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Off-the-shelf systems stack up at Morrisons

Wm Morrison, the UK's fourth biggest supermarket chain, is to spend £110m over the next three years replacing all of its core IT systems.

The move is part of a programme to reduce complexity and help the retailer compete with its main rivals: Tesco, Asda and J Sainsbury.

Newly hired management information systems director Gary Barr will be in charge of replacing Morrisons' mainly in-house-developed systems - including merchandising, warehousing, point of sale, supply chain, payroll and finance - with a range of best-of-breed packaged applications.

Announcing the investment at the company's annual results presentation, chief executive Marc Bolland said, "We have a sound business, but it has development areas. Our IT systems have been adequate until now, but they were not built for the future. We will go from in-house to packaged."

Bolland's comments were expanded on in the retailer's annual results statement. "Our systems are now approaching the point of requiring to be changed. We believe that the market for retail systems is well developed, and that there are relatively few areas where we need to continue with home-grown applications," it said.

The major capital investment in IT systems comes almost three years after Morrisons acquired rival supermarket chain Safeway.

Since then, it has been focused on consolidating the two businesses, including migrating former Safeway stores individually onto Morrisons' systems. The business integration project has cost the firm £371m over the past two financial years, prompting a series of profit warnings, but is now close to completion.

Morrisons' £110m investment in off-the-shelf systems is part of a £450m, three-year programme that analysts say will determine the future success of the company.

The retailer has been reliant on core applications that were mostly developed in-house, and some systems are now 30 years old. But finance director Richard Pennycook said the size of the investment should not be a cause for concern.

"The investment in IT systems is less than a third of the size of the sorts of programmes our competitors have gone through. We are not taking radical action, we are buying best-of-breed applications," he said.

Datamonitor lead analyst Alex Kwiatkowski said, "Morrisons is replacing its IT because it has sweated its existing systems almost to the point where they are exhausted. It has been relying on legacy systems that are costly to run and hard to maintain."

Morrisons extends supplier database

Morrisons' preliminary results y/e 4 February 2007

A system so good that Morrisons bought it twice

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