The Co-operative Group (Co-op) is to buy its supermarket rival Somerfield for £1.57bn, in a move that will highlight cost savings associated with IT.

The Co-operative Group has recently emerged from a merger of two major co-op retail groups that saw a major IT integration effort.

Somerfield, for its part, outsourced its IT in December 2006 to Indian outsourcer Tata Consultancy Services (TCS) in a seven-year £50 million deal that handed over IT operational management and planning, including central infrastructure maintenance and IT service delivery to 900 stores and eight distribution depots.

The outsourcing occurred as Somerfield was part way through a £70-million IT transformation programme to consolidate a variety of legacy operational systems onto SAP systems with Business Objects business intelligence systems and new point of sale technology.

The Co-op itself has recently been through a major consolidation process led by CIO Gerry Pennell. In 2005, IT for the Co-operative Group and the Co-operative Financial Services (CFS) merged.

“We had two completely separate IT teams, so we have spent the last 12 months uniting the team and its functions,” said Pennell. “The focus has been on consolidating the systems infrastructure where we can and looking for synergies across datacentres, desktops and similar areas.”

This was followed by a merger of the UK’s top two retail co-operatives - the Rochdale-based United Co-operatives, which has 930,000 members, and the Manchester based Co-operative Group. The combined retail group uses Oracle databases, Oracle E-Business Suite 11i and IBM xSeries servers.

Recent IT initiatives at the Co-operative Group include an £8.3 million investment in an electronic point of sale systems for its food store network and a warehouse management system from Manhattan Associates for its regional distribution centre in Thurrock, Essex.

In addition the Co-op is putting a major emphasis on Green IT, including an automatic out-of –hours shutdown system for tills, printers, chip and pin devices, scanners and displays at its 2,200 food stores.

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