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TCS in retail: OK for now

Alexander Simkin | March 19, 2009
In the long term, TCS must brace itself for slowing demand from retailers that are putting IT projects in other lines on hold.

TCS has a partnership with SAS which accounts for much of TCSs retail analytics revenues. But SAS doesnt provide the price optimisation solutions that offer retailers the fastest ROIs. The market leader in price optimisation is Oracle and its ProfitLogic suite. In the current economic situation, with retail margins narrower than theyve been in years, getting retail pricing right is crucial. TCS needs to build its services around price optimisation solutions, and therefore with Oracle.

Retailers putting other IT projects on the back burner will impact TCS

The global economic slowdown is forcing retailers to delay or cancel IT projects that arent mission critical, offer tangible cost savings or rapid ROI. These cutbacks are affecting hardware, software and services vendors. For vendors with little exposure to the retail vertical, these cuts dont matter much. But for vendors such as TCS, with significant retail exposure, they do. Approximately 9 per cent of TCSs total revenues are from retail. So the rate of decline of IT spend in the retail industry over the course of the downturn is of concern to TCS. The counter-cyclical opportunities arising from BPO and analytics provide TCS with a safety net in retail, but it will still feel the pinch of dwindling discretionary spend as national economies slide further into recession.

Before the credit crunch hit, many retailers were talking about transformational infrastructure projects and nice to haves such as digital signage. Those projects have largely been set aside. Plans to broaden mobile device use on the shop floor to offer mobile POS (point of sale/service) and price checking have also been mothballed, as have in-store merchandise management solutions.

Dr. Alexander Simkin is a senior analyst within the Software and IT Services practice at Ovum where he focuses on application-led outsourcing and project services. He also covers the software and IT services (S/ITS) market for the retail vertical.


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