When Does a Lot of Small Equal Big?

Opinion: With massive expansion, some retailers face an age-old IT question. Do they let stores manage data on their own and consolidate information later or do they operate as one large enterprise?

Microsoft this week will roll out a new dot release of its Point of Sale package, one that claims better scalability capabilities.

Although that is clearly not earth-shattering, it does cast some light on the age old question of IT organizational strategy when a company is enjoying rapid growth.

The conventional IT thinking has been that, all else being equal, consolidated and centralized is the most efficient way to run a business. All of the data is analyzed globally and purchasing trends can be quickly spotted and acted on.

A less traditional approach is mirrored sites. This allows for the purchasing of smaller systems (geared for small retailers), albeit a heck of a lot of copies.

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Microsoft is fond of positioning itself for the small retailer, proudly pointing that its research shows that more than 99 percent of retailers are actually one-location operations.

Of course, if you do a retail survey that counts Wal-Mart as "one" and Sams Bait Shop as "one," you cant necessarily expect meaningful results. But Microsoft still makes a fair point. (Long-time readers know how crazy it makes me to concede that Microsoft is making a fair point.)

Microsoft is therefore in a position to encourage lots of sites running operations on their own with the data consolidated and analyzed later, just as Oracle and SAP are more inclined to suggest consolidation, as thats their playground.

Mike Dickstein, Microsofts director of POS products, points out that even with chains, one location can be remarkably different from another.

There are some chains whose each and every store has a remarkably complicated and sophisticated SKU selection, such as Home Depot and Sams Club, while other chains have very small individual store locations, Dickstein said.

One such chain would be Family Dollar, a $6 billion discount retailer with 5,948 stores in 44 states. When talking with Family Dollars CIO, Josh Jewett, last week, he spoke about his chains plans to add 400 to 600 news locations every year.

Indeed, dealing with that kind of store growth is one of the chains top four strategic initiatives.

Family Dollars stores average about 8,000 square feet each, compared with a typical Home Depot size of about 140,000 square feet and about 40,000 SKUs at each location.

Given the small size of their locations, theyve been working with Wyse thin-client Web-based applications, mostly for kiosks that will take job applications. Those applications—if approved—will automatically be dropped into an Oracle payroll application.

"We are looking at our organizational structure" and trying to "find the lowest TCO [total cost of ownership] way to do it," Jewett said, although he was very careful to not say how he planned to do so.

"Im not comfortable commenting about or sharing how we are structured to support growth. We deem our ability to grow well and profitably a strategic differentiator," he said.

One of the reasons this debate is returning is that the options and the IT landscape have morphed over the last few years.

Consider Metro, Germanys largest retail chain at about $68 billion in annual revenue. Gerd Wolfram is managing director of the Metro Group Information Technology and also serves as the chains chief technology officer.

The chain has some 2,400 stores in 30 countries, employing about 250,000 people.

Next Page: Trend turns back to decentralization.