FT : Wal-Mart Goes Global With SAP

Wednesday, May 28, 2008

Wal-Mart has begun rolling out a global information technology system in a break with its traditional reliance on the home-grown IT that underpinned its rapid expansion in the US.  The world’s largest retailer selected Germany’s SAP software over competition from Oracle last October.  It has stepped up hiring in its IT department, with an accompanying increase in corporate costs, as it starts to implement the changes.  Tom Schoewe, chief financial officer, said the “efficiency of the home grown system has not kept pace with the corporation’s growth”.  “It is going to be expensive to implement, but it will be far more efficient once we’re up and running and . . . it is scalable.  As you continue to see us grow, enter new countries, it’s something that can accommodate that better than our home-grown solution.”  Rising IT costs contributed to a 20% increase in Wal-Mart’s corporate expenses in the first quarter of this year, the company said without naming the total amount, adding that, without the expenditure on “transformation” projects, corporate expenses would have increased by 3%.  Mr Schoewe said this month that the additional expenses “will continue to be a headwind for the rest of this fiscal year and for several years to come”.  The first phase of the global roll-out is expected to be completed in the next two years, with a second and third phase completed in three to five years.

The shift to an external software package represents a significant shift for Wal-Mart, whose IT department historically spearheaded the development of technologies that have in the past transformed its business.  These include developing its “Retail Link” system in 1991, which give suppliers access to current sales and inventory data on their products on the company’s shelves.  Wal-Mart will continue to develop its own IT solutions, including RFID wireless tagging solutions, and hopes to create a global e-commerce platform that would both unify the systems used by existing online operations in the US and Europe and be replicable in new markets.  Tesco, Wal-Mart’s UK rival, relies on Oracle’s software for a global software system that was most recently deployed to support its US Fresh & Easy chain.

Reference : http://www.ft.com/cms/s/0/34542b3c-2b4c-11dd-a7fc-000077b07658.html

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