A critical review of the benefits of SaaS/cloud deployment for fragmented national and franchise retail businesses

Transcription

1 A critical review of the benefits of SaaS/cloud deployment for fragmented national and franchise retail businesses Author: John Roberts Managing Director CounterBooks

2 Contents Page 1.0 Executive Summary Current challenge for on-premise deployment for large retail business Drivers and market dynamics to a new deployment model What is SaaS or Cloud computing? The benefits of SaaS to a retail business Issues and concerns with SaaS Recommendations About CounterBooks CounterBooks is a trading name for CV Retail Ltd. This publication contains certain text and information extracted from third party documentation and so being out of context from the original third party documents; readers should bear this in mind when looking at this publication. The copyright in such third party text and information remains owned by the third parties concerned. Please note that the inclusion of a company in this publication does not imply any endorsement of that company by CV Retail Limited nor any verification of the accuracy of the information contained in any of the examples. This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, CV Retail Limited, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it CV Retail Limited. All rights reserved. CounterBooks refers to an online retail accounting system which is owned and sold by CV Retail Limited.

3 1.0 Executive Summary Over the past 10 years, we have seen the expansion of internet based systems which were originally born out of the dot-com bubble. This whitepaper will outline some of the barriers to rolling out an IT project under the traditional on-premise deployment model and emergence of the new solutions for retail businesses which many are now adopting. The retail industry has often been known to lag behind others in the adaption of new technology. A key driver is the extremely low margins which retailers work with, which require a quick return on investment (ROI). A new software deployment model called Software as a Service (SaaS) has emerged. SaaS is a software delivery model in which software and its associated data are hosted centrally (typically on the Internet) and are accessed by users using a thin client, normally a web browser over the Internet. The benefits of this deployment model are that it reduces the Total cost of ownership (lower hardware costs), reduces deployment times, is globally accessible, always gets the latest upgrades, and incurs limited upfront costs. SaaS is empowering fragmented businesses such as national retail businesses and retail franchises which have a sizeable number of stores, dispersed over a large geographical area and where the ownership is distributed amongst multiple parties. 2.0 Current challenge for on-premise deployment for large retail business Historically, large corporate retail businesses with multiple outlets were required to buy or build, and maintain, their own IT infrastructures which involved substantial capital expenditure costs for hardware, software and intense project management resources which diverted focus from more strategic issues within the business. There are some general challenges which are applicable to deployment:- Any system which is deployed will use the client machine for operating and is bound by the performance capabilities of that machine. Therefore if a more powerful programming language is used in a new system, there is a likelihood that there will be a hardware upgrade requirement. When rolling out a new project, there is often a requirement for IT personnel to be present at each site to setup the new system, either for a clean install or system migration this is costly, resource and time intensive. Subsequent remote maintenance can be difficult with custom installations as resetting a problem machine to factory settings is often insufficient and further time consuming software installation will be required. In some cases site visits may be required. Multiple systems, databases and platforms within a large business there are often many systems and getting them to communicate from different locations and systems can be a challenge. Managing updates Business models are rapidly changing, new channels are being introduced and new opportunities are emerging making system updates or

