PART 1: INTRODUCTION

1.1 Purpose of report:

This report has been requested by Mr Frank Hedge, the CEO of Myer Department Stores- Australia. The reports purpose is to investigate and analyse the strategic role of information technology (IT) to Myer's business, including an IT infrastructure audit. Cloud computing is evaluated, and recommendations made for its partial adoption.

1.2 Limitations:

This report is limited by the lack of IT infrastructure details provided by Myer. Assumptions were made when required, to enable completion of the report.

1.3 Scope of the report:

This report focuses on Myer and the potential use of cloud computing within its IT infrastructure. Divided into four main sections, the report covers Myer; IT infrastructure challenges; cloud computing costs/ benefits and recommendations for cloud computing adoption. It has been compiled from research literature and phone/email interviews with two Myer store managers.

1.4) Myer and its industry

Homepage URL; http://www.myer.com.au/

Myer is Australia's largest department store group with 65 stores and approximately 14,000 employees. It is present in 25 of Australia's top 30 retail centres and attracted 185 million customers in 2009 (Myer 2010). Myer generated net profits of $106.8 million for the first half of the 2011 financial year (AAP 2011).

Myer operates across major segments of the Australian non-food retail industry as a department store chain. This industry consists of four segments; household goods, clothing & soft goods, department stores and other (eg newspapers, books) (Myer 2010).

Myer competes with other department stores, discount department stores, and single store operators as well as internet retailers and direct retailers. Within the department store segment, David Jones is Myer's main competition though the former targets a slightly higher income group (Myer 2010).

Competition exists with other retailers on price, store location, product range and customer service. Additionally, consumer demand hinges on factors such as disposable income which are sensitive to macroeconomic conditions eg interest rate rise's (Myer 2010). The industry has struggled recently, due to weak consumer confidence and increased competition from cheaper overseas internet retailers (GST free and strong Australian Dollar) (Brooks 2010).

1.5) Myers products & services:

Myer offers approximately 600 000 product lines from 800 suppliers globally including categories such as; clothing; beauty and cosmetics; electrical and homewares (Myer 2010).

Myer provides additional products and services such as;

  • Myer One customer loyalty program, over 3 million members.
  • Gift cards
  • Myer corporate sales- eg corporate gifts, office fit outs, VIP nights
  • Insurance (home, contents, travel, car)
  • Bridal & gift registry
  • Myer Visa Card (Myer 2010).

1.6) Myers corporate mission& corporate structure:

‘At Myer we strive to offer customers a wide and relevant choice of brands, rewards and ideas in a way that makes them feel both welcome and inspired', (Myer 2010, p.3).

Myer's corporate structure is shown in Figure 1.1. Head office operates under a hybrid of divisional (eg apparel, electrical division) and functional groups (Finance, marketing etc). A national retail store manager oversee's regional store managers, who oversee individual store managers. Head office functional groups, directly manage their particular function (eg HR) in the individual stores (Myer 2010; S Johnson 2011, pers. comm., 20 April). (Adapted from: Myer 2010, pp. 25-7).

1.7) Myers major business processes:

Laudon and Laudon (2010), note business processes are sets of activities to produce a product or service. Due to its variety of offer, Myer has many business processes such as;

  • Sourcing product to offer in store.
  • Automating administrative processes.
  • Reducing stock theft.
  • Creating visual merchandise displays.
  • Analysing potential sites for new stores.
  • Refurbishing existing stores.
  • Making sales (Myer 2010).

1.8) Myer's business strategy

Myer has invested substantially in its business since 2006 ($500 million) realizing a world class supply chain, improved retail execution and focused customer service (competitive advantages) (Myer 2010).

Myer aim's for additional margin and sales growth using specific strategies of;

  • Opening 15 new stores in next five years.
  • Revitalizing instore environments for a better customer experience.
  • Expanding the Myer One program.
  • Implementing a new point of sale system (POS) improving productivity & customer service.
  • Implementing a CCTV system to reduce losses (Myer 2010).

1.9) Myers relationships with external entities:

Myer has significant relationships with a variety of entities which include;

  • Its 800 global suppliers (Myer 2010).
  • Global sourcing offices in Hong Kong and Shanghai (Algar 2011).
  • Partnership with Melbourne Institute of Technology for paid internship for students (RMIT 2011).
  • Myer's involved with philanthropic and community programs including children and women's charities and Melbourne Christmas Carols (Myer 2010).

