ComputerworldUK has met Ocado’s chief technology officer (CTO) Paul Clarke to find out why the world’s largest dedicated online groceries retailer believes it should be considered as much a technology company as Google or Facebook.
“I’m very definitely a CTO, not a CIO,” says Clarke, who has been in the role and in charge of the online grocery company’s Technology division since 2012.
“What we do here in terms of technology is very different from what most companies do. It’s not IT and certainly we fight quite strongly when anyone tries to put that label on it,” he says vehemently.
“The bit that people call IT, which is things like helpdesk, DBAs, purchasing computer equipment, desktop apps and things like that. That’s a tiny little piece of our estate.”
As Clarke reveals, projects that Ocado Technology deals with include a major move to cloud platforms, which will involve a replacement of its large, on-premise Oracle estate, and experiments with smart vision systems and robotics. This will be supported by a high-profile recruitment campaign the company is running to attract the type of skilled people who would be interviewing for a major tech company like Google, to Ocado instead.
Like that scene in Monster’s Inc
Ocado Technology uses and builds technology that ranges from the typical business systems, like supply chain, finance and employee systems, to e-commerce and mobile applications, all the way to “more exotic” things like robotics for its warehouses.
The retailer has heavily automated warehouses, two for food, one near its headquarters in Hatfield, Hertfordshire, one in Dordon in the Midlands, and a non-food warehouse in Welwyn Garden City, also in Hertfordshire.
“If you’ve ever seen the first Monster’s Inc film, where Sully is jumping on the doors. Our warehouse is a bit like that,” explains Clarke, referring to a scene in the animated film which shows thousands of doors, lined up and zooming around a factory environment.
“Things are flying around the place, cranes are whizzing around at 30km an hour, 7,000 boxes are on the move typically at any one time, 24km of conveyor, thousands of junctions - and it’s all automated. There are people doing parts of the process, but all of the moving of goods and coordination are automated. Even where human beings are involved, the systems are controlling that.”
But the technology does not stop at the warehouse.
The company develops systems associated with its delivery vans, which includes routing systems, route optimisation, tracking of vans, collecting all the big data that relates to the vans, such as GPS, engine revs, fuel consumption, how fast they’re cornering, how fast they’re going over speed bumps.
In addition to this, Ocado has a big data and analytics optimisation division, which are working on data science and mathematical modelling, and specialist areas, which include the robotics and the high-fidelity mathematical simulation of its facilities
All this, before you even get to the “real secret sauce stuff”, which falls under Ocado’s special R&D department,‘10x stream’, about which, unfortunately, Clarke remains tight-lipped. The secretive R&D department is based on an idea from Google’s co-founder Larry Page, who believed that making a 10 times improvement can be tougher than making a 10 percent improvement, because making something 10 times better requires you to go back to the drawing board.
“It forces you into making radical new steps that are game-changing type, disruptive steps,” Clarke explains.
He also promises: “People don’t get bored. We offer them the chance to move around [the business]. Although teams don’t like to see their prized people leave, it’s part of our culture that you can never say no to that.
“But what goes around comes around. Even if you give up one of your prized people, you get somebody else. What it does is spreads the knowledge across the teams. So we strongly encourage that.”
Ocado v Google- next section
Ocado v Google
Ocado was founded in 2000, starting with a branding and sourcing agreement with Waitrose. It began piloting deliveries in 2001, and in 2002, it expanded its delivery area to include 2.2 million households.
In 2010, it listed on the London Stock Exchange as a FTSE 250 company, at which point it was delivering 100,000 orders a week for the first time. It also launched its own-brand range of products.
In its results for the first half of 2014, the retailer said it delivered an average of over 161,000 orders a week to 396,000 active customers, with mobile apps accounting for over 35 percent of all checkouts.
The breadth and depth of technology Ocado deals with is “very rare”, Clarke says, and is why the company is trying to sell itself as a company worthy of attracting the talent that would usually be applying to the likes of Google.
“Many people interviewing here are second-interviewing at places like Google and other tech companies,” he says.
“We set the bar very high. We are looking for the top drawer of applications.”
The diverse and high standard of skills Ocado seeks in its tech employees explains why the company is taking its time to fill 150 software engineering and other technical vacancies it announced it would be recruiting for in November. The company currently employs 330 staff in the technology division in Hatfield and about 100 in its offshore site in Krakow, Poland. It aims to have 530 people in total by the end of November 2014. Ocado employs 7,500 people overall across the business.
“We don’t want to make mistakes. We’re looking for the crème de la crème in terms of applicants. We’re certainly not into the recruit in haste, repent at leisure type model,” says Clarke.
Once Ocado finds the high-calibre employees it wants, they are also obviously people that the company trusts to spread the company message. On its visit to Ocado’s headquarters in Hatfield, ComputerworldUK spotted a recruitment poster offering staff an attractive, £2,000 incentive for referring successful candidates.
But how does Ocado get these highly skilled applicants to choose it over Google? Clarke claims that it just takes showing them the warehouse in action.
“From the outside, we try to make our business look quite simple. Actually, there’s a lot of complexity that goes on under the surface to do what we do, at the scale we do it, with the level of fulfilment and reproducibility that we bring to it.
“[At an assessment day] whilst they’re having lunch, we’ll talk to them, and after that we show them round our warehouse here, and they’re nearly always completely blown away by that. That really brings it home.”
As well as academically brilliant and “very smart” people, Ocado wants people who have a self-starting, start-up mentality, and who want to stretch boundaries. They also need to be very passionate about what they do, and quick learners, because the technology they will be “playing” with at Ocado changes so quickly.
“Because we are a disrupter in our field, because we are changing the way people do retail as an end-to-end fulfilment model. We’re creating this as we go along, no one’s done this before, what Ocado does, at this scale of automation.
