Fashion retailer New Look is controlling its IT costs by paying its outsourcing supplier Accenture based on the number of sales transactions it processes.
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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.