Wal-Mart Combines IT and E-Commerce Technology Groups

“Wal-Mart Combines Corporate IT and E-Commerce Technology Groups” is an article from the Wall Street Journal by Kim S. Nash and Steve Norton. The discount superstore, Wal-Mart, has planned to shift its corporate IT and e-commerce technology from multiple units into a single unit. The IT unit will now report to the e-commerce unit, instead of having its own unit. The company hopes that this change in business will increase sales and quiet the threats from Amazon, an online marketplace system.

Combining Corporate IT and E-Commerce Technology could be a very smart move for Wal-Mart. Outside IT groups are working with Wal-Mart to build technology that will combine physical and online shopping. This is done with an Enterprise Resource Planning (ERP) System. An ERP is a collection of integrated software for business management, accounting, finance, supply chain management, inventory management, customer relationship management, e-collaboration, etc. All modules come from the same provider. This is a very good example of how IT increases firm productivity because they will be able to continually refine and improve their products and services in a more proficient way.

“Wal-Mart is the world’s biggest corporate spender on IT…”[1] In 2014, Wal-Mart spend over $10.2 billion on IT. However, by combining Corporate IT and E-Commerce Technology, they will be able to cut their spending significantly. Over the next two years, Wal-Mart plans to spend only $2 billion on E-Commerce, which will now include IT. This will save the company over $8 billion.

Recently, Wal-Mart has been experiencing low sales growth due to a broad shift from physical shopping to online shopping all over the globe. Because of this Wal-Mart plans to close hundreds of stores worldwide and 154 in the United States alone. By combing corporate IT and e-commerce technology, which will also combine physical and online shopping, Wal-Mart hopes to get back on track and start to match their competitors’ numbers again. Since their most prevalent competitor, Amazon, only offers an online marketplace, this could give Wal-Mart an advantage. This strategic advancement will be in addition to mobile store mapping applications and the ability for customers to shop online and pick up their products in stores.

I think that Wal-Mart has overlooked that even though they are combining physical and online shopping, many people only want to or have the ability to online shop, so they will not change their current habits. I also think that they should be spending their extra $8 billion on expanding their inventory that will help beat out competitors. Lastly, Wal-Mart may have overlooked that different parts of ERP systems sometimes are not good enough and do not work well together. They should use their extra money to assemble the best applications and plug them together.

---

[1] http://blogs.wsj.com/cio/2016/01/15/wal-mart-combines-corporate-it-and-e-commerce-technology-groups/

Source: http://blogs.wsj.com/cio/2016/01/15/wal-mart-combines-corporate-it-and-e-commerce-technology-groups/