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Cloud Hangover Costs UK Retail Sector Over £260 Million Every Year

16th July 2015

Research from Sungard Availability Services finds that unexpected costs, integration challenges and increased IT complexity are all contributing to a ‘Cloud Hangover’

                                                                                                             

A third of retailers agree that the cloud has not met their expectations

 

London, United Kingdom Sungard Availability Services® (Sungard AS), a leading provider of information availability through managed IT, cloud and recovery services, today announces research which reveals that UK retailers[1] are spending over £260 million[2] each year on maintaining cloud services and on hidden costs associated with their cloud computing projects. The research questioned 47 senior IT decision makers from retail sector organisations in the UK, Ireland, France and Sweden. The results are part of a wider study of 400 interviews with IT decisions makers which revealed that the Cloud Hangover is costing European businesses an average of more than £2 billion per year[3].

Now considered as a more flexible and efficient way of managing IT, cloud computing has gained significant momentum across retail sector organisations. Recent research from IDC revealed that the cloud has established itself as a viable IT model within retail, with the market set to increase its investment over the next two years[4]. However, Sungard AS’ research reveals that retailers are now facing a large number of challenges in managing and operating these cloud environments.

 

Unexpected Costs in the Cloud

Over three quarters of retail industry organisations (81 per cent) have encountered some form of unplanned cloud spend. With each organisation paying an average of £166,800 per year on maintaining cloud services and an additional £190,000 over the last five years thanks to unforeseen costs such as:

  • Internal maintenance costs for software, e.g. patching, recovery, data compliance (53 per cent)
  • Systems integration costs to ensure applications can share data (45 per cent)
  • Integration costs between different infrastructure clouds (39 per cent).

Whilst 51 per cent of retailers looked to increase business agility and 62 per cent looked to reduce IT costs, challenges such as integrating the cloud with legacy systems (57 per cent) has meant that more than half (55 per cent of retailers have been forced to bring in additional external support to implement their cloud solutions.

57 per cent have also spent more managing their cloud implementations than originally predicted, so it is no surprise that one of the biggest challenges retailers have around cloud computing is staying in control of IT cost (47 per cent).

 

Retailers Face Complexity with the Cloud

Moreover, although 60 per cent of retailers expected to see improved IT team efficiency and reduced IT team workload, over a third (36 per cent) feel this has not been achieved. In fact, 60 per cent felt that their cloud implementation had simply created a new set of challenges and process for their organisation.

Keith Tilley, Executive Vice President, Global Sales & Customer Services Management at Sungard Availability Services, said: “Retailers have taken a very unique road to the cloud, coming not primarily for a cost reduction approach – although they are not averse to saving money – but from an innovation perspective. For many retailers, cloud strategy has focused on allowing them to offer a more responsive and innovative service for their customers. The industry has looked for the flexibility of cloud, its ability to scale up on demand and allow them to become more agile, particularly at peak periods such as Christmas, which can account for 75% of annual sales. However, while the approach may be different many of the problems around cloud are universal: unplanned spending, increased complexity, and challenges in integrating new cloud services with existing legacy systems.

“Retailers have taken a very unique road to the cloud, coming not primarily for a cost reduction approach – although they are not averse to saving money – but from an innovation perspective. For many retailers, cloud strategy has focused on allowing them to offer a more responsive and innovative service for their customers.”

— Keith Tilley, EVP, Sungard AS

“Whilst there are no silver bullets for cloud adoption, there are ways to make deployments run smoothly. As ever, a concrete understanding of what a retailer wants the cloud to deliver is crucial – rushing into the cloud, or any technology for that matter – with vague ideas about becoming more innovative or available simply won’t wash. Retailers need to determine the business outcomes they want to see and then work closely across the Board and with a trusted partner to establish how best to achieve this.  With complexity and integration issues supplying the biggest headaches, looking carefully at how cloud computing can either replace or augment aspects of their current IT estate to deliver these outcomes is vital.”

 

The full report on the Cloud Hangover is available to download here.

For further research results and infographics, please visit: www.sungardas.co.uk/cloudhangover.

To follow the latest news on Twitter, follow @SungardASUK or join the debate using #CloudHangover.

 

*About the research

Interviews were carried out in February 2015 by Vanson Bourne on behalf of Sungard Availability Services. 400 interviews were conducted altogether: 150 from the UK, 150 from France and 50 each from Sweden and Ireland. The research spoke to IT decision makers in businesses of over 500 employees in the UK, France and Sweden and 250 in Ireland across a variety of sectors – including 47 senior IT decision makers in the UK in retail sector.

Note for Editors:

The abbreviation for Sungard Availability Services is ‘Sungard AS’ as cited above.  Please use ‘Sungard AS’ when abbreviating the name rather than ‘Sungard’ or ‘SunGard,’ which may confuse the reader with another separate company with a similar name.

 

[1] Respondents referred to as retail or retailers also include those from organisations who may be involved in the supply chain for this sector such as distribution and transportation

[2] Actual figure is £262,619,411

[3] http://www.sungardas.co.uk/company/Press-Release/Pages/Cloud-Hangover-Costs-UK-Businesses-Over-%C2%A31bn-Every-Year.aspx

[4] https://www.idc.com/getdoc.jsp?containerId=prUK25349214