Digital Transformation Drives Distributed Store Networks To The Breaking Point
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- Alyson Burns
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1 Digital Transformation Drives Distributed Store Networks To The GET STARTED
2 Overview Forward-looking retailers are realizing the value of cloud- and data center-based applications as they move high-priority applications, such as POS and payment/inventory management systems, outside the local retail site. However, that initial movement of applications has severely stressed wide-area networks (WANs). While IT organizations work to improve performance, a second wave of migrating applications, focused on delivering a world-class customer experience, is about to hit, adding even more pressure to networks and causing added challenges with availability, performance, and bandwidth. One in five retailers report site outages on at least a monthly basis. With core applications being run across the WAN, outages are not just an inconvenience, they are a loss of revenue! Purchasing additional bandwidth alone does not solve these challenges. It takes the right technology, paired with appropriate network support partners, to meet the network requirements of digitally empowered stores. In March 2018, Hughes commissioned Forrester to conduct a study exploring the adoption, challenges, and investment plans for distributed store networks that support 200 or more locations spread across a large geographic area. The study surveyed 100 store operations and technology decision makers at North American retail and financial services companies with distributed store networks. The results illuminate how and why companies with distributed store networks are transforming their businesses and how they are preparing for increased demand on their networks. Industries (top 4): # of physical retail locations: Department: Title: Department/big box stores 34% 200 to % IT 34% C-level executive 9% Restaurants/fast food 17% 300 to % Digital/innovation 16% Vice president 13% Financial services 15% 500 to % Store ops/general mgmt. 41% Director 37% Specialty/apparel retail 14% 1, % C-level 9% Manager 41%
3 Digital Solutions Improve Customer Experiences But Strain Store Networks Today, distributed store networks support a myriad of in-store technologies and applications running in both on-premises data centers and in the cloud. Whether it is interactive digital displays that make it easier for customers to buy, or in-store analytics that help marketers better understand their customers, these digital solutions play an important role in the in-store customer experience. With the amount of applications hosted in data centers and in the cloud, many stores are pushing their already constrained network bandwidth to the limits. A majority of surveyed stores host their instore technologies (with the exception of security cameras) in their data center or in the cloud, and this dependency is increasing as stores move more apps to the cloud. Unless network performance is improved, stores will be forced to choose between limiting customer experience or reducing employee effectiveness through the technologies they turn on or off. Hosting the applications directly in store compounds costs and complexity related to servers, systems, and personnel, making it an unworkable alternative for most.
4 Stores Want Networks That Are Secure, Available, And Substantial With the rise of in-store digital solutions, both in number as well as importance, the network fabric that powers these solutions becomes a critical component of store success, as well as a potential point of failure. It is critical that these networks are: Secure. With more applications serving as potential points of entry to the network, network security is more important than ever with 88% of those surveyed saying security is important. Available. Critical application downtime results in bad customer and employee experiences, and ultimately, lost revenue. Seventy-six percent of those surveyed say that it's important their network be resilient and always available. Substantial. If bandwidth was not an issue for stores before, it certainly is now. In fact, 75% of those surveyed list having enough bandwidth as important to their network access and connectivity. A lack of access to larger circuits, or the cost of increasing circuit capacity can be a limiting factor for bandwidth. As a result, most stores are running up against bandwidth constraints, which limits what they can do today.
5 Today s Distributed Store Networks Struggle To Meet Application Demands For Bandwidth, Availability, And Performance Eighty-six percent of distributed store networks are managed at least in part by internal IT services. And unfortunately, many lean IT teams don t have the resources to manage and maintain the in-store network fabric at each and every store location seven days a week for the extended 12 to 14 hour retail day. As a result, many stores are left wanting more flexibility (only 25% are very satisfied ), performance (27%), and availability (28%) from their network. In addition, they feel their support teams are too slow to make needed changes and that the costs of the network are too high. Availability and performance top the list of critical network qualities. However, only 28% of respondents are very satisfied with their network s availability and only 27% with performance.
6 Inconsistent Performance And Outages Plague Distributed Store Networks The worst-case scenario for customer experience is a network outage with downtime for mission-critical systems. And unfortunately, distributed store networks face this challenge all too frequently. Two-thirds of companies we surveyed report outages at least twice a year, and one in five have outages monthly or more frequently. Many store networks, despite their complexity, are single-threaded, creating a single point of failure. This means that a problem with one part of the network can cause ripple effects with performance and availability of other applications on the network, resulting in inconsistent performance and downtime. The net result: lower customer loyalty, damage to the brand, and lost revenue. This is the worst case for the customer, the store, and the company. According to our survey, nearly two-thirds of respondents (64%) say that inconsistent performance and being unable to access their network is disruptive to their store operations.
7 Increasing Third-Party Support Can Help Solve Current Network Challenges Stores value network availability, security, and performance, and they indicate that their current network solutions are not sufficient for those needs. As a result, many stores are looking to third-party managed solutions to help them achieve those priorities. A third-party provider can bring to bear more support staff across broad geographic areas with the ability to support all work schedules. Some providers will also provide specialized skills and tools to help solve complex network issues, informed by best practices. Our survey shows: Two-thirds of stores would like to use a third party whether exclusively or in conjunction with their IT department to help manage their networks. This desire is consistent between both IT and business respondents, indicating that both groups would prefer to move toward including managed services to meet their growing network needs.
8 New Network Technologies Can Help Meet Bandwidth And Performance Demands In addition to turning to managed services to help manage their networks, stores are also exploring new technologies to help with their current network challenges. SD-WAN (software-defined WAN) is one such solution. SD-WAN provides capabilities that help optimize traffic flow across the WAN and multithreaded workloads to improve application performance and availability, resulting in significantly less downtime. While thirty percent of respondents use SD-WAN today, over half have plans to adopt in the next two years.
9 Today s Digital Store Technologies Require A Modern Network Fabric To Handle Increased Complexity The in-store digital technologies that companies rely on to drive revenue, to provide differentiating customer experiences, and to improve operational efficiency, are pushing most current store networks to the breaking point. Challenges facing distributed store networks include increased traffic volume, increased applications in use, and increased application hosting both in data centers and in the cloud, all of which drive increased network complexity. The result is insufficient performance, network outages, and high costs all of which lead to lost revenue, lower customer loyalty, and decreased brand value, threatening to negate the benefits of digital-store solutions. Given the increasing dependency on an always-on and always-available network, stores are turning to new technologies like SD-WAN that are better able to manage traffic and deliver higher levels of performance and network uptime. In addition, they are looking to bring in third-party service providers that are able to better manage the increased complexity of today s distributed store networks and the accompanying risks and costs. To this end, savvy retailers are partnering with managed service providers that specialize in implementing and managing new SD-WAN solutions which can provide an optimized and modern network fabric to get the most from digital store investments. ABOUT FORRESTER CONSULTING Forrester Consulting provides independent and objective research-based consulting to help leaders succeed in their organizations. Ranging in scope from a short strategy session to custom projects, Forrester s Consulting services connect you directly with research analysts who apply expert insight to your specific business challenges. For more information, visit forrester.com/consulting. 2018, Forrester Research, Inc. All rights reserved. Unauthorized reproduction is strictly prohibited. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change. Forrester, Technographics, Forrester Wave, RoleView, TechRadar, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. For additional information, go to forrester.com. [1-162SZ65] METHODOLOGY In this study, Forrester conducted an online survey of 100 store operations and technology decision makers at retail and financial services companies in North America with 200 or more physical retail locations who were responsible for technology or store operations for multiple physical retail locations. Project Director Andrew Magarie Market Impact Senior Consultant
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