IP and the future of retail
In the first in a series of articles designed to help retailers maximise return on their IT investment, Ray Low, managing director of Transaction Network Services (UK) Limited (TNS), explains the benefits of converging communications infrastructure using IP and IP-VPN solutions.
It�s no secret that the retail landscape is tougher than ever before. The BRC-KPMG Retail Sales monitor showed that UK retail sales in August fell 1.0% on a like-for-like basis, which continues this year�s negative trading pattern. Central London suffered August sales 11.5% lower than last year and with Christmas 2004 the worst in decades, 2005 looks on unsteady ground. In recent years we�ve seen retailers eating each other�s lunch � for example, petrol forecourts becoming convenience stores, food retailers becoming clothes retailers and so on. The challenge for retailers today is finding ways of increasing efficiency and reducing costs. [b]How IP can help[/b] More than three-quarters of companies in the UK are now using ADSL broadband Internet access, according to the latest research from the Communications Management Association (CMA) . But whilst many companies may be using broadband, only a handful of UK retailers have exploited the technology to join up head-office and store networks. Of these IP-enabled technologies, one of the most talked about is Virtual Private Networks (VPNs). According to analysts IDC, the VPN market was worth $4.3 billion in 2004 and will grow to $5.8 billion in 2009, with over 80 per cent of that growth projected to occur in 2005 and 2006. [b]”2004 was another high-growth year for IP-VPN services, with DSL and the mid-market the hot areas. However, as we are now seeing, providers of all sizes targeting companies of all sizes need a proposition much broader than ‘just IP-VPN’.” James Eibisch, research director of IDC’s European Business Network Services [/b] On the most basic level, employing IP technology reduces the cost of communication for retailers. But, particularly when combined with VPNs, there�s so much more to it. ADSL broadband access between stores and head office ensures immediate communication, helping to improve processes such as inventory management, point of sale performance and timesheet management. Deploying ADSL broadband may also enable retailers to adopt Voice over IP (VoIP), which enables telephone calls between stores and head-office at reduced cost, and data to be transported over the same network. However, there are real gains to be made by exploiting IP by consolidating payment and non-payment traffic over the same communications infrastructure. The chances are, if a retailer is yet to deploy ADSL broadband, then their payments are probably processed via dial-up or ISDN. It doesn�t make sense to continue with this methodology if broadband is being deployed at a branch/store level. Furthermore, VPNs allow retailers to send encrypted transaction data through a secure tunnel into a privately owned network and on to the acquiring banks. In addition, IP-VPNs also potentially provide retailers with a simpler maintenance solution and a lower cost of ownership than many traditional alternatives. [b]Security first[/b] Many IT managers, quite rightly, raise concerns over sending customer payment information over the public Internet. A breach of network security would spell disaster for any retailer. Some retailers choose to overcome this by transporting payment information over a private, secure network, and non-payment information, such as stock reports and pricing information, over a secure path via the Internet. The problem for retailers looking to deploy ADSL broadband for payment and non-payment traffic is that most consumer ISPs treat broadband access like a commodity and are unlikely to have the skills or inclination to deal with the more sensitive payment data. Not only that, but ISPs may not be geared up provide software upgrades or provide retailers with tools to understand more about their transaction volumes. Broadband means retailers can transport all of their data at the same time, rather than having to wait for the end of the day. And, they don�t have to worry about floor limits � they can send all transactions for authorisation at no additional cost. With fraudsters getting smarter and more advanced in their activities, identity theft is a major concern for the retail and banking industries. When transporting your transaction data to the acquiring bank, you want to be absolutely 100 per cent confident that the network is secure. Dealing with a specialist is a prerequisite to ensuring that payments and non-payment customer information is secure. [b]The managed service approach[/b] Retailers may be focused on finding ways of improving margin � but business continuity has a critical part to play too. If a retailer�s network was to go down, every second that passes eats into margin. Your network is essential for connecting to branches, suppliers, partners and banks. Managing multiple and disparate systems (X.25, ADSL, dial-up, GPRS etc.) requires skilled, dedicated network professionals. There is a growing acceptance that the best way of achieving this is through third party managed service providers. IT isn�t a retailer�s core business, so it makes sense to outsource. The best way to achieve this is by bringing in that expertise from a trusted third party supplier. Managed service providers can support a retailer�s local and wide area networks as well as their IP-VPN and unified communications environment. Drawing up strict SLAs, helps to ensure high performance and quality of service, offering the retailer peace of mind. [b]Majestic Wines case study[/b] [b]Background[/b] Majestic Wine Warehouses operates the largest wine warehouse chain in Britain, specialising in the sale of wine by the mixed case direct to the public. [b]Solution[/b] Jim Bendon, IT Director, Majestic Wine Warehouses Ltd, explains: �TNS is providing us with a fully managed ADSL link via its private network. We selected this solution as it allows our customer’s transactions to be authorised via a high-speed digital connection, which, in turn, provides them with an efficient and secure payment service. �We regard the implementation of a ADSL-based transaction solution as strategic to our business. It will further enhance customer service by providing high speed connectivity to our Intranet, messaging and real-time stock location systems.� [b]Outcome[/b] The TNS solution will result in an overall reduction of Majestic�s communication costs as the company no longer requires its ISDN circuits for on-line authorisation. Furthermore, as ADSL is always-on, authorisation dial-up charges are eliminated and response times increased. Jim Bendon adds: “As an added benefit, we now have enhanced connectivity from Majestic’s Headquarters to our 115 stores around the UK.”