PART 2: IT INFRASTRUCTURE: ISSUES AND CHALLENGES(727 words)

2.1) Description of Myer's IT infrastructure:

Laudon and Laudon (2010 p. 191) describe IT infrastructure as, ‘the shared technology resources that provide the platform for the firm's specific information system applications. It includes investment in hardware, software, and services…that are shared across the entire firm…'.

Myer's IT infrastructure was analysed according to Laudon and Laudons' (2010 p. 203) model which comprises of seven components. The required information was obtained from Myer's Head Office IT department and interviews with two store managers (Appendix 1). A summary of each component is presented in Table 2.1. The IT infrastructure differs between head office and individual stores, due to centralization (Slotty 2009).

TABLE 2.1 Summary of Myer's IT infrastructure ecosystem.

Component

Head Office

Individual Stores

1) Computer hardware platforms

Client machines- eg desktops (mainly IBM types eg Lenovo), laptops & smart phones used.

Servers- IBM types eg x86.

Mainframes- N/A

Floor staff- terminals only.
Managers- Desktops (eg Lenovo and some older HP), mobile phones (voice only).

IBM server/s present.

2) Operating system platforms

Clients- Microsoft Windows 7.

Servers- Linux

Clients- Mainly Windows 7.

Servers- Linux

3) Enterprise software applications

An Oracle portal is present (middleware) to bring together Myer's newer systems. SAP HR is a legacy system via the portal.

Staff have access only to relevant systems via the portal.

4) Networking/ Telecommunication

Networking hardware by IBM working with Cisco.

Telecommunicating services by Telstra (voice & data). LAN's & WAN's based on Linux.

Wireless internet in head office.

As per head office, though wireless internet not available.

Intranets (within store and with head office) & extranets with suppliers exist.

5) Consultants/ system integrators

IBM supplies a range of IT services to Myer, eg networking, desktop, applications, help desk.

IBM supplies a range of IT services to Myer, eg networking, desktop, applications, help desk.

6) Data management & storage

Myer uses a 3rd party data center for main storage.
Myer's data accessed via Oracle's retail data warehouse software (RDW).

Localized content saved to a local server.

RDW software available to managers for limited functions eg comparison of sales.

7) Internet platforms

Website uses Microsoft.NET software as well as Java.
Not aware of hosting services or hardware used.

Website most likely outsourced.

Stores internet access- email (managers only).
Only electrical division has world wide web access.

(Adapted: Myer IT department; Interview with two Myer Store managers 2011).

The key findings from the analysis of Myer's IT infrastructure presented above, are as follows;

Computer hardware platforms:

  • Client machines (desktops) are not standardized across Myer.
  • A small number of servers exist at multiple locations (65 stores) doing replicated tasks (localized data storage, networking etc).

Operating system platforms:

  • Client and server machine software is licensed per computer with Windows variability on client machines.
  • Large information asymmetry exists between managers and sales staff due to their limited access to software (Laudon & Laudon 2010).

Enterprise software applications:

  • While an intranet portal exists to link to Myer's applications, only newer applications (eg Mymerch- merchandising, POS) are fully integrated.
  • Many legacy systems remain isolated and not integrated.

Networking/Telecommunications:

  • Myer operates both analog (phone system) and digital (data) networks using two providers (Telstra and IBM).
  • While Myer accesses the internet, it also operates private networks (intranet) in the form of LAN's and WAN's.
  • Networking is not possible between individual stores.

Consultants & System Integrators:

Integration and implementation of new IT infrastructure is outsourced to IBM, including training.

Data management & storage:

While the majority of Myer's data is stored with a third party vendor, localized data storage occurs at individual stores (65).

Internet platforms:

  • Physical infrastructure and maintenance of Myer's website is outsourced to third parties.
  • Information asymmetry exists, with very limited access to internet for individual stores.

Myer's network infrastructure is further illustrated in Figure 2.1, which outlines information flows. Note information does not flow between stores, only between stores and head office.

(Adapted: Myer IT department; Interview with two Myer Store managers 2011).

