Circuit City Inks Deal with IBM to Outsource Data Center Operations
Circuit City will be the next in a long past and future line of companies seeking to reduce I.T. expenditures by outsourcing certain operations. Although big savings can be expected, what is to become of its internal Information Technology employees.
Circuit City Stores Inc. CIO Bill McCorey said last week that the company moved to outsource its IT operation to IBM last year to cut costs and allow internal staff to focus on better supporting workers in the company’s retail stores.
In a keynote address at the ERIeXchange retail show here last week, McCorey said the consumer electronics retailer is still in the process of transitioning its IT operation to IBM under the $775 million outsourcing pact announced in April. The company expects to shave IT costs by 15% over the life of the seven-year pact.
In his speech, McCorey said he had to convince corporate management of the long-term benefits of outsourcing. “You’ve got to have a real understanding at the top that IT investments are not short payback, but necessary investments, especially if you’re looking to grow the business,” he said.
He said that managers concluded that the outsourcing effort would allow the company to better align the IT operation with the company’s business needs. In the long run, he said, outsourcing the primary IT jobs to IBM would let the internal IT staff better focus on providing Circuit City associates working on the store floor with the “technology and tools to create the best experience for the customer.”
