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12. Tesco

• Quarter:
• Screens: 12,300
• Employees: 266,178
• Head of IT: Philip Clarke, Asia, Europe and IT director
• Industry: Retail
• Website: www.tesco.com

+Last year saw Tesco consolidate its dominance as the world’s third largest grocery retailer, both domestically and overseas in the US, Europe and Asia.

Despite recent trading updates that indicate challenging economic times are having a direct impact on consumer incomes and slowing growth in its booming non-food business, Tesco has largely bucked the downward trend in UK-based retailers’ profits. They were up 5.7 per cent before tax during 2007/8 for the group, with total sales increasing 11.1 per cent to £5.2 billion.

A standardised and reusable IT infrastructure lies at the heart of its international growth. Getting to grips with its global organisation from a central and local perspective has characterised much of the IT investment building on its infrastructure goals. For example, the retailer has expanded its use of supplier management software to reduce supplier setup lead times. Having originally used the software to accelerate the implementation of its new Oracle 11i procure-to-pay and financial back office systems for goods and services not for resale, it is now using the software to streamline its overall supplier management.

Oracle has always featured heavily in its IT environment and last year it completed the strategic, global roll out of Oracle Retail Planning systems across the world to match local needs with product assortments. With non-food sales increasing five-fold in the past six years to reach £6.8 billion, Tesco’s merchandising department was still heavily reliant on spreadsheets three years ago, when it began its initial deployment.

It also extended its applications management outsourcing contract with Indian provider, Xansa in a deal worth £18 million. The supermarket giant said it would use the further reduction in the cost of core UK and Ireland IT operations anticipated with the three-year deal extension to focus investment on extending its retail offering and improving customer experience.

Most recently, Tesco signed a five-year, £100-million outsourcing deal to consolidate and modernise its IT network infrastructure. A new internet protocol (IP) based network will bring together all of the  existing Tesco UK communication infrastructure, connecting more than 1,800 Tesco sites including stores, regional offices and distribution centres. Internationally, the network will directly connect Tesco operations in 14 separate countries including China, India, Japan, the US, Republic of Ireland and Turkey, as well as over 400,000 people. International offices will also be able to access centralised management systems over the network.

Its single supplier, Cable&Wireless (C&W) will implement a voice over internet protocol (VoIP) platform on the network, which is anticipated to significantly reduce voice and data call costs at Tesco, as well as enabling the introduction of a Fixed Mobile Convergence (FMC) communications service for Tesco employees, significantly reducing its call and equipment costs. The service will enable Tesco staff to use their existing mobile phone for all calls – operating as a fixed line phone in the office, and roaming on to a mobile network when outside.

The networking deal is also key to many innovative new technology based customer-facing investments the retail giant will work on during the next 12 months. These include in-store information kiosks that are able to direct customers to items, market in-store offers and provide other self-service information. While it also intends to adopt high-definition video conferencing ‘telepresence’ technology, provided by Cisco, with additional features such as shared documents and interactive whiteboard facilities. The network will also support the broadcast of staff information and management presentations to stores and distribution centres, in the UK and internationally, to keep colleagues informed.

Nick Folkes, Tesco UK Infrastructure and Operations IT Director said: “Innovation was at the core of the [C&W] service. This next generation network opens up a new set of opportunities for us. We can be much more creative in terms of the services we can offer our customers, as well as our staff.”

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