2.2) The issues and challenges of managing Myer's IT infrastructure:

Myer faces several challenges and issues in managing its IT infrastructure. Laudon and Laudon (2010) identify challenges arising from platform and technology change, management and governance and investing in infrastructure prudently. These challenges are also influenced by the strategic role of IT to the business and the impact of the industry in which the organization operates.

By revisiting section 1.8 it can be seen that IT plays an important strategic role in achieving Myer's medium term goals of increased operating margins and sales growth by;

  • Facilitating increased supplier and sales volumes from new store initiatives (eg hardware and software required).
  • Optimizing productivity, cost savings and customer satisfaction via implementation of new applications (POS system and CCTV loss prevention system).
  • Catering for an expanded Myer One loyalty program (increased data storage and analysis needs for targeted marketing) (Myer 2010).

As a result of IT's important strategic role, the challenges of managing Myer's IT infrastructure are intensified. This is best demonstrated by specific examples;

The challenge of platform and infrastructure change:

To best accommodate expected future growth, improved productivity, cost efficiencies and increased data needs, infrastructure components need to be easily scalable (Armbrust et al 2010). This will be particularly true with regards to Myer's hardware & software platforms, its enterprise software applications and its networking, internet and data storage platforms.

Currently, significant pressures exist within Myer's industry. Consumer spending is down and offshore internet retailers are offering cheaper prices due to the strong Australian dollar and absence of GST (Brooks 2010). This poses further challenges to Myer to adjust components of its IT infrastructure quickly to generate database driven marketing programs or improve its operating efficiencies (Myer 2010).

If cloud computing platforms are considered as future components of Myers infrastructure, then appropriate use guidelines and practices will be needed. Service level agreements (SLA's) for example would commit cloud computing vendors to minimum levels of performance and reliability for Myer's systems (Hinchcliffe 2009).

The challenge of management and governance:

The management and governance of Myer's IT infrastructure is significant, considering its strategic role, further evidenced by the commitment of $500 million to its IT program since 2006 (Myer 2010). Aspects to be considered include the location of IT control (centralized or decentralized model), the allocation of IT costs to functional groups or stores, the strategies and policies for using IT and measuring effective return on IT investments (Laudon & Laudon 2010).

The challenge of investing in IT infrastructure prudently:

Considering the significance of IT infrastructure for Myer as it seeks its business goals, this is a crucial challenge. Whether Myer should rent or buy its infrastructure components will be further investigated in section 4 of this report. (Laudon & Laudon 2010)

PART 3: CLOUD COMPUTING & ITS BUSINESS BENEFITS & COSTS(986 words)

3.1)An overview of Cloud Computing:

Zhang et al. (2010) note cloud computing is not a new idea. While many definitions abound, from an organizations perspective, ‘Cloud computing is an architecture in which companies consume technology resources as an internet service rather than as an owned system' (Brandel 2009, p. 1).

Most people have already experienced cloud computing through the use of Hotmail, Gmail or Facebook (Wyld 2009). Recent improvements in internet bandwidth, virtualization of servers and storage, open source software, adoption of Web 2.0 standards, has pushed cloud computing strongly into the business sphere (Kennedy 2011).

Mell and Grance (2011) claim that cloud computing consists of five crucial characteristics, three service models (software, platform and infrastructure as services) and four deployment models (private, community, public and hybrid clouds) which are outlined in Tables 3.1 and 3.2. Potentially cloud computing can deliver to a business most of its IT needs (from computing power to collaboration tools to software) as an on demand service, wherever and whenever required. As long as an internet connection exists, computing becomes location and device independent (Agger 2009).

TABLE3.1 The crucial characteristics, and service models of cloud computing.

Crucial Characteristics

Description/ Outline

On-demand self-service

Consumer can provision their computing capabilities automatically without needing human interaction with a service's provider.

Broad network access

Capabilities are accessed via network, through standard mechanisms, promoting use by mixed client platforms (eg mobiles, PDA's).

Resource pooling

Provider's computing resources are pooled to serve multiple consumers using a multi-tenant model. Resources dynamically assigned/reassigned dependent on demand, include storage, processing, memory, bandwidth

Rapid elasticity

Capabilities can be rapidly & elastically provisioned, to quickly scale out & rapidly released to quickly scale in. Purchased as required.

Measured Service

Cloud system automatically control & optimize resource use by using a metering capability relevant to the type of service. Resource usage can be monitored, controlled & reported for the utilized service.

