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Survey: retailers ready to spend on IT again, but want smarter systems

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New survey shows IT budgets recovering from recent recession, but concentrated on high-value projects such as product placement and customer analytics.

Retail is a bellwether of economy health, and it appears organizations in this sector are starting to ramp up their information technology spending after the bruising 2008-2009 downturn. However, this spending will be very focused, concentrating on areas that will deliver the most value the quickest, such as product placement and customer analytics.

These are the findings of a new survey of 109 retail CIOs, jointly sponsored by IBM and Aldata Solution. The survey showed that IT budgets appear to be recovering after the initial downturn at the start of last year's recession, with averages for all retailers at 1.3% of sales compared to 1% last year.

Twenty-six percent of respondents expect their IT budget to increase; the same figure as last year. However, while last year's increase was to cover projects already underway, additional funding this year will go to more aggressive plans to implement new systems.

What's driving this spending? Product/place/promotion is one aspect -- a majority will be upgrading, replacing or implementing new systems in areas such as assortment optimization (58%), promotions optimization (56%), promotions management (54%), automated replenishment (52%), and demand forecasting (46%).

Customer relationship management systems also top IT expansion plans. Multi-channel CRM was ranked as the most important application by respondents, with 42% having yet to implement multi-channel CRM, but with plans to do so within the next three years. Similarly 38% of CIOs surveyed plan to implement loyalty systems -- with customer data linked to buying patterns and behavior -- within the next three years. And finally, systems that support the safety of customers were considered the most important application by 47% of respondents.

There's also a big push on to consolidate data into a single view across the retail enterprise. Master Data Management (MDM) is on many agendas, with spending planned both across the enterprise (35%) and for supplier management (28%).

For the first time, attitudes to sustainability were considered as part of the research, and in terms of which applications retailers feel are having the greatest impact on sustainability, applications for store operations came top of the list. For the future, more retailers believe that multi-channel retailing will have the biggest impact on sustainability.

Allan Davies, CMO of Aldata Solution, summed up retail IT spending plans this way: "while the downturn hasn't halted retailers' IT spend, it has certainly changed the way that money is spent. Gone are the days of end-to-end, rip and replace projects, and instead we're seeing a big focus on process optimization. Retail CIOs are not afraid of investing in new projects, but they need to see a quick return on investment. And by quick, I'm talking about months, not years."

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Joe McKendrick

Contributing Editor

Joe McKendrick is an independent analyst who tracks the impact of information technology on management and markets. He is a co-author of the SOA Manifesto and has written for Forbes, ZDNet and Database Trends & Applications. He holds a degree from Temple University. He is based in Pennsylvania. Follow him on Twitter. Disclosure