IT Investments

By Evan Schuman  |  Posted 2005-03-13 Print this article Print

: Retail Style"> Many retailers can go 10 or more years before replacing a Retek system, in the same way that the Point-of-Sale (POS) systems they are replacing today are often 10-15 years old.The reason why they last so long is another cashflow yin-yang Retek fact: highly-customized. Retek’s team crafts packages precisely to that specific retailer’s situation. On the plus side, it’s a hypnotizingly-persuasive lure when making that initial sales pitch and clients cough up impressively big bucks in the beginning.“Retek brings to the table a lot of marketing pizzaz,” said Greg Buzek, president of the IHL Consulting Group. “It demos very, very well.”
But like a high-quality custom-made suit, it lasts a very long time and the alterations are often free. On a great suit, however, the hope is that the customer will buy many more like it. With retailers, it’s not necessary. The best that Retek can hope for is word-of-mouth referrals, which it’s been getting. But ultimately, there are only so many Tier One retailers. Retek’s only hope is to find some way of getting those retailers to pay for additional services—or to be bought out and to let the new owners worry about it.
“We’re not talking about the XP model, where every two years you get a new model. This stuff doesn’t turn over,” said Jeff Roster, a principal analyst for retail at research firm Gartner. “If you want to be doing a lot of updates, that may not fly (in retail). This has to last ten years because there is so much customization that goes into it.”And when it comes to milking customers for more money, few can hold a candle to Oracle’s Larry Ellison. (Ok, Bill Gates can, but Microsoft has a very different view for retail: capture the low-end. But that’s another column.)With this level of customization, retailers don’t replace it until they absolutely have to. What they will do is tweak the programming every so often to adjust for business changes, but that’s handled using in-house coders. Oracle’s acquisition nature is not about being shy. To read more, click here. Retail is different from many other verticals because of a notorious cheapness, but it’s a stinginess out of necessity. IHL’s Buzek estimates that the typical healthcare company runs at about an 8 percent profit margin and a traditional insurance company tries to bring in six percent margin. The average retailer can barely hope to bring in 1.5 percent, Buzek said.Despite the industry’s efforts to paint this Retek battle as an ego war, it’s much more than that. Although I’ll grant you that it’s hard to envision an Oracle strategy that isn’t somehow pegged to id-protection. In the new Webster’s Dictionary, under “ego,” it offers Ellison as a synonym.What is really going on is the technology push for the next generation of retailers. With ERP, business intelligence and CRM initiatives being seriously debated in every major retail boardroom today, it’s clear that a lot of high-end software dollars will be up for grabs very soon.Oracle and SAP are hoping that if they have tight integration with merchandising systems from Retek, it will help deliver large amount of purchases: their kind of purchases, with lots of upgrades and new per-seat licenses and technical support and more upgrades and cross-platform support and more upgrades. And did I mention even more upgrades? Oracle is hoping to start naming upgrades Oracle Business Intelligence 10g.5PM and 10g.6PM. The next phase of retail technology may be the morphing of retail and consumer goods manufacturers. To read more, click here. One of the key reasons retail is so attractive to Oracle and SAP is the vast amount of data being collected and how little of that data retailers tend to truly understand.Aberdeen Group retail analyst Paula Rosenblum phrases it well when she says that many large retailers “are almost savant-like. They know every detail of how they put their business together. But, in fact, some of these details matter and others don’t and they can’t tell the difference. Ask 99.99 percent of retailers what their core competency is and they can’t tell you.”SAP appears to be bracing for a loss with Retek, with their CEO late last week pulling a page from Aesop’s The Fox and the Grapes and saying that it’s not that critical if they lose Retek. "Retek was, is, a firm that meets our requirements, and we made an attractive offer. Its not the only possibility," SAP CEO Henning Kagermann told Reuters. "Its not that we have a hole in our company that we necessarily must fill."Uh-huh. No, they just wanted to drop a half-billion dollars on a lark. SAP has been desperately trying to get into retail for years, with little success. If they officially lose Retek, look for them to quickly grab a Retek rival, very possibly Finland’s Aldata Group. The U.S. stockmarket has been boosting the stocks of JDA Software, Catuity and Retailix on speculation that they could be a backup plan for SAP.Let’s not forget that one of the most real reasons so many are looking to grab Retek is that Retek has made itself such an enthusiastically willing acquiree. This may be one of those cases where the Retek board concluded that it would be best to letter larger and greedier heads prevail.Retail Center Editor Evan Schuman has tracked high-tech issues since 1987, has been opinionated long before that and doesnt plan to stop any time soon. He can be reached at To read earlier retail technology opinion columns from Evan Schuman, please click here.

Evan Schuman is the editor of's Retail industry center. He has covered retail technology issues since 1988 for Ziff-Davis, CMP Media, IDG, Penton, Lebhar-Friedman, VNU, BusinessWeek, Business 2.0 and United Press International, among others. He can be reached by e-mail at

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