In Texas, prior to the resumption of school in the fall, consumers are given a tax-free holiday on back-to-school purchases. That's great for consumers, but it puts a bit of a burden on retailers, who need to adjust their POS systems to account for the tax break on school-related purchases like notepads, erasers, apparel and the like.
“Retailers have to put in new rules and test them and distribute them to every register in their stores,” said Dave Dorf, director of technology strategy for Oracle Retail, Austin, Texas. “It's time-consuming.”
But now there may be a faster and easier way to execute this change. What if instead of having to get under the hood of the POS system to install new tax rules, the POS system could simply call out to a separate tax “service” that could be easily adjusted to offer the back-to-school freebie?
With a tax service that does nothing but deal with taxes, retailers “have one place to make the change,” said Dorf. “It's a lot easier. It cuts down on the time to get it done.”
The tax service is one example of a new breed of computer business logic called services, each addressing a very specific task. Other POS-related services include an item service, containing all the stockkeeping units in a store; a price service, providing the price for each of those SKUs; and a tender service, handling credit, debit, check, cash and other payment-processing tasks. Retailers can build their own services or access them from third-party applications.
The sum of these services is known as a service-oriented architecture, or SOA. In the case of POS, instead of a self-contained, hard-wired application, SOA allows retailers to leverage a collection of loosely affiliated, easily managed services that can be reused in other applications such as a kiosk, call center or website or used to create entirely new business processes. Services can be located anywhere in the enterprise and can be readily changed or replaced without affecting other services or applications.
“Whereas traditional systems are built to last forever, SOA is built for change,” said Dorf.
SOA is an IT framework that a growing number of retailers — 56% of respondents in an ARTS survey — are beginning to explore, and that some regard as a potentially game-changing approach to the retail business.
“There's a higher SOA penetration in retail today than 24 months ago,” said Richard Mader, executive director of ARTS (the Association of Retail Technology Standards), a division of the National Retail Federation, Washington.
The importance of SOA is reflected in the attention it is being given by ARTS, which counts among its members such major food retailers as Kroger, Safeway and Publix. In January, ARTS unveiled an SOA Blueprint for Retail, the result of a project, co-chaired by Dorf, to give ARTS members a free step-by-step guide to adopting SOA, along with vendor-neutral best practices. (The Blueprint is available to non-members for $249.) ARTS has also made available — in some cases just to ARTS members, in other cases to anyone — some downloadable building blocks of SOA technology.
In addition to its SOA Blueprint, ARTS, in concert with IBM, has developed a technology called RTI (retail transaction interface) that vendors would use to turn their core POS functionality into services (item, price, tax and tender). RTI is new, Dorf added, and POS vendors are still evaluating it. ARTS offers basic RTI technology for free, though members get more detailed documentation.
Like Dorf, Mader pointed to IT agility — the ability to make rapid changes in response to customer needs or competitive threats — as a primary reason that retailers should care about SOA. “If the CFO wants to track ZIP codes and capture phone numbers at the POS, the CIO may say, I can do that, but it will take me four weeks. The CFO says he wants it next week. SOA gives you the ability to make those changes quickly.”
Mader and Dorf also observed that in an increasingly multichannel world — in which consumers may wish to make purchases online and pick them up in the store — SOA makes it easier to link channels together. “You can create a service to make sure the same product description is used on the Web and in the store,” said Dorf. “By leveraging the same service across multiple channels, you save the IT department quite a bit of money on integration costs.”
Ahold USA is among some major food retailers, including Supervalu, Kroger, Carrefour and J. Sainsbury, that are investigating or implementing SOA. “We're moving from taking software and just dropping it into the environment, to a more thoughtful, architected view,” Sheel Kishore, vice president, IT strategy, Ahold USA, told SN earlier this year. “Everything will fit into a blueprint that will allow our applications to be a lot more flexible. We'll be able to expose services and rapidly compose applications almost on the fly.”
Another retailer that has begun taking an SOA approach to its IT implementations is Big Lots, Columbus, Ohio, led by Greg Wilmer, Big Lots' vice president of technology, who is the other co-chair of ARTS' SOA Blueprint for Retail project. In an August presentation at the NRFtech 2008 IT Leadership Summit in Broomfield, Colo., Wilmer outlined Big Lots' approach to SOA.
Big Lots, said Wilmer, “gained knowledge through ARTS resources, work in the ARTS community and hiring knowledgeable resources.” The chain has assigned its architecture team to specific SOA projects covering the POS, a data warehouse and an implementation of software from SAP.
Wilmer said Big Lots is retrofitting its existing data warehouse to represent a “canonical [data] model for major components of the business.” This means that Big Lots is creating a data model based on “one version of the truth” regardless of how the data is used, explained Dorf. “If I have a canonical model for an item, there's only one version of what an item contains, such as a UPC, 50 characters for a short description, etc.” This in turn makes SOA much easier to implement, he added.
In creating its data model, Big Lots started with the data model created for the retail industry by ARTS, Wilmer said in his NRFtech presentation.
Giant Eagle, Pittsburgh, is also known to have embarked on several SOA projects, including document management workflow and integrating human resources and labor scheduling processes. (See “Sampling SOA,” SN, May 21, 2007.)
One of the key technologies associated with SOA is called Web services. These are a collection of Internet-based standards, such as XML, that serve as the currency for exchanging data between a service like tax calculation and the POS. Haggen, Bellingham, Wash., a chain of 15 stores in Washington and Oregon, has implemented Web services “extensively” for its new loyalty program and website, among other areas, said Harrison Lewis, Haggen's vice president of information technology.
ARTS has developed its own retail-focused standards, called XML schemas, for packaging and sending data around a service-oriented architecture. ARTS makes these schemas available for free download from its website, nrf-arts.org. “We're getting a high adoption of our 18 schemas,” which include those for POS, stored value, digital receipt and customer loyalty, said Mader. Big Lots is employing ARTS XML schemas in its data warehouse retrofit, said Wilmer.
ARTS is also developing services for POS peripheral devices such as printers and scanners in connection with its Unified POS standard.
Riding the Bus
The ARTS SOA Blueprint suggests a list of other technologies retailers need to implement SOA. These include a business process designer, used to put services in place to support a business objective; a registry, or library where services can be found; an enterprise service bus (ESB), which allows services to be accessed; business process execution language (BPEL), used to call services in the right order; services management, used for security and to check performance; and business activity monitoring.
Several retailers have invested in an ESB as a key SOA building block. Ahold USA purchased an ESB from Tibco, Palo Alto, Calif., to link applications and deliver data elements to applications, while Giant Eagle's ESB is from Oracle. In his NRFtech presentation, Wilmer said Big Lots is using an “ESB approach to integration” for its SAP implementation.
Dorf acknowledged that SOA can be “quite expensive” and time-intensive to implement “soup to nuts.” However, he added, it's possible to “smart small” and then add pieces incrementally.
In his NRFtech speech, Wilmer of Big Lots advised retailers to “align your SOA initiative with upcoming business projects” and “work through your business and IT strategic plan to see how you can layer in SOA each year with each project.”