Transforming Retail with Cloud-Native Architecture: Lessons from Neiman Marcus Group
The COVID-19 pandemic disrupted the retail industry more than any event in recent past. As the sea change in consumer behavior catapulted ecommerce into hyperdrive, retail digital transformation moved forward at unprecedented speeds. In fact, when compared to all other sectors today, the retail industry is furthest along in the digital transformation journey. According to IDC, 2021 retail IT budgets are drifting higher – 39% of retailers have reported that IT spending will be higher in 2022 than actual spend in 2020.
As retailers continue their journey down the digital transformation path, they are on a constant strive to be agile in how they respond to ever-evolving customer requirements. To achieve these ambitious goals, retailers must rethink their operating models.
We spoke to Vijay Karthik, Senior Vice President & Chief Technology Officer at the Neiman Marcus Group (NMG) on how tech operating model transformation is helping retail companies optimize today's business while building the models of tomorrow. Like several other CTOs, Vijay too believes retailers need to adapt to current trends and transform the operating model to stay relevant and lead the changing landscape of the industry.
Cloud-Native Operating Model
With customer expectations and technology evolving at an unprecedented pace, moving to cloud is no longer a nice-to-have; but a must-have for retail companies in terms of operational resilience, reliability, security, scalability, and agility. At NMG, most of the applications were built on a monolithic architecture and ran on on-prem systems. This not only compromised the speed to market, but hampered innovation within the organization.
The process of migrating a monolithic application into microservices requires modernizing legacy systems. To accomplish this, NMG incrementally refactored monolithic applications, instead of refactoring the entire code at the same time. Starting down a journey of traditional cloud agnostic approach, NMG quickly pivoted towards a cloud-native approach. After gaining maturity in building cloud-native apps, leveraging native cloud services, the focus shifted to delivering faster, but with the same level of security and availability that customers expect.
The Journey to Serverless-First
A significant step in the journey was migrating to a serverless-first approach, which transformed the company’s core foundation where the team is rapidly building and deploying code.
NMG built a Cloud Center of Excellence team, responsible for the complete DevSecOps practice across the organization. They are responsible for setting up the cloud build pipelines, guard rails, governance, platform architecture & security standards, so that different product teams have a certain baseline and, are still within those guard rails, can operate really fast and execute scalable and standard performance tested architectures.
What started with a top-down goal of a cloud-first quickly evolved into a cloud-native, and then serverless-first -- but none of these happened overnight. Even though NMG started operating in the cloud, they needed to have certain enterprise guidelines, best practices and architectural standards in place. So they built a solid platform that different product teams can innovate at scale and quickly deliver value to business partners.
Serverless architecture also helped NMG elastically scale their app to quickly meet demand. Elasticity is essential to retail companies because they regularly experience bursts of traffic during sale promotions, holiday season and weekends.
Results That Make the Difference
Today, NMG has a fully built-out platform ecosystem that enables the business to drive several omnichannel strategies and innovative ideas. However, the most rewarding result of this womb to tomb approach was accelerated business agility and speed to market. An increase in online customer satisfaction was apparent, as the company could improve its ability to personalize the customer experience. Moreover, there was a major uptick in associate productivity as they were given a platform where they have the information and the intelligence needed to engage the customers effectively and efficiently.
There is a cultural transformation afoot at NMG that goes hand-in-hand with a digital transformation each feeding off the other - it’s not just enough to have a great vision and strategy at the top, but the empowerment and trust within the chain of command and across teams are needed to truly transform the enterprise across the teams.