Don't Forget About the Branch: Modernizing for the Future
Branch infrastructure is the foundational support every organization needs in order to run. But too often, branch infrastructure is neglected in the race to innovation. Join our experts John Casebeer and Erik Bilicki as they reveal smarter approaches to driving innovation across branches to propel efficiencies, engagement and revenue.
Episode 4 – Don't Forget About the Branch!
Published April 6, 2017
Announcer: You're listening to Technomics. Connecting you to insights on digital transformation and the marketplace, with your hosts: Robyn Itule and Jeremy Nelson. The hosts' opinions are their own. Enjoy the show!
Robyn Itule: Okay, we’re going to talk about a topic that is near and dear to a lot of people’s hearts and that is retail therapy. Except we’re not talking about retail therapy where you go in and you cruise the aisles. We’re talking about the kind of retail therapy that makes businesses run and makes sure the infrastructure behind somebody’s Target trip is not undelightful. So joining me today are Erik Bilicki and John Casebeer who head up our retail and hospitality practice and our retail solutions architecting. So gentlemen welcome to Technomics.
John Casebeer: Thanks
Erik Bilicki: Thank you for having us here.
Robyn Itule: Well I’m really excited to have this discussion today because it just brings a whole new layer of interest to think about all the intricacies that go into what happens any time you’re processing a transaction anywhere. Any kind of store. So our primary topic today is really going to be around what branch infrastructure is.
John Casebeer: So branch infrastructure is the foundational infrastructure that businesses can business on. So it’s what makes those customer facing applications, employee enablement applications, ways of transacting business with your customers, it needs this foundation for you to actually run your business. So the way that we define that foundational infrastructure is the wide area network. Like how does this branch connect to the rest of the world. What is the wired and wireless infrastructure and how am I connecting all the devices that are in my branch to that network? It’s the voice services. How do I get dial tone? Its security and how can I secure this branch from external penetrations and provide my customers that are in my store with very secure Wi-Fi access. And then finally it’s the compute and storage infrastructure that you’re running those applications, your point of sale. We have one client that’s a veterinary clinic, they run Woofware on their compute and storage infrastructure in their stores. That’s the foundation infrastructure that really makes a lot of these initiatives customer facing, employee enablement run.
Robyn Itule: Now the way we tend to talk about it at Insight is as unified infrastructure. So what does that mean for us. And you rattled off just a ton of things there so I’m curious how the scope has changed in recent years from what we meant when we said unified way back when, like 18 months ago, to what we mean when we say unified today.
John Casebeer: Right so, what we try to help our customers with is provide what we call unified branch structure and, in that space, it’s like those five components that I talked about. Let’s provide you with a repeatable, scalable, reference architecture that’s already sort of 80% baked. So when we talk about branches, we’re talking about companies that have 100, 200, 300, up to 1,000 locations. They all have a similar looking field. They all have the same sort of business requirements. So what Insight tries to do is provide that reference architecture for them that takes care of 80% of what their business is trying to do and we’re starting at 80%. And then we’re just customizing that infrastructure, that last 20% that’s applicable to their business. And so we have developed reference architectures that are really driven toward the application strategy and the business strategy companies are trying to do in their infrastructure. You’ve got a lot of companies that have really bad applications that don’t work well out in the cloud, they have to run in the store, they’re tied to it. So we have architectures that will help those kinds of people build on-premise infrastructure that’s really reliable. And then we have a lot of customers where their applications work fine out on the cloud, out on the Internet somewhere. And we have architectures that take advantage of that and try to simplify the environment even more for them.
Robyn Itule: So when you say 80% of a lot of these things is already baked, what is comprised of that 20%?
Erik Bilicki: I would say its going to be innovation, your differentiators? So if you think of unified branch infrastructure as block and tackling for the stores, the 20% is going to be what you’re doing unique to that store to make it different than all the other retailers. So what are you doing to add value to the guest, what are you doing to add value to the associates, and what are you doing to continue to scale with new technologies?
