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Interview: Tesco CIO Colin Cobain
On RFID, green IT, offshoring and retail tech

By Andy McCue

Published: Tuesday 25 September 2007

In this exclusive interview with silicon.com, Tesco group IT director Colin Cobain - just crowned CIO of the year at the CNET Networks UK Business Technology Awards 2007 - talks about the supermarket giant's move to standard global systems, green IT and the challenges of using radio frequency ID tags to track products across the supply chain.

silicon.com: Give us an insight into the size and scale of the IT infrastructure and operations that run Tesco on a day-to-day basis and the size of IT team you need to support that.
Cobain: "We start with the customers at the tills so throughout the group there are about 28,000 tills in operation. Behind them you've got the back-of-store operations, which typically in a large hypermarket might have 15 to 20 handheld computers and several computers and printers for things like shelving labels. Back at the centre in every country we've got our data centre running operations. The largest by a distance of course is the UK where we've got twin data centres with mainframes, Unix boxes, a whole variety of equipment. This is supported by one centre of excellence in terms of the IT people, which is our Bangalore service centre with around 1,500 IT professionals. And then in each of the countries we've got about another 800 IT people in the UK and about 500 dotted around the other countries.

The retail sector is typically not a big spender on technology. How important has technology been to the Tesco success story and how much has that been down to investing more in technology than your competitors?
The retail sector does not spend a lot on technology because of the wafer thin margins - it all goes to these suppliers. We have to make sure where we spend money we spend it wisely. What our strategy tends to be is unless it is something we think is going to be a value-add operation such as ordering of stock into stores we try and use an off-the-shelf type solution. So we try not to spend money on things which don't add value and then we can actually invest wisely in things which really improve our processes and deliver competitive edge.

Does Tesco invest more than average in technology compared to other retailers?
If you talk about percentage of sales it's probably less than average.

Tesco has very ambitious expansion and global growth targets over the coming years. How does technology support those plans?
Technology is an important part of the international growth strategy. What we want to do is create a common suite of processes and systems that we can use in all of our countries. To do that what we've started off in the US - where we're due to launch later this year - we're building a suite of integrated processes and systems that will enable us to run that business. We'll have common processes and systems but the offer to the customer will be very local. It will not look like it does in Cheshunt [Hertfordshire] or Korea. It will be a very specific offer for that group of customers and that's really important for us.

Is this the 'Tesco in a box' project?
We've renamed it 'the operating model'. While systems are a part of what we're trying to do we're also trying to make sure we've got processes defined, training materials, organisational structures - a complete package to help run each country.

Will that just be for new Tesco sites?
We're intending to roll that solution back into all our countries over time, including the UK. We're currently putting in a part of the solution in Japan and China, by the end of next year we're going to have the complete solution in Turkey, and we're just kicking off putting it into the Czech Republic, Slovakia, Thailand and Malaysia - so fairly aggressive.

Tesco has been one of the early retail adopters exploring radio frequency ID (RFID) technology. What have been the challenges you've encountered and what's the latest with where you're at and your future plans?
The biggest challenge has been the telecoms legislation, I suppose, whereby the European legislation is quite different to that in the US. That really prevented us doing anything on a large scale because you couldn't get it to work effectively with lots of readers close to one location such as a distribution centre. I'm pleased to say that has now changed and we're now in pilot with a solution in Northern Ireland where we're looking to use it to help our supply chain. We will make sure that we're clear about what the business benefit is before forward rolling. Now we can see the technology is working we're now at the point of looking to see what the business cases are. The trial we've got in Northern Ireland is to do with the tracking of product from distribution centre, out of the doors, onto the lorries and back out of the lorries into the store. The reason being we want to ensure the right product goes to the right shop and therefore you get accurate book stocks. That's what the trial is all about, making sure we track product from the distribution centre through the network to the correct shop.

Will the RFID tags be used in distribution, warehouses and transport rather than on individual items in the store?
You can see solutions in a variety of places and supply chain is one obvious one, and fairly high-value items like CDs, clothing, mobile phones are another. It's really going to come down to what the business case shows. We do things to make things better for our customers, simpler for staff and cheaper for Tesco.

Has the price of RFID tags come down enough to make them viable for large-scale rollouts?
The cost-benefit is a case we're just looking at, at the moment.

How do you balance the global marketplace for IT skills and resources between in-house talent, your captive offshore centre in Bangalore and outsourcing - how do you get that mix right?
We're still growing our centre in Bangalore. Our intention is that the majority of our coding and all that sort of stuff will all happen out of Bangalore. The key thing we want to have in-country are the people who actually relate to the people in that country to understand what change is needed, understand the differences maybe in terms of fiscal needs of that country which then feed back to the Bangalore centre for development and ongoing support of those type of things. We'll use third parties where there's a shortage of particular skills or a particular need so we're not big into outsourcing.

What's been the big advantage of using the Bangalore centre?
What we're trying to do by putting this captive centre in Bangalore is we're trying to leverage the fact that we're doing things in one country that we can roll out very quickly and easily to another. So the example earlier about the operating model and building it for the US - I've got people from India also out in Turkey, Japan, China and the Czech Republic working on implementing different parts of that operating model.

How do you attract and retain top IT talent?
We're very fortunate in that people look at Tesco and see a fairly successful business so they are quite keen to come and work with us, especially as we also have a reputation of being a company that effectively uses IT to deliver business benefit, which is a goal for most good IT guys. I think that's been really the key to how we've managed to attract and retain the right people.

How do you see tech shaping the consumer retail experience in the future?
I think most of the time technology will be in the background. We see two big areas of competitive edge for us in the use of technology. One is around what the offer is - so understanding the customers, what do they want to buy and making sure you're tuning the offer in that store and location to the people who are actually going to come through the door. The second one is then using it to smooth the flow of product through to the shelf, so very much in terms of advanced techniques of ordering and enabling staff to get the products on the shelf efficiently. So we see it as a background thing, not lots of gizmos customers are going to have in their hands to use when they're doing their weekly shop. There will of course always be the Tesco.com offering, which we're very pleased with the success of and we do see that going from strength to strength.

What's been the differentiator for Tesco.com compared to other online retailers?
In terms of why is Tesco.com a success I think you have to go back to the way it started, which was that it started very simply looking at the problem from the point of view of what did customers want. Customers want an online one-stop shop. To do that you need to have the full range that you get in the shop, not the range you have in the distribution centre, which is where quite a lot of companies went and found it didn't work. By having it in the shop you find you've quickly got to find a way of efficiently getting the product off the shelves to the customer, which is where Tesco focuses.

Tesco has publicly pledged to cut its carbon footprint by 2020. How can IT help in reaching that goal?
We are looking at various things to do with how is IT actually affecting the environment. So we've done things in the past few months like increasing the average ambient temperature in the data centres to try and reduce the amount of air-conditioning, and looking at the actual requirements of the equipment we buy. One of the considerations in our next-generation till will be what's the energy consumption, which is not the sort of question if you go back two years ago we'd have been particularly asking. We are trying to do the right things and we're developing our plans at the moment.

Click here to watch a video of this interview.