Source: Jonathan Weiss / Shutterstock
Target now builds and maintains 70 percent of its technology in house
The retail giant Target has completely reshaped its outlook on technology by putting a focus on insourcing, smaller budgets and a more manageable number of projects, according to the company’s executive vice president, chief information and digital officer Mike McNamara.McNamara, who joined the Minneapolis-based retailer 18 months ago, told an audience at the National Retail Federation’s Big Show in New York Monday that the company was still mired in the aftermath of a major breach of its customers’ data.
But the bigger problem, he said, was that Target had allotted too much money and too many people to too many technology projects (the company had 800 ongoing technology projects when he joined).
“We had an oversized budget,” he said. “Engineering resources are strategic, and shouldn’t be squandered. Target is a big company, but no company has 800 priorities. You end up doing a lot of things that don’t really matter. And what does matter gets lost in the fog.”
In his first meeting with the company’s board, McNamara asked for a smaller budget and also set about reprioritizing the projects to be addressed and the way those projects would be developed. That included a shift away from outsourced products.
“Our role is not plugging in purchased software,” he said. “It’s creating and developing software. Our architecture was being driven by third parties.”
McNamara said whereas two years ago roughly 70 percent of Target’s technology was outsourced and 30 percent was handled by in-house engineers, that ratio has flipped. Now, 70 percent of Target’s technology is built and maintained in-house.
“I need great engineers, and I need a lot of them,” he said.
In terms of Target’s internal technology philosophy, McNamara, who prior to joining Target spent 17 years with UK retailer Tesco, said he has tried to reshape that to keep pace with the change facing the retail industry.
“The old Target way involved a lot of discussion, and waiting for perfection,” he said. “That doesn’t work anymore. Retail is changing too quickly.”
When asked about how Target can compete with Amazon, McNamara called that the “billion dollar question.”
“I don’t see Target hitting them head-to-head,” he said. “We do have some strategic advantages. Amazon is trying to build out a fulfillment network and Target has 1,800 stores that reach about 95 percent of the U.S. population.” He also noted how Target has a lead time and a potential cost advantage.
McNamara was also asked more broadly about the omni-channel challenges Target faces. He mentioned that supply chains across the retail industry have to be reoriented away from shifting lots of product to a single location and toward delivering single units to individual customers.
“There’s no doubt online is less profitable,” he said. “But it also requires less capital expenditure.”
