Cloud computing for retail - IBM paper explains how cloud computing can help retailers address these challenges. Why cloud computing for the retail industry? Simply put, cloud computing can reduce the IT costs of managing existing and new systems• • ...

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<ul><li><p>Cloud computing for retail</p><p>IBM Global Retail White Paper</p><p>Cloud Computing</p></li><li><p>2 </p><p>Retailers constantly strive to improve efficiency and reduce cost. Managing their large application portfolios has become increasingly complex and expensive and their IT departments frequently must support vertically-focused applications with overlapping functions. Distributed infrastructures and multiple architectures inherited from packaged solutions complicate the management of information. As retailers add new capabilities and enter new market segments, the challenges of complexity and cost of managing their IT increase. This paper explains how cloud computing can help retailers address these challenges.</p><p>Why cloud computing for the retail industry?Simply put, cloud computing can reduce the IT costs of managing existing and new systems. We see retailers constantly exploring new business models and adding new capabilities to their application portfolios, which in turn increases the complexity of IT infrastructure, volume of data and demands more computing power. For example: </p><p> Grocery chains are increasing private label assortments and developing new product life cycle management, manufacturing and recipe management capabilities.</p><p> Food safety requires specialized systems to track inventory. Drug and pharmacy chains, offering medical care and private </p><p>labels, now behave almost like pharmaceutical companies and require new applications.</p><p> The use of social networks to increase business requires specialized vertical systems to manage customer reviews, unstructured content, digital media and more for websites.</p><p> Fashion apparel retailers focus on localized assortments, shorter cycle times and customized offers that require specialized inventory, faster execution of sales promotions and greater visibility of the supply chain.</p><p> General merchants offer more consumer electronics and subscription plans with specialized application needs.</p><p> Do-it-yourself retailers continue to develop more precise solutions for delivery scheduling, installation and setup, including optimization of field service management.</p><p>Such a customer-focused retailing approach creates a tremendous amount of data driving a 54 percent growth in storage shipments every year.1 Yet retail IT operating budgets, as percentage of revenue, are one of the lowest in the industry. The need to do more with less is therefore a continuous imperative for these IT departments.</p><p>Cloud computing for retail</p><p>IT challenges in the retail industry Alwaysonrequirementsforcustomer-facing ITservicessuchaswebsites</p><p> Significantvariancesincomputingcapacities betweennormalandpeakworkloads</p><p> FlatITbudgetshavingtoabsorbnew capabilitiesandgrowth</p><p> Consolidationofsoftware,hardwareand systemsmanagement</p><p> Alackofinternalexpertise</p><p> Efficientreuseofhardwareinvestments (astestanddevelopmentenvironments)</p><p> Supportformorecomputationallyintense services</p></li><li><p>3 </p><p>What is cloud computing?Cloud computing is an emerging computing model that offers users access to their applications from anywhere, with any connected device. The services themselves are in data centers where computational resources can be dynamically provisioned and shared to achieve significant economies of scale. </p><p>Cloud computing focuses on:</p><p> Virtualization of infrastructure and services Automated provisioning of services Elastic scaling (increase or decrease) of computing </p><p>poweron demand Increased availability and connectivity with end users</p><p>There are different types of cloud offerings public, private and hybridall of which can help retailers better manage their application growth and computing costs.</p><p>PublicThe infrastructure in a public cloud is owned and managed by an organization selling cloud services and is made available to the general public. In this model, computing capabilities and services such as standardized business processes, applications and infrastructure services are accessed by multiple subscribing clients on a flexible, pay-per-use basis.</p><p>PrivateThe infrastructure in a private cloud is operated solely for a user organization. The organization can own the private cloud or they can engage a third party to host iteither on site or off. A private cloud provides restricted access to the computing capabilities and resources to be shared by employees; internal departments such as human resources, IT or marketing; and external partners such as distributors and manufacturers. </p><p>At the same time as they are ramping up their capabilities, many retailers are trying to cope with expensive, complicated IT infrastructures. On average, 70 percent of retail IT budgets is spent maintaining current infrastructures.2 Annual operational costs (that is, power, cooling and management) of distributed systems and networking can exceed double their acquisition cost and