IT woes push Sainsbury's to £1.5bn outsource deal

Troubled supermarket chain Sainsbury's wants to outsource its entire IT operation to Andersen Consulting in a bid to break free of its creaking legacy systems.

Sainsbury's new chief executive, Sir Peter Davis, has pushed forward with the plans since his arrival in February, believing that the company's ageing legacy IT systems were partly to blame for it losing its leadership of the UK supermarket sector.

Announcing the plans on Tuesday, he said, "The age and complexity of our current IT systems are hampering our ability to perform and develop. We spend in excess of £200m a year on our IT systems. It is essential that we get better value-for-money."

Chris Montagnon, Sainsbury's IT director, said that Davis was prepared to, "take a more radical view" of IT investment than previous managers.

The two firms hope to finalise a seven-year, £1.5bn deal by the end of September.

Eight hundred IT staff, mainly located at Sainsbury's offices in Blackfriars, London, were told on Tuesday that they would be become Andersen employees.

Under the contract, Andersen will assume responsibility for designing, building, implementing and running all IT systems and networks for Sainsbury's supermarkets. It will also assume responsibility for managing all of Sainsbury's current IT contracts with third-party suppliers.

Montagnon said the intention was to replace all of Sainsbury's legacy Cobol-based systems with modern packaged software that would enable the retailer to "run complex integrated systems" and "meet the demand for increased functionality".

"At the moment we have too many hand-crafted interfaces and we wanted help and expertise, " he added.

The news could bode well for Oracle, whose applications Sainsbury's already uses in a number of departments. Montagnon confirmed that the company would be unlikely to move away from using Oracle based systems.

One outsourcing specialist was surprised that Andersen wanted to take on such a contract with Sainsbury's: "Andersen are not usually into infrastructure deals - the only ones it has are at the Danish and London stock exchanges.

"It usually prefers pure management, consulting and application development contracts."

Commenting on the fact that Davis signed another huge outsourcing contract with Andersen in July 1997, while at the helm of insurance giant Prudential, he described the Sainsbury's contract as a "golf course deal".