Technology
How retailers can optimize the cloud strategy to boost profit
Eric Troyer, CMO at Megaport, explains why retailers must optimize their digital strategies to maximize operational efficiency, workforce productivity and in turn, profit margins and how a multicloud infrastructure and software-defined networking play into the strategy.
January 12, 2021 by Eric Troyer
The pandemic-forced shutdowns and economic downturn have severely disrupted the retail industry, dealing a crushing blow to physical retail business while giving a significant boost to online shopping. That's why it's more important than ever for retailers to optimize their digital strategies to maximize operational efficiency, workforce productivity and in turn, profit margins. Fortunately, it's possible to achieve this by leveraging a multicloud infrastructure over software-defined networking to ensure scalable cloud connectivity.
E-commerce traffic has been extremely volatile and unpredictable, so it's especially important through the peak holiday shopping season and beyond for retailers to be able to scale their cloud services up and down to accommodate changing demand. For example, retailers need to be able to ramp up their cloud services when there are spikes in traffic or else risk diminishing connectivity to key cloud-based software such as customer relationship management and enterprise resource planning platforms. Diminished connectivity to these tools leads to lost capabilities within the platforms and increased latency for employees — which translates to lost productivity, damaged customer experience and reduced revenues.
On the flip side, it's also helpful for retailers to be able to scale down their cloud services when demand decreases, to save money by avoiding paying for excess unused bandwidth, storage, compute or other services. The other element retailers need to factor into the equation is making sure they're using the right cloud for the job.
The best way to achieve scalability is taking a hybrid multicloud approach. This allows retailers to create a custom cloud ecosystem that fits their specific needs, rather than selecting a generic solution and hoping for the best.
A hybrid multicloud approach often involves leveraging multiple public clouds as well as private and on-premises infrastructure. This enables employees to connect to whichever cloud or provider is the most appropriate for any given workload — factoring in the quality of integration with the specific application or database and even available network capacity. It also means IT teams can optimize their cloud spend: for example, they might opt to store data in one cloud, while running inventory management, contact center or other specialized applications in another cloud better suited for the application or performance needed.
In order to attain scalability, retailers must also be cautious to avoid locking themselves into any rigid, multiyear contracts with cloud service providers. Fortunately, this issue of "cloud vendor lock-in" has received significant criticism in recent years and most cloud providers now offer flexible contracts.
One other key consideration to keep in mind when considering a multicloud approach is that connectivity is paramount. All cloud models should have consistently strong connectivity between the environments within them – which can only be achieved with a software-defined networking approach.
A software-defined networking approach enables extremely efficient data transfer across the retailer's entire network without the need to set up new infrastructure. Instead, this network virtualization allows retailers to connect to the right cloud provider or service endpoint such as a branch or office location from any location in the world — meaning all employees and customer service agents can have immediate access to real-time inventory and know exactly which products are available in any store or warehouse.
Emerging technologies such as AI and machine learning, AR, and IoT require secure, scalable, and always-up connectivity all the way out to the edge. Global brands such as Sephora, IKEA, Gucci and others have launched mobile apps using AR to help buyers try out products from their phones. Companies like Amazon, Alphabet, and Alibaba have adopted drone delivery to solve last-mile delivery challenges.
A software-defined networking approach also provides the capabilities to set up, scale up or down or shift connectivity easily and rapidly — equipping retailers with the ability to scale their network and cloud infrastructure to align with shopping demand. This also frees retailers from the constraints of major telecommunications providers, who make it very difficult to provision capacity during peak periods like the holiday season because of moratoriums on changes to the backbone infrastructure. Traditional telecommunications providers often require retailers to commit to fixed network capacity (sometimes several quarters in advance) rather than offering the pay-as-you-go model where retailers only pay for the capacity they need.
Retailers are increasingly realizing that their cloud strategy is critical, as evidenced by the explosive growth of the retail cloud market, which is estimated to continue skyrocketing from $11.9 billion in 2018 to $39.6 billion by the end of 2026, according to a Fortune Business Insights report. However, not all cloud and networking strategies deliver the same connectivity or scalability that retailers expect. Retailers striving to empower their employees with the most reliable and efficient data connectivity while also saving costs on infrastructure and unused services need to deploy a multicloud approach over software-defined networking.
Eric Troyer is CMO at Megaport
About Eric Troyer
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