4 upgrades across 20+ sites can be more costly than the actual software development and can reduce the viability of the incremental improvements. Security If a business has an increasing number of remote outlets and mobile workers there can often be issues with connecting via a VPN. Many businesses are worried and have concerns about the security risk. Any new system will require additional in-house training for both users and the IT staff, with an already overwhelmed IT department this can restrict the speed and effectiveness of the implementation. Implementing a national or international system within a franchise business can be one of the hardest challenges, even if the franchise network understands the incumbent systems limitations, the actual task of introducing a new system is a challenge as many franchisees will not be willing the spend the money and will be resistant to change Many of the above challenges are faced by national retail businesses. There are some merits to deployment, however due to the above challenges, many businesses are looking at alternative models. 3.0 Drivers and market dynamics to a new deployment model Over the last five-to-ten years, the pace of development for technological solutions applicable to corporate and franchise retail businesses has increased dramatically. High penetration of broadband UK broadband penetration has grown to 95.1% and is now highly accessible to businesses including the 4.7 million small businesses. The adoption has been driven by the increased competition, by the reduction of cost and increase of availability. The higher penetration of broadband has enabled remote, centrally-hosted applications to offer speed comparable to on-premises software which was not attainable under dial up connections. Growing adoption of Wi-Fi, mobile communication technology including 3G. Improved encryption and security technology including the standardisation of the HTTPS protocol which has made lightweight security available and sufficient for most everyday applications. Social acceptance more than 80% of the online population has purchased an item online. This is a dramatic shift from 13.3% in 2002 showing that online has changed significantly over the past 10 years ago where ecommerce was still considered risky. Hardware is smaller, lighter, faster and more durable an example is the use of ipads within the business environment. Software is becoming easier, intuitive, and more responsive to the end-user through dynamic graphic user interfaces. Customer frustrations with traditional software buying cycle which is considered as costly and timely.

5 The above market dynamics have paved the way for the corporate and franchise businesses to deploy IT systems in a different and revolutionary way. For franchise businesses, which are looking to implement a new accounting, ERP, POS or CRM system, this can be delivered through what is commonly called Cloud or SaaS computing. 4.0 What is SaaS or Cloud computing? Software as a service (SaaS) is also sometimes called "on-demand, it is a software delivery model in which the software and the associated data are hosted centrally on the internet this is where it has coined the term cloud. It is accessed securely by users through a web browser over the Internet. SaaS has become a common delivery model for most business applications, including accounting, collaboration, customer relationship management (CRM), enterprise resource planning (ERP), invoicing, Point of Sales (POS), Back of Office (BOS), inventory or stock management, human resource management (HRM), content management (CMS) and service desk management. SaaS has been incorporated into the strategy of many leading enterprise software companies. Some examples of popular business-to-business systems include:- CRM system collaboration software customer experience software retail accounting system SaaS started to appear with the development of the web during the 1990s and brought about a new class of centralized computing, called Application Service Providers (ASP). Software as a service is an addition of the idea of the ASP model. Quick facts about the SaaS market:- It is suggested that over 30% of new software will be deployed through the SaaS delivery model in Gartner Group estimate, SaaS sales in 2010 reached $10b, and was projected to increase to $12.1b in 2011, up 20.7% from Gartner Group estimates that SaaS revenue will be more than double its 2010 numbers by 2015 and reach a projected $21.3b. Customer relationship management (CRM) continues to be the largest market for SaaS. SaaS revenue within the CRM market was forecast to reach $3.8b in 2011, up from $3.2b in The benefits of SaaS to a retail business The deployment of SaaS means that every retail store can have access to an online system which can be accessed via a web browser at anytime and anyplace while being totally secure and viewing one source of data without the cost implications of on-premise. One of the main benefits for SaaS is that:-

6 SaaS eliminates capital costs such as computer equipment, faster deployment, streamlines use and management time, increases flexibility as it can be accessed from anywhere, better reliability and performance as it is run from a hosted machine (Hurwitz & Associates, 2009) SaaS is not just the concern of the IT department; there are two financial implications which will require the involvement of the accounting department. 1. Cash Conservation and Liquidity On-premise deployment involving a combination of up front capital expenditure, in-house development salary costs and a heavy deployment spend can have a significant negative impact on cash and bank balances, facility headroom and liquidity. SaaS, on the other hand is typically delivered and charged for by way of a monthly license fee with short termination periods. The majority of the upfront costs are borne by the SaaS provider giving real benefits to retailers many of whom are under capitalized and having difficulty raising bank finance to support their operations in the current climate. 2. Total cost of ownership (TCO) There is a growing acceptance that TCO will generally be lower under SaaS with all of the above costs being spread among a larger group of users. The downside of this benefit might be limited customization but many SaaS providers now offer a range of customized options that have been developed throughout the systems life and that can be implemented at low cost. The monthly subscription is a critical factor when rolling out to a large retail franchise network as the costs are minimal and do not present a barrier to deployment. There are many IT and operational considerations:- A recent survey of a thousand IT professionals by Forrester Research found that they are turning to SaaS products as a way to offload management of applications such as HR and CRM. Plus, the subscription-based SaaS pricing model can keep IT budget costs consistent or lower than packaged or self developed software. Fragmented ownership and locations Geographically dispersed organisations have more of a challenge maintaining accurate business information, even more so, for a franchise business. A franchise by its very nature has many outlets spread out across a city, a country or internationally, often with each one owned by a different person. Having a fragmented ownership model is a particular challenge for a franchise business as they all have their own P&L, and it is therefore critical for the franchisor to reduce costs as they will directly affect the profit and cash for each unit. In order to attain maximum buy in it is vital to obtain the lowest initial costs, an affordable payment model and total cost of ownership.