Cloud Service Models

Description/ Outline

Software as a Service (SaaS)

Offers renting application functionality from a service provider rather than buying, installing and managing software yourself. Examples include Salesforce.com and Gmail.

Platform as a Service (PaaS)

Provides a platform in the cloud, upon which applications can be developed & executed. Eg Microsoft (Azure), Google AppEngine.

Infrastructure as a Service (IaaS)

Vendors offer computing power & storage space on demand. Eg Rackspace & Amazon EC2 (compute) & S3 (storage).

(Adapted from: Mell & Grance 2011, pp. 2-3; Department of Finance & Deregulation 2011, pp. 12-3)

TABLE3.2 The deployment models of cloud computing.

Deployment Models

Description/ Outline

Private (internal) cloud

Cloud services are provided solely for an organization & are managed by the organization or third party. These services may exist on/off site.

Community cloud

Cloud services are shared by several organizations & support a specific community that has shared concerns. Services may be managed by the organizations or a third party and may exist off site eg government.

Public cloud

Cloud services are available to the public and owned by an organization selling cloud services eg Amazon.EC2.

Hybrid cloud

An integrated cloud services pact that includes a cloud model & something else (another cloud model, back end systems, etc), eg data kept in private cloud database, used by program running in public cloud

(Adapted from: Mell & Grance 2011, pp. 2-3; Department of Finance & Deregulation 2011, pp. 12-3)

3.2) Current trends in Cloud Computing:

Present studies suggest, ‘…the number of organizations using cloud computing to rise to 43% within four years as they continue to cut their costs' (Cross 2011 p. 1). In addition to greater cloud computing use in general, there are several trends within cloud computing concerning areas such as;

  • User type & deployment models- O'Neill (2011), notes small to medium enterprises using cloud computing are typically accessing public clouds for cost savings compared with private clouds. Alternatively larger enterprises use private clouds (third party or onsite) for greater control. Governments (federal level) are trialing SaaS and Ouellette (2011) believes state and local governments will soon follow.
  • Purposes for using cloud services- It's principal use remains as a testing/developing environment and/or as a platform for less critical services and applications (Knorr & Gruman 2010). Synder (in The Australian 2010) believes moving core applications to the cloud is still to come.
  • IT's changing role- Hakala (2009) believes the need for IT worker's performing maintenance tasks will contract as cloud computing is embraced and employee's can ‘self serve' directly from the cloud.
  • Innovation- Cloud computing will continue to be a conduit for business innovation due to its low costs and rapid scalability of IT resources (Kennedy 2011; Information Age 2011)
  • Pricing- Cloud computing pricing (especially commodity) continues to become cheaper and simpler for users. Thibodeau (2009) suggests models utilizing a set number of hours for a range of cloud services.
  • SLA's & improved security- Improving cloud computing reliability via strong service level agreements (SLA's) continues (Hinchcliffe 2009). Colley (2011) & Violino (2010) expect most businesses will demand independent certification of cloud providers reliability in next few years. Cloud providers are targeting improved security to allay user concerns. Working groups such as the Cloud Security Alliance are focusing on this issue (Thibodeau 2009). Violino (2010) noted a need for better access control and identity management within and across clouds.
  • Improved performance and service- The performance of cloud services rises, as more managed service providers enter the market (Ouellette 2011) and performance monitoring standardises (Thibodeau 2009). Typically IT staff connect cloud services individually, though cloud aggregators and integrators are emerging to smooth this barrier (Knorr & Gruman 2010).

3.3) The business benefits of Cloud Computing:

Cloud computing offers many benefits to business. Leighton (2009 p. 5) asserts, cloud computing will ‘transform the way IT is consumed and managed, promising improved cost efficiencies, accelerated innovation, faster time-to-market, and the ability to scale applications on demand'.

Sagari (c. 2010) notes the level of benefits cloud computing brings to an organization will vary dependant on the types of services utilized, the business processes evident and the degree of integration achieved. Major business benefits can include;

  • Reduced costs (set up & ongoing) * Increased flexibility & response times
  • Scalability & increased efficiencies * Increased business focus.
  • Increased innovation * Improved mobility

Armbrust et al (2010) maintains, one of the most impressive benefits of cloud computing is scalability (elasticity of resources). The business pays for its hardware needs (servers, storage) on demand with the cloud providing great elasticity. Business needs can be scaled up or down as required, saving time, money and improving revenue in peak periods (Zhang et al. 2006; Waxer n.d.).

