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Sainsbury's IT insourcing produces targeted savings as profits rise

Sainsbury's IT insourcing produces targeted savings as profits rise

Major expansion of online service planned

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Sainsbury’s is on track to hit its £440m cost savings target a year after insourcing its IT operations, the supermarket giant announced as it posted a 42% increase in profits for the year to 24 March.

The company also signalled a new focus on developing its online shopping service

Sainsbury’s cancelled a £1.7bn IT outsourcing contract with Accenture in October 2005, when it had five years left to run, as part of its Making Sainsbury’s Great Again recovery strategy, aimed at saving £440m by March 2008. The insourcing was completed a year ago, with IT assets and 470 staff brought back in-house.

Chief executive Justin King said the supermarket firm was “on track to achieve our cost saving target of £155m in 2007-08” – the last year of the original target period – and was aiming to offset half its operating cost inflation with further savings over the next three years.

IT costs were a “key area” of the costs savings made over the past financial year, along with supply chain developments and staffing, Sainsbury’s said in an announcement released with the preliminary results.

Sainsbury’s also announced a 49% rise in its online sales, describing it as “an outstanding year”, with a record Christmas performance. and plans to substantially expand its online operation by increasing the number of stores supporting online order delivery from 114 to 200 over the next three years.

The firm anticipates “significant growth potential in the online operation”, which has been promoted largely through word of mouth, and aims to boost capacity in geographical areas with high demand.

Sainsbury’s would not disclose sales figures for its online operations, but figures from internet retail analyst comScore Networks, based on online spending by two million shoppers in the first seven months of last year, showed Salisbury’s took 14% of UK online grocery orders – putting it in third place behind market leader Tesco with two-thirds of all orders and Asda with 16%.

But the data showed Sainsbury’s shoppers spent more online with an average £90 per order, compared with £80 for Tesco and Asda.

Sainsbury’s is also aiming to boost its sales by extracting more useful information from customer data. Last month the retailer extended its deal with Nectar loyalty card firm LMG to include the provision of analytics services.

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