Robyn Itule: What kind of innovation are we seeing in that slice of the spectrum right now? Where are people turning their eyes towards?
Erik Bilicki: Mobile is a big one, so different end points. We talk about real-time business so those intelligent end points at the end that connect back into the stores and are providing that experience with the guest. A lot of retailers are talking about RFID and a lot of sensing technologies. So beacons and technologies there for identifying inventory, to identify how guests are interacting in the stores, to support loyalty initiatives. We’re looking at unifying commerce and so looking at different ways to be able to shop and check out within the store. And to bring the different channels into that store. So if you think of retail beyond just the traditional brick and mortar, its really end to end. The unified branch infrastructure can really be in any of those facilities. Its not just the traditional retail outlet.
Robyn Itule: So where are the biggest challenges is that with establishing the core reference architecture and getting that updated to where it needs to be given considerations like security and definable repeatable? Or is it in innovation?
John Casebeer: Well, so its both. So when you look at what a traditional store or banks or any kind of organization that has hundreds of locations, the cost of keeping that infrastructure modernized and the best of breed is very expensive. So right there, a lot of these organizations kind of kick the can down the road. They can’t afford to spend millions of dollars modernizing their infrastructure. And so they’re kind of playing catch up. The longer you wait to refresh that infrastructure, the more outdated the technology becomes, the more failures that happen. Also, in these environments, they’re very difficult to manage. A lot of these organizations don’t have the staff or the tools to properly manage that infrastructure. So along with things getting to be end of life, its not being properly patched and maintained. Again, more breaks are happening. So all of this starts to gait the innovation that companies are trying to do. They’re trying to build these great new applications and customer experiences on infrastructure that’s old and antiquated and prone to failure.
Robyn Itule: So prone to failure is a really important point here. And we know that there’s a cost involved in trying to abandon legacy infrastructures that aren’t working for you anymore or are leaky. But what’s the compelling reason why? Eric, I know you spend a lot of time working with organizations trying to look at technology as a way of both advancing and protecting. What are you hearing from those organizations about their motivation to ensure that they’re protected and that their systems are sound?
Erik Bilicki: So the biggest thing is brand reputation, brand management. If you have a security issue or its not sound or you have an experience fracture point, that reflects very poorly on your organization. And with social media and the way that information is spread like wildfire, it really takes it to a whole new level. So 20 years ago if you had a bad experience, you might tell your friends and neighbors and it was isolated. Today you have a bad experience and suddenly the entire world knows. And it takes on a life of its own. And its very difficult to pull that back and recover from it. And so when we look at unified branch infrastructure and all the layers of security and what we want to do for those stores, even though we say its block and tackling, it’s the most fundamental, important piece of retail. Because without that, you can’t build onto those experiences.
Robyn Itule: So how do you keep up with the expectation on those experiences?
Erik Bilicki: Well for a retailer, part of that is, you have a strategy team. You’re looking out, what are those trends and technologies. You partner with someone like Insight where we can also share those trends and technologies. We have companies like Gartner, Forester, RIS, IHL. They all surface up different trends and technologies that retailers can look at. Additionally, consumers will give ideas. So if they have a bad shopping experience or a way to better their experience, they may talk about that on Facebook or on the retailer’s sight, or they’ll send a letter in. or there’s focus groups.
Robyn Itule: People still send letters?
Erik Bilicki: They do. I actually had a letter not too long ago from a customer and I don’t even work in that retailer anymore. Because again, stuff lives out there forever and people want to communicate. The other piece of that is the retailers are always playing. Retailers spend a decent chunk of their budget towards R and D. And you have folks like Amazon who are spending billions of dollars toward R and D. To always innovate and make a new experience for the consumer. To make it refreshing and appealing, to get you to come through their virtual door. Other retailers don’t spend necessarily as much, but they rely on partners to bring that vetted technology to the door. The last thing they want is to have a very stale experience where they’re kind of like, “Ho hum. This is great, but I really want to go somewhere else that wows me.” If you think about the millennials and that generation, they’re really paying for experience so much than going on and paying for product. So now its become a very integral part of that shopping experience.
