#NRF2020: Insourcing enables retail technology deployment at speed

Taking technology in-house provides retailers with the power to introduce new solutions at great speed and scale for larger operators.

Speaking at Retail’s Big Show, organised by the National Retail Federation (NRF), Mike McNamara, CIO of Target, says: “The move has more than paid off. We can produce technology at a speed that was unimaginable. New features and functions need to come out immediately today. We can do daily releases. We could only previously do two or three releases for the POS annually but now we can do it on a weekly basis.”

The decision to insource came after Target suffered a major data breach in 2013, at which point it had built up a mostly outsourced technology team of 10,000 people. “We decided it was a too many and looked to reduce the number of people, work on less projects, and to just focus on the major ones that meant the most,” he says.

He says this radical move was not particularly difficult to sell to the company’s board as he was proposing reducing the team to 3,000-4,000 and delivering millions of dollars in savings. It was also clear that the growth was mainly coming from digital and that you had to build it yourself. “For a differentiated customer offering you needed your own technology,” says McNamara.

Delivering a unique experience to the customer was also behind the decision of Lowe’s to insource. Seemantini Godbole, EVP & CIO of Lowe’s, says: “The customer experience is the secret sauce and we believed we should do our own technology [for these business processes].”

The company has since gone on to hire many technologists – including 1,000 in 2019 alone, and it will be a similar number brought in this year. Interestingly retail has become an increasingly attractive home for technologists, according to McNamara, who says: “The technology you create is obvious, unlike at deep technology companies. You can explain what you do to your mum and the appeal of projects is that they go out to the public. There are some phenomenal problems to solve at scale.” 

McNamara says everything is now built in house, apart from non-retail specific aspects such as ledger and payroll, but he recognises that this approach is more relevant to a business of the scale of Target. However, he does recommend the insourcing of certain aspects of technology for retailers of all sizes.

“I’d look at the most important things for [achieving] competitive advantage. Whereas the likes of warehouse management could be outsourced. Things like allocation and assortment planning I’d build it and embed machine learning,” he says.

This embedding of artificial intelligence and machine learning is also part of the strategy of Lowe’s. It is easier to achieve when developing your own technology and wanting to enhance your differentiation. “We’re embedding it in every bit of software we use,” she says, adding that it provides that extra bit of power to your solutions.

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