Additional business benefits offered by cloud computing include;

  • Smoothed cash flow * Increased strategic role for IT
  • Reduced business risk * Improved sustainability.
  • Greater computation power * Improved business continuity

These benefits are further expanded in Appendix 2 with business examples and their references.

3.4) Cloud computing solutions for Myer:

Section 4 details specific cloud computing recommendations to be adopted by Myer. In contrast, Table 3.3, outlines cloud computing solutions best suited to Myer for the aspect identified in column one. The reasons for these choices are as follows;

  • Servers for serving applications- Amazon EC2 has been the market leader in this area and for good reason (Huang 2010). It exceeds Microsoft Azure's new offering and it has a superior range of operating systems to use (eg Linux, Myer using), compared with Google's App Engine (Amazon 2011).
  • Servers for storage- Amazon S3 was preferred over Microsoft Azure and Nirvanix for the reasons noted in Table 3.3 eg a price leader, very easy to use and highly reliable, SLA exceeding 99.99% (Huang 2010).
  • Client productivity software- Microsoft's new Office 365 retains the known office layout of which Myer staff are familiar. Additionally it incorporates email, calendar & collaboration tools. Superior in features to Google Doc's or Zoho (McAllister 2010).
  • Private cloud- If recommended to Myer, Amazons virtual private cloud is a good solution. It integrates easily with a firm's existing IT infrastructure, including firewalls and security systems (Amazon 2011).
  • Applications- As an application development platform, Force.com has been suggested for its long history of business application development. Furthermore, to use this environment, subscription to Salesforce.com CRM applications are required, which may be beneficial to Myer (Force.com c.2011).

TABLE 3.3Most suitable cloud computing solutions for Myer.

Aspect

Model

Vendor

Reasons Selected

Servers-serving/ processing

IaaS

Amazon: EC2

Reputation, elastic, flexible- supports many uses and languages, ease of use, payment flexibility- on demand basis $/hr. secure. SLA- 99.95%,

Storage

IaaS

Amazon: S3

Very easy to use, price leader (eg $0.15/GB/mth) and highly reliable SLA exceeds 99.99%.

Client productivity soft

SaaS

Microsoft: Office 365

Familiar Microsoft Office platform via the cloud, email also & other tools. Eg $6/user/mth, SLA 99.9%

Private Cloud

Multi

Amazon

Amazons virtual private cloud- integrates easily, firms security systems wrap around it.

Applications

Multi

Salesforce /

Force.com

Salesforce's-CRM application- sales & service cloud, Force.com for application development platform.

(Adapted from: Amazon 2011;Force.com c. 2011; Microsoft 2011)

3.5) Costs of cloud computing to Myer:

Typically the IT industry uses ‘Total Cost of Ownership' (TCO) to determine the total cost of a technology implementation (Laudon & Laudon 2010). Table 3.4 provides an estimate of the costs to Myer in implementing the cloud computing solutions listed in Table 3.3.

As can be seen, support, maintenance, space and energy costs pass to the cloud provider and hardware and software acquisition costs are essentially avoided. Some training costs of the IT staff involved in implementing and/or the staff using the cloud services would be incurred (Aggarwal & McCabe 2009). A small amount of ongoing support to Office 365 users may also be required. Integration issues and costs are not expected, as the servers and software to be sourced via the cloud will not be critical systems.

Additional infrastructure costs (eg bandwidth) resulting from cloud computing's greater internet reliance, may occur. Downtime estimates from providers SLA's are less than typical IT departments of large companies ie 44hrs/yr (Mann 2010). Moving data into and out of Amazon S3 storage, will incur costs (Amazon 2011). Finally, Aggarwal and McCabe (2009), reported TCO savings of some 50% over four years, for medium sized businesses implementing CRM software from the cloud, compared with on-premise deployment.

TABLE 3.4 Total cost of ownership (TCO) for Myer's cloud computing solutions.

Infrastructure Component

1) Servers Processing

(Amazon EC2)

2) Servers storage

(Amazon S3)

3) Client soft.

