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For growing retailers particularly those in the multi-channel retailng market, technology can be a major hurdle to the smooth growth of the business. Too often what would otherwise be considered a small incremental adjustment in operational strategy comes hard up against the revenue model of the business’ retail software partner.

Retail software vendors are forced to make best guess feature assignments into multi-channel retailing software modules, these modules in turn each bring with them a step change in licensing costs. As a result the retailer can find themselves at the mercy of an arbitrary business decision on the part of the software vendor that bears no resemblance to the growth plans of the retail business. These constraints can cause delays in piloting new sales channels, testing a call centre to support a mail order channel for example, can become an unnerving and expensive leap into the unknown. Innovative retailers find themselves being offered not support for a pilot sales channel but large modules of functionality that make a myriad of assumptions regarding “best practice” according to the multi-channel retailing software vendor.

Retail software vendors bring useful expertise to any business process development, yet software vendors also bring with them pre-made solutions, not to mention assumptions about received wisdom in retail operations, that left unchecked, can constrain innovation and escalate investment requirements. Having seen many retail software implementations, viewed from a technical, problem-solving perspective with the usual imperatives on quality and TCO, software vendors look for generalisations that allow aggregation over many clients, the software vendor therefore, makes trade-offs that don’t necessarily well serve the innovative retailer.

If generic productised software constrains the personality of the retailer undermining the very character which sets the business apart from it’s competition, bespoke software vendors offer a far more innovation-friendly experience. Bespoke software providers can offer unique solutions mapping directly to the changing business processes of the retailer. While this approach offers the retailer a distinct competitive advantage, the solution comes at a high cost. Bespoke software, by definition, has not previously been production proven, as a result far fewer assumptions can be made regarding it’s fitness for purpose. With this uncertainty comes a need for higher levels of due diligence, requiring the recruitment of specialist management personnel; experienced retail staff from within the business have to be repurposed to reconcile their understanding of the business’ requirements with the emerging software i.e. test the software’s suitability. Finally, building from the ground up will certainly require more software engineers! While great results can be achieved with bespoke software, a very firm hand and visionary influence is required to ensure your software development project does not become the cuckoo in the nest, draining resources and distracting focus.

For the innovative retailer without the luxury of unconstrained budget, the turnkey solution and bespoke routes are not mutually exclusive. Any turnkey solution provider will of course be capable of modifying the solution that they created. Ability to modify software however is not a pure function of familiarity with that software. Multi-channel retailing software vendors like all turnkey vendors are designed to sell the generic, their business models are formed around the idea of evangelising on why the choices the software makes out of the box are the best solution to the problem the retailer faces, not around reinventing their product to serve a one-off view of the world that makes the individual retailer unique. While turnkey software vendors perhaps don’t offer the flexibility of the bespoke route, their generic base offers a far higher degree of reassurance that the end product, complete with modifications is at least partially production proven.

In reality, no retailer of a significant size is likely to have become so by being so bland in terms of business process model that a simple turnkey software solution can serve all of their requirements. Software customisation therefore is an essential part of any system implementation. With this in mind, the wise retailer will assemble a shopping list of requirements and try to match first a software system to those requirements and then a set of modules within that system. This second step is crucial as retail software vendors typically price system licences by module. So we return to the problem that the retailer business process map seldom fits squarely into a neat set of modules, but lies across a number of more or less utilised modules which then require some customisation to leverage them in a way that best serves the uniqueness of the retailer business.

Having chosen a vendor and committed to the base license costs of the system the multi-channel retailer has perhaps without much recognition of the fact, stepped deeply into a relationship with the software vendor. The software vendor is now in a unique position to serve the changing business requirements of the retailer. As the creator and license owner of the base system, the turnkey software vendor appears to be the only outlet for customisation assistance. Large proprietary base software systems bring with them a large burden of knowledge management and transfer, software professionals can’t simply be recruited with fully fledged and relevant skills, training and retaining software professionals in the unique base system therefore accounts for the premium price tag which accompanies such customisations.

This principal of premium service costs and vendor lock-in, pivots around the retailers need to license a base system. Were the base system open to all bespoke software vendors to modify, the premium chargeable for those skills would be reduced significantly, and with the increased competition, the imperative to better serve the retailer’s needs, conversely, would increase. Similarly, if the base system came without license costs, there would be no constraint on the retailer with respect to innovative pilots, such as testing new sales channels, the functionality would be available without substantial license cost increases, software vendors would have no motive to package their software into modules other than for the obvious logical management of functionality.

Base system licenses therefore are the lever by which the traditional software vendor business model works. Removing such a lever may seem like dreamy egalitarian musings, yet the status quo is facing just such a revolutionary movement. For many years, small bespoke software vendors have recognised either explicitly or implicitly, that the components of their systems can be classified into two broad categories, asset and liability. Like the turnkey software vendors, perhaps even in response to them, bespoke software developers realised that creating a base system on which to build reliable solutions dramatically improves productivity and reliability. Yet for the bespoke software vendor, a base system while levelling the competitive landscape, is difficult to license without moving to a composite business model.

