Microsoft DW retail industry article

Benefits in store

According to Microsoft, retailers can look forward to a new age of 'knowledge productivity' based on data warehouse solutions that are powerful, easy to use and, above all, affordable.

In retailing today, the barriers to success can appear so great that retailers might be forgiven if they sometimes felt like 'shutting up shop' altogether. But as the most successful retailers know, overcoming these barriers can lead to vast rewards in terms of market share and increased profits. Information is the key - information to support faster and more decisive decision-making. This is why retail managers now acknowledge the critical role information technology (IT) can play in achieving and securing a competitive edge.

The more a retailer knows about its business, and especially its customers' needs, the better decisions it can take about its current and future direction. 20 or 30 years ago, the retail trading model was such that it was still just about possible for retailers to have this sort of information. 'Knowledge management', all be it on a vastly more simplistic level, was achievable. The rosy image of the shopkeeper keeping tabs on stock and knowing the products an individual customer wants - in some cases pre-empting their demand - is a familiar one. But in recent decades, the scale and nature of retail operations have changed beyond all recognition. Knowledge management has become ever more elusive.

Yet retailers know instinctively that the ways in which they can gather, analyse and deliver information, to whoever needs it across the business, can be a key differentiator. Information is what enables retailers to track changes in the marketplace and to react promptly to new trends, constantly reshaping their business and tailoring products, services and promotions to customer needs.

Information for the consumer age

Perhaps more than any other sector, retailers can be seen as running their business on a knife-edge. They face rising costs and falling margins. They want to ensure a faster time-to-market, and provide a more efficient consumer response (ECR). In an increasingly competitive environment, building customer loyalty is a top priority, and many want to use relationship and 1:1 marketing techniques to increase customer retention and lifetime value. Other, equally important issues to consider include price and promotion management, category and inventory management, merchandise forecasting, store location planning, supplier and supply chain management and, last but not least, financial controlling and human resource management - typically across multiple sites and, increasingly, multiple countries.

In parallel with these business challenges, there's also a range of technical issues that must be considered and then overcome.

There's usually a multitude of IT systems in place within retail organisations. The data held in each has the potential to tell you something about your business and its customers - from various back office legacy and transactional systems, through ERP (Enterprise Resource Planning) environments, to EPOS and so on. Yet all too often, these systems are incompatible and the valuable data they hold remains locked away. Consequently, it does little to drive the business forward. And the data volumes can be immense, too, especially when you consider the number of product lines, customer transactions, retail outlets, promotions and employee numbers, for example, that can be involved in a modern retail operation. And if that wasn't enough, this already difficult situation can be made almost unbearable in a pre-Millennium environment that's characterised by ever-tighter financial scrutiny, limited resources and static IT budgets.

So if this is the reality facing retailers, what steps can they take to align their information (and IT) needs more closely with the demands of the consumer age?

The rise of the data warehouse

In the 1990s, recognition of the value of information fuelled the rise of the data warehouse or, as IBM sometimes called it, the information warehouse. But as labels for this computing environment, both data and information are increasingly redundant. Many industry experts believe that in the near future, the true wealth of companies - retailers included - will be measured by the knowledge productivity of its employees. It seems likely that the true value of a data warehouse, therefore, will lie in the opportunities it presents to maximise the intellectual capital that exists within the organisation. The implication is that when this intellectual capital can be released, the retailer can rise to meet the myriad business challenges it faces.

Data warehouses were originally described in such terms as "centralised repositories for data collected by an enterprise's various information systems". But such a definition does little to communicate the enormous business potential of data warehousing. And the fact that warehousing was originally seen as a technology rather than a business solution goes some way towards explaining why many early projects failed.

From the early 90s, in retailing as elsewhere, data warehouses were typically held on mainframe servers. Data was extracted from various operational and legacy systems and organised. It could then be analysed and exploited via decision support systems (DSS) and, more recently, through business intelligence tools and data mining techniques.

