Fashion retailer New Look is controlling its IT costs by
paying its outsourcing supplier Accenture based on the number of
sales transactions it processes.
New Look IT director Adrian Thompson's budget is directly linked
to the volume of transactions going through the retailer's stores.
The greater the number of goods it sells, the greater his budget
becomes.
Thompson said linking the cost of the Accenture contract to
sales would give him more flexibility to spend on other
projects.
"The contract gives me the ability to take some costs out in the
short term, protect against the baseline payment to Accenture, and
to set up our IT systems to more accurately meet the company's
strategy," he said.
New Look estimates that its 10-year contract with Accenture will
cost £23m, based on forecasted sales volumes. Thompson declined to
say how much Accenture would receive as a minimum payment each
year, or how much the supplier will be paid for each New Look
transaction.
The contract is a renewal of a deal that New Look signed with
the supplier in 1998 to manage its core merchandise and warehouse
management systems.
New Look uses Oracle Retail Merchandising System and a warehouse
management system from the same supplier.
Accenture manages both Oracle applications as well as the
underlying Oracle database and the hardware that supports these
systems.
Hung LeHong, research vice-president at analyst firm Gartner,
said, "New Look has chosen the best single measurement for payment
by volume. Payment by transaction is certainly a major determinant
of volume; stock-keeping unit count is another big measure of
volume. Those things combined provide a major indicator of the
amount of activity for the outsourcing supplier."
When New Look introduces new systems, Accenture is contracted to
supply and then maintain the interfaces between the Oracle
applications and the new systems.