In stark contrast to a turnkey vendor, a bespoke vendor’s base system is not an asset to them, but a liability. For small bespoke businesses in particular, the overhead of maintaining and modernising a base system can be overwhelming. For a bespoke software vendor then, a new way to mitigate the liability is required. As bespoke vendors tend towards open technologies and standards due to the greater availability of skilled staff, know-how transfers far more easily from software vendor to software vendor. This phenomenon has been utilised by individuals within the software industry to create, at first, small generic solutions to frequently encountered problems such as “how do I reliably save to a database”, and then shared, first informally, among acquaintances. As the scale of these solutions grew and the number of contributing participants increased, a formal structure of open knowledge transfer was created among software professionals. This movement today is known as “open-source”.

Today the open source movement boasts many fully fledged base-system products for the multi-channel retail market and with these products a new class of software vendor has emerged. Open Plus Ltd is such a software vendor, bringing industry vertical awareness once seen only in the turnkey providers yet using license free base system technologies and open standards that allow the retailer both to swap vendor at their leisure and focus investment on the uniqueness of their business rather than on a generic system that then must be modified at a premium. Andrew Sykes, M.D. of Open Plus Ltd explains, “Because software vendors like Open Plus employ open standards in their software customisations, the ready availability of capable staff allows us to scale faster and access fully-formed knowledge workers in a fraction of the time a traditional proprietary vendor might”.

Retailers selecting a multi-channel software solution have a number of choices open to them. Traditional (proprietary) software vendors can bring years of experience with them and well formed generic solutions, yet may ultimately constrain the direction of the business, either due to inflexibility of product, or required investment. Bespoke software development services are typically far more flexible, but can have a hidden cost in internal resource utilisation required to support the development process. For retail businesses with innovative plans and a careful eye on budget, a new breed of license-free vendors can, if carefully selected, offer the vertical sector knowledge, and production proven solutions of the traditional vendor, but with the flexibility and innovative technical mindset of the bespoke software development house.

We are often reminded that retail software implementations are a partnership. In the midst of the current global turmoil, the need to choose partners carefully has been brought into stark relief. Open Plus Ltd, bring a business model designed for difficult times that introduce a whole new selection criteria to retail partners and ERP vendors, the watch-word is leverage.

With financial strains starting to hit high street retailers, furnishings firm, Rosebys being among this week’s casualties, it’s becoming clear that innovative bottom-line savings are to be the crucial survival differentiator for 2009.

Recent developments in the financial markets have introduced the term “leverage” to the retail Zeitgeist. The act of using debt to amplify the effects of the business’s revenue generating model, or leverage, is what allows a hedge fund to generate such large returns. Leverage however is not the lofty preserve of esoteric financial transactions, but the fuel that drives our entire enterprise ecosystem.

With the cost and availability of capital increasing, prudent retailers are seeking inventive new ways to decrease reliance on the financial leverage, until recently, readily accessible from the now ham-strung banking sector.

Like great retail businesses, great retail solutions has been built, not solely on the equity investment of shareholders, but on the financial leverage extended to software vendors by banks. De-leveraging a retail business will take innovative new operational strategies and with that, innovation within the retail software industry. Yet with retail software vendors facing the same leverage constraints as the retailers themselves, innovation will inevitably come at a new price.

Just as software vendors are likely to face unprecedented downward pressure on price, they are also going to find themselves instrumental to retail de-leveraging strategies. Margins can of course be squeezed and capital reserves drawn upon, but software vendor’s pockets do not have infinite depth and the extent to which these reserves can be drawn upon will depend on the individual software vendors reading of the financial future.

The question for the prudent retailer, having carefully constructed a de-leveraging strategy, is “to what extent is my software partner leveraged?”. To answer that, the retailer must look to the vendor’s approach to product development. Heavily leveraged product development is a double edge sword for the retailer. Not only can the retailer expect to face price increases, but the rate of product innovation from the software vendor is also likely to be reduced.

Open Plus Ltd is uniquely placed to answer the leveraging question. As a specialist in open source software, product development has never been a function of how much debt or investment the business has available to it. Product development exists as a community effort aggregated over many vendors. While other vendors seek to find solutions to the debt drought open source products chosen by Open Plus continue to accelerate in their rate of innovation.

World opinion is united in anticipation of tougher times to come. Successful retailers will be those that transition to modified business models as smoothly and painlessly as possible. To facilitate this transition, retailers will need a software partner who specialises in agility and whose business model is not predicated on the easy availability of bank credit. Open Plus stands uniquely poised.