Robyn Itule: Don’t go away, we have a little more Technomics coming right up.
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Robyn Itule: Which presents the greater opportunity? Updating legacy infrastructure or perusing innovation?
John Casebeer: Well, let’s just say that you can peruse innovation but if you ignore that foundational infrastructure, you’re going to gait your success. So let’s take a very simple example. I’m trying to provide a mobile application to my sales associates, so they can transact business and have consultative interactions with their customers anywhere in the store. But the Wi-Fi that I’ve deployed in that environment is spotty and only works in one quarter of the store. So that’s just trashed, that whole imitative and the experience that the customer’s going to have. So the associate says, “I have this great app, but we have to stand over here in the front of the store for me to be able to transact this business.” So hey that idea is great, and that idea was a real sexy thing that has a great ROI and is customer facing. But if you ignore that foundational infrastructure, the likelihood of success of that initiative is poor.
Robyn Itule: So similar question, which is riskier, not handling legacy or perusing radical innovation.
Erik Bilicki: I would say not handling the legacy right. Because that’s pervasive throughout your chain. Your innovation is typically contained to a few stores and you’re doing duct tape and chicken wire and its not meant to scale. The legacy stuff is your backbone and if that’s not working, you’re bringing down your entire shopping experience. You may not be able to checkout on your POS. Or you can’t use Wi-fi and you kind of go back into the retail dark ages. So its much easier not to address that and it gets more cost prohibitive. So if you don’t invest in today and you kick that can down the road, technology prices continue to change, you may be able to expand on stores and suddenly you’re kind of getting out of sequence and you have too many different footprints out there. Or you’re way outdated and you can’t support new technology and your consumers are bringing newer devices into the stores than you have. Or you have risk for the brand management. It’s the security risk, the experience risk.
Robyn Itule: So we’ve established that the legacy infrastructure piece is super foundational for all the reasons that you just mentioned. From a security standpoint to an ability to innovate, to just simply maintaining the brand. Which is a point that I absolutely love because I believe that brand and technology are becoming such a tremendous crossover. So how do you know that you’ve reached the tipping point where it’s time to update your branch infrastructure?
John Casebeer: Well I think it all begins when you’re thinking about how to innovate in your business, whether its retail or in a bank or whatever customer facing business might be. Why you’re thinking of these customer-based initiatives is to actually assess your infrastructure while you’re doing the creative bits.
Robyn Itule: And what does that assessment involve?
John Casebeer: So look at the business initiatives that you’re doing. Try to understand, hey if I’m trying to do this in my business, how could this infrastructure and that branch actually impact that business. Two, let me look at my current environment. Am I already having initiatives that have been in flight that are actually failing because of some technological issue in that endpoint? Three, and I think something that we don’t really think about is, “Hey, how do I pay for this? Can I actually instead of having these massive one-time cash out lays to refresh all my stores, could I look at a subscription-based model? And say hey instead of spending a million dollars every three years to refresh my infrastructure, could I pay a monthly fee per store over time.” So that’s the third component. To really look at how am I consuming that infrastructure. And then from there, you can really start to map out what architectures makes the most sense for you, based on how you’re perusing and delivering those applications to that store. Are you putting a server there, are you putting it in the cloud, what have you? So take a look at that technology infrastructure assessment while you’re innovating, not after.
Robyn Itule: So whether it’s the core infrastructure that’s being established or re-established as the case may be, or doing the innovation. How much influence does an individual branch have? Is it a corporate versus individual retail site conversation? Like how do bigger organizations with many, many different end points if you will, how do they handle that kind of feedback?
