BENTONVILLE, Ark. -- Wal-Mart officials here have inked a multimillion-dollar deal to buy new data storage equipment.
The technology upgrade will effect the entire chain's data system. It is designed to produce a faster and more reliable e-business infrastructure, analysts said.
The retailer has selected the Enterprise Storage Server system, known as the Shark, and eServer z900 mainframe equipment from IBM, Armonk, N.Y.
The new technology is being installed in an effort to increase the retailers' data storage capacity.
"We're seeing a major retailer spending some very significant dollars in a post-Sept. 11 environment," said Jeff Roster, a senior analyst with Gartner Dataquest, Mountain View, Calif.
"The deal was done after the fact, so they knew the impact, and they saw the opportunity significant enough to do a major play in technology."
"This is pretty good news," he added.
Some industry sources placed the price tag on the deal at $50 million, although Wal-Mart declined to comment on the financial aspects of the expenditure.
"[Data] storage is growing very rapidly, in spite of the economic downturn and the recent attacks," said Mike Kahn, chairman of the Clipper Group, Wellesley, Mass. "Storage is a place where big enterprises will spend a lot of money."
With an influx of data and an increase in online transactions, retailers are willing to invest in the technology to handle these new realities, he said.
When it comes to information consolidation, it is always more efficient to have data stored in as few places as possible, Kahn explained.
The new technology at Wal-Mart will be managing data processing, reconciliation, debit and credit transactions and product replenishment for all its retail outlets.
Tom Williams, a spokesman for Wal-Mart, said the technology initiative involves all of the retailer's "core data."
Wal-Mart officials said they anticipate a considerable boost in processing speed and more reliable access to all information systems once the new system is in place.
The retailer is also expecting to realize direct benefits in customer service as well.
"Logistics is a key part of the whole Wal-Mart equation," said John McArthur, group vice president of IDC, Framingham, Mass.
"Keeping the right products in the right regions at the right time means a lot of computing jobs that require a lot of calculation and data manipulation, and the faster those jobs run the faster you've got the product," he added.
Server consolidation provides for a more efficient use of space and energy both on- and offline, observers said.
According to McArthur, companies spend millions of dollars to run big data centers.
"Being able to keep power consumption steady while increasing processing ability and storage capacity is important," he said.
"When thinking about what it takes to run old technology, users ought to factor in the cost of electricity. It's a lot more than just dollar per megabyte," he added.
Yet while fewer, more powerful units are sure to conserve space and energy, a procurement of this size will always come back to the quality of service in terms of performance and reliability, Kahn said.
"IBM has a very strong, solution-oriented practice in retailing, indicating not just success in selling boxes, but in helping retailers better serve their customers at a lower cost," he said.
Indeed, several major grocery chains have adopted IBM's Enterprise Storage Server networks over the past year.
Hannaford Bros., Scarborough, Maine, is using the servers in support of warehouse management, order and store inventory, merchandising and category management systems.
Spartan Stores, Grand Rapids, Mich., has also installed two Shark servers, primarily for protection and backup support in the event of a disaster.
"Retailers haven't traditionally looked at their IT shops as a tool to gain competitive advantage," Roster said. "Over the past couple of years, smart business are looking at their IT infrastructure not just as a way of doing business or as a facilitator of business, but as a way of gaining competitive advantage."
