How retailers can optimize their cloud strategy

Vincent English, CEO, Megaport

According to a GlobalData report, the cloud market in Asia Pacific (APAC) is estimated to skyrocket to $288 billion by 2024.  The retail cloud market will no doubt play a part in this increase while the continued “temporary” pandemic-forced shutdowns and economic recovery continue to disrupt the retail industry, dealing crushing blows to physical retail business while giving a significant boost to online shopping.

According to data from IBM, the pandemic actually accelerated the shift to e-commerce by about five years. Two years ago, online purchases represented just under 14% of all retail sales. In 2021, that figure is expected to be just under 20%. That’s almost a 50% increase in just a couple of years. While the rise is the global lean towards e-commerce, Asia is leading the charge. In fact, in 2020, Asia accounted for 59.1% of global online retail sales.

That’s why it’s more important than ever for retailers to optimize their cloud strategies to maximize operational efficiency, workforce productivity and in turn, profit margins. E-commerce traffic can be extremely volatile and unpredictable, so it’s especially important through the peak shopping events and beyond for retailers to scale up their networks to accommodate surging demand.

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On the flip side, it’s also helpful for retailers to be able to scale down their network requirements when demand decreases, to save money by avoiding paying for excess unused bandwidth, storage, compute, or other services. By definition, cloud computing’s flexibility and pay-for-usage billing model solves for the needs of online retailers.

But an even better way for retailers to optimize their cloud usage is with a hybrid multicloud approach.

This allows retailers to create a custom cloud ecosystem that fits their specific needs, rather than selecting a single cloud where you’re locked into a specific vendor.

In Singapore, the regional tech hub of Southeast Asia, companies and firms are championing the hybrid multicloud strategy. Research firm IDC predicts that by 2022, 90% of enterprises around the world will rely on a mix of multicloud and legacy platforms to meet their infrastructure needs.

A hybrid multicloud approach often involves leveraging multiple public clouds as well as private and on-premises infrastructure. This enables organisations to connect to whichever cloud or provider is the most appropriate for any given workload – factoring in the quality of integration with the specific application or database and even available network capacity.

It also means IT teams can optimize their cloud spend: for example, they might opt to store data in one cloud, while running inventory management, contact center or other specialized applications in another cloud better suited for the application or performance needed.

In order to attain scalability, retailers must also be cautious to avoid locking themselves into any rigid, multiyear contracts with cloud service providers. According to the recently published “2021 Cloud Connectivity Buyer’s Guide”, a Forrester Consulting study commissioned by Megaport, organisations should look for solutions that offer flexible connectivity to multiple clouds, blended with the reliability and control offered by direct connections to a single cloud provider.

One other key consideration to keep in mind when considering a multicloud approach is that connectivity is paramount. All cloud models should have consistently strong connectivity between the environments within them – which can only be achieved with a software-defined networking approach.

A software-defined networking approach enables extremely efficient data transfer across the retailer’s entire network without the need to set up new infrastructure. Instead, this network virtualization allows retailers to connect to the right cloud provider or service endpoint such as a branch or office location from any location in the world – meaning all employees and customer service agents can have immediate access to real-time inventory and know exactly which products are available in any store or warehouse.

An added benefit of software-defined networking is that, with the right provider, a retailer can connect to multiple clouds in a point-and-click manner, and often be up and running in a cloud in a matter of minutes. Software-defined networking makes it much easier to build hybrid multicloud networks than it would be if a retailer chose to connect directly with each individual cloud.

This also frees retailers from the constraints of major telecommunications providers, who make it very difficult to provision capacity during peak periods like the holiday season because of moratoriums on changes to the backbone infrastructure. Traditional telecommunications providers often require retailers to commit to fixed network capacity (sometimes several quarters in advance) rather than offering the pay-as-you-go model where retailers only pay for the capacity they need.

Emerging technologies such as AI and machine learning, AR, and IoT require secure, scalable, and always-up connectivity all the way out to the edge. Global brands such as Sephora, IKEA, Gucci and others have launched mobile apps using AR to help buyers try out products from their phones. Companies like Amazon, Alphabet, and Alibaba have adopted drone delivery to solve last-mile delivery challenges.

Another recent Forrester Consulting report, Business Technographics Networks And Telecom Survey, 2020 found that 55% of Retail Organisations in APAC are interested in using or increasing as-a-service network and telecom services.

Retailers are increasingly realizing that their cloud strategy is critical, as evidenced by the growth of online shopping and the growth of the global retail cloud market. However, not all cloud and networking strategies deliver the same connectivity or scalability that retailers expect.

Retailers striving to empower their employees with the most reliable and efficient data connectivity while also saving costs on infrastructure and unused services need to deploy a multicloud approach enabled by software-defined networking.