Do Retailers Really Need an IT Department Anymore?

In his recent WSJ article, Joe Peppard, from the MIT Sloan School of Management, takes the position that the IT department has outlived its usefulness. The IT department at many companies has grown into such a powerful force that it’s hard to imagine a company without one. With that said, the article certainly got me thinking about how retail businesses are organized, as well as what role the IT department plays in retail companies.

I’ve spent my career working in retail IT, as well as for several solution providers that focus on the retail industry. Thinking back, I’ve realized how often I heard the term “the business,” as in, “Let me check with the business,” or “We are fully aligned with the business.” It implies that retailers are divided into a business and a separate IT organization – that feels wrong to me.

The proliferation of technology meant that it was necessary to have a team dedicated to server upkeep, which is specialized work. Somehow, this dedicated server maintenance function morphed into an entire department that served the different lines-of-business, such as merchandizing, marketing, and store operations. This has led to slower execution. Simultaneously, if someone needed a report, a new feature, or an application upgrade, then they would schedule it with IT and hope the IT team got to it relatively soon. Does any of that sound agile and efficient?

Centralizing this specialized function made sense years ago—until technology permeated every corner of the retail organization. Now, as digital transformation has become especially important to retailers, it isn’t limited to just the IT department. The concept of transforming processes to make them more technologically efficient has impacted all departments—in particular since sophisticated applications and technology infrastructure are now engrained throughout the organization. This begs the question—why do retailers hold on to the centralized IT department?

As it turns out, the digital commerce business in retail is usually less dependent on IT and has its own technical capabilities that are separate from the rest of “the business.” The Chief Digital Officer manages the online business and technology together. Therefore, there is no issue with alignment. This should be a model for the rest of the retail organization.

Since cloud computing has offloaded the undifferentiated heavy lifting of traditional, legacy, old-school technologies, retailers using cloud-based infrastructure no longer have to focus on day-to-day server management. This lets retailers with modern cloud architecture redeploy IT personnel and skillsets to other business lines, such as merchandising and marketing, to increase collaboration, experimentation, and innovation, with both “the business” and IT fully aligned. For example, it makes sense that the IT people working on merchandizing systems shift to the merchandizing department, the IT team members who manage point-of-sale systems move to store operations, and so on. This approach is more efficient and can spark creativity as business-minded teams and technology-focused personnel work together to overcome challenges.

This personnel realignment certainly seems to lessen the need for an IT department. However, IT teams are important for another reason—to manage the company’s core centralized technology architecture with governance, security, and corporate standards. Therefore, I’m an advocate for keeping the CIO role. I don’t want it to disappear. Instead, it should become a centralized overlay role to ensure technology quality across the company. The CIO should set the standards and guardrails, thereby giving each department autonomy and flexibility to work within those rules.

I believe this model will unleash more creativity with faster, better business outcomes. I’d love to hear about experiences in your organization. Are you seeing a similar evolution and, if so, is it leading to more innovation?

Be sure to leave comments on this post. And, as always, AWS is here to help your company achieve its goals. Contact your account team today to discuss your cloud transformation projects.