Sainsbury's, Outsourcing, Contract
Sainsbury's saves on IT after terminating outsourcing contract
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Supermarket chain Sainsbury’s has reported a better than expected reduction in IT costs less than a year after it terminated its outsourcing contract with Accenture.
The retailer completed the migration of its IT services and staff in-house earlier this year after terminating its transformation contract with the outsourcer.
Sainsbury’s had initially signed a seven year, £1.7bn deal in 2000 and re-negotiated terms in 2003 to extend the contract until 2010.
The migration of 470 IT staff and services cost it more than £60m but the supermarket predicted payback in less than two years through annual savings of £40m.
But in its interim financial results for 2006/07, Sainsbury’s reported that IT savings were a significant factor in its continued positive financial outlook.
Chief financial officer Darren Shapland says overall, it expects to save more than £285m this year and £440m next year.
‘It is positive news on IT where the insourcing means we will pay back quicker than we expected to,’ he said.
Last year, Sainsbury’s chief executive Justin King said Accenture had provided system reliability and stability, but that the time was right to develop its IT capability in-house.
But it was believed the connection between the IT infrastructure and the customer-facing business was poorly managed.
Doubts were cast on the capability of Sainsbury’s IT systems to support the business the year before that when problems with supply chain IT systems were cited as the reason behind disappointing financial performance.
The IT cost became a greater proportion of sales than previously.
Source: Accountancy Age
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