(eg Microsoft Office 365)

4) Applications Development

(Force.com)

Hardware acquisition

Nil cost

Nil cost

Use existing

Use existing

Software acquisition

Db small cost

Nil cost

Eg $6/user/mth

Nil cost

Installation

Minimal cost

Data in $0.1/GB

Data out varies

Need web browser

Need web browser

Training

Minimal to IT

Minimal to IT & staff.

Minimal to IT & staff.

Self taught to IT (2 -3 hours)

Support

By provider

By provider

Minimal

By provider

Maintenance

By provider

By provider

By provider

By provider

Infrastructure

Internet cost

Internet cost

Internet cost

Internet cost

Downtime

4.5hrs/yr.

52mins/yr.

8.75hrs/yr.

8.75hrs/yr.

Space & energy

By provider

By provider

By provider

By provider

Cost to use service

~ $0.50/hr using Linux OS

~ $0.15/GB/mth

Eg $6/user/mth

$15 to $75/user /mth

(Adapted from: Laudon & Laudon 2010, p. 224; Amazon 2011; Microsoft 2011; Force.com c.2011 )

PART 4: RECOMMENDATION OF CLOUD COMPUTING ADOPTION/ ADAPTION(785 words)

4.1) Competitive forces model for IT infrastructure Investment:

Specific recommendations for the adoption of a cloud computing strategy by Myer will soon be made. These recommendations will be based on the preceding analysis and also take into account the ‘competitive forces model for IT infrastructure' as described in Laudon and Laudon (2010 pp. 222-3). Table 4.1 summarises the main points of this model as it relates to Myer.

TABLE 4.1: Competitive forces model for IT infrastructure investment of Myer

Model components

Outcome

1) Market demand for Myer's services (eg customer, supplier & enterprise):
Myer's point of sale (POS) system & supply chain improvements are based on extensive research of their services. These systems improved efficiency & speed, and are satisfying customers, suppliers & staff (Tindal 2010)
Information asymmetry especially with sales staff is affecting performance.

Current IT investment (CII) is meeting this aspect.

2) Myer's business strategy:

Myer's five year goals are to increase operating margins & sales growth. Major initiatives which are being implemented (section 1.8), are delivering many of these aims. Cloud computing capabilities could provide further cost savings.

CII is mostly meeting this aspect.

3) Myer's IT strategy, infrastructure and cost:

As noted in section 2.2, the IT strategy is closely aligned with Myer's goals and helping to drive growth and improved margins. Further centralization of IT (cloud computing) would reduce costs (Table 3.4 for TCO).

CII is mostly meeting this aspect, cut costs further.

4) Information technology assessment:

$500 million of IT investment over the last 5 years has Myer well situated in terms of technology uptake. It was previously lagging. Adoption of some cloud computing aspects at this date (maturing market) is positive (Gartner 2010).

CII is mostly meeting this aspect, trial cloud service

5) Competitor firms' IT services:

David Jones is using IT by growing its etail business, & maximising its store credit card system (David Jones 2010). Myer's IT investments bring competitive advantage to its supply chain & superior customer service compared with other department stores (Myer 2010). Internet is bringing challenges to Myer.

CII is mostly meeting this aspect, cut costs further

6) Competitor firms' IT infrastructure investments:

Benchmarking Myer's IT infrastructure spending against competitors was not attainable. It's expected Myer is at the forefront of IT investment in their field.

CII is meeting this aspect.

(Adapted from: Laudon & Laudon 2010, pp. 222-3)

The competitive forces model above, can help determine if Myer's spending on IT infrastructure is adequate to sustain, grow and compete in their field (Laudon & Laudon 2010). From this review, it appears Myer's current level of IT investment is sufficient to attain their stated goals of improved sales growth and increased operating margins (ie decreased costs). The following points though, should be noted;

  • Information asymmetry is affecting the performance of sales staff.
  • Cloud computing initiatives and further centralization of IT could reduce costs.
  • Cloud computing is maturing, providing a good time to trial services (Gartner 2010).
  • Internet retailers (especially overseas) are challenging Myer, cost cutting is required.

