CIO interview: Rob Fraser, IT director, Sainsbury’s
Sainsbury’s IT chief talks about why in-house IT works better than outsourcing and how to double revenue without doubling IT spend.
Rob Fraser, IT director of Sainsbury’s, talks to Computer Weekly about why an in-house IT team works better than an outsourcing model and how the retailer hopes to grow to twice its current size without doubling its IT footprint.
Rob Fraser is something of a retail veteran, having held various technology roles at Boots including IT director for three years, as well as a job with Marks & Spencer. As such he is a firm believer in retailers having a strong in-house IT strategy.
Since Fraser joined Sainsbury’s in 2009, the firm’s IT architecture team has seen a six-fold increase and capital investment in IT has more than doubled. “IT was massively underpowered when I arrived for the size of what we were intending to do. We now run a capital plan that is probably twice the size of what it was three years ago,” he says.
Responding to customer needs rather than following the lead of competitors is key to Fraser's strategic thinking. “We wouldn’t do a thing because Tesco or Morrisons has got a thing. We absolutely look for opportunities internally or where we want to stretch the business and what makes sense to put in place,” he says.
“I tend to think about technology from the point of view of what grabs customers and what will make our colleagues more efficient.”
A good example of this was the deployment of Brand Match, a real-time information system which tells customers if they could have bought their branded items more cheaply elsewhere. After a pilot in Northern Ireland the system was recently deployed across the company’s main stores.
“Normally you do a pilot, wait and then 12 months later it starts to appear in a shop. We ended the pilot and then the following Monday we were live in all our main stores. From an IT department standpoint that is exciting," says Fraser.
“The last thing you want is a five-year development plan when you’ve worked out something that makes sense for the customer.”
The deployment of Brand Match also fed into Fraser’s broader virtualisation strategy, as the system sits on a virtual platform which will become the building block for future deployments: "We wanted that virtualised environment anyway, and having that in place means we won’t have to do a store visit for a server installation - we can put all our new systems onto that electronically.”
Virtualisation means the IT footprint won’t increase along with the retailer’s ambitious growth plans to double its size by 2020.
“We are seeing a net reduction in floor space used in datacentres. In years gone by they were getting fuller so this is great news as it takes the pressure off. The reason for virtualisation in stores is that over time you can fall into the trap of saying, I’ve got a new idea for a system and put in another server. Quite quickly you can end up with a lot of servers all doing one thing,” says Fraser.
“With so much we want to do over the next five years it makes sense to invest in a large virtualisation system. That gives headroom for all sorts of things we haven't even thought about yet."
On top of its programme to modernise IT, Sainsbury’s is also aiming for an 11% cost reduction in IT operating costs this year.
“A lot of that comes through renegotiation of contracts. The BT contract is more for less, as is the NCR contract more for less – in return we offered NCR the opportunity to have a much bigger footprint with us," says Fraser.
“We will also look to retire older systems that are disproportionately expensive to run and target expensive service contracts."
Cloud is less prominent in Fraser’s plans: “The cloud is very present in the news at the moment. We do take some things as services but to be honest when we take them we often buy the complete service. For example, Sainsbury’s Nectar card points is run as a complete package externally. That’s not to say we wouldn’t chop a service up but it can get fiddly if you do start putting things like infrastructure on demand,” he says.
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Fraser heads a 500-strong IT workforce, and while he’s keen not to increase this number as the store chain grows, the roles aren’t about to be outsourced anytime soon.
“Based on my previous experience, I’m not necessarily a fan of the wall-to-wall, let's-give-it-all-to-someone-else approach,” he says.
It's a mantra that would go down well at Sainsbury's, which famously cancelled a £1.7bn outsourcing contract with Accenture in 2005, when the contract still had five years left to run, bringing its technology and IT staff back in-house.
IT capability is too important to leave to someone else, says Fraser: “Those big 10-year outsourcing deals were a very late 1990s, early 2000s thing. We did one, Boots did one, but most people came away with the feeling they were not quite working.”
Partnerships are important but control must stay in-house, he says. Sainsbury’s has just signed a deal with IBM to provide all future hardware and storage for the retailer, replacing kit from Sun and HP.
“IBM technology is fantastic. It turns out fantastic products in terms of hardware and software," he says. "But services are always more challenging to do in general."
The retailer has also announced a new extended relationship with BT: “But as part of that there are some services that we take back in house because they are critically important to us and we would like to own them.”
However, despite Sainsbury’s growth, the number of IT staff has remained roughly the same over the last three years, so the slack must have been taken up by partners, says Fraser.
“In application delivery we’ve got TCS, Infosys, Cognizant as preferred partners, so that scale and flex must have come through them and they do a great job for us. But that’s with us clearly owning the business change part, project and programme delivery, and architecture parts. Our delivery partners are fabulous at turning out high-quality delivery, build and test for us but we retain control of owning the outcome.”
For a company reliant on a relatively large in-house IT team, getting the right skills has been an issue in the past.
“We did have a shortage of architecture skills and large-scale delivery skills. When programmes go from £1m-£5m in size to £50m, you require a different level of delivery skills. So we did do external recruitment in those areas and are now developing skills internally,” says Fraser.
Career development is also important, he says.
“We’ve doubled our investment in training colleagues. Most of our roles in departments are now filled internally. That’s great for our colleagues but also great news for us and far more cost effective if we can promote a colleague and move them into role in four weeks compared to the lag if we go to market.”
In such a fast-changing consumer environment, what does Fraser see as the next big trend in retail?
“Retailers are all enthusiastic about digital possibilities beyond the e-commerce channel; they are enthusiastic about what digital can do that connects the channels together,” he says.
“If you have a good online presence you can stretch that out and do all sorts of things in store, such as consumers scanning items with your phone. [We are] all coming up with fairly similar possibilities, but the challenge is do customers really value them – that is the bit we have to prove."
Space-hungry check-outs for cash payments could be an area to be scaled back, says Fraser: “People shopping online already have an online account, which they could just pay through in-store too. We would want to be reassured from the security point of view but that is something we are certainly thinking about.”
Being responsive to market demand while also having a long-term vision appears to be at the heart of the balance Fraser must strike.
“Retailers are fabulously over-served with technology. At the consumer end things are moving fast, not only Apple but Microsoft too. Our challenge will be keeping up with that,” he says.
But simply being reactive is not enough to achieve success in the market, says Fraser: “Architects need to be looking at where they are going in year four and five so we can make choices in year one and two to be faster over time."