Boots aiming to shave £30m off annual IT costs

Health and beauty retailer Boots is aiming to cut the cost of running its IT operations by a third after completing a £300m, three-year modernisation programme.

Boots' current total annual IT budget is around £130m - split between £100m of 'keeping the lights on' run costs and £30m new investment.

In an exclusive interview with silicon.com, Rob Fraser, IT director at Boots, said the figure for run costs will now come down more in line with average retail industry IT spend to around £70m or £80m per year.

Fraser said: "We're slightly above retail sector average because of transformation. Our annual IT budget is going down year-on-year because as we assimilate some of the transformation spend, as we decommission systems that we no longer need, and as we just sharpen up our act, actually... we are - net - saving money."

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Boots is just putting the finishing touches to an SAP rollout that will pretty much complete a £300m IT overhaul that began in 2001. During that transformation the retailer increased its new IT investment from £25m to £100m per year.

Fraser said: "Since 2001 we've pretty much gone out and touched every piece of IT in the organisation. So for every year of the transformation we were spending four years' worth of IT money."

Just over £200m of that new investment went into the in-store IT infrastructure, which includes a new pharmacy system that will link to the NHS' e-prescription service, 15,000 new touchscreen tills to replace the 17-year-old ones in the shops, chip and PIN, a new store network and a role-based web portal that allows staff to access the back-office applications and information relevant to their jobs.

Boots is currently the subject of a private equity takeover bid, with an £11.1bn offer tabled this week by Kohlberg Kravis Roberts and led by Boots' deputy chairman Stefano Pessina looking like it has beaten off competition from the rival Terra Firma-led private equity consortium.

Read the full interview with Boots' IT director Rob Fraser.