Erik Bilicki: So it’s going to be different based on their operating model. For traditional retailers, they own all of their branches. And so its much more of a pushdown. They’ll get feedback and solicit that from the store management team and their consumers. But its really that you have a strategy team and you’re working with your line of business to map up to that strategy and say, “These are things that we need to do, here’s our priorities, this is what we funded.” There’s other models like with our quick serve restaurants or franchise owner operators where those owner operators have a big say in their P and L. And so they’ll push back and say, “No, we can’t pay for this right now. We have to be profitable at our own level. We’re responsible for that business.” And so again, kicking that can down the road and saying, “We don’t want to do this right now, we don’t want to own that.” And so at that point, it becomes more of a partnership with the corporate team and with those corporate stores and then with the franchise owners as well to figure out what’s going to make best for them. That’s where we see the biggest disconenct when we get to kind of the enterprise infrastructure. Because those franchise owners typically lag behind because they’re so focused on the profit margins and making sure the business is running that they don’t want to have a big outlay of cash to get to the newest infrastructure.
John Casebeer: Yeah if they’re a small business they don’t have the deep pockets like an organization. If you can give them a way to not have to pay 100, 200, 300,000 dollars on new infrastructure and say, “Hey. How about this, how about a month per month until you’re out of the business?” For a lot of franchise owners and small business people I think that’s a much more comfortable mile.
Robyn Itule: Sure, you know you can also see the case where some of those small business owners who are voiced back to an enterprise model might be a source of innovation. Do we see that happening as well?
Erik Bilicki: You do. So you’ll have regional market players where maybe in the northwest they’re doing something a little bit different in those markets. Especially with some of these bigger retailers where they do break it out in divisions. And a lot of times they’ll have their own initiative and say, “Go do something cool in your stores. Go figure out what’s really going to drive sales.” And they have these internal competitions and that’s where you get some of that organic innovation in retail. With these smaller businesses, absolutely, they’ve got to stay one step ahead. So they’re going to use best practice that they see online with e-commerce with Amazon, with jet.com, with Alibaba, with whatever they’re doing, kind of the e-commerce piece of it. And then they’ll look at what are those best practices that they can pull from other retailers. So it comes from all matters, I don’t know that there’s necessarily one specific template that fits.
John Casebeer: The people in the store are the people that are closest to your customers. So they probably understand them a lot and when we think about retail, one of the things that frustrates me, I’m from Chicago and we used to have a great department store called Marshall Fields. And when Macy’s came in and took it, I got Macy’s curation. National curation and I lost sort of that local feel. And so I think a lot of businesses need to pay more attention to those stores and associates that are interacting with their customers every day and know what makes then happy and what the trends are locally. I should write a letter.
Erik Bilicki: You’re really upset about that.
John Casebeer: I am.
Erik Bilicki: This is like the second or third time we’ve talked about it.
John Casebeer: I want my Marshall Fields back. Kidding, I love Macys too. Its just different.
Erik Bilicki: It’s a different kind of love, is that what you’re saying?
John Casebeer: Yeah.
Robyn Itule: Its not the same. Its different, its just as good, its just as good. So I think there is, when you talk about the kind of investment whether you’re looking at it from a corporate standpoint or from a more regional standpoint, I think everybody’s looking for some sort of future proofing which you just can’t promise. But how do we help clients make either the foundational or innovation investments really scalable for the next five or ten years since the infrastructure is so seminal to the whole operation.
John Casebeer: I really do think and if you look at the market literature that probably the number one hurdle to keeping your infrastructure in refreshed is the capitol involved in doing that activity. So I really think and you really see this in pretty much anything across the board. Everyone’s talking about, “Hey, can I deliver this as a service?” And say, “Hey, let’s take the huge operational or capitol expense cost that it takes to refresh 100 stores, finance that, the software, the hardware purchase, all the services to get that infrastructure into your store. And on top of that, as a service operate that as well so you don’t have to employ people to manage and monitor that infrastructure anymore.” Give it to you as a service model and say, “Hey, when its time to do this again, three or four or five years down the road, its going to cost the same to do that. Its still going to cost the same amount to operate it. Its going to still cost the same amount to buy the software and hardware.” So you actually see that cost and financed that that second time around, that monthly subscription fee that I’m providing the service to you for, its going to stay the same. So now I’ve taken out the whole argument of saying hey, I want to avoid that cap-ex every three years. I say well hey, for nine years, I can have the same cap-ex expense per month per store importunity. As long as I’m renewing that contract.