4.2) Recommendations:

Based on the results of the competitive forces model above, and sections 1 to 3 of this report, the following recommendations concerning cloud computing adoption by Myer, will now be made;

  1. The servers at the 65 stores to be replaced by Amazon EC2 and S3 cloud computing services.
  2. The client machines (eg desktops) throughout Myer to migrate to Microsoft Office 365 (SaaS)
  3. Head office sales/marketing staff to trial Salesforce.com CRM software (SaaS).
  4. Force.com to be utilized as a development and testing platform for non-critical applications.
  5. Investigate the use of a private cloud by Myer in the future (next 3 years).

As discussed in section 4.1, Myer's current level of IT investment is not inhibiting business growth. Rather, the cloud computing recommendations made, offer possibilities for increased productivity and cost reductions. They also provide opportunities to trial and test cloud solutions with non-critical systems and data, which should ease concerns over provider reliability or data security (Strickland 2008). Amazon's S3 data storage for example is backed up at several diverse locations in the event of failure (Amazon 2011). Training of IT staff or other staff will be minimal as outlined in section 3.5. There should be no major issues or concerns regarding the successful implementation of these recommendations.

Leighton (2009) noted, cloud computing can bring cost efficiencies, faster innovation, as well as ability to scale. These are all attributes Myer desires. The reasons for each of these recommendations will now be explained.

Recommendation 1:

Replacing the servers at the individual stores with cloud solutions will decrease operating costs (section 3.5). Server's currently performing networking and non-critical application serving can be replaced by Amazon's EC2. Servers used for localized data storage at individual stores (excludes data in the data center) can be replaced by Amazon's S3 service. This will help solve scalability issues, mentioned in Section 2.2.

This recommendation further centralizes the role of IT at Myer as the maintenance of the servers at 65 stores will pass to Amazon. In large organizations such as Myer, a centralized role is advantageous due to cost efficiencies and increased production (Slotty 2009).

Recommendation 2:

Replacing Microsoft productivity software (eg office, outlook) on desktops/laptops with a cloud version (Office 365) will further drive cost efficiencies (section 3.5). Continuing to use a Microsoft product is comfortable for staff, and they can test ‘software as a service'. Providing sales staff with access to some of these communication and collaboration tools will reduce information asymmetry and improve performance (Laudon & Laudon 2010). Ideally, desktop hardware and operating systems (eg Windows 7) would also be standardized across Myer to improve efficiencies (Slotty 2009).

Recommendations 3 & 4:

Recommendations 3 & 4 achieve two goals. Firstly head office sales/marketing staff can trial the leading CRM cloud software for minimal cost (Salesforce.com 2011). They may find some functions useful to their work and/or generate new idea's for Myer applications. Secondly, IT can use the sister site, Force.com as a development and testing platform for non-critical applications. This provides the benefits of flexibility, rapid scalability for testing and allows greater innovation to occur as trialing new products becomes inexpensive and easy to provision (Knorr & Gruman 2010).

Recommendation 5:

Myer should investigate the future use of a private cloud to further streamline operating efficiencies and drive innovation. This cloud could be outsourced to a third party or built in house and managed by a cloud provider eg Amazon virtual private cloud. It's envisaged this cloud would host all data and core enterprise systems. While potentially several years away, as data security and reliability of cloud services continues to improve, this is a stronger possibility (Hinchcliffe 2009).

Finally, it's advised that Myer also moves fully to an internet based architecture for its networks (eg LAN & WAN). It's analog phone system could be moved to the internet via VOIP technology, further reducing costs (Laudon & Laudon 2010). These measures would help to open up lines of communication between stores, which are currently missing.

PART 5: CONCLUSIONS

This report has investigated the strategic role of Information technology (IT) to Myer's business and particularly the position cloud computing can take in its future. After extensive consultation with Myer and relevant literature several points were noted.

Myer is operating within a challenging retail environment with increased competition from oversea's internet retailers. IT infrastructure investment and systems of Myer are generally sufficient for their stated goals of continued sales growth and improved operating margins. Information asymmetry between staff members exists, as does restrictions to internet access.

A detailed cloud computing analysis produced several recommendations for the partial adoption of cloud services. Migration of non-critical data and replicated systems at individual stores to a cloud environment, would provide Myer with further cost efficiencies, increased innovation and the ability to scale infrastructure quickly. Minimal disruption to Myer and its staff would result from the cost effective implementation process. Finally, improving internet access and reducing information asymmetry amongst staff will deliver improved performance and continued sales growth for Myer.