Circuit City CIO Explains Decision to Outsource
"I tried to outsource myself, but IBM didn't want me." —Bill McCorey, CIO, Circuit City
Wed, June 13, 2007
Computerworld — Circuit City Stores CIO Bill McCorey said last week that the company moved to outsource its IT operation to IBM last year to cut costs and allow internal staff to focus on better supporting workers in the company's retail stores.
In a keynote address at the ERIeXchange retail show in Boston last week, McCorey said the consumer electronics retailer is still in the process of transitioning its IT operation to IBM under the US$775 million outsourcing pact announced in April. The company expects to shave IT costs by 15 percent over the life of the seven-year pact.
In his speech, McCorey said he had to convince corporate management of the long-term benefits of outsourcing. "You've got to have a real understanding at the top that IT investments are not short payback, but necessary investments, especially if you're looking to grow the business," he said.
He said that managers concluded that the outsourcing effort would allow the company to better align the IT operation with the company's business needs. In the long run, he said, outsourcing the primary IT jobs to IBM would let the internal IT staff better focus on providing Circuit City associates working on the store floor with the "technology and tools to create the best experience for the customer."
McCorey said he decided to outsource the company's data center because it was the IT unit's biggest and most expendable commodity. Circuit City had managed and monitored its data center adequately but decided that IBM, with its size and the experience of its staff, could handle the job better, he said.
Top executives at the retailer approved the plan last October, McCorey said.
The plan was quickly disclosed to the 150 IT staffers shortly thereafter as part of an effort to keep them informed of the effort, McCorey said. "I wanted the [project] team open and sharing information on a daily basis," he said. "I would do it that way again."
He said 50 of the IT workers moved on to IBM, while most of the rest agreed to remain on a short-term basis during the transition. He also noted, "I tried to outsource myself, but IBM didn't want me."
While the company declined to disclose how much it expects to save by outsourcing its IT operation, a spokeswoman said this week that the project "is going well and on track."
