How Blockbuster is Updating Its IT Infrastructure

CIO — Prior to signing on as CIO of Blockbuster in 2007, Keith Morrow had spent some time doing IT due diligence for companies looking to make acquisitions. So when he arrived at the movie rental company, he knew how to take measure of its technology group. What he saw—a siloed organization using outmoded technology—didn't surprise him.

Using "vintage early '90s" technology, such as IBM AS/400 minicomputers, he says, the existing staff was spending most of its money on maintenance, and technology was siloed by department. Several major business areas had their own developers, business analysts and project managers, he says, leading to duplicate and "reactive" work.

Last June, Morrow engaged Cognizant Technology Solutions to set up an application maintenance and support center of about 200 technologists in India. "We significantly changed the team and that gets us a smaller budget," Morrow says, though he declines to say how much Blockbuster is saving.

Just as important as saving money, he says, the arrangement frees headquarters staff to concentrate on new projects. He retained in Dallas a team of about 100 people who focus on strategic initiatives. These include working with NCR to build kiosks (where customers can access their Blockbuster accounts and download digital movies) as well as integrating inventory and merchandising data from consumer electronics vendors into Blockbuster's largely homegrown supply chain systems. This year, IT will work closely with Blockbuster's store operations staff to roll out new servers at each store, replacing a mix of Digital Equipment and Compaq machines. Blockbuster hasn't yet chosen a vendor, but needs faster machines to support the digital business it's building.

"Technology-enabled retail can produce shareholder value," says CEO Jim Keyes," and that's what we're after."