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Best Buy to Outsource IT to Accenture

IT head count expected to drop from 820 to 40 as retailer stresses agility over customization

By Carol Sliwa
April 19, 2004 12:00 PM ET

Computerworld - In an uncommon move in an industry that usually takes a selective approach to outsourcing, retailer Best Buy Co. last week confirmed its intention to outsource all of its IT operations to Accenture Ltd.
Richfield, Minn.-based Best Buy currently employs 820 people in its IT department but said it expects only 40 to remain with the company if it reaches a final agreement with Accenture.
Best Buy spokeswoman Dawn Bryant said that those 40 will oversee IT strategy and manage the relationship with Accenture. About 650 IT employees are expected to receive comparable job offers from the management and technology consulting firm.
Best Buy last week notified the other 130 IT employees that their positions are being eliminated. Bryant said the employees will remain on the payroll for 60 days, after which they will receive severance packages.
Bryant said positions are being eliminated in areas of redundancy, and she stressed that job performance wasn't a factor in the decision-making process. "It's about needing to be really efficient as an organization and being able to react to changing business needs," she said.
The agreement isn't yet a done deal, but it's nearing completion, said Bryant.
Based on information that has been publicly disclosed, the Best Buy deal appears to differ from some other retail outsourcing contracts, including the 10-year agreement that Sears, Roebuck and Co. is negotiating with Computer Sciences Corp.
In the second quarter, Sears hopes to finalize a deal, estimated to be worth $2 billion, that calls for CSC to manage much of its IT infrastructure. About 260 of the retailer's 1,160 IT workers are expected to be affected, but Sears has said it expects CSC to hire nearly all of those staffers.
Testing the Waters
John McCarthy, an analyst at Forrester Research Inc. in Cambridge, Mass., said most large retailers are doing some experimenting with outsourcing and offshoring as they try to beef up technology initiatives on low budgets. But companies typically outsource only a selected or commoditized piece of IT, such as the infrastructure or maintenance. "What Best Buy is doing is unique, and it's unique in most industries," he said. "Most companies don't necessarily want to get rid of all of IT."
Accenture, however, noted that the potential Best Buy arrangement isn't unprecedented. In late 2000, London-based grocery chain J Sainsbury PLC signed a seven-year deal to outsource its entire IT operation to Accenture and claimed it expects to save about $50 million per year. Sainsbury transferred about 800 employees to Accenture and retained a small in-house staff to oversee the company's IT strategy and manage

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