Retail CIOs Focus on High-Priority Projects, Cutting Costs

Tightened purse strings are forcing many retail CIOs to focus on high-priority IT projects, as they stay on the lookout for creative ways to cut costs to help pay for those projects.

Retailers attending last week's National Retail Federation annual conference talked about completing projects they started in prior years, getting more return from the systems they have in place and launching only those new initiatives that are critical to the business.

"We've gotten very rigorous about the projects that we're doing. And we're looking to make sure that we're being fully efficient on the processing side," said Ken Harris, CIO at San Francisco-based The Gap Inc. Harris said his company has considered moving some project timelines.

High-priority projects cited by retail CIOs ranged from the installation of merchandising, inventory management and point-of-sale systems to the unification of disparate customer databases. To pay for those initiatives, some retailers said they would postpone low- priority projects, seek out projects with a quick return on investment and look for ways to cut costs.

Judith Formichella, vice president of IT at New York-based Polo Ralph Lauren Corp., said her CEO told all departments to cut expenses by 5%, and she thinks she can do better.

Formichella said she will try to renegotiate software maintenance contracts and put the savings toward new capital projects.Top priorities will be supply chain and inventory management, completion of a point-of-sale rollout and moving Polo to common systems on a global basis, Formichella said.

Evelyn Follit, senior vice president and CIO at RadioShack Corp., said the Fort Worth, Texas-based retailer plans to continue to use offshore programmers to develop code, emphasize training for U.S.-based staffers "in this time of low turnover" and revisit vendor contracts to make sure her company is realizing the "correct value from the agreement."

Those efforts should help Follit's IT department take on a new project to improve the analytics that enable RadioShack to optimize pricing and other business functions. Follit said her company also will focus on supply chain improvements.

Phillip Maxwell, senior vice president and CIO at The Neiman Marcus Group Inc., said the Dallas-based luxury retailer had a large IT budget increase planned. Instead, the budget will stay relatively flat. Priorities include unifying the company's approximately 20 customer databases and creating a gift registry, with both projects expected to generate new sales.

Replacing Neiman Marcus' aging point-of-sale systems, by contrast, won't bring a good return on investment, Maxwell said.

"If the system is eight or 10 years old, you have to go do something about it," he said. "Same way as we move into financial systems. There won't be a good ROI on it, but it's the basis to do some other things that we want to do afterward."

Copyright © 2002 IDG Communications, Inc.

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