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Morrison IT could get revamp from £2.9bn Safeway takeover

Daniel Thomas
Supermarket chain Morrison will aim to exploit a number of IT initiatives developed by Safeway, if its £2.9bn bid for the rival supermarket chain goes ahead, analysts have predicted.

Morrison, the UK's sixth largest supermarket chain, has traditionally concentrated on getting the maximum value from its legacy IT systems, and has turned its back on IT-based initiatives such as Internet shopping and loyalty cards.

But that could change, according to Tony Savage, head of consultancy at retail analyst firm RMDP.

"Morrison has always focused on extending the life of its systems, but I have no doubt that it will take advantage of some of Safeway's initiatives," he said.

"The self scanning system that Safeway introduced has been particularly successful and should not be too hard to integrate."

However, the overall integration between the two supermarket's IT systems will be more complex, Savage warned.

"Both companies run IBM in the back office but the point of sale terminals are different so this may take some time," he said. "I expect them to run the two separate IT systems together for at least a year, with perhaps both IT directors reporting to the finance director."

Morrison expects to save approximately £75m from combining the head office and central functions, such as IT, of the two groups, but Savage said it would have to spend to save.

"They are going have to spend time and money to make sure they get this right," he said. "I think they will have to put aside at least £4m or £5m to integrate head office systems, for example."

Safeway's IT runs on MVS mainframe and Windows 2000 operaitng systems. The company uses IBM storage and database products and Peoplesoft ERP systems.

Morrison could face competition for Safeway, with Sainsbury's and Asda owners Wal-Mart reported to be considering bids.

Wal-Mart's 1999 purchase of Asda shows the savings that are possible with successful integration of IT systems following a merger. Analysts at Deutsche Bank last year suggested that the merged group will save £150m a year when Wal-Mart's IT systems are fully integrated with Asda's systems

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