Meeting M&S CIO Darrell Stein in December and asking him what his main challenges are at the moment seems like a foolish question in hindsight. His answer is completely unambiguous: Christmas. The end of year holiday period is one of the most lucrative for the 129 year old retailer and is a time when Stein implements a change freeze policy to ensure that the technology supporting sales over the festive season is as stable as possible.
“Christmas, that’s the one challenge. That’s it. Making sure that my systems aren’t responsible for a single penny of lost business. That’s my sole challenge between now and 1st of January,” says Stein.
“We have this mad rush of projects completing in September/October time, but the whole year is geared around that peak to make sure the systems are as stable as they can be. Whereas, the rest of the year we are putting new bits of code and changing it around a lot.”
After the Christmas mania settles down, however, Stein will sit down with his team and conduct a review of what went well, what didn’t go well, what the core priorities are for the year ahead, and pick up projects that need to be delivered before the next technology change freeze in October. The key technology objective for M&S in 2014? Ensuring a smooth transition to a newly developed, in-house, online platform for M&S.com.
“The challenge for next year is M&S.com going live. It’s a really exciting time to be working in retail IT, we are much more central to the business than we were perhaps five years ago. There’s a lot more interest in what we do, whereas I think before we were seen as an overhead.”
Online platforms are essential for modern retailers, where those who have lagged in adopting modern technologies have suffered huge revenue losses and have had to invest millions in playing catch-up. M&S was an early adopter, however, having placed its systems in Amazon’s public cloud six years ago to allow for rapid growth and scale – a platform which is now bringing in close to £700 million a year.
Having established itself in the market and learnt the lessons of what it takes to be a truly digital retailer, Stein is now ready to move off of Amazon’s cloud and bring the capabilities back within M&S’ four walls, in order to allow for further innovation.
“In our online business we were on the Amazon platform, renting. But now we are in the closing stages of replacing that with our own set of systems,” explains Stein.
“We are live with three out of the eight systems – the back-end systems – and we will put the front-end stuff on in the New Year. That’s going to go live by Spring next year.”
“Amazon has been a useful system for us because in that period we grew our business from probably about £30 million to close to £700 million, where we are today. It’s just now that it’s the right time, but it’s a big project. Its eight different systems and you can’t have any of them down for any amount of time – it’s a difficult project, but we are nearing completion.”
The project has been running for approximately 18 months and has been developed by TCS and Sapien, both of which carried out a similar project for Target in the US. M&S.com is being headed up by Laura Wayde-Gery, who was hired from Tesco and now sits on the Board at Marks & Spencer, and is someone Stein describes as the “closest thing to a Chief Digital Officer” for the retailer.
Stein explains that there will be a number of benefits to bringing the systems in-house, but is largely being driven by a concern that Amazon is also operating as a successful online retailer. “The problem with using Amazon is that you have got a key growth area for your business being run by a competitor – they are now also selling general merchandise online.
“Also we couldn’t change the systems as frequently as we wanted. They were trying to drive it down more of a package route and we want to be really flexible and change it every five minutes. It was completely divergent.
“We also believe that it will ultimately be cheaper to run ourselves compared to running on Amazon.”
As well as its front-end digital systems, Stein has also been working to get M&S’ back-end applications in order by consolidating disparate and aging applications into single platforms that operate across the business. Over the years this has included rolling eight different HR and payroll systems into one platform provided by Ceridian, whilst also implementing a single SAP platform for procurement and finance.
However, Stein is taking this even further and is trialling some of the latest innovative technology being released by SAP – its in-memory platform HANA. By running processes and transactions in-memory, HANA will allow M&S to take advantage of real-time stock management.
“This was something that wasn’t a necessity in the past, but with the growth of online retailing, HANA became an attractive proposition,” he says.
“Previously you could order overnight, it was in the store the next day – but the internet has blown all that away. You need to know what you have got right now so you can show your customers in real-time.”
Stein describes the roll-out of HANA as a “key infrastructure project”, but one that is still in validation mode. Given that the technology is still maturing, with SAP only launching the option of running its core ERP platform on HANA this year, Stein is still ensuring that it is resilient before going live.
“The technology works fine, the speed is okay, we have a lot of data to process. I would say there’s a question mark around operational resilience. Does it work? I know another company that’s used it for management reporting, but they used it with a thing called a side car – which means that if HANA doesn’t work it just goes back to the original management reporting,” says Stein.
“It’s not proven enough to be operationally robust. It’s got to be operationally robust. I wouldn’t say we have had problems, but that’s what we have got to prove.”
M&S also wanted to go down the route of having its ERP running on HANA in SAP’s Enterprise Cloud – essentially a managed service for the product. Despite SAP touting that this reduces the procurement time for the application from three to six months, to two to three weeks, Stein found it too expensive a proposition.
He explains: “We are doing it ourselves; we couldn’t get the money to stack up on the Enterprise Cloud. Which was a bit disappointing actually, I would rather have done it that way. We just couldn’t get the financials to work.”
Finally, Stein explains how his technology decisions have impressed the finance community, where he has shown that the right strategic decisions can not only deliver a return on investment, but can also allow a retailer that has been operating for over a century to transform its business for the digital age.
“Our strategy is to become the leading, international, multi-channel retailer. So all of our projects are designed to help us do that, or they are designed to take cost out of the business. It’s typically one of those two things,” he says.
“Over the last few years we have had a pretty decent track record – when we have invested in IT the investment has stuck and we have had a decent return.
“We recently did an investor day to the City, where we showed them what we have invested in and we definitely are outperforming the market.”