Home Improvement

Home Depot is betting its $1 billion investment in IT infrastrucutre will boost growth and earnings, while fending off rival Lowe's. Can a strategy designed to improve efficiency also increase customer satisfaction?

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E-Learning. "If we hired every certified electrician in the United States, we wouldn't have enough people to staff our electrical departments," says DeRodes. "That's how big we are. When you get to this scale, you can't rely on the retired electrician to stand in the aisle. We have to train the people." To that end, Home Depot rolled out Web-based training courses for its 299,000 store employees in 2003 and delivered 23 million hours of Web-based training last year. The e-learning courses are delivered via dedicated PCs located in stores. They cover everything from basic sales and customer service skills to specialized product and brand knowledge. DeRodes maintains e-learning is "paying tremendous dividends in terms of higher customer satisfaction numbers."

While Home Depot under Nardelli and DeRodes seems to be distancing itself from its past by saying the old infrastructure won't support the company's new business and expansion plans and that the IT needs to be replaced. In fact, a lot of what they're doing—including the kiosks, the wireless scan guns and the mobile ordering system—continues plans conceived by Ron Griffin, DeRodes' predecessor.

A New IT Strategy to Meet the Competition

Because individual Home Depots were responsible for keeping track of which products sold or did not sell, as well as determining how to attract and retain customers, the company needed systems throughout the '80s and '90s to help managers make these decisions. To that end, and to support the company's expansion, former CIO Griffin introduced in the early 1990s a corporate data model and an application architecture based on a set of reusable software components. The components represented different kinds of commands or functionalities, such as inventory checks and price changes, that could be plugged into new applications. This component-based application architecture allowed the IT department to create applications quickly, without having to rewrite a lot of code.

Michael Starr, who is CIO of software provider Agilisys and former senior manager of application development at Home Depot, says Home Depot always felt that its business and operations were so unique that no packaged application could provide the stores with what they needed without huge, expensive, drawn-out customizations. But as the company grew, building systems in-house became less cost-effective. As Home Depot saturated markets with stores, sales growth at individual stores began to slow. As a result, says a former Home Depot vice president, the amount of technology and manpower that Home Depot could afford diminished. "You started to see a need for a less costly organizational and systems infrastructure," he says.

Accordingly, Griffin began embracing a strategy that relied more on packaged applications. In 1999, he announced that Home Depot would implement SAP financials in South America and later in the United States and Canada to replace its aging financial system. When Nardelli took over as CEO in December 2000, the move to packaged applications became even more pronounced. Griffin (who, citing nondisclosure agreements, declined to be interviewed for this story) announced in November 2001 that he'd leave the company by the first of the new year, and many of the projects he'd announced, such as the North American SAP implementation, in-store kiosks and wireless scan guns, were postponed until Nardelli found a successor. When DeRodes took over IT in early 2002, he had Nardelli's blessing to do whatever was needed to get the company back on track, and Home Depot's IT department started to change. Former Director of Store Systems Allen says the IT department under Griffin was less strategic and more reactive to store needs. He says this was a result of being constrained by the company's infrastructure and its freewheeling operations.

Former Director of Operations Strategy Beasley says, "I think the current group in IT is both more willing to tackle big transformational change and moving more to partner much better with the business."

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