As margins are squeezed and the credit driven spending of the last ten years is replaced by a more sombre and frugal mindset on the high-street, retailers find themselves consolidating infrastructure to drive out cost, retail software faces some serious challenges to support the new economic climate. Open Plus Ltd knows retail solutions and breathes agile software development.

Just as retailers find themselves with too much floor-space or management heavy processes, the climate for multi channel retailing software has also changed radically in the last twelve months. With uncertain times ahead and unprecedented downward pressure on price, retail software must accommodate a radically different approach to the retail environment.

Retail software infrastructure and the people and processes supporting it will need to be more flexible than ever before. Just as the future of the market is now less clear, the requirements of the software that supports it are more subject to change. As bottom line pressure drives retailers to innovate, retail solutions specifications will become more emergent.

Open Plus’ experience in agile software development means that our software has always been structured with the intention of supporting rapid change and emergent strategy. With low internal operating costs, short software development cycles and years of experience in minimalist approaches to supporting business processes with enterprise software, Open Plus bring the execution of innovation through technology to the retailer.

Software vendors are fond of describing themselves as “software partners”. Partnership will now be a function not of how vast the software vendor’s array of features are, but how quickly they can respond to the rapidly changing needs of the retailer and the costs associated therein. Open Plus has been built for this challenge.

Andrew Sykes. CEO of Open Plus Ltd takes a stroll through the technology options open to the multi-channel retailer and explains his own preference for open source.

For growing retailers particularly those in the multi-channel retail market, technology can be a major hurdle to the smooth growth of the business. Software vendors can foster innovation at best and constrain development at worst.
Retail software vendors package features into generic modules, typically each module is licensed separately. A retailer with specific operational needs will find themselves drawing from a shopping list of features spread across many modules, but with only partial utilisation of each.

The constraints of the vendor’s packaging policy can mean small experimental projects using new features can have disproportionate price tags if they happen to straddle the module boundary. Innovation as a result is stifled. Retail software vendors attempt to counter this problem by leading retailers down the “best practice” path for which the software was designed. Unfortunately, best practice implementation of generic software leads to homogeneity, the retailer’s nemesis.

Bespoke software while addressing the homogeneity problem, comes with far greater risks, higher costs and a more profound and continued investment of money and energy in maintaining any competitive advantage that the software provides. Bespoke is therefore not an option for most, instead choosing a software provider with a base system which can be customised.

Having chosen a vendor and committed to the base license costs of the relevant system modules the multi-channel retailer has stepped deeply into a relationship with the software vendor. The software vendor is now in a unique position to serve the changing business requirements of the retailer. As the creator and license owner of the base system, the turnkey software vendor appears to be the only outlet for customisation assistance. Large proprietary base software systems bring with them a large burden of knowledge management and transfer, software professionals can’t simply be recruited with fully fledged and relevant skills, training and retaining software professionals in the unique base system therefore accounts for the premium price tag which accompanies such customisations.

This principal of premium service costs and vendor lock-in, pivots around the retailers need to license a base system. Were the base system open and accessible to all software vendors to modify, the premium chargeable for those skills would be reduced significantly, and with the increased competition, the imperative to better serve the retailer’s needs, conversely, would increase. Similarly, if the base system came without license costs, there would be significantly less constraint on the retailer with respect to innovative or experimental pilot projects.

Today the open source movement boasts many fully fledged base-system products for the multi-channel retail market and with these products a new class of software vendor has emerged. Open Plus Ltd is such a software vendor, bringing industry vertical awareness once seen only in the turnkey providers yet using license free base system technologies and open standards that allow the retailer both to swap vendor at their leisure and focus investment on the uniqueness of their business rather than on a generic system that then must be modified at a premium. Because software vendors like Open Plus employ open standards in their software customisations, the ready availability of capable staff allows them to scale faster and access fully-formed knowledge workers in a fraction of the time a traditional proprietary vendor might.

The traditional retail solutions vendors see the value of open source too. Increasingly their product development includes open source products, yet there’s not much evidence that these cost reductions are being passed on to the client. Perhaps the reasons for this are best illustrated by their ambivalence to open source. Scare stories about the lack of security involved in community projects abound, yet since most of the vendors outsource software development to developing countries, the model differs little. The criticism not only reveals a lack of understanding of open source, but of security issues in general. To make real gains from open source software that can be passed to the client, a business needs a complimentary culture not a set of internal conflicts.

Retailers selecting a multi-channel software solution have a number of choices open to them. Traditional (proprietary) software vendors can bring years of experience with them and well formed generic solutions, yet may ultimately constrain the direction of the business, either due to inflexibility of product, or required investment. Bespoke software development services are typically far more flexible, but can have a hidden cost in internal resource utilisation required to support the development process. For retail businesses with innovative plans and a careful eye on budget, a new breed of license-free vendors can, if carefully selected, offer the vertical sector knowledge, and production proven solutions of the traditional vendor, but with the flexibility and innovative technical mindset of the bespoke software development house.

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