Next Generation Managed Services Enable Retailers to Innovate

Online competition and access to price information has been squeezing already thin retailer profit margins for some time now. Combined with the added pressures of the economic crisis, many retailers are being pushed to the edge. Sadly, familiar names, such as Circuit City, have already been pushed over the edge.

To survive this crisis forward-looking retailers need to focus on:

1. Efficiency -- making every part of the business as lean and efficient as possible, especially in the supply chain.
2. Cost Removal -- driving out costs everywhere, especially in labor, their second biggest cost after the goods that they sell.
3. Customer Experience -- seeking ways to differentiate an increasingly homogeneous shopping experience.
   

Salvation in Managed Services
Retailers have traditionally been very closed to the idea of managed services provided by third parties. Razor thin margins have made them very risk adverse. There is a general skepticism of service providers, large IT firms, and their understanding of retail or their ability to adequately serve retailer needs.

Those fears and biases are beginning to fade as the reality of economic pressures for cost reduction and competitive pressures for differentiation bite harder than ever before. Retailers are now exploring how managed services allow them to address these monumental challenges.

Research by Cisco IBSG (the company's strategic consulting arm) reveals that successful providers of managed services must address retailer core buyer values:

• Proven Reliability -- to manage risk and complexity.
• Cost Effective -- pay for performance.
• Tailored Solutions -- specific to the retailing industry.
• Focus on Customer Experience -- enabling competitive differentiation.
• Speed to Market -- deliver benefits immediately.
  

Managed Services Enable In-Store Innovation
Many retailers are aggressively applying managed services to innovate. Digital Signage, or the ability to provide targeted multi-media messaging to customers, is being used by retailers such as WalMart and Eddie Bauer to influence buying decisions at the point-of-sale and to increase store traffic. The complexity involved in the deployment, underlying network and operations means that retailers are increasingly turning to proven, managed end-to-end solutions.

Companies like Best Buy and Home Depot are trialing Telepresence kiosks that allow them to enhance the shopping experience by bringing expertise directly to their customers in their stores -- in a scalable and cost effective manner. Service providers that install and deliver these solutions become valued partners who offer unique value-added solutions specific to the retail industry.

The current economic crisis will re-shape the retail business. Resilient retailers who survive and thrive will be those that proactively embrace next generation managed services as a means to attain competitive differentiation. Inventive managed service providers will deploy unique solutions that help to position retailers for the long term.

About the author: Stuart Taylor is a Director in Cisco IBSG. Stuart leads thought leadership and engagements with key Service Providers in managed services. He has over 15 years of experience focused on strategy, corporate development, business unit strategy, M&A and operational improvement with large mobile and wireline operators and high technology clients.

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