“We’re in the innovation business, we’re constantly creating new and better mousetraps, new and better ways to do what we do. A lot of that innovation comes from bottom up, as well as top down,” says Clarke, whose background is mostly in start-ups. He helped found a successful start-up called Torus Systems, which built a user interface for IBM PCs, just few years after graduating from the University of Oxford.
He again makes the comparison with Google, referring to the search giant’s perk that allows employees to spend 20 percent of their time experimenting on something that interests them. Products that arose from these projects include Gmail, Google News and Google’s autocomplete system.
“Although we don’t have a formal equivalent of Google’s 20 percent, we have a very good track record here of what I would call stealth projects,” Clarke says.
These projects are where employees have thought of new and better ways to do existing tasks, built a prototype in their own time and then taken it to their manager to be approved, developed and implemented in the business. Clarke says that these projects occur so frequently that he loses count, but include parts of the simulation systems that Ocado uses to model its new warehouses.
“Many of our most prized or most revered production systems here started life as a stealth project where someone thought they could come up with a better version of a previous system and did so.
“It speaks to the culture and to the kind of people that we hire, who have that level of ownership, to care enough to go off and do that in their own time. So when you take all that together, that’s why it’s a challenge to find the people we’re looking for,” he explains.
Ocado v Amazon - next section
Ocado v Amazon
You’d be forgiven for thinking that UK online food retail is Ocado’s end-game, but the reality is far more ambitious. Clarke cites another major technology company, Amazon, as a role model, and his explanation sheds some light on why the company has taken until this year to make a profit - £7.5 million for the first half of 2014, up from a loss of £1 million last year - and why, apparently, shareholders still invest.
“We’re building this technological solution not just for groceries in the UK, we are doing this to build a platform that can be rolled out for food and non-food groceries in other countries. It’s an Amazon-type journey.
“That’s why, when people say why aren’t your shareholders concerned you’re not making more of a profit, it’s because our shareholders understand the journey we’re on. They’re in it for the long-term too. They know that we’re trying to build the core of a much, much bigger business. We’re laying the foundations of that much, much bigger business now, and that takes time to get right.”
Ocado’s 25-year contract to provide the UK’s fourth largest supermarket, Morrisons’ with its online shopping service, is just the start of this journey.
Morrisons’ website is built on Ocado’s platform, and Morrisons’ goods are picked from Ocado’s Dordon warehouse, which are housed alongside its own goods. The drivers delivering the shopping are Ocado drivers, dressed in Morrisons’ livery, driving Ocado vans with Morrisons’ branding.
The Morrisons’ project was just as ambitious as the company’s overall business strategy. Ocado completed the project a mere 11 minutes before the deadline in January.
“The project had to be done in a very tight timescale. We only kicked it off formally in June 2013 and it had to go live in January. Most companies would have gone, ‘no way it could be done in that time’, but we love a challenge,” Clarke grins.
According to Clarke, Ocado is much more automated than Amazon is, when it comes to food, including its groceries business on the west coast of the United States.
“There is nobody, as far as we know, anywhere in the world, with our level of automation when it comes to these grocery fulfilment centres. The two largest automated grocery fulfilment centres in the world, we own, here and in Dordon. There’s quite a big gap before you get to anyone else, including darkstores,” he says.
Ocado is not trying to compete head-on with Amazon, however, because the company’s footprint in non-food is so vast.
Instead, it is looking at more specialist areas, which is how Fetch.co.uk, Ocado’s first non-food website aimed at pet goods buyers, came to be launched in 2013. This year, the retailer is launching a specialist kitchen and homewares shop, Sizzle.co.uk.
Cloud migration project - next section
Cloud migration project
From a technology point of view, the most significant project that Ocado is doing is moving everything, except the systems that control the innards of the warehouse, to the cloud.
The project, one of the reasons for the recruitment drive, started in January, as soon as the Morrisons’ project was finished. However, it is not simply about moving applications into the cloud, Clarke insists.
“It’s to increase developer agility, so DevOps, release engineering, things like that. It’s also to increase business agility, to make it easier to integrate with third parties [like Morrisons’] and things like that, but also to prepare for international expansion.
“I don’t want to be building data centres in other countries. I want to be able to roll our solution out in the cloud.”
But the project also has major implications for Ocado’s legacy technology. The company has a large Oracle estate on premise at the moment, and runs IBM servers in its warehouses. Its warehouses, webshop and data warehousing is all on Oracle, but much of this will be moving to NoSQL.
“It’s an opportunity to throw away the inevitable technical debt that you accumulate over 12 years of iterative development, but also to get involved in a whole range of new technologies, both cloud and middleware,” says Clarke.
Ocado will be using mainly public cloud, with private cloud used for parts of the warehouse systems. While Clarke refused to say who the private cloud providers are, he was open about the retailer using Google and Amazon Web Services (AWS) for the public cloud.
“We’re deliberately working with more than one because we will be needing to integrate with other companies, who will have chosen one of those or others.
“We’re also looking at a lot of cloud-based middleware on top of that, like NoSQL solutions such as Cassandra. We’re using Hadoop for big data analytics and both those companies have their own storage solutions that we’re using.”
In addition, Ocado uses open source middleware, such as Apache ActiveMQ for messaging and a lot of open source development tools.
For “commercial reasons”, Clarke will not say how long the replatforming onto cloud will take. All he will reveal is that the systems are not being moved one by one, nor will they be delivered all in one go.
“All those areas I talked about before all have a replatforming stream to them,” he says.
As the replatforming project gathers momentum, Ocado technology is set to look very different by the time the Morrisons’ deal reaches a year old in January. It will be interesting to see over the next few years if cloud - and the larger team of technical employees - can deliver the international expansion and profits that shareholders are patiently waiting for.