Technology service providers (TSPs) must look beyond their focus on Tier 1 retailers and gear their offerings more to Tier 2 and Tier 3 retailers if they are to survive the current fall in retail spending on IT, according to Gartner, Inc. Gartner defined Tier 1 retailers as companies with revenue of more than $1 billion. Tier 2 retailers are companies with revenue of $250 million to $999 million. Tier 3 retailers are companies with revenue of less than $250 million.
Between January and March of 2009, Gartner conducted a survey with 83 senior retail executives with significant responsibility for IT decision making. The survey revealed that North American retailers have severely pulled back their spending on IT this year.
To weather the storm, Gartner advised TSPs to build growth strategies to capture resilient market segments, such as grocery, and allow for market maturation among Tier 1 retailers. As most Tier 1 retailers will have already made most of their vendor selections for the 2009 holiday season, TSPs should also target IT — the late adopters of IT and the non-adopters. Software as a service (SaaS) offerings with built-in best practices will appeal to Tier 2 and Tier 3 retailers that are currently priced out of the supply chain application market.
Based on the survey findings, Gartner predicts that the remainder of 2009 will see retailers significantly pulling back on all new project launches in the supply chain areas, except for vendor managed inventory (VMI), the uptake of which is being driven by cost containment strategies. Survey data indicates that no new warehouse management systems projects were planned by respondents in 2009, although quick and late adopters said that they would be looking to launch some projects within two years. Similarly, very few new transportation management systems are planned for this year, but double-digit growth could return within two years.
Inventory planning projects launched by respondents before September 2008 are likely to continue with some Tier 2 retailers looking to launch new projects. Gartner expects double-digit growth to return to inventory planning projects within two years, led by new engagements among quick and late adopters. Demand planning projects in 2009 are likely to be limited almost exclusively to Tier 1 and Tier 2 retailers, although double-digit growth is expected to return to all three tiers within two years.
Survey respondents indicated that although ongoing sourcing projects will continue throughout 2009, no new sourcing projects are expected to start this year, with Tier 1 and Tier 2 retailers expected to launch new projects within two years.More information on CRM can be found at www.CRMindustry.com