Retail CIOs Predict Significant Increase in Outsourcing to Transform Business Performance

IBM Survey Shows Increase in Retail Industry Tech Spending, as CIOs Worldwide Aim to Boost Employee Productivity, Customer Responsiveness, Inventory Management, Enterprise Flexibility

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SOMERS, NY - 24 Sep 2003: According to the 2003 Retail CIO Survey, released today by IBM Business Consulting Services, information technology spending for 2002 increased to 2.1 percent (from 1.8 percent) of total retail industry sales. In addition, the survey highlights several investment areas, including outsourcing, Point-of-Sale overhauls, and enterprise reporting and analytics, that retail industry CIOs are now prioritizing. These investments are being made in an effort to improve customer responsiveness, boost productivity and increase enterprise flexibility.

The survey is based on interviews with CIOs and senior IT executives from leading retail companies North America, Europe and Asia. All companies surveyed have annual revenues of more than $100 million with approximately half reporting revenues of over $1 billion per year.

Among the most significant predicted shifts in IT spending, retail CIOs indicated a dramatic increase in IT outsourcing over the next three-to-five years, with nearly 40 percent of retailers expecting to deploy at least 20 percent or more of their IT budgets on outsourced projects. This is more than double the current outsourcing rate in the retail industry. The key objectives cited include reducing operating costs, increasing responsiveness to unexpected events and disruptions, gaining access to key skills and capabilities, and freeing up capital to invest in core businesses.

In addition, in such areas as call centers, store infrastructure, and application management, approximately one third of retail CIOs expect to work with partners who can deliver variably priced, usage-based outsourcing models.

In terms of in-store IT investments, the majority of retailers expect to deploy IT solutions that solve their most important recurring business issues:

Specific questions on Radio frequency identification (RFID) determined that while it is not an immediate priority for most retail CIOs, more than 40 percent expect to be deploying some form of RFID solution within the next two years to transform a wide range of key business processes. These include item and pallet level tagging, security surveillance, RFID-enabled shelf management, and smart checkout.

"This survey demonstrates that retailers are faced with an increasingly challenging marketplace in which the rules of competition are changing constantly," said Ming Tsai, Partner, IBM Business Consulting Services. "This environment requires more than ever that retailers fuse information technology with business strategy to compete effectively."

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