Coles wary over cloud, NFC security

The IT head of supermarket giant Coles yesterday expressed extreme hesitance to move any customer data to the cloud or conduct an expansive trial of near-field communication (NFC) payments technology, saying that security and data privacy issues keep him up at night.

(Portrait of a Shopping Trolley image by Timothy Allen, CC BY-SA 2.0)

Conrad Harvey, IT group general manager for Coles, said at a CEDA event in Sydney yesterday that cloud computing is compelling for enterprise IT because it provides "compute power at our fingertips we wouldn't have now". However, he said that a broad move into the cloud is a volatile proposition in the long run.

"When you have your own PC and it crashes, it's a very big deal ... however, if it's in the cloud, and you have hundreds of thousands of customers using that cloud [when it crashes], it's a catastrophe," Harvey told attendees, adding that events like the Sony data breach had bred mistrust of cloud computing for customers at a large enterprise level.

"The consumerisation of the cloud ... has got some way to go, and needs to recover from things like Sony to regain traction."

Likewise, NFC, which Coles is currently considering, still holds security concerns, according to Harvey .

"For us, there's an exciting opportunity in changing the way we can further interact with customers using NFC. We are going to become contactless in the near future, but I think one of the things we want to see is how the technology becomes more robust and secure.

"The last thing I want is my brand associated with a lack of trust. I think it is an exciting opportunity, and it will come. When it comes, we will want to be ready," he said.

Near-field communication facilitates the transmission of data over a range of approximately 10cm. An NFC-enabled chip in a mobile phone can interact with a proximity card reader to make mobile payments.

In other areas of technology, Harvey said that the supermarket has experienced a great deal of success with its automated checkouts, but warned against deploying them as a replacement to manned checkouts, as it would sour customer sentiment towards the store.

"It will always be a mix [of manned and automated checkouts]. What it does is create opportunity to offer different services. There are retailers out there ... I think it's Tesco in the UK ... who use them to extend their trading hours, for example.

"I don't see a world where there will be no checkout operators unless there's a completely new tech," he said, adding that Coles needs that human presence in-store. In a similar vein, Harvey said that the supermarket's successful online store model wouldn't go replacing physical shopfronts in the near future.

"Coles Online is very successful for us. I think it's the equivalent of five or so supermarkets, and it's grown dramatically. We see it as complimentary and not supplementary.

"I think the adoption [of online channels] has definitely grown, and is quite high in some areas, but we're a while away from being a predominately online retailer. It's important we have both," Harvey said.

As Coles continues to work its way into its customer's lives with an online store, faster payment methods and integration with social networking tools such as Twitter and Facebook, Harvey is losing sleep at night over security and data privacy.

The last thing that Harvey wanted, he said, was to see the Coles company name become a byword for security breach like Sony has.

"[Security is] one of the many things that keeps me awake at night. As we expand our internal universe into people's devices and the external universe ... how we keep those relationships private is important for all companies, especially ourselves," he said.

Fixing Coles' IT

In 2006, Coles was caught in what Harvey called a doom loop. The company was losing business to its major competitors, and was forced to heavily discount prices to attract customers back into stores. The problem was that the prices were often discounted below cost, meaning that the company continued to shed revenue, staff and stores. Coles announced in 2007 that it was having the slowest sales growth since the turn of the century.

"The only way we could drive sales was to cut prices; cutting prices cut revenues; then we cut shops; then we cut service; then quality; and then we went," said Harvey, describing the "doom loop".

Wesfarmers stepped in during 2007, buying the sluggish supermarket for $22 billion, the largest corporate takeover in Australian history. The then-CIO Peter Mahler left Coles in February 2008, after which Harvey took the top IT spot and began fixing the company's IT bloat.

Harvey confessed that before the takeover, the Coles IT department worked like it was an external business entity, billing the Coles Group for the time it spent working on issues.

"Everything was a charge; we were like a consulting company for our own business. If I wanted an estimate for Coles IT, IT would give me a bill," he said, adding that the team didn't feel like part of the business.

"The challenge that faced us in 2007-08 was that we had a bad and broken business."

Harvey has worked for years to integrate the IT department back into the business, to make Coles IT staff feel a part of the company, he told attendees.

"I've been on a long journey over the last eight years ... and we now focus on being a part of Coles to put our customers first," Harvey said.

Post-merger, Harvey said that his job is developing new technology for Coles' internal and external business, as well as conducting ongoing maintenance activities.

"In IT, you're almost always painting the Harbour Bridge as well as building a new one," Harvey said.

The main areas of focus for Harvey are improving the day-to-day operations of Coles, including logistics and enterprise resource planning, as well as improving the customer experience, as well as the supermarket's supply portal, in an effort to keep up with one of its closest competitors: Woolworths.

Woolworths is also innovating in the technology space, after dramatically overhauling its automated replenishment system and, more recently, deploying contactless payments across all of its brands in partnership with Visa.