In the wake of one of the worst starts to a year for the retail sector, Boots the chemist chain, remains - no pun intended - in good health. Its stores remain popular with customers, it has a presence in all the key channels, it fared better than some in the ongoing corporate tax scandal and it continues to grow as an international brand.
"IT's job is to boost business performance. If it doesn't, then we may as well shut up shop," Boots IT director Jonathan Vardon says of the major business process and technology transformation taking place at the company. Vardon is relaxed, and with Christmas trading brisk at the Oxford Street store below Boots London office where we meet, he is enthused by the course the organisation is following.
In June of 2012 US pharmacy retailer Walgreens acquired a 45% stake in Alliance Boots, the company of which Boots is a part.
"It is a partnership. For the US they have an opportunity to get into the UK and European market and they have the option to buy the remaining 55% stake in three years' time," Vardon explains of the merger between these two dominant global retail players.
As well as its deal with Walgreens, Boots acquired Nanjing Pharmaceutical in China in 2012 and this global reach is a key driver of Vardon's technology and online strategy.
"Everything we are doing has a digital lens," says Vardon. "The new Burton-on-Trent warehouse will drive our online and international business," he says of recent supply chain improvements. Revisions to the pharmacy business are also being carried out by Boots and Vardon says the focus is on making sure in-store and online areas of the business support each other as much as possible.
"We have done a lot of work on pharmaceutical management systems. Boots and IT has been guilty of point-to-point solutions," he says, and indeed industry watchers have been critical of the pharmacy systems and prescription services offered by Boots.
"The leadership understand the complexity of the IT estate and the very old ways of working and there is a great recognition and expectation of what IT can do," Vardon says of the role IT is taking in the business transformation.
"For IT it's a chance to really drive through changes in anger. What we are seeing is the huge volumes that we are putting through at the moment.
"The last couple of years there has been a huge capital investment in IT to really put it at the front of the organisation's transformation. Not only will this continue, but we are significantly increasing our investment in 2013-14 when compared to 2012. IT has never worked more in partnership with our business teams."
Vardon inherited a transformation plan from his predecessor Andy Haywood. "Andy initiated a three-year transformation activity called Break Through. The first year of my role was to make sure we delivered on that activity."
Haywood, now group CIO for the Co-operative Group, hired Vardon himself and is a keen advocate of Vardon's talents - telling this title how proud he is of Boots for backing Vardon's progression. Whenever a protege moves into the top seat there is a tendency to live in the shadow of the previous incumbent, but Vardon, while committed to completing Haywood's plans, has some clear strategy ideas of his own.
"Now the strategy for the next three years is a platform for growth and for ensuring IT is all about the customer. All our KPIs are about how we help the stores to trade, increase sales and ensure there is a feelgood factor for stores, customers and colleagues.
"I'm really excited about the ambition to have IT at the centre of that transformation."
With this IT-centricity in mind, Vardon has team members working with all areas of the business to deliver the technology message.
"My relationship team sit within the business areas. These are the people that have the customer lens, without the technology jargon. As a department our mission statement is "to deliver what the business needs at pace"?, not what it wants, not to be order-takers, but assertive in what we can do and what the business problems are.
"Some CIOs have a desire to deliver innovation, but Boots is very focused on understanding what the customer wants," he says, pointing out that the helpdesk operation has been trailblasing ideas that have reduced costs at the company.
Prescription for change
Rationalising and modernising the Boots estate is no small task for Vardon.
"Boots has got a complex legacy estate, it's not what I'd call simplified," he says. "SAP is part of the drive towards agility and operational efficiency and we have still got a good job of work to complete. Some of our mainframes are aged and are clearly not fit for purpose as we go into the digital age. We are in the process of laying in a new generation of strategic applications that will simplify our operational landscape and kick-start future growth.
"Mainframe is relatively cheap to run and support, but it becomes a complex estate to support and therefore costly, but SAP can be costly to run. It all depends on how you run your partner model so that everything depends on the business benefits," he says of the legacy versus rip and replace dilemma many CIOs face during their careers.
"We have had a busy year looking at our partner model and we are about to go on a three-year sourcing transformation journey," said Vardon.
"Boots has been with Infosys for five years and now we have gone over to Cognizant for application management and maintenance, coupled with Steria, who we continue to work with. IBM is also our managed service provider across the UK, Ireland and the international online business.
