Reference no: EM13946481

Case study

Supermarket Tesco sets out its infrastructure strategy

Illustrates the role and importance of IS strategy in determining the IT infrastructure which can respond to changed business needs. It shows how a new technology was introduced to increase the flexibility in comparison to the previous legacy systems.

Expansion in a competitive environment relies on being able to respond to new challenges as quickly as possible.

Retail giant Tesco, which is opening new stores in the UK as well as expanding overseas, needed to be able to rapidly build new applications to help maintain its competitive edge.

Its legacy back-end servers were based on old

Unix-based systems, and weren't flexible enough to handle the rapid creation of new applications.

In 2001, the company's board made a strategic decision to develop a new architecture for building and hosting web-based software.

It set out a strategy to build a back-end hosting architecture that would become the central platform for all of Tesco's applications to plug into.

What were the business objectives of the project?

The primary objective for Tesco was to web-enable its application infrastructure, cutting time to market for the development and deployment of new applications.

'We made a board-level decision to put in an entirely new application architecture for building and hosting applications', said infrastructure programme manager Steve Butler.

The platform would help Tesco maintain its competitive edge by bringing new tools to market faster.

'Speed and reactivity are key in the retail market', said Butler.

What were the key milestones in the implementation? Planning for the system began in 2001, but development began in earnest in February 2002, with the majority of the work being done by software consultancy 1E.

'A number of phases were mapped out, beginning with the creation of a new Microsoft .Net-based development environment in April 2002', said programme manager Nigel Chubb. This was followed up with the design and delivery of a live environment.

By September, the foundation infrastructure was in place and ready for handling new applications.

'Over the Christmas period, all system development was frozen as we dealt with our busiest retail period, but by February we were able to take operational control of the platform from 1E', said Chubb.

'The key deliverable from 1E was that once they had built the system for us, we had to be able to take control and move forward by ourselves', he said.

What technology was used?

The foundation of the infrastructure is a build and management platform, almost entirely based on Microsoft products, upon which all new applications are rolled out.

On the front-end, Microsoft Internet Information Server handles the presentation layer; Microsoft's .Net framework is used for the development environment; and Microsoft SQL Server provides the back-end database.

'Another component that is bolted on top of the build and management platform is an enterprise application integration layer that handles requests to and from our legacy systems', said Butler.

How did you manage the business change and people issues involved?

Chubb says it was crucial to have high-level support for the change in architecture. 'You need that level of buy-in from above to ensure success', he said.

An obvious challenge was migrating the in-house developers' skills to an entirely new development platform. 'We needed to build their confidence that this new platform could work, in order to help incent them to shift their skills,' said Chubb.

Another challenge was shifting from the current application development time of one to two years, to being able to deliver new tools in as little as four or five months.

A crucial step in achieving all of this was successfully delivering the new platform and demonstrating that it could actually work as promised. 'This was a major confidence booster for the developers', said Chubb.

What results were achieved?

Tesco has created a flexible, scalable, web-based environment for building and hosting new applications, making it far more capable of rapidly adjusting to business change.

'The project was delivered on time and on budget, which was a great success considering the scale of the work being done', said Butler.
The platform has given the company the power to develop new applications in-house, or to simply purchase off the shelf software and roll it out.

'The system has cut our time to market significantly, cutting development time from years to months', said Butler.

Last September, the firm rolled out Customer Service Desk (CSD), its first new application, across a number of its stores.

CSD is a till-based application for dealing with customer satisfaction issues electronically, removing the previous inefficient paper-based system and substantially improving the process for both customers and store staff.

Since then, it has been able to roll out a number of additional tools, improving a wide range of processes in the firm's stores and distribution centres.

What were the lessons learnt?

'You should definitely create the development environment first, providing a strong foundation for application rollout', said Chubb.

Butler adds that it's crucial to concentrate on the business requirements and to build the system accordingly.

And both agree that working with a partner that has knowledge and experience in this type of rollout is a must.

What were the business benefits and return on investment?

As the platform forms a core infrastructure for applications, it wasn't being produced to generate a return, says Butler.

'This was seen as a very strategic project and it was recognised that the business benefit would come from the applications that would be rolled out on top of this,' he said.

Tesco now has a platform that is capable of generating powerful new tools rapidly and rolling them out quickly to stores across the world.

How do you plan to build on the project further?

'Our focus during 2002 was building and piloting the system. In 2003, we're dealing with an aggressive rollout of the new applications we've already created', said Butler.

Tesco has created a number of applications, which are in various stages of deployment across the group's 780 stores, as well as into its international operations in Korea, Thailand and central Europe.

Question

To what extent do you think the success of this infrastructure project reflects a sound approach to IS strategy development within Tesco? Use the case to demonstrate how Tesco managed this project as part of its IS strategy

One of the most important tools is the Mobile Shelf Edge System (MSES), a PDA-based tool that enables store staff to handle stock management on the shop floor by connecting them to the stock system across a radio frequency network.

MSES is being rolled out across the UK, while a new PeopleSoft-based human resources system is being deployed in Thailand.

Butler says the firm has plans for an e-learning system, as well as investigating a number of other potential projects.

Computing says:

As IT becomes increasingly fundamental to businesses, the ability to rapidly develop new applications and bring them live is critical to achieving corporate objectives. Tesco recognised that their previous infrastructure could hold them back, and proactively introduced new technology as a foundation for its future competitiveness.

Source: James Watson, Project of the Year Awards: Tesco, Computing, 23 July 2003. www.computing.co.uk/Analysis/1142526