retail digital transformation (dx) infrastructure 2021

Retail Digital Transformation (DX) infrastructure2021 Investment Guide

January 2021Robert Eastman

© IDC

This Retail DX Infrastructure 2021 Investment Guide presentation addresses IT benchmark data, and spending trends and priorities specific to IT infrastructure in the retail industry.Infrastructure, in this document, includes network and network infrastructure, cloud, mobile and mobile infrastructure, edge computing, IoT (Internet of Things), payment / POS, AI / ML (artificial intelligence / machine learning), augmented reality (AR) and virtual reality (VR), computer vision, omni-channel security, microservices and containers, robotics, and blockchain.This Investment Guide should therefore be used to complement other IDC IT benchmark data and insights that address retail applications, solutions, and technologies.

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In This Investment Guide Presentation

Top 3 Infrastructure Initiatives in 2020

© IDC 3Source: Source: IDC 2020 Industry IT & Communications Survey, July 2020, N=211

Ø IoT ranked as the top “Rank 1” infrastructure technology initiative in 2020 by 12% of retail survey respondents.

Ø Augmented reality (AR) was the highest cited “Rank 2” infrastructure initiative.

Ø Mobile apps and mobile devices also rank highly.

Ø Drones, AI, VR, and Edge are further down the list of top infrastructure technology initiatives for 2020.

Q. Based on the technology initiatives currently active in your organization, please prioritize your top three

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

% of retailer survey respondents

Rank 1 Rank 2 Rank 3

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Covid-19 Impact on 2021 Infrastructure Spend.1

Source: IDC 2020 Industry IT & Communications Survey, July 2020. N=211

Ø More than 50% of retail survey respondents are increasing spend for 7 technology categories as a result of Covid.

Ø Network equipment, non-cloud servers in datacenters, and digital workspaces are seeing increased spend by more than 60% of retailers.

Ø Retailers are increasing or keeping level spend for Network equipment, and SaaS.

Q. Compared to your organization's actual spending in 2020 (after COVID adjustments), how do you think your organization's spending on the following IT products and services will change in 2021 ?

0 10 20 30 40 50 60 70

Collaboration platforms

Mobile Applications

Infrastructure as a Service (IaaS)

Software as a Service (SaaS)

Digital Workspaces

Non-cloud Servers in DCs

Network equipment

Increasing Spend No impact Decreasing spend

% of retail respondents

5© IDCSource: IDC 2020 Industry IT & Communications Survey, July 2020. N=211

Ø More than 40% of retail survey respondents are increasing spend for these 7 technology categories as a result of Covid.

Ø PaaS, 5G, and Robotics, in particular show the strongest sentiment for spend increases.

Ø Retailers are also decreasing spend, particularly for security(25.7% of retailers) and server / storage for private cloud(27.9% of retailers).



0 10 20 30 40 50 60 70

Security

Blockchain

Software Dev Tools

Server/storage for Priv. Cloud

Robotics

5G

Platform as a Service (PaaS)



Fig 8

6© IDCSource: IDC 2020 Industry IT & Communications Survey, July 2020. N=211



% of retail respondents% of retail respondents

Ø Retail survey respondentsindicate weaker support for spend increases for these 7 technology categories as a result of Covid.

Ø “No impact” to planned spending is strongest indication for AI / ML, non-cloud enterprise storage for datacenters, and augmented reality.

Ø Nearly 40% of respondents indicate they are decreasing spend for virtual reality.

0 10 20 30 40 50 60 70

Virtual Reality

Non-cloud Enterprise Storage/DCs

Augmented Reality

Internet of Things

AI / ML

Infrastructure Orchestration / Mgt

Server storage at Edge



Fig 9

Ø Edge is an area of focus for more than 90% of retailers: just 8.8% of respondents said edge was not an area of focus.

Ø Edge is current and remaining a key part of DX for the next 3-5 years for nearly 20% of retail respondents.

Ø But nearly twice as many retail respondents (36.8%) have Edge planned in 3-5 years as for the 1-2 year timeframe (19.3%).

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Edge Technology is an Area of Focus for RetailersQ. Which technologies do you expect will drive digital transformation (DX) the most within your organization?

Source: Source: IDC 2020 Industry IT & Communications Survey, July 2020

0% 10% 20% 30% 40%

Not area of focus

Will be part of DX in next3-5 years

Will be part of DX in next1-2 years

Key part of DX only fornext 1-2 years

Current / Will remain keyover next 3-5 years

Self-managed IT solution from enterprise vendor

Enterprise IT solution with

managed services

Full managed solution

from cloud service

provider

Ø Retailers are just embarking on edge initiatives.

Ø At this early stage, anecdotal indications are that more retailers are operating self-managed IT solution from enterprise vendors, as capex investments than following other strategies.

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Edge Computing in the Retail IndustryQ. Which of the following most closely describes your planned or actual Edge investment strategy?

Source: Source: IDC 2020 Industry IT & Communications Survey, July 2020

Fig 21

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Drivers for Edge Infrastructure in Retail

Source: IDC 2020 Industry IT & Communications Survey, July 2020

Support new products or services

Build greater storage capabilities

Build a more resilient IT infrastructure

Build a more secure IT infrastructure

Enable new business models

Enable new operational processes Build more robust local processing or compute capabilities

Q. What are the top objectives of your company’s Edge infrastructure investment?

Reduce operating costs

Reduce use of service provider services

Increase use of service provider services

Build faster networks/ lower latency data access

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IDC Retail Insights Prediction: Connected Store Edge

IDC Retail Insights predicts that by 2025, digital shelves, real-time inventory visibility, robotic fulfillment, and automated checkout will accelerate Investment in connected store edge platforms by two years and 10xover current forecast levels.