all these costs continue to increase. </p><p>Even worse, the utilization rates of these commodity servers hover around 5 percent to 15 percent, on average wasting capacity. This means that as much as 85 percent of retail computing capacity sits idle in distributed environments. It can take months to provision new servers (from purchase to installation), hampering lines-of-business efforts to respond quickly to competitive threats or new opportunities. </p><p>To minimize such disintermediation, retailers must reinvent their data centers and infrastructures so that they use virtualization and consolidation to improve server utilization levels with a corresponding reduction in power consumption. They need a data center model that dynamically provisions IT services in minutes or hours rather than months (and at lower cost).</p><p>Cloud computing is a compelling answer to many retail challenges. For example, recent analysis indicates that, in some cases, private cloud implementations built around larger virtualized servers are almost 90 percent less expensive than a distributed, stand-alone server approach.3 Cloud computing also offers virtualized storage at significant savings and efficient service management and automated provisioning, which can lower the costs of adding IT resources than doing so with traditional mechanisms.</p><p>IBM Global Business Services</p></li><li><p>4 </p><p>Private cloud computing helps drive efficiency, standardization and best practices in the services it provides while retaining greater customization and control than public clouds would permit. </p><p>HybridThe infrastructure in a hybrid cloud consists of a combination of both private cloud and public cloud features. In this model, computing capabilities and resources are owned and maintained by both the user organization and the cloud provider. An organization uses public cloud computing capabilities and services for general computing, but stores customer and sensitive data in its private cloud to ensure security. </p><p>Choosing your cloudTo compare the benefits of public clouds with those of traditional dedicated services, you should evaluate the software services provided by application service providers (ASPs) compared to the software services that are available on the public cloud. </p><p>Similarly, for private clouds, you should compare the traditional hosted enterprise IT infrastructure available in data centers to services that are available from a private cloud.</p><p>Dispelling the misconceptions</p><p>Noteverybrowser-basedapplicationaccessibleoveranetworkcanbeconsideredacloudsolution.Doingsodilutesthevaluepropositionofcloud,whichisaboutflexibilityandefficiencyofcomputingresourcesandcost.</p><p>However,fromabusinessperspective,cloud,especiallyapublicorahostedone,canalsobeconsideredadifferentcommercialmodel,onewhereresourcescanbepurchasedbyusage,shiftingtheexpensesfromacapitalexpendituretoanoperatingexpenditurebucket.</p><p>Despitethepopularassumptionthatallcloudsarepaybythedrink,themarketplaceisrealizingthatthereistremendousvalueinprivateclouds.Retailersdontnecessarilywanttogiveupcontrol,theircompetitiveadvantagesortheirdifferentiatedcapabilitiesandmovetoshared,standardizedcapabilitiesthatputsthemon-parwiththeircompe-tition.Retailerswouldrathersimplyavailthemselvesofthebenefitsofcloud,withoutgivingupcontrol.Insuchsituations,aprivatecloudisanexcellentchoice.</p><p>Notallaspectsofthesolutionneedtobecloud.Traditionalsoftwarevendorscontinuetostrugglewithhowlicensingwouldworkinapayperusemodel.Itisstillpossibletodevelopacost-effectivesolutionwheretheinfrastructurecanbeonacloudandthesoftwareislicensedbytraditionalmeans.</p><p>Cloud computing for retail</p></li><li><p>5 </p><p>Types of services provided by cloud computingCloud computing provisions and delivers standardized IT ser-vices to users over a network (Internet or intranet) in a flexible pricing and usage model. The users are only aware of the ser-vice. They have no need to understand details of the underlying IT infrastructure, its technology or implementation. The ser-vice provider is responsible for implementing the service and managing the required infrastructure. </p><p>In addition to provisioning and virtualization, the cloud model also deprovisions these services so they can be reallocated for other purposes. The concept of repurposing and reuse is a key tenet of cloud computing. </p><p>IBM Global Business Services</p><p>VIRTUALIZATION STANDARDIZATION AUTOMATIONReduced</p><p>Cost</p><p>CLOUD TYPES</p><p>Business Process as aService (BPAAS)</p><p>Software as a Service (SAAS)</p><p>Platform as a Service (PAAS)</p><p>Infrastructure as a Service (IAAS)</p><p>Business processes as a service; e.g. indirect procurement, payment processing etc...</p><p>Software as a service e.g. email, CRM, eCommerce, merchandise optimization etc...</p><p>Application servers, databases, middleware, development tools as a service</p><p>Infrastructure such as servers, storage, file-systems as a service</p><p>Figure1:Servicesinacloudcomputingarchitecture</p><p>The cloud infrastructure focuses squarely on efficient utilization of the base infrastructure (Figure 1) This includes virtualization, routing and storage management. The cloud platform manages the services running on the infrastructure. The services provided by the cloud are what the consumers actually use.