(Third in a series of Microsoft blog posts about the cloud in vertical industries. Today: Retail)

Retailers today are working to do more with less. And for retailers seeking to get big results with minimal resources, cloud computing is beginning to look like a miracle.

In a recent Microsoft-commissioned survey of about 3,000 business decision-makers across the United States, nearly half of the respondents (48 percent) from the retail industry said that their companies have used cloud computing. One-third (32 percent) said that their companies were ready to move all applications to cloud computing.

So, what’s pulling retailers toward the cloud? It’s the ability of cloud computing to address three key challenges for retailers: focusing on core competencies, meeting unpredictable demands and improving customer service.

Refocus Investment on Core Competencies — not IT
Smart retailers are returning to core competencies in order to compete. That means more closely connecting with consumers. The NRF/KPMG research reported that more than two-thirds (67 percent) of respondents said customer database/data mining will be a priority for 2010.

Cloud computing enables retailers to focus their resources on the things that set them apart: Store portals, social media, digital marketing and employee retention. And it lets them invest less in maintaining, monitoring and updating shared working documents, e-mail and, operational data. Retailers have been quick to realize the benefits cloud offers. In fact, many of our early Microsoft Online Services customers were from the retail industry, including REEDS Jewelers

As a full-service jewelry retailer operating online and in 16 U.S. states, REEDS needs fast, accurate information exchange between corporate staff and the chain’s 67 stores. Phone and paper-based communications were time-consuming and difficult to reference, and the company’s e-mail and collaboration systems were unstable and difficult to use. REEDS used Microsoft Online Services, which led to reduced infrastructure costs by 90 percent and e-mail support work by 80 percent, by hosting communications services in a Microsoft datacenter.

Pay for Just What You Need to Scale Up for Peaks in Demand 
A second way in which cloud computing helps retailers is by better managing the peaks and valleys of holidays, unexpected demand surges, and weather events. In a typical IT environment, retailers need to able to scale fixed datacenter resources in advance of demand spikes. This leads to wasted capacity and increased costs. Even worse, it can mean an under supply, with network outages and crashed servers.

By taking advantage of cloud computing, retailers can dynamically adjust to the very dynamic nature of demand. Retailers only have to pay for the level of service they need, without the costs of unused capacity or under supply of capacity.  

Improve Information-Sharing, Collaboration among Retail Workers
Finally, cloud computing transforms how retail employees collaborate and share information. Employees are perhaps a retailer’s most expensive and most valued assets. These deskless workers need to communicate with peers and share customer feedback. If the retailers don’t give them a forum, this younger generation of workers will create one themselves. For proof, just venture onto Facebook and search any retail organization. You’re likely to find an employee group created by the chain’s associates sharing everything from store promotion tips to company policy gripes. And it’s all in the public domain for your competitors to read — and act upon.

By implementing a hosted intranet with messaging, online meeting, and social networking tools that span time zones and geographies, such as SharePoint Online, retailers gain a more effective way for employees to collaborate — whether in the field, at corporate or at a supplier, improve information flow and create more time for customers. By providing access to all employees from any device, retailers can also save travel expenses while boosting productivity, feelings of corporate loyalty and time with customers.

At Microsoft, our advice for retailers is to pick a cloud computing platform that delivers a consistent, connected experience. Our approach to the cloud allows retailers to pick the right mix of hosted and on-premises solutions that make sense for their business. 

Posted by Fred Bentfeld
GENERAL MANAGER, U.S. DISTRIBUTION & SERVICES SECTOR