7 Unified system the management team of a large corporate or franchise business will require a suite of regular management information which is used to drive the business performance. This is where SaaS can play an integral role. By using a SaaS system, specialised applications for its franchisees can be used, for business functions such as stock control, accounting, promotions, loyalty programs, and so on applications that franchisees around the world can access using only an ordinary personal computer and broadband connection. This arrangement benefits all the parties in the relationship. In the example given, the franchisees benefit from applications that would otherwise not have been available to them. Similarly, through the usage of these applications by the franchisees, the franchisor receives enhanced feedback and data that contribute to more accurate and valuable business intelligence. SaaS features and benefits to all businesses Features Centralised data, no data is held at store level Data integrity Security Lower development and setup costs Hardware costs Scalable system Accessible from any Internet connection Financial Benefits Maintenance Upgrades/Patches Benefits No back up procedures are required by the user as this is managed by the SaaS provider on a secure and remote server. All data is centralized into one secure data centre instead of spread through the world on local PCs and servers. There is one data source to avoid version corruption. The server is located in a purpose built data centre with security and maintenance undertaken on a 24 x 7 basis by a leading professional hosting company, which is often superior to on site deployment. Software setup, configuration and maintenance issues are completely eliminated, significantly reducing the Total Cost of Ownership for to customers. The hardware costs are often zero as no servers are required and existing client machines can be used as it is a web based application. New users can easily be added to the system and can scale up and down rapidly to meet the needs of the company. The system is online therefore it can be accessed anywhere. Software is subscribed to and not purchased, therefore expenses are not front loaded and are made up of predictable monthly fees. Software deployment and maintenance is handled elsewhere, allowing users to focus on their core competencies to run their business. Due to the system being online, the user will always be accessing the latest version and security updates; no need to spend time updating each of the computers within the business.

8 Uptime Ideal platform for a multi lingual system Redistribute IT Budget Shorter deployment time Server applications are hosted in a data centre so power outages and Internet outages are isolated from incidents that affect local offices. Being a web based system, SaaS can easily be a adapted to become a multilingual system which is critical for retailers with international operations. By deploying a SaaS application, software functionality is the responsibility of the SaaS provider. This allows the retailer to realise cost savings in infrastructure requirements and IT personnel knowledge requirements. SaaS can be setup within a relatively short time as opposed to a phased implementation that could take 1 12 months. SaaS benefits unique to fragmented and franchise retail businesses based on retail accounting system Features Benefits Group reporting Extensive corporate reporting is often available at head office and territory levels including compliance and exception reports, trends, key figures, Historic/Budget/Actual variance reports. All this information can provide a better view of the business and therefore drive the business performance. Through the usage of financial information, the franchisor/retail business can access the liquidity of the franchisees, therefore managing the risk, adjusting credit limits accordingly and, if necessary, taking remedial action if the franchisees business is failing in order to protect the brand. Purchasing It is possible for the corporate or franchisor business to assess compliance whether, at store or franchisee level, the approved or nominated suppliers are being used for brand management and Comparative reports consistency. Through using one system it allows comparative reporting which can be used for benchmarking purposes, both at corporate/franchisor level or within a group of outlets. Real time data The data is available in real time meaning that financial information can be accessed immediately by any authorized user of the system. Usage data The corporate/franchisor business can use the system management suite to assess the usage of the system, and allocate training and support resources where required. Business risk Many retail corporate/franchisors are distributors of their product, therefore it is imperative that they manage the credit risk associated with their franchisees. This can be achieved by monitoring the net worth of the franchisee, where franchisees are struggling, additional support can be deployed to assist with the turnaround or credit terms can be renegotiated. No data is held at store level A major benefit is that, once the data has been entered, reports can be produced in standard formats, quickly and easily, saving a great deal of cost, time and effort in the collection, collation and maintenance of the information. This is vital if the business goes through distressing or challenging times, as very often the

