Tesco has awarded Xansa a new three-year multimillion-pound IT outsourcing contract that guarantees the supplier a minimum revenue until 2008.
Building on an IT relationship that extends back over 15 years, Xansa has again been given the task of driving down Tesco’s IT costs through improved delivery, productivity improvements and offshoring many operations.
Xansa said it would continue to provide Tesco with a portfolio of services through its integrated delivery channels in the UK and India.
Ovum Holway analyst Samad Masood said of the deal, “Xansa may well breathe a sigh of relief that Tesco has decided to stick with it, particularly as Tesco opened its own offshore centre in Bangalore in January.
“By winning this deal, Xansa continues to prove its offshore credentials in the face of Tesco's other offshore suppliers, Wipro and Infosys, the latter of which claims it will soon be Tesco's largest IT supplier after IBM.”
But Masood added that there was a “high chance” that the renewal had decreased the value of the contract to Xansa. Although the value of the extension has not been disclosed by the pair, the analyst said the new deal could be worth as little as £10m compared with £15m for the previous contract.
Masood said Xansa would have to win more new business to allow it to really grow sales.
Under the Tesco deal, Xansa will provide services including application management, software development, and programme and project management for a wide range of Tesco’s critical IT systems, covering distribution, stock replenishment, products and pricing, and daily shelf-edge labelling.
Xansa will also support Tesco’s UK and Ireland payroll systems, as well as providing general sales information.
Within the UK, Tesco has 2,365 stores and over 367,000 staff, serving 15 million customers a week.