This new architecture promised much. Even in the early days, its raison d'etre was to help retailers understand their business better, to run it more effectively and meet changing customer needs consistently and accurately. But the marketplace soon became dogged by perceptions of costly and drawn out data warehouse projects that, ultimately, failed to deliver on their promise.

Why warehousing failed

Early warehousing projects were invariably driven by the IT side of the business. As a result, data warehouses seldom reflected the key business drivers they should have been helping to achieve - from tracking turnover and improving customer loyalty to optimising shelf space and speeding supply chains. The basic point is that there was often little or no integration of the technology with the business.

And there was also the fear that the new system might not be able to evolve to meet changing needs. This is vital in an industry where customer behaviour and market conditions are notoriously unpredictable, and where even minor seasonal variations can have an impact on the bottom line. When it's difficult to know what retail decision makers will 'need to know' in the next six months, let alone two or three years down the line, having such flexibility to accommodate changing business needs was essential. And only then could retailers cope with the inevitable growth in data volumes, new data sources, and exploit new business approaches such as e-commerce (particularly as on-line retailing assumes an ever-higher profile).

Crucially, data warehouses were also expensive. Many retailers faced the prospect of investing in the hardware and software required, plus expensive consultancy services. Yet there was no guarantee of results, and quite probably high risks associated with implementation. Not suprisingly, many companies were disappointed when the data warehouse failed to show a measurable let alone rapid return on investment (ROI). No wonder, then, that data warehousing was often such a difficult sell to Boards of Directors who, with an eye on the bottom line, wanted to see fast results. Other companies meanwhile, and certainly smaller and medium-sized retailers, failed to get off the starting blocks in the first place as entry level costs were simply too high. Data warehousing was just too costly to contemplate.

But time marches on. By the late 90s, the data warehouse marketplace has matured rapidly. With hardware, software and IT skills now effectively commoditised, knowledge management can at last be seen as a right for all retailers, rather than the privilege of the few. In this environment, Microsoft is delivering low cost solutions that, as you'd expect, are just as powerful, reliable, flexible and scaleable as any other world-class data warehouse.

A 'one stop shop' for retail knowledge management

Microsoft's objective is to slot the data warehouse, seamlessly, into a retailer's business environment and IT infrastructure to smooth and speed information flow, thereby creating what Bill Gates calls the 'digital nervous system'. The data warehouse element is achieved by providing an integrated set of affordable, easy-to-use products in a form that's easy to implement, use and develop further.

But why Microsoft for data warehousing and why now? Microsoft's trading model is based on delivering high volume software at low cost. Data warehouses, traditionally, have been the opposite: low volumes delivered at a high cost. Now, with technology and IT skills commoditised, data warehousing isn't just for the few that can afford it, or for retailers that recognised its value early and had the financial muscle to implement a warehouse.

There's always a better way of doing things, and data warehousing is no exception. Microsoft can, in short, deliver powerful, enterprise-wide data warehouses in high volumes at low cost. Plus, the commoditisation of data warehousing skills means those all-important consultancy services, to ensure the warehouse is precisely mapped to a retailers' key business drivers, can now be delivered at a highly manageable cost.

In an industry as diverse as retailing, no two companies are the same. This is why Microsoft offers a range of tools and approaches, plus strategic relationships with other suppliers in the Microsoft Alliance programme, that enables retailers to chose 'best of breed' products and solutions to support their precise requirements. And they are able to proceed with development at the pace and scale that makes most sense to their organisation - whether they're a single independent department store, an expanding mid-range retailer, or a multinational retail giant.

The bottom line is that, today, Microsoft for data warehousing makes sense. The company's underlying ethos is "why settle for a limited pool of knowledge workers when you can turn everyone into a knowledge worker?" Or to put it another way, why not seize the opportunity to transform your entire retail organisation into a customer-focused 'knowledge enterprise'?

Improving the business

In general terms, data warehousing should enable you to understand your business like never before, ensuring "the right information is delivered to the right people at the right time". And this up-to-the minute, comprehensive and accurate information is consistent across the enterprise.

