public services. We invest over 50% of our gross income in public services every year, whether we want to or not!” says Wrennall. “We spend hundreds of billions a year on public sector services and almost every facet of our everyday lives is enabled by government IT.”

As he explains, if the UK is spending that amount of money on public services, then it obviously needs to make sure it is getting its money’s worth, given the state of public services in the UK. Just like every other sector Fujitsu looks at, cloud can have exactly the same cost-saving impact, for all the same reasons, on public services.

However, as Wrennall is anxious to point out, cloud computers running massive tasks for millions of people and dealing with extremely confidential, or even secret, information are in a very different game from almost any private sector organisation.

‘There is a justified level of paranoia in terms of some of the threats that the UK Government specifically suffers,” he says. “It’s not to say that banks don’t suffer some of the same threats that the UK Government suffers, but some of the hostile conditions it has to operate in means that there are particular elements that make it an even harsher environment in which to operate than that of the private sector.”

So in many respects, says Fujitsu, the government needs to make certain that whomever it chooses as an IT supplier understands these conditions and doesn’t try to create an environment of fear. Fear breeds cost, cost breeds inappropriate behaviour and inappropriate behaviour leads to increased taxes and the dearth of the economy.

Central government, explains Wrennall, spends about £16 billion on IT every year, of which Fujitsu supplies only a part, but it has unique capabilities in the sector. For example, the company provided much of the computing infrastructure for the HMRC’s self-assessment system and for the DVLA’s online tax disc application system. This close frontline involvement with government IT means that Fujitsu is highly committed to IT working well and efficiently across public services. “It’s incredibly important to the UK and to the services on which we all depend,” adds Wrennall.

He defines Fujitsu’s mission as enabling government to operate effectively in an open market and to start breaking down some of the ‘silo barriers’ that exist in the public sector. For example, in Wrennall’s experience, separate government departments have in the past had a tendency to guard their own IT systems against resource sharing, even if their facilities are not running at full capacity.

“All of these departments will have different ministers, different responsibilities, different line management and, strangely enough, slightly different service level agreements,” explains Wrennall. “However, if you look behind the scenes in the engine room, all of these are actually in the same data centre. So data consolidation is one key premise going forward.”

Government does itself a disservice in a sense with regard to cloud adoption, believes Wrennall, because in a sense “it has kind of already done it”, with regards to datacentre consolidation.

Wrennall explains that none of the agencies would choose to build their own datacentres any more – they’re expensive, they’re big, they consume lots of electricity and they’re capital intensive. And the data centre building is fundamentally a physical cloud service that the government is already consuming and has done for a couple of decades. Datacentre as a service has, therefore, been around a long time.

“As we move up the maturity curve,” Wrennall continues, “each of these agencies will become used to the idea that you can buy further levels of service.” He is confident that the public service culture will change as the current thinking on cloud services coincides with the existing cloud-like structures government datacentres already have.

This, he explains, will mean re-engineering not just the more stubborn conservative areas of public service culture, but the silos themselves. Unused computing power can be reallocated easily between departments to allow for more agile handling of peaks in demand, such as the annual Self Assessment deadline. This puts far greater pressure on the HMRC’s network than other famous online peaks, like Amazon’s pre-Christmas rush and the online tax disc service’s end of March and September peaks.

In the drive towards increasing cloud adoption by government, Wrennall was instrumental with Fujitsu in the Valuation Office Agency’s project to scan its entire document holding into an Electronic Document Warehouse.

The agency didn’t want to buy a datacentre or scanning machines, but aimed to get paperwork into an accessible, electronic format. The successful project was key to changing the whole model for such enterprises.

“Do our customers want to commit to building their own physical structures with five years of work?” asks Wrennall. “If an outside contractor can do it for a fraction of the cost, it’s really a no-brainer.”

Jeremy Worrell, Director of Cloud Computing, Private Sector, for the Fujitsu UK and Ireland, sees much common ground between a leading IT supplier like Fujitsu and the government culture. “We as an IT industry have evolved to provide common, shared services,” he says. “Where government departments have similar needs, they can each pay for computing per unit and realise the dream of departments coming together and doing things in common ways.”

Local councils, he points out, are also moving the same way, with groups of councils getting together to perform the same function in the same data centre.

Local councils, he points out, are also moving the same way, with groups of councils getting together to perform the same function in the same data centre.