Top retail concerns with edge include enterprise data security, lack of a measurable business case, service provider data security, complexity of interoperability with internal IT systems and infrastructure, and that the technology is unproven / too early. (source: Source: IDC 2020 Industry IT & Communications Survey, July 2020, N=211)

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IoT Spend BreakdownQ. In 2020, what percentage share of your organization's total IT budget will be spent on IoT technology investments


Ø Spend on IoT Telecom services (access, usage charges) is the category showing the largest percentage of retailers planning spend increases.

Ø IoT Spend categories with themost retailer responses reporting spend decreasesare hardware (device modules, sensors, servers, storage, networking equipment) and Other Services (content, 3rd party data, media, call center)

0% 20% 40% 60% 80% 100%

Other Services

Hardware

Software

Services

Telecom Services

Increase Stay the same Decrease

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AI / ML (artificial Intelligence / machine learning)

% of total AI IT budget

Q. Q. In maintaining your Artificial Intelligence technology investments, please estimate how your spending will be incurred in the following IT technology categories.

Ø To maintain their artificial intelligence investments, retail respondents indicate they are allocating nearly 40% of their total AI spendto software applications and platforms.

Ø Nearly 35% of AI spend is allocated to IT and business services (34.1%)

Ø Just over 25% (26.5%) is allocated to hardware servers and storage.


Software Platforms, 19.7

Software Applications,

19.65

IT Services, 18.06

Business Services , 16.03

Hardware Storage, 14.58

Hardware Servers, 11.97

Total = 99%

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Augmented Reality / Virtual RealityQ. How much will you company spend roughly on total AR & VR projects over the next three years?


69.2%

19.1%

6.4%0.8%

4.0%0.4% 0.2%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Less than$99,999

$100,00 -$249,999

$250,00 -$499,999

$500,000 - $1million

$1 Million -$4.9 million

$5 million -$9.9 million

Greater than$10 million

Spend on AR and VR Projects over 3 years

Ø Nearly 95% Of retail respondents (94.7%) plan to spend up to $499K on AR/VR over the next 3 years

Ø The mean spend on AR/VR is just under $260K

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Adoption of Computer Vision Enabled StoreQ. Have you already implemented, or do you plan to invest in, Computer vision and AI enabled store over the next 12–24 months?


0%

5%

10%

15%

20%

25%

30%

35%

40%

For automated checkout For fraud prevention, traffic intelligence,or queue management

Already implemented

Currently implementing

Planning to implement in the next 12 months

Evaluating and/or planning to implement over the next 12–24 months

No plans to implement

§ Over the next 12-24 months, > 65% of retail respondents are evaluating / planning to implement CV for automated checkout

§ Over the next 12-24 months, > 55% are evaluating / planning to implement CV for fraud, traffic intel, or queue management

Web, 19.3%

Network, 18.7%

Messaging /email, 14.9%

Security Vulnerability Management,

14.0%

Endpoint, 11.6%

Encryption, 10.8%

Identity Access Management,

10.8%

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Omni-channel Security Spend CategoriesQ. Please estimate how your 2019 security spending will be allocated across the following components

§ Retailers have focused their security spend on Web, andnetwork security, the biggest spend categories.

§ Changes in omni-channel security risks is driving the importance of Cloud security (cloud security gateways), IoT security, security automation and orchestration, data security, SIEM (security information and event management), fraud management, threat analytics platforms.

Source: IDC EMEA, US Vertical Survey, June 2019, N=213; IDC PlanScape: Cybersecurity Risk Blueprint for Retail Industry (IDC #US46630320, July 2020)

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Retailers are Investing in MicroservicesQ. What best describes how your company is investing, or plans to invest, in a retail commerce platform?

Ø 37.3% of retailers are investing in microservices to support retail commerce platforms

Ø Platforms enable innovation at speed and scale, at the lowest possible cost of ownership.

Ø Microservices are critical for retailers to realize platform benefits of producing more innovation with greater speed at lower cost.

Source: IDC EMEA, Global Retail Innovation Survey, June 2020 N=593

37.3%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Integrating legacy IT systems

Migrating select core platform services to SaaS

investing in microservices-

based architecture

integrating new core platform services

investing in open APIs, developing

services

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Robotics and DX StrategyQ. Physical robots Which technologies do you expect will drive digital transformation (DX) the most within your organization?


Ø Robots is a near-term focus for retailers. 26% of retail respondents say robots are a current part of DX and will remain so over next 3-5 years.

Ø Nearly 29% of retail respondents expect robots to be a key part of DX in the next 1 to 2 years.

Ø Robots will be a focus for 45% of retails in the next 5 years.

0% 5% 10% 15% 20% 25% 30% 35%

Not area of focus

Will be part of DX in next 3-5 years

Will be part of DX in next 1-2 years

Key part of DX only for next 1-2 years

Current / Will remain key over next 3-5 years

The content draws from ongoing IDC research including conversations with retail leaders, CIOs and IT and business leaders, and retail vendors and service providers.

For more information on these topics, and on spending and technology trends in the retail industry, reach out to IDC Retail Insights.

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Learn More

IDC Retail Insights recommends:

Ø Incorporate this information into IT strategy development, gaps assessment, and benchmarking of current budget and strategy.

Ø Use this information in concert with other published IDC Retail Insights research, engagement with IDC Retail Insights, and other contextual research and insights addressing retail infrastructure.

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retail digital transformation (dx) infrastructure 2021

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