For retail managers, this means they can track current trends, anticipate future ones and respond to both in the most effective ways. This might entail identifying the best (or the worst) suppliers and then taking appropriate action; targeting specific groups of customers, and marketing directly to them (consumers with young families, or vegetarians, say). Managers can focus on and then adjust retail margins at the right time, without having an adverse affect on sales. And companies can optimise their stock levels and therefore reduce capital costs - they can, for example, eliminate 'shelf warmers' while ensuring there's enough stock of goods that are forecast to be popular at certain times of the year.

In these areas and more, a Microsoft data warehouse helps retailers to make more strategic and therefore more profitable decisions. Managers can understand and manage key business drivers to achieve corporate objectives: from fighting off the competition and building market share, through controlling costs and managing human resources, to improving customer satisfaction, optimising the product mix and making better use of shelf space.

The Microsoft advantage

Quite apart from sheer affordability, Microsoft data warehouse solutions can provide a fast return on investment - simply because they deliver measurable productivity improvements based on investments that are both realistic and controllable.

Microsoft data warehouse solutions are also inherently flexible and, in both business and IT terms, are 'future-proofed'. They're also highly available: from data centre to laptops. Merchandisers can, for example, take selected components of the warehouse with them 'on the road'. How's that for enhancing knowledge productivity? And the intuitive, familiar tools provided by Microsoft mean that no major cultural changes (or, indeed, employee training) are required to see rapid benefits and productivity gains.

Benefits such as these are dependent on technology that is both proven and powerful. Microsoft's SQL Server - the building block on which Microsoft data warehouse solutions are based - is both.

Proven technology

In terms of the underlying technology, integration is the key to Microsoft data warehousing. SQL Server includes an integrated OLAP (on-line analytical processing) Server that's used to normalise data from various transactional and legacy systems, and to enable faster, more 'real life' multidimensional analyses and reporting. Integrated data transformation services mean retailers can automate the import, export and transformation of data from multiple sources, quickly and easily. An integrated Data Repository provides a common infrastructure that's optimised for information sharing. Integrated replication techniques support multi-site updates, and allow retailers to maintain dependent data marts (smaller scale, typically department-based or process-specific data warehouses). And a range of integrated tools enables you to take your retail data warehouse capabilities onto the World Wide Web.

Across Europe today, many retailers are deploying Microsoft technologies such as these to create a digital nervous system with a data warehouse at its heart - a system that enables them to respond swiftly to market dynamics and address shifting consumer needs.

For example, Marks and Spencer, one of Europe's largest retail groups, chose Windows NT as the basis for its new enterprise-wide IT infrastructure. The first system to be rolled out, the New Store Infrastructure, connects the company's stores and terminals across Europe. ICL Retail Systems, a Microsoft Alliance partner, has already developed a new point-of sale application that draws on SQL Server database capabilities.

And in Belgium, leading retailer Delhaize 'Le Lion' turned to SQL Server and Windows NT as the basis for a new data warehouse infrastructure that's closely aligned with the needs of its business. According to Michel Eeckhout, IT Director at Delhaize 'Le Lion', "Microsoft solutions meet our current needs and guarantee coherent developments for the future. Once we'd begun using SQL Server, we soon noticed it was extremely well suited to becoming a genuine data warehouse. What is ingenious about Microsoft (solutions) is that we don't have to create a data warehouse from scratch, as though we suddenly decided one day to install a new way of working. The whole art of the new (information) age is to install a flexible and expandable infrastructure right from the start."

The knowledge-based retailer

If one thing is clear, it's the fact that Microsoft has something new to offer the world of retailing: powerful data warehousing for all, with the emphasis on affordability, flexibility and availability. Because of this, retailers have an opportunity to build a more effective, customer-focused knowledge-based enterprise - whatever the scale or scope of their operations.

Data warehousing isn't really about data or even information. It is about knowledge, and using that knowledge to build a more successful retail business. Data warehouses, and the knowledge they create, should be at the heart of the digital nervous system. A system that enables retailers to react, adapt and succeed like never before.

To find out more visit www.microsoft.com/europe/industry/datawarehousing

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