Watch out for falling technology: Wal-Mart's IT issues

A retailing giant wrestles with its legacy

Wal-Mart has been having some travails in the market, which the retailer's executives blame on an oversaturated US market and economic uncertainty.

But lurking behind the scenes may be some major technology issues. In a recent article, CIO's Thomas Wailgum observes that the retailer has another anchor dragging its progress -- information technology.

Say it ain't so... Wal-Mart's IT is legendary; it's secret to success -- at least that's we've been told incessantly over the years. Wal-Mart is constantly held up as the shining example of slick, efficient IT and intelligent supply chains.

Apparently, Wal-Mart has fallen victim to the Carr Conundrum, in which, as Nick Carr proclaims, happens when every player in a market gets access to the same technology, leveling the playing field for all.

Wailgum summarizes Wal-Mart's IT plight this way:

"Wal-Mart today is caught between two worlds: Sam Walton's, where a zealous commitment to 'everyday low prices' is enforced (despite Walton's skepticism about computers) by IT-assisted decisions made in Bentonville, and a new global marketplace in which the retailer's sheer size is not as big an advantage as it once was. Competitors such as Target and Tesco can match Wal-Mart in technological sophistication and surpass it by innovating in new retailing segments with higher-margin goods."

Other factors hampering Wal-Mart include its centralized IT structure, which overrides local store decision-making, and too much reliance on home-grown IT systems.

So Wal-Mart has become a company burdened with legacy systems, some of which may still provide competitive advantage; others which are commoditized to the point where a packaged system can and should be swapped in. Welcome to the club, WM. And talk about fertile ground for service-oriented architecture, which could ease the transition to new thinking and new technologies.

But, alas, no one brought up SOA in the article. But read between the lines, and SOA underpins everything. Analysts, for example, recommend the retail giant leverage its current assets -- such as its massive data collection capabilities -- and move them out to its community. "Wal-Mart is known for its ability to collect data. Now, analysts say, it's imperative that IT enable merchandisers and buyers to use it to make better decisions."

The retail giant is also purportedly switching from its homegrown systems to packaged software, including pricing and business-intelligence software from Oracle and HP. SAP also just scored a big win, announcing this past week that Wal-Mart will be replacing its legacy financials with SAP ERP Financials. As SAP keeps telling us, they're all about SOA now.

Analysts and consultants also urge the retail giant to move more aggressively into the Web 2.0 space, and applaud the retailer's early steps in this direction. For example, the company is taking steps into the social networking arena as a way to better connect with its customers, as well as promote customer blogging "to reinforce the values of its brand and promote its new products."