Tuesday, May 18, 2010

Cloudy with a Chance of Insight

Cautious retailers think that storing critical data off premises in "the cloud" entails major risks such as service outages that halt business operations, poor response times that hamper productivity, and questions about data ownership and transfer at the end of a contract.

While these are genuine concerns, major retailer Dollar General relies on a cloud computing platform to manage its $12 billion enterprise with 8,800 stores. They executed the implementation carefully, chose a provider that relies on farms of "plain vanilla" servers instead of big iron (and that had experience supporting the New York Stock Exchange), and most of all, relied on a consolidated database in the cloud for rapid and actionable analysis of pricing trends, promotion and campaign effectiveness, and demand affinities between unrelated products.

Quoted in an article in Retail Info Systems News, Jim Thorpe, SVP of consumables merchandise for Dollar General, noted there were major measurable productivity gains. "We used to wait to look at item-level performance at the end of the month, but now we can use it every day," said Thorpe. "Extracting data frequently helps up increase productivity and better run our business, not only in merchandising but across multiple functions such as supply chain and finance."
Two other big benefits Thorpe noted were: "One, we can now make decisions in absolutes and not in averages, which is important when you have 8,800 stores and averages tend to level things. This makes us a much better merchandising team, because we can more accurately assess current campaigns and adjust much more quickly on the fly. And two, we can build item clusters and store clusters by doing analysis faster and in more detail. We are even beginning to determine affinities in the basket and analyze patterns by day of week or time."

As the RIS article asserts, the bottom line is cloud technology "may be more bullet proof than many retail CIOs think" -- especially if that's the most effective way of consolidating disparate databases and improving analytic/BI effectiveness.

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