Sainsbury's cuts out IT outsourcing middleman

Sainsbury's is simplifying its IT outsourcing contract with Accenture by spending £553m to buy the intermediary set up to handle...

Sainsbury's is simplifying its IT outsourcing contract with Accenture by spending £553m to buy the intermediary set up to handle the relationship between the two companies.

The purchase of Swan Infrastructure, announced last week, will give the retailer greater control of its IT systems and data. Sainsbury's expects to cut its IT costs by £25m this year.

One retail IT expert said the move to bring the assets back in-house was not surprising given that data stored in IT systems are the "crown jewels" for any retailer. Setting up an intermediary to handle an IT outsourcing relationship has never been seen before in the retail industry, he added.

Alex Blues, principal consultant at outsourcing consultancy Orbys, said large organisations were increasingly taking more direct control of outsourcing contracts.

"Whereas contract management was once left to the side, major organisations are now re-examining their approach,"he said. "We will increasingly see more businesses wanting to have a greater control of outsourcing contracts."

Sainsbury's £1.8bn business transformation programme, which began in 2000, is due for completion this summer. It involves a complete overhaul of IT systems, covering distribution centres, warehouses and customer-facing systems. Sainsbury's expects to have cut IT costs by 50% when all the systems are up and running.

The decision to buy out Swan comes three months after Sainsbury's extended its outsourcing contract with Accenture by three years to 2010.

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