The BTM Business Case for Retailers

Convincing retailers to invest in Business Transaction Management is a big challenge.

• The margins in retail are rather slim
  
• The impact of a single transaction is low (compared to the Finance Industry for instance)
  
• Competition is fierce due to today's retail search engine proliferation
  
• Expanding into online sales has been enough of a challenge as it is
  
• ROI has to be clearly shown in order to justify the investment
  

I have taken the liberty to try and come up with a business case for why retailers should consider a BTM solution; I truly believe that those that will take the step will find it hard to understand how they lived without Business Transaction Management. How can you run a business that is so transaction dependant and not be able to make the connection between business and IT?

Figures for this case study have been inspired by Aberdeen Research's well cited APM study from June 2008 (available for free). I had a tough time finding any analysts, or vendors that published concrete numbers on the retail industry. If you have seen anything, please let me know.

ROI case for Business Transaction Management

A large retail company with an annual revenue of $563M in both online sales (30%) and through its chain of nationwide stores was unsatisfied with the performance of the business critical applications they were using. They were unable to identify issues before they impacted end users, their applications were increasing in complexity, and they were unable to test the performance of their applications whose development had recently been moved offshore.

    Growth in their online division had forced them to rapidly increase capacity over the past few years and now they were stuck in a situation where they had very heterogeneous infrastructure, from the old legacy systems that they had implemented in the early nineties, to their newer SOA based applications, things were such a mess, that they were estimating that IT employees were spending 30% of their time just searching for the cause of the problems, let alone resolving them. The Retailer had also estimated a 5-7% revenue loss due not only to their customer facing web applications, but also due to productivity issues with their CRM and ERP applications. They also calculated total downtime cost per hour to be $80,000.

In order to increase productivity, customer satisfaction, brand image, and to reduce the lost revenue opportunities (in online sales) the Retailer had come to the conclusion that the monitoring tools that they had implemented for each one of their components was not enough, and that it was time to invest in a business transaction management tool. They were looking for a tool that would give them an understanding of the business context of their problems. They needed a single solution that would work for both production and pre-production testing in a way that developers could gain visibility into the interactions between their different applications. Their current tools were retrieving large amounts of data at every node, but the information was useless when it came to increasing productivity and sales, they needed something that would provide visibility across their entire infrastructure. Most importantly they didn't have time to waste weeks or months in order to implement one of the solutions provided by the larger vendors, and didn't want to have professional services people modifying their code. They wanted to go with a solution that was not service intensive, and wouldn't cost them an arm and a leg, due to the tight margins that the retail industry was as a result of a tightening economy and rising fuel costs.

For all of the reasons stated above, the Retailer should go with a Business Transaction Management Solution. In order to justify this claim, the following presents a hypothetical continuation to this case.

The organization had requested an initial BTM POC for their online division, in order to better understand the potential ROI that could be yielded from increased sales revenue which is easier to quantify, unlike increased employee productivity and mean time to repair which is tougher to justify.

On the first day of the POC, the BTM agents were already in place and transactions were being monitored from the user end all the way through the webservers, app servers and to the legacy back end. The value became clear immediately, during peak hours, numerous transactions had been taking much too long. The retailer had always wondered why it was experiencing a high number of abandoned shopping carts online. One guess was that users that were shopping the popular search engines ended up opting for competitors that were able to be more responsive to customers. Not only that, various members of the IT department were able to connect the dots on many of the performance problems that they were experiencing and resolve them immediately.

    A full installation was put into place and suddenly issues with the application's performance could be pinpointed immediately without the need to perform long grueling meetings between the IT department's professionals. In the first few months of using their BTM solution, a steady decrease in empty shopping carts could be charted. They were able to achieve a 600% average improvement for response times on business critical transactions. Developers were very satisfied to have a solution that they could directly log on, test the changes and gain immediate insight as to how the overall application performance had been affected. The MTTR was decreased and problems could be spotted proactively before they reached the customer at an 85% improved success rate.

    Since then, the retailer has expanded the scope of their BTM solution to include its internal applications. They were able to raise employee productivity since they saw an average improvement of application availability of 80%, and best of all, IT headcount, did not have to be increased. The Retailer has also been able to increase capacity exactly where it needs it; the justification for increased capacity becomes easy when IT problems are put in the business context.

If you can think of any way to make this study more robust, please write!