The pressure for businesses to innovate can be intense
and urgent and IT is partly to blame. Given its pervasiveness in
organisations, a gain in staff productivity could mistakenly be
mapped to installing a faster server with a faster processor, along
with the latest version of an operating system. All this without a
thought to the practical problems facing staff and
customers.
"Organisations being technology-led rather than business-led is
one of the main reasons why IT projects fail," said Tesco group IT
director Colin Cobain.
"Companies tend to be blinded by the glare of new technology,
whereas Tesco is only interested in IT if it supports our processes
and ultimately delivers value for our staff or our customers."
Throughout his career Cobain has been involved in both IT and
non-IT projects, and this has shaped his view on how technology
should be implemented. In his role at Tesco, he is responsible for
delivering the strategic investment of IT for the UK's largest
retailer.
"Our business objectives are closely aligned with our IT systems
but we are not technology led," he said. When asked how Tesco
decides to invest in an IT project, Cobain is quick to point out
that the company does not invest in IT, it invests in solving
problems.
"We go through a straightforward checklist: is it easier for
customers, is it easier for our staff and does it add value for
Tesco?" Cobain said.
Asking basic questions about how much easier an application
would make life for staff and customers is an approach supported by
statistics from analyst firm Gartner.
These show that 30% of IT projects fail because the features of
an IT system are not aligned with the needs of its end-users. The
survey also found that projects which do not clearly define its end
benefits are delivered over budget and fail to deliver some of the
promised functionality. Part of this problem can be having no clear
metrics to measure the effectiveness of an IT system. As the old
management axiom has it: you cannot manage what you do not
measure.
Cobain seems to have this aspect well under control. "Tesco
defines its measurements well in advance and in five main segments
customers, operations, people, finance and community," said
Cobain.
A case that illustrates how Tesco realised benefits for its
stakeholders through IT was when the company rolled out technology
to improve its "one in front" initiative, which it implemented in
1994.
Last month Tesco won a
Retail Week Customer Service Initiative of the
Year award for its use of IT to further develop and strengthen
this initiative.
Tesco deployed cameras from Irisys that use thermal imaging technology to
measure and predict customers' arrival at checkouts. This enables
managers to react in real-time to ensure the right number of tills
are open to deliver an optimised service to customers.
"The metric was simple, it was reducing the number of customers
who were not receiving a one-in-front service," said Cobain.
"A quarter of a million more customers every week do not have to
queue now because we can manage the service they get much more
precisely."
Recently, Terry Leahy, chief executive of Tesco, even
credited the IT system as being a key factor in the company's
half-year pre-tax profits, rising 10% to £1.092bn.
Promoting the success of an IT system to the board is no mean
feat. Seventy per cent of senior executives who responded to a
Gartner survey stated that while they regard IT as critical to
growth, some jointly view IT as a constraint to that growth.
This suggests a separation in views about the value of IT
between IT directors and other board members. Just what can CIOs do
to make sure proposals for new systems carry weight?
"IT directors should not sell IT to the board they should work
with them to solve problems. Part of this involves the IT leader
having a clear vision of where the business is heading and to make
sure that they leverage the most relevant technologies to this
end," said Cobain.
He emphasises that companies have to leverage the most out of
their existing IT systems, before looking to new technology.
For example, Tesco is in the process of
porting its legacy supply chain software to
run on IBM servers, rather than on more expensive mainframe
systems, to support its launch in the US later this year.
With 1,897 stores in the UK, Tesco is expanding its operations
internationally. It already has 281 stores in Thailand, 111 in
Japan and eight in Turkey, but its biggest push will come later
this year when it launches in the US.
Central to its plans is the ability to run its UK inventory
application - which Cobain describes as the "beating heart" of the
company - abroad.
The company's continuous replenishment application currently
manages inventory and stock control for all of its UK stores. Over
time, the software has been optimised to work in line with its
business processes and best practices.
However, the application was built on a mainframe system in the
UK, which would be expensive to replicate at international sites
given the choice of modern servers now available.
What is more, the application was coded in
Cobol, which meant there was a need for the
software to be re-purposed - rather than rewritten - to run on new
servers and to talk to modern technologies such as .net, Java and
Websphere.
The continuous replenishment application is part of the
"Tesco-in-a-box" suite of bespoke systems, designed to deploy a
common operating model worldwide. This requires standardising the
IT systems which support the stores, said Cobain.
Tesco-in-a-box was developed in Tesco's Turkish business, going
live in March 2005. The system is designed to provide international
stores with all the systems required to operate key Tesco
processes, such as supply chains and replenishment.
Ensuring the application can handle regional data types -
foreign languages, character sets and regional customisations for
compliance - is where the project is currently at.
"The global roll-out of a domestic application requires
modifications such as the standardising of data, and this is
something that we are working through in preparation for a US
launch," said Cobain.
In expanding abroad, Tesco could have outsourced the building of
a new continuous replenishment application to a third party. But
because its existing software had been refined to work alongside
its business processes, Cobain felt the company would have lost a
competitive edge.
"We believe we have a degree of specialisation with our
continuous replenishment application. We could buy a new
application off the shelf or we could outsource, but we would lose
that specialisation by using technology our competitors have access
to," he said.
His comments contrast with research from Forrester, which showed
that UK retail firms outsourced more than financial service firms.
"Thirteen per cent of the total known deals came from retail firms.
Some, such as Boots, DSGi, and WHSmith have even signed several
outsourcing contracts over the past nine quarters," said Sonoko
Takahashi, an associate analyst at Forrester.
However, this was mainly in helpdesk and support services which
outpaced the demand for other services such as customer
relationship management systems.
So, what does Cobain see as the next big thing on the CIO's
agenda?
"They should not be looking at the next big thing they should be
focusing on what is best for the business first and how IT can meet
these needs. It is as simple as that."
Related article:
Tesco takes Direct route to effective data
management
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