Erik Bilicki: And that goes back to that franchise model or owner operator and that really resonates well. So now they have something that’s much more manageable on that P and L and there’s not such a pushback.
Robyn Itule: We really tackled some of the ways that we can get over the cost. Which I think is always sort of a big pill to swallow. Even no matter how much you know you have to do it. But some of the most compelling reasons that most businesses have to really go back and evaluate and standardize have to do with this issue of security. Specifically customer security. That’s really for retailers become so present in every interaction. So there are so many examples of large organizations that have suffered some retail losses because of various infrastructure breeches. And I’m curious how that has changed the conversation at all or if it makes the topic of funding these projects a much easier one.
Erik Bilicki: Yeah I would say that because of the breeches, security is not such an overlooked piece. It used to be that security was kind of, “Oh yeah, we have a security practice, or we have a guy in the back office that knows about security and maybe is doing some patches.” And over time that’s become more and more prevalent and you’re seeing that investment maybe get over indexed. There’s a lot more visibility on security and it gets a lot of prioritization when you’re looking at it from an enterprise perspective, how do you fund that? And so with the unified branch infrastructure, that is such a huge opportunity for hackers, data thieves, that if you’re using Wi-Fi or any of these end points that are not secured, you’re opening yourselves up to, not only the reputation piece of it, but there’s financial pieces of that as well. And it becomes very expensive, very quickly if you have a large breech. And so for retailers, recognizing that when we talked about innovation, any time you’re putting in technology that maybe is not tried and true and it’s a little on the newer side, there’s always that hesitation of is it secured properly? Is that going to put me at risk? And then two, they just want to make sure that they’re not going to leave themselves open to a law suit. Whether its their consumer’s security and information, their associates security and information, any of their IP, there’s so many ways that you can look at this. It just becomes very, very prevalent in the conversation and security really has a seat at the table now with the rest of IT and those business owners to say hey, “Yes, you can do this. No, you can’t do this. Hey, this is how you should do that.” And its not the, “Let’s do this and bring security on two months later to kind of figure it out.”
John Casebeer: You also have this weird thing going on where you’re actually tying to open up your environment a little bit more. Especially in the retail space by offering them customer Wi-Fi. And so when you do that say, “Well am I going to buy another Internet connection and overlay another whole wireless infrastructure over here just for my customers?” Probably not. I’m going to try to figure out how to secure the wireless in my environment and say, “Hey, these customers they can only get out to the Internet.” Whereas if I’m an associate, I can get out to anything that’s not on my corporate network. And so you have this weird dynamic where you’re trying to protect everything but at the same rate, you’re kind of opening up the kimono a little bit to people that aren’t your employees. And I think that’s why its so critical that you have that security within the branch. To be able to provide that flexibility without compromising your whole security posture.
Robyn Itule: How do you build that in? Unified is such an important part of this security conversation. Because it only takes one weak link to bring the whole thing down. So how do we help customers address that challenge?
Erik Bilicki: We had a reference architecture that addresses the 80% and security would be one of those foundational pieces and so as we work with our partners and to bring the best to bear, that reference architecture, that’s really what John focuses on. To make sure all these pieces are integrated, and we’ve got the best possible solution. Again if you wanted to add additional security to something that’s innovative, that’s that 20% piece, then you can start looking at something like Kaspersky [assumed], I can never pronounce that name. Or someone along those lines, we had Route 9B and a few others. So that’s where you can look at that from that standpoint.
Robyn Itule: Well let’s come back to that reference architecture though, what are the other core components of the reference architecture? If security is in that 80%, what else accompanies it?
