Enabling a multi-channel retail partnership with a cloud hub
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Enabling a multi-channel retail partnership with a cloud hub

Jessica Twentyman — December 2013

How UK supermarket chain Morrisons and its new online fulfillment partner, Ocado, are using cloud as platform for data exchange.

From January 2014, Internet-only grocery company Ocado will begin delivering online orders on behalf of Morrisons, the UK’s fourth largest supermarket chain and, to date, very much a bricks and mortar operation.

The tie-up is a high-stakes gamble for both companies. Morrisons, with more than 450 stores and £18.1 billion ($29.7bn) in annual revenues, has stood on the sidelines of multi-channel retail, debating the pros and cons of launching an online shopping service while rivals Tesco, Sainsbury’s, Asda and Waitrose have convinced significant numbers of their customers to shop online. Meanwhile, executives at Ocado (which will fulfill orders placed at Morrisons.co.uk using its warehouses and delivery fleet), see the deal as the 13-year-old company’s best chance of finally achieving profitability.

       Ocado CTO Paul Clarke

Since the £200 million ($328m), 25-year agreement was signed in May 2013, both companies have been working frenetically to ensure the IT infrastructure required to handle and fulfill customer orders is in place by the January launch date. That meant finding a way to extract information from their back-end systems and share it, and both companies quickly settled on a cloud solution as the most suitable staging post.

“When we need to be flexible and we need to be fast, cloud has become key to our agility,” says Paul Clarke, Ocado’s chief technology officer “It also makes sense cost-wise, but actually, cost is not the main driver, it’s agility.”
Cloud reciprocity

The two have each built a data platform, hosted on public cloud services, that exposes information about products, orders, customers and deliveries to each other. In Ocado’s case, it is using Google’s Cloud Platform to present relevant data to Morrisons’ managers; with Morrisons, the cloud platform is based on Amazon Web Services.

“We’ll provide Morrisons with information on its sales, for example, via our cloud platform, and when it needs to add a new product to the service, the cloud platform is what it will use to feed us that information,” says Clarke. Each company will upload data from back-end systems to their respective platforms, based on its urgency — in some cases, on a daily basis, but in others, every 15 minutes.
Expanding horizons

The Morrisons deal aside, cloud technologies will only become more important to Ocado as the company rolls out ambitious plans to expand into new territories and new, non-food lines of business, says Clarke. Earlier this year, the company, which had revenues of £678.6 million ($1.11bn) in 2012, launched an online pet supplies store, Fetch.co.uk, the first of a planned series of specialist ‘destination’ sites it will use to transform itself “from a supermarket to a hypermarket.” Future sites, according to Ocado’s management, will focus on baby products, health and beauty, toys, gardening and more.

According to Clarke, it’s cloud technologies that will enable Ocado to try out new approaches to online retail as it increasingly competes against the likes of Amazon, as well as multi-channel retailers such as Pets at Home and Toys R Us.

“We’ve crossed the point where we ask if a new application should be engineered to run in the cloud — it’s a foregone conclusion.”

“From an experimentation point of view, cloud technologies mean our developers can spin up test environments at very low cost. We could do that in-house, but to have the scale of IT resources available to developers to provision a test environment at a moment’s notice would almost certainly mean running IT infrastructure in a very wasteful way, in terms of the spare capacity required and the cost of powering and cooling it,” says Clarke. “With the cloud, you pay for what you need. When you don’t need it, you don’t pay anymore. That gives us enormous flexibility to experiment and to try out new ideas.”

“And when new services go into production,” he continues, “we will use the cloud to deploy them internationally, without having to open up and kit out new data centers in new territories.”

“We’ve now crossed the point where we ask if a new service or application should be engineered to run in the cloud,” says Clarke. “It’s a foregone conclusion that it should, even where initially, it’s going to be kept internally on a private-cloud infrastructure. All Ocado applications will be able to run across hybrid cloud deployments, so that’s now a non-negotiable, built-in design requirement from day one of the planning stage.”

First published December 2013
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