"These are the two big contract changes and they gave us a great opportunity by offering better value for money; to be more responsive and more proactive in taking the organisation forwards with growth," says Vardon.
"How our partners work and engage with us is my key decision-making process. We have 12 business processes that our partners support and there is a lead partner for each of these giving us one point of contact when there is an issue or a question.
"We do a lot of work on where the organisation is going that involves partner forums. At these we score partners and they score us and we recognise and reward those that are doing well," he says.
Not only has Vardon been busy changing the outsource services model, he has been reshaping internal sourcing too, including creating an IT academy as part of Boots' apprenticeship scheme at the company's HQ in Nottingham.
"I hope to get to a 50:50 sourcing model through the academy and we are working with colleges and universities to up-skill these graduates. They will provide the flexibility and agility Boots will need.
"Historically we have gone too far with the outsource model and that had made us too reliant on our partners. Having an in-source service means I can get the business close and at every level. We are already seeing small and medium changes becoming easier," he says.
Vardon has also been recruiting more skilled IT personal with deep technical expertise to meet internal demands.
"We have some fantastic capabilities that have been with us over a period of time, and bringing in some very high calibre people into the business has made a massive difference. The evolution will be to break out of a complex legacy to be a platform for growth," he says of the important human factor in technology transformations.
The human factor will remain important as the company's online offering grows to complement, not replace, its core in-store business.
"Boots is the one organisation that won't see a shift to online like others. We have a fantastic store network that our customers like as it offers a real opportunity to try out the products and experience them.
"We do see an online growth and especially mobile as well. Over Christmas Boots had a gift app combined with video gift tags which was popular."
Not to be sniffed at
Unlike some High Street rivals, Boots effectively has no quiet period. Vardon explains that Christmas shopping represents the peak trading period for Boots, but thanks to our seasonal sniffles, stores are always busy - summer is good thanks to hay fever and winter is buoyed by the good old-fashioned common cold.
This year-round need for Boots' wares aids customer loyalty, a relationship backed up by the store's popular Advantage loyalty card.
"The key for me is the seamless interaction between in-store and online and is the customer connected to us. Next year we will continue to enable this and look to implement WiFi in more of our stores," he says.
Boots, like Tesco before it, is accepting that customers want to use the internet on their smartphones to research products and check prices even while they are in the stores.
"I'm looking at a framework model for our mobile strategy at present to drive convenience for customers," he says.
Boots is modernising the in-store experience too and Vardon has rolled out 9,000 contactless till terminals. The company will complete its adoption of contactless tills by the end of 2013.
As for in-house IT, Boots currently only has a very small percentage of its applications in the cloud. Of more importance to the CIO of late has been getting Boots off its aging Lotus Notes email service and on to the Microsoft 365 platform, which has enabled home and mobile access for Boots staff.
Boots is running an internal trial of its own social media tool, Talk Boots, but at present doesn't allow access to Facebook and other social sites. On bring your own device (BYOD), Boots, like many other organisations, has seen the senior leadership drive early adoption.
"I don't worry about BYOD. At the leadership level there is a plethora of devices and it's pleasing to see," says Vardon.
Vardon has been IT director for a year and sits on the executive board, but reports to the COO, Ken Murphy. The seat on the executive board seems to be more important than the reporting line.
"It's the least hierarchy-obsessed organisation I've seen. On the whole Boots is one business and IT and I can get to the decision-makers in a minute's walk," he says of the campus it operates from in Nottingham.
"We [the executive board] meet every Monday for two to three hours and we cover everything off, week to week and IT has the best seat at the table with the discussions on stores and supply chain. That shows the recognition of IT's importance and Boots has a very supportive culture for IT."
Jonathan Vardon CV
May 2012-present: IT Director, Boots
October 2011-April 2012: Interim IT Director, Boots
2010-2011: Head of Solution Delivery - Corporate & Commercial, Boots
2009-2010: Head of Central Functions, Lloyds Banking Group
2008-2009: Head of Enterprise Platforms & Operations, HBOS
2006-2008: Head of Colleague Engagement & Change Programme Manager, HBOS plc - Retail IT
2002-2006: Senior Project/Programme Manager, HBOS
1999-2002: Programme Manager & Senior Projects Manager, Caudwell Distribution Group