By Steve Ranger, 27 October 2005 15:20
NEWS
Sainsbury's is ending its 10-year outsourcing contract with Accenture three years early and bringing its IT operations back in house over the next six to 12 months.
The retailer said that, as part of its plans to revive its fortunes, its IT focus has changed and now "is the right time to rebuild expertise back in-house".
It said detailed plans are now being drawn up for the migration of the IT services and future development needs from Accenture to Sainsbury's.
A Sainsbury's spokeswoman told silicon.com: "Everything will be back in house in the next six to 12 months. We said back in October last year that we would be reviewing the contract with Accenture. The decision has been made that was announced today."
The retailer signed the 10-year contract with Accenture in November 2000, hoping to save about £35m per year on its previous £200m per year IT spend.
Key IT development will continue as planned, the retailer said. It said the priority throughout the migration period will be to make sure customers and staff are unaffected by the change, particularly through the Christmas and Easter trading periods.
The retailer said in a statement: "During this period all Sainsbury's IT systems will remain fully operational and there will be no change in the IT service provided."
Around 700 staff at Accenture work on Sainsbury's IT systems but the retailer could not say how many will transfer back.
Sainsbury's said it will make future cost savings so that the exit costs "are expected to pay back in the short term".
Douglas Hayward, senior analyst at researcher Ovum, said that the problems with the deal show what can go wrong in any outsourcing relationship.
He said in a research note: "The problems included poor decision-making by Sainsbury executives, weak outsourcing governance, political in-fighting at the retailer and a risky 'big-bang' approach that made too many assumptions and took too many risks.
"It's a warning that business benefits don't necessarily follow from IT infrastructure renewal unless the business itself is well run and the two sides are properly connected. New IT infrastructure can't compensate for poor business management. In that sense, Sainsbury shows us the limits of transformational outsourcing."
Comments
There are 9 comments. Join the discussion
1. Anonymous
Maybe now the re-oedering system will finally start working. Do Accenture people eat at home or do they just go to restaurants?
2. anonymous
As someone watching this from the outside when the deal was struck, it is not suprising that the agreement failed. It is difficult to run any IT Dept where (as I understand it) you re-employee existing staff on more generous (and bonus enhancing) packages, add in high paid consultants and partners and not have a net additional cost.
3. anonymous
As someone watching this from the outside when the deal was struck, it is not suprising that the agreement failed. It is difficult to run any IT Dept where (as I understand it) you re-employee existing staff on more generous (and bonus enhancing) packages, add in high paid consultants and partners and not have a net additional cost.
4. anonymous too
As someone who use to use Sainsburys up until recently (hello Tesco), it was obvious that their POS\ ERP system was a joke. Week after week we'd go in to find common items had not been restocked onto the shelves (nice empty space though). The failure of their stock re-ordering system to do it's job did give me a chuckle though; the wife eventually said she had had enough of going in to find "it" still out of stock.
Still, it could have been worse, they could have paid Sharon a couple of million to alienate the customers some more.
5. Colin Scott
Not sure that Sainsbury's 'no change to the IT service provided' is appropreate, surely during the transition would be an ideal time to improve the services provided by the IT dept to both the internal and external customer base's?
6. anonymous
Maggie Miller legacy being expunged, and not before time. This was the worst example I've seen in the private sector of an IT person thinking they've got a clue about business, and the business believing the bulls**t. That's not to say no IT people have a clue - but Maggie definitely doesn't.
7. Reetesh Vadodaria
I feel sad about this as in my previous job, as a IT faculty in a premier management school in India, I used to give the case study of Sainsbury's to examine the issue of outsourcing.
However, looking at the problems associated with many large-scale & high-profile outsourcing deals that have failed to achieve promised benefits (most notably the EDS' Navy contract), I have come to the conclusion that you cannot stretch the theory of core competence beyond a point & start thinking of outsourcing everything that you consider "non-core".
In fact, there is a paradox here - IT is supposed to be one of the core competencies of the modern organisation & at the same time, it is considered non-essential enough (or not understood enough) to let outsiders run the show.
8. anonymous
To the person who nows shops at Tesco's - you must have been at the only store in England who have gone backwards as according to the Grocer Magazine Sainsburys have had the best on shelf availability of all the supermarkets for the last quarter. Yes I do work for Sainsburys and I do think we still have a way to go but we do have better quality and prices on parr with Tesco's.
9. anonymous
For the Sainsburys bod. I am an ASDA bod and we have problems with inadequate stocking of the shelves at the store where I work. Problem here is one of manpower planning, there are really not enough people to fill the shelves overnight and almost nobody to replenish during the day. So to get the widest choice shop between 7 and 8 in the morning!
As a former IT person the IT is old and not responsive quickly enough for a fast moving business and there is too much central control with not enough local input allowed - I have had that from one of the managers.
I am happy to have retired from the IT world - we were and are always blamed for everything.