John Casebeer: So there’s the wide area network which is the connectivity. Like how do you access the Internet? How do you access corporate assets that are not in the branch? There’s the wireless and wired connectivity, all the endpoints that are in my branch. The POS system, the phones potentially, security cameras, etc., is how I interconnect all those devices into that environment. There’s the voice which is the overall dial tone. How can people contact the branch? How do I call out? Maybe use overhead paging, that kind of activity. There’s also the security component which we already covered. And then finally it’s the servers and the storage within that environment for hosting any applications that need to be provided locally in that branch. Either for performance reasons or for availability reasons. Those are the five components.
Robyn Itule: So what about off-premise?
John Casebeer: The reason why we have reference architectures is precisely because of that. So organizations I think when you talk about how they’re delivering applications and services to that branch, there’s two ways to do it. One is to host it in their own private data center, or two its out in the cloud. Alternatively, there’s applications that have to sit on the site. Either they’re mission critical and they can’t afford for the WAM to go down and not be able to access that application. Maybe I can’t conduct any business if the WAM goes down if that’s the case. So we have reference architectures that are built towards for companies to move those applications out of the branch and into either centralized data centers that they own or out in the cloud. And then you have other ones for whatever reason need to run applications locally on that site. So you’re probably not going to find a company that is either, or. Its probably a blend of the two.
Robyn Itule: We have some pretty fresh and innovative thinking around reference archictecture for hybrid cloud. How is that factoring into the work that you’re doing for retail?
John Casebeer: Well I think a hybrid cloud assessment will tell you which reference architecture for a unified branch infrastructure you should follow. Because the hybrid cloud is basically telling you, where should this application live? Should it live in your branch? Should it live in a data center that you own? Should it live out on the cloud? So based on how that is answered, that will tell you what do I have run here in my branch, or what do I have to access outside of my branch. And so that’s really I think the number one driver of which reference architecture I’m going to follow for the branch infrastructure.
Robyn Itule: There’s not a once size fits all is there?
John Casebeer: No.
Erik Bilicki: We wish, it’d be really easy that way. You like click a button.
John Casebeer: My philosophy is you define the spectrum and you build a reference architecture that’s on the left, a reference architecture that’s on the right, and then you meet with the customer and you figure out, “Hey maybe the voice component is on the right, maybe the storage is on the left. But let’s make it right sized for you.” And that’s the question about the 80-20. So 80% of it is already there, we’re trying to figure out is this on premise or is this out on the cloud.
Robyn Itule: So really, kind of becoming very simple and clear about why organizations are needing to reevaluate, update, progress towards a unified branch infrastructure. Why is it a smart business move?
Erik Bilicki: Well I think if you want to compete in this day and age, you have to be able to flex and adapt to new technologies as they come out to the market. So its speed to market with that innovation. Its security, its being able to provide that experience. Because that fractured experience is going to have that walk away. And that does go back to that brand management. If you didn’t have that, the cost to continue to upgrade your storage would get really prohibitive. It really slows down your ability to grow your enterprise and do new concepts. So we see a lot of retailers want to explore and try different concept stores. If you have a flexible infrastructure like this, it allows you to do that much faster while controlling those costs.
John Casebeer: I really think that the branch infrastructure, it enables three things. One, it allows you to get new capabilities to the market faster and have a higher degree of confidence that its going to work. Second of all, the new technologies that come in with some of the technologies we’re looking at allows that environment to be managed and monitored in a much more simple way and a much more flexible way. And three, its that if that infrastructure is going to be agile enough to adapt to any new things that I didn’t think about when I first deployed this architecture. So that versatility, it allows you to bring that as well.
Robyn Itule: Very good. Alright gentlemen, thank you so much for helping me understand branch infrastructure, how its going to benefit organizations, improve their agility and keep their brand management intact. There’s some very important take aways with that. And until next time, thanks for joining us on Technomics.
Erik Bilicki: Thanks for having us on, appreciate it.
John Casebeer: Thank you.
Robyn Itule: Thanks for listening to Technomics. If you want to find more episodes, you can download the podcasts from iTunes, Google, or your favorite podcast provider. And, for more stories on intelligent technology, visit www.insight.com.