9 Automation of POS/BOS management is removed from the business, and having data held offsite which is under control of the franchisor/corporate business allows for smooth and seamless transfer. It is possible to integrate the back office and point of sale systems to reduce the manual bookkeeping function, and therefore costs, for the franchisees and increase the accuracy of the data as it is imported from source. Many businesses are now implementing SaaS based applications in many areas of their business. The Independent Software Vendor (ISV) community has capitalized on this opportunity and introduced and widely accepted lightweight integration protocols such as REST and SOAP. These protocols have enabled affordable integration between SaaS applications (residing in the cloud) with internal applications over wide area networks and with other SaaS applications. This approach can deliver considerable reduction in operating expenditure of the corporate and franchisee business, in some cases up to 95% of the transactional book-keeping and data entry can be automated. Below demonstrates typical architecture deployed by CounterBooks. 6.0 Issues and concerns with SaaS Some limitations that have been highlighted which can explain the slow acceptance of SaaS and restrict the usages of SaaS in many cases: Issues with connectivity being an online based application having internet availability is absolutely critical. Certain processes require 100% availability - A POS system, that doesn t work because the internet is down can result in lost sales at worst or inadequate records at best. Other processes online accounting for example - are not so dependent on 100% availability. Since data is being stored by the Independent Software Vendor (ISV), data security becomes a concern for some companies.

10 A concern for some users is the financial stability of the ISV, although this has become less of an issue as many providers offer an escrow agreement and downloadable data. SaaS applications are hosted in the cloud, therefore it is not ideal for applications that demand immediate response times (sub second). Some SaaS applications have limited customisation and integration is not always easy. Multi-tenant architectures (having a large volume of users on one system), which drive cost efficiencies for the ISV, but does not allow for 100% customization of the core application. Lack of understanding of the implications and benefits of the model. Many advocates believe the lack of awareness is a key barrier to the next stage of growth for SaaS providers. In a survey conducted by IDC, a group of business leaders were asked, How significant a role did each of the following play in your decision to not adopt SaaS? Viability of service provider Security concerns Integration concerns Reliability of the service Robustness of functionality Customisation concerns Recommendations Like with any business decision, there are benefits and risks associated with a decision to adopt SaaS. It is without doubt that SaaS is still an emerging deployment model, and the benefits might not be evident to all groups or hold any advantages over existing systems in certain cases. But many large retailers, whether franchise or wholly owned, struggle with deploying new systems for many of the reasons mentioned (distance, cost, limited personnel, etc), and SaaS can resolve many of these challenges. There are many case studies available of companies which have been able to gain a better understanding of the business s performance, manage risk, collate customer information, and reduce costs through the deployment of SaaS systems. 8.0 About CounterBooks

11 CounterBooks is an online retail accounting management suite which delivers tangible benefits of reduced costs, improved performance and managed risk to corporate retailers which operate dealer/franchise networks. CounterBooks has been innovatively designed to help manage many of the challenges faced by retailers on a daily basis, which other retail accounting management suites do not. Current clients include multinational oil companies to small independent retailers. For help in understanding how your business can become more effective through the implementation of a retail specific accounting system, contact CounterBooks: Telephone: (+44) info@counterbooks.com Website: Slideshare: Address: Russell Square House, 10/12 Russell Square, London WC1B 5LF

12 "We're going to demote the PC and the Mac to just be devices; we're going to move the digital hub, the centre of your digital life, into the cloud Steve Jobs, 6th June 2011