Asda is embarking on what it terms “Europe’s largest IT transformation project”, as it aims to change 2,500 systems across every part of its business.
The transformation, named Project Future, is a necessity as Asda separates its systems from that of former owner Walmart following its £6.8bn acquisition by the Issa brothers and TDR Capital in 2021.
But it’s not been smooth sailing. There have been reports of a delay to the project, its move to a new payroll system led to a glitch that impacted thousands of employees, and the man tasked with leading the transition, chief transformation officer Mark Simpson, stepped down from his role “by mutual consent” last month.
Meanwhile, in Asda’s annual employee survey, only 48% of the 75,591 employees who participated felt they could articulate the benefits of ‘Project Future’.
Retail Gazette looks into what’s going on with its dramatic transformation and whether it’s on track?
What is Asda’s Project Future?
The grocer says it is planning to build “world-class systems in a once-in-a-generation IT transformation” to separate itself from its previous Walmart systems.
The three-year project is a massive undertaking and involves changes to 2,500 systems across the whole company, including infrastructure, POS, ERP, HR, and payroll, to move to a new cloud-based system.
It has hired hundreds of new roles to work on the transformation and has plunged £430m into the project, according to Asda parent company Bellis Finco’s latest accounts.
Asda chief financial officer Michael Gleeson says that while it spent the first two years of the project “designing, planning, building and testing” for the separation, it has been “firmly in implementation mode since the beginning of this year”.
It has already transitioned some major systems, including introducing series of new checkout technology to its stores, and completing the rollout of its new online groceries picking system, store-assist.
However, the ambitious plan has hit some stumbling blocks with the transition to a new payroll system leading to a glitch that impacted thousands of workers, although this has now been resolved, the retailer has confirmed.
Gleeson points out that last week it paid staff on Workday for the sixth time this year.
In another big change, Asda plans to outsource some of its technology function to Indian-based supplier Tata Consultancy Services (TCS).
Between 130 and 135 staff members have entered the outsourcing consulting process, which is due to finish in September.
An Asda spokesperson said the move would “ensure we have the necessary skills and capabilities in place to support these new systems”.
There’s no doubt that the complexity of the transformation project is immense, however, Asda has made the task even more difficult, according to former Sainsbury’s group CIO Phil Jordan.
He says Asda is “trying to do three really difficult unbalancing things at the same time”.
“Swapping out core systems when you’re still running a business, doing it in a really cost constrained way, and swapping out partners or outsourcing,” he says. “All those three are such high risk that when you do one of them it’s challenging, to do all three together is deeply challenging.”
Former Sainsbury’s, John Lewis and House of Fraser CIO Julian Burnett notes that the decision to outsource staff to TCS isn’t “a wholly uncommon action to take” for the grocery giant.
“The vast majority of grocers do outsource and have outsourced reasonable chunks of their technology operation to organisations including TCS, Accenture, Capgemini, Wipro and various others,” he says.
“It’s not an untypical pattern where a tech services business is invited to deliver a transformational investment programme that results in a new set of technologies and a new set of capabilities required to manage those technologies.
Commenting on why Asda has decided to outsource staff, Burnett says: “There will be a blend of benefits they’re seeking to gain. Ultimately it’ll be an economic decision, but it’ll also potentially be the sustainability and scalability of the service.
“It could be that because of their purchasing scale, TCS are able to access economic benefits in the relationships they have with the software and technology infrastructure providers.”
What next?
Asda CFO Gleeson insists it is on track to complete Project Future – which since Simpson’s departure, will be led by chief digital officer Matt Kelleher, the former CIO of Morrisons, who started his role last month – by the end of this year.
Matt Kelleher
The executive explains the supermarket has “achieved an awful lot in half one,” including “closing quarter one and two on its new systems”.
Its next big project will be changing its in-store replenishment system.
Gleeson says: “We’re piloting a number of stores through September and then we go into implementation in October and November with a view to being complete at the end of this year.”
Jordan believes the hard slog isn’t over for Asda yet. “The only certainty is that there will be more bumps in the road. You simply can’t do any of the things they’re doing and not create negative impacts,” he says.
“And of course its competitors will take every opportunity to capitalise on the instability created by Asda,” he says.
Some believe it is already causing harm in the here and now.
In fact, in the wake of Asda unveiling a 5.3% like-for-like decline in its second quarter results last week, GlobalData associate retail director Sofie Willmott shared her view that its technology transformation had become a distraction.
She says: “No doubt this will bring benefits and cost savings in the long term but while it has taken its eye off its core product offer, distracted by these projects as well as buying EG Group and a number of Co-op stores, its competitors have been laser-focused on food at a time when consumers have been extremely budget-conscious and willing to switch.”
Will it be worth it in the long run?
Despite the challenges ahead, Jordan insists the tech transformation presents a “fantastic opportunity” for the supermarket.
“I don’t think any other retail business would contemplate replatforming itself and changing its operating model in the way Asda is,” he says.
“If they can do it, they could certainly leapfrog capability, they could go from having pretty old Walmart-based systems to having the state-of-the art technologies.
“I personally think the journey to get there is deeply challenging and will take a lot longer and cost a lot more and probably create a lot more of the instability they’ve seen before they get there.”
Burnett agrees, and believes the new IT paired with TDR taking on a majority shareholding in the supermarket in June leaves Asda “standing on the departure point for a better future”.
Hopefully it will be short-term pain for long-term gain at the supermarket as it works towards its looming Project Future deadline.
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