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Sainsbury's on track for £40m-per-year IT savings
In-sourcing to replace ditched Accenture deal is ahead of schedule

By Andy McCue

Published: Tuesday 21 November 2006

Supermarket Sainsbury's is ahead of schedule to achieve £40m-a-year cost savings from bringing its IT back in-house after scrapping an outsourcing deal with Accenture last year.

Sainsbury's signed a 10-year outsourcing contract with Accenture in November 2000, hoping to cut £35m per year off its £200m annual IT budget, but ditched the deal a year ago as part of a back-to-basics programme aimed at saving £285m this year and £440m next year across the company.

The supermarket brought 470 IT staff from Accenture back in-house, along with all of its IT assets, earlier this year at a one-off cost of around £65m but said that the resulting future savings of £40m a year will pay back the exit costs within two years.

Sainsbury's recorded a seventh successive quarter of sales growth and a 123 per cent increase in pre-tax profits for the first half of this financial year in its interim results, published last week, with CFO Darren Shapland saying the cost savings programme is "absolutely on track".

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"The in-sourcing means we will pay back quicker than we expected to," he told analysts and investors.

One of the next projects the supermarket will tackle is ripping out a disastrous automated depot and supply chain project that left shelves empty at key times of the year. Sainsbury's has already taken a £290m hit writing-off automated equipment, redundant IT assets and stock losses related to that project.

Sainsbury's CEO Justin King said the long-term aim is to get the depots working with a much higher manual component.

"Actually the automation gets in the way... The next thing very likely we will do, because it will be the next step in terms of increasing the capacity of those depots, is to spend money taking that automation out so that we can operate more volume and get it out of the way, because it is literally in the way," he said.