</p><p>Business Process as a Service Business Process as a Service (BPaaS) is when a third party leases business processes and capabilities to a company so that the company does not have to handle them in house. The services are available by network and the company either pays as it uses them or makes a low, upfront investment to get started. </p></li><li><p>6 </p><p>Software as a ServiceSoftware as a Service (SaaS) is the distribution of software hosted by a provider in a central and remote location and made available to consumers over a network. SaaS uses a pay-as-you-go pricing model, which decreases or increases the number of software licenses based on need, without having to procure, install or maintain software or hardware or incur ongoing maintenance costs. When retailers use the SaaS delivery model, they can access, business applications, such as accounts payable and customer loyalty virtually.</p><p>Platform as a ServiceWith Platform as a Service (PaaS), the complete application development and deployment platform (both hardware and software) can be delivered as a service, typically over the Internet. Developers can create, test, deploy and host applications quickly without having to bear the cost and complexity of buying and managing the underlying software and hardware. PaaS is often referred to as cloudware. In some cases, Web services, Web 2.0 capabilities and middleware are offered as an integrated platform on which applications can be built, assembled and run.</p><p>Infrastructure as a ServiceInfrastructure as a Service (IaaS) provides hardware components such as servers, network equipment, memory, CPUs and disk space. With IaaS, a retailer could run all operations without installing and maintaining in-house data centers. The approach to the delivery of these services varies from providers to provider.</p><p>The benefits of cloud computing for retailersCloud computing provides dynamically scalable and virtualized resources as a service. Users dont need knowledge of, expertise in or control over the technology infrastructure that supports them. Whether you understand all the technical details involved or not, the crucial issue is: What can cloud </p><p>Cloud computing for retail</p><p>computing do for a retailer? Some of the most noticeable benefits that cloud computing can bring to retailers are:</p><p> Fasterdeploymentofnewcapabilities. The use of a common repository, combined with scheduling and automation, means that new capabilities can be deployed much more rapidly. This is due, in part, to faster testing and ensuring tests are thorough and complete (for both unit and integration tests).</p><p> Improvedconsistencyandqualityofnewcapabilities.A common image repository one in which common and reusable images are tested and hardened ensures consistent, higher-quality results.</p><p> IncreasedefficiencyintheuseofITresources. Cloud computing helps provide significant reuse of existing compute, storage and data resources by simplifying access to them.</p><p> Fasterintegrationwithpartners,vendors,customersandsuppliers. A cloud-based test environment requires standardization and consistency. This approach allows external partners (such as outsourced development firms) to plan test phases more efficiently and confidently, because the environment is consistent and well known.</p><p>How retailers can put cloud computing to workSavvy and market-leading retailers are aggressively pursuing the use of cloud computing, primarily for cost reduction, speed-to-market and quality benefits. The key to doing this is to not boil the ocean, that is, create a cloud enablement plan that is so complicated its hard to know where to begin. Getting precise about which retail capabilities can benefit from cloud and moving specific workloads will be lot more effective than simply trying to cloud enable an entire IT infrastructure all at once. IBMs methodology, for example, is to take a Component Business Model (Figure 2) view of a retail enterprise and identify specific workloads that match the characteristics that are most suitable for movement to a cloud infrastructure.</p></li><li><p>7 </p><p>Retail functions suited to cloud computing include:</p><p> Merchandise analytical functions that require significantly varying compute power can benefit from server and storage virtualization</p><p> Store back-office functions running on desktops can benefit from desktop virtualization</p><p> Card-based payment processing by settlement can be moved to a shared, public cloud for PCI-DSS compliance and better privacy</p><p> Development and testing of retail applications can benefit from an infrastructure-as-a-service cloud</p><p>IBM Global Business Services</p><p>Marketing and CustomerManagement</p><p>Customer Relationship Strategy</p><p>Consumer Segmentation</p><p>Marketing Strategy and Planning</p><p>Merchandising andProduct Management</p><p>DIR</p><p>EC</p><p>T</p><p>Brand Strategy</p><p>Strore and Channel Supply Chain Business and FinanceAdministration</p><p>CO</p><p>NTR</p><p>OL</p><p>EX</p><p>EC</p><p>UTI</p><p>VE</p><p>Merchandise Strategy</p><p>Price/Promotion Strategy</p><p>Supplier Str...</p></li></ul>


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