 Seven years ago, when information technology (IT) outsourcing was still an embryonic concept in South Africa and most local companies were clinging to their IT operations for dear life, the Edcon Group let go.
"Why do we outsource? Because in the fierce retail battle that is out there, we would rather get in very strong partners than try to do everything ourselves," says Henri Slabbert, chief information officer at Edcon. This doesn't mean for a moment that Edcon sees IT as peripheral. "Some people think you can only outsource the things that are 'non-core'," Slabbert says. "That's a misconception. We see IT as very core to the business, just as the nervous system is core to the body." Widespread Recognition
In fact, there is widespread recognition within Edcon that improvements in stock-turn and sales would not have happened without the IT enhancements made. To quote from Edcon's 2005 annual report: "The significant progress that the Group has made in its IT infrastructure provides Edcon with a sustainable competitive advantage." Substantiating this, the report attributes the increase in Edcon's stock–turn from 5.2 times in 2004 to 5.8 times in 2005 to its "state–of–the－art information systems." Similarly, it ascribes the 46 percent improvement in stock distribution, up from 128 million units to 225 million within a year, to upgraded systems support and better distribution facilities. The report goes on to say that systems enhancements and capacity upgrades facilitated 645 million transactions in a single day in December 2004, resulting in sales of R147 million—"the best-ever sales for a single day." Slabbert is quick to tackle another common misconception about IT outsourcing, that once you have taken the plunge, your IT infrastructure either stagnates or costs an arm and a leg to operate and upgrade. "Actually, the IT budget has grown by a lot less than Edcon's sales," Slabbert says, pointing out that the Group's IT cost as a percentage of sales was down from 4.7 percent in 2004 to 4.2 percent in 2005. That favourable trend is expected to continue this year, when the expected growth in IT costs is projected at eight percent, well below the budgeted sales increase. This is despite—or perhaps because of—the significant investments being made in new IT systems development and applications. Rather than focus on cost-cutting or run-of-the-mill maintenance, Edcon's partnership with Accenture is geared towards investing in innovative applications that sharpen the group's edge in the hotly contested South African retail market. As Slabbert points out, Edcon does not treat its IT infrastructure as just another budgetary line item, but as an integral part of the group's business strategy, warranting continual fresh investment and a steady stream of new applications. More Building, Less Fixing
This attitude is much the same as that of many of the Fortune 1000 companies that were rated as high–performing IT organisations in a recent Accenture global survey. These companies adopt technology aggressively, spend more time building and less time fixing systems, and drive more and more transactions online. So what's new at Edcon? Plenty. "A big nut we've cracked is the system to support import processes," says Henri. "We've developed a system so that our buyers and planners can travel abroad and download all the stock, sales and budget data they need to make good buying decisions. They can also create their orders remotely while on the road." This has strengthened Edcon's ability to base business decisions on logic and hard facts, as has the sales–monitoring system introduced at all 743 Edcon stores countrywide. "In retail, if you have brought a product into the stores over the weekend, you need to know on Monday morning how it is selling," Slabbert says. "With this system, we know every day what is happening with about one million active items in our stores, giving us the ability to act quickly on mistakes." These applications, along with many others such as online talent acquisition, credit management, financials and distribution systems, have been implemented through Edcon's outsourcing partnership with Accenture, which has a full-time team of 280 people working on Edcon's premises. Repeated Returns, Renewed Relationship
Despite a seven-year history, going all the way back to 1997, the relationship has strengthened rather than soured. "The fact that we recently renewed the contract for another five years indicates that we are happy with the relationship," Slabbert says. "But formal contracts aside, the relationship is such that we really want to be in it. Working with Accenture, we benefit from their worldwide experience in the retail business and in systems development. We leverage off that capability, knowing that we are getting international best practice and solutions that we are confident will work." To Top |