Solution providers who specialize in the retail vertical market would be wise to lay some contingency plans going forward because the top players in their marketplace are not likely to increase their technology spending anytime soon.
That’s according to a new report from Gartner which suggests solution providers shift attention to more resilient retailers such as grocery stores or to tier two or tier three retailers.
“Double-digit growth in new projects should return within two years, and the 12- to 24- month future holds opportunities for cost optimization applications,” says Jeff Roster, research vice president at Gartner, in a prepared statement. A study conducted at the beginning of 2009 by Gartner with 83 senior retail executives showed that North American retailers were severely pulling back IT spending in 2009.
“Cost removal is a key strategy in 2009 in retail, and this is particularly evident in the supply chain where uncertainty and caution are causing a market slowdown in new projects launched,” Roster says. “While many survey respondents are hoping for a return to rigorous IT spending within two years, a high degree of uncertainty prevails.”
A weak Christmas 2009, expected by many, could further delay any return to spending by these retailers. Roster warns that retailers may even make their cost containment strategies more aggressive and push back IT spending until stability returns.
Gartner suggests that solution providers looking to appeal to tier two and tier three retailers may consider software as a service offerings (SAAS), something that could help them get into the supply chain applications that may be too expensive for them on a license basis.
The Gartner survey also showed that retailers will pull back on new supply chain product launches with the exception of vendor managed inventory ( VMI) projects. Warehouse management systems and transportation management systems have been shelved for the duration of the recession.