Insourcing - the end of Sainsbury's?

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A year ago David Carter argued that Sainsbury's had to take its IT development back in-house from outsourcer Accenture. "Perhaps in future years the Sainsbury's case will be quoted in business schools as the textbook example of how a company destroyed itself by outsourcing its IT," he wrote. With Sainsbury's this month announcing the end of the Accenture contract, he speculates on what is going to happen next.

"Supermarket giant Sainsbury's is set to terminate its IT outsourcing contract with Accenture five years early and take its systems back in-house.

"In 2000 the company signed a 7 year deal valued at 1.7bn with Accenture, to transform its IT operations and improve the efficiency of the business. In 2003 the contract was extended to 2010, and its value increased to 2.1bn.


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25th Nov 2005 19:19

Infrastructure, Architecture and Management
Interesting that this article and the UK Gov't Benefits system failures due to complexity happen to coincide.

Responding to issues with I.T. failing to meet business needs (at acceptable cost) by outsourcing is saying that I.T. isn't a core part of how we do business and how we want to do so in the future.
That may be OK in some industries and smaller companies but large scale retailing isn't one of them.

Just like the UK Gov't - the issue starts at the top with a lack of both consulation and acceptance that I.T. matters more than just at an application level - Infrastructure, Architecture and Design may sound useless phrases but the difference in agility and performance of whole companies can often be determined by the effectiveness of those who have the responsibility for the 'bigger picture' of I.T. which guides the business application procurement/development processes through the minefields of infrastructure, technology evolution etc..

If you allow business units the freedom to take independant decisions about I.T. it will only be a question of time before someone is asked to pick up the fragmented islands of data, processing, user interfaces etc. etc. that actually impact and interact with each other generating a major aspect of the complexity that the UK Gov't systems are suffering.

Sadly for Sainsburys, when faced with the problem they thought that outsourcing was a way in which the problem could be solved. This probably (I have no inside knowledge) relegated I.T. consultation and engagement perhaps even lower than before.

As a simple rule of thumb, any large organisation should have at least one person (and at least one apprentice!) who:

(1) understands the whole of the I.T. that runs the business
(2) understands the technologies used by those current systems and the options for the future
(3) has EARNED the respect of the Development communities wherever they exist within the business
(4) has the CEO as a sponsor to whom they can very occasionaly turn to resolve issues
(5) takes a pro-active role in educating business and I.T. management about the I.T. matters which are important to the company

Apologies for the length of the post - I hope it inspires someone to stand up for an holistic approach to corporate I.T..

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26th Nov 2005 13:58

SaaS is different to this sort of IT outsourcing
I think John is asking the wrong question of SaaS providers at the start of this thread, and SaaS should not be confused with what Sainsbury's did in outsourcing to Accenture. Surely their approach was tantamount to saying "we can't manage IT and it's not our core business, so we'll subcontract to a third party specialist". It sounds like the Accenture expertise worked well on the technical management of systems and infrastructure, but not on business process improvements, because Accenture didn't understand enough about retail or Sainsbury's. So the problem was more to do with how far they went in offloading IT management - their Accenture contract should have only been about hosting and managing the applications, not about deciding what to do.

A.W.B. Ross is right that the organisation needs to retain the key person who understands IT and how it can be used to develop the business. Whether the systems he/she chooses are traditional software managed in house, or hosted with a third party, or SaaS is just one of the strategic choices that person needs to make.

SaaS solutions are, by definition, designed as a standard but flexible solution on a "one to many" model to make cost effective use of economies of scale. If you need purely bespoke, then you'll need to find a hosted or ASP provider who can manage your bespoke solution. However, there are SaaS solutions that can be as function rich and flexible as the modules provided by the major ERP providers. Here's an example that relates to Sainsbury's. The Spar supermarket chain in the Netherlands uses a SaaS solution to handle all supply chain order management and fulfilment between it's 800 supermarkets, it's distribution centres, warehouses and suppliers. Their ICT manager Peter de Lange, understands their business thoroughly, found a flexible solution that could be customised (but not modified) to provide exactly the support he wanted. The SaaS provider's service level and 24/7 availability were amongst the reasons why he opted for that route.

SaaS solutions may be mostly aimed at SMEs now, but you'll begin to see them being used more and more at the enterprise level in the near future.
David Terrar
mail: [email protected]
web: and

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24th Nov 2005 12:19

A lesson here for the software as a service debate?
I wonder how the software as a service providers will react to David's comment, "Once you hand over IT to someone else, you lose the ability to develop the systems yourself"?

Granted, there aren't a lot of organisations around with Sainsbury's requirements for bespoke systems, but if your organisation is going to grow and require highly specific features, would the online service provider be able to deliver?

John Stokdyk
Technology editor

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By Anonymous
24th Nov 2005 12:21

SaaS - horses for courses
John - SaaS advocates have always acknowledged that this approach is probably not suitable under certain circumstances. Generally the guidelines revolve around the degree of customisation required (the meta-data approach can mitigate this to some extent) and sometimes organisation size (although this needs to be assessed on its merits).

With this in mind it is confusing why you talk about the "lesson" here for SaaS suppliers.

Realistically, would Sainsbury have any providers other than perhaps SAP, JD Edwards, PeopleSoft etc on their shopping list?

We can all take extreme examples to prove a point but surely a sense of proportion is required - in the same vein Sainsbury would probably discount QuickBooks & Sage but that does not mean these products are unsuitable for their target market

Nevertheless, we need to recognise that for the appropriate market SaaS is undoubtedly the way forward and try not assign attributes to it that far exceed the equivalent desktop approach - basically compare like with like

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24th Nov 2005 12:45

No comparison.
There is no comparison between the Sainsburys problem (which is not unique to Sainsbury's) and the concept of SaaS (if that is what it is now called).

The difference is that in the former you are asking an outside contractor to do something very bespoke and unique to your business which requires business specific knowledge and in the latter you are asking an outside contractor to provide a generic product which requires little knowledge of the business. With SaaS if one supplier fails to perform you take your dataset and go to another supplier. I accept that at present the offerings are fragmented and that the market requires some maturity before it is going to be fully functioning, but I feel the two are completely different situations.

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