WHSmith’s other Swann – IT director Peter Swann – talks to Joanna Perry about how the retailer’s efficiency drive has left it well placed to get value for money in the downturn

At WHSmith, the difficult decisions that many IT directors are now making have already been taken. While other retailers work out how to cut their technology operating costs, WHSmith is already reaping the benefits of the work done in the past few years – which has lowered what the retailer spends by about a third.

The work of Peter Swann and his team – under the watchful eye of the retailer’s notoriously cost-conscious chief executive Kate Swann (no relation) – has seen the retailer already transform its IT cost to service ratio.

Peter Swann explains: “We know what it costs to operate IT – and we have reduced the operating costs by more than 30 per cent over the past three and a half years. There is a cost against a service standard. Three and a half years ago the service standard was weak, now it is much better at a vastly reduced price.”

The company had to take a fresh look at everything it did, remove waste and increase the value of its customer proposition. This has required a major re-engineering of the systems used.
The travel business is now running on a common platform, ending much systems duplication, and five data centres have been consolidated into one, with an additional site for disaster recovery.

Swann says that despite any budget cuts an IT department might face, there is no room for a reduction in the standard of the service provided. “IT has to be prepared to help the business – and you can’t be less responsive, flexible or efficient in how you do that,” he says.

That is certainly the case in a business such as WHSmith. He continues: “Kate [Swann] takes a personal interest, as does Robert [Moorhead], our group finance director. They understand the significance of IT in the organisation and don’t overemphasise it either, which is important. She wants to be able to hold business units accountable and so it is important that IT is off the problem page – enabling the business and not constraining it.”

The company has found it gets better value for money by working with a variety of technology service suppliers. “We did have a single-service arrangement that wasn’t working – and we doubled up with a large internal department,” says Swann.

Now WHSmith works with Capgemini, Accenture and BT Expedite. Swann says of this model: “They each have enough of our business to make it work for them. There is something to be said for a little bit of competition – and our ability to manage it.”

These partnerships have served the retailer well as the recession began to bite. Swann notes: “The recession doesn’t change the need, but it changes the focus on what’s really important.
It means going back and questioning the fundamentals, asking: ‘Why does this cost what it costs?’.”

He continues: “Going into last Christmas we sat down and looked at every aspect and challenge. We looked at every vendor and challenged them on whether things could be done in another way that would be sustainable.

“It is a two-way street. We have to challenge our own assumptions as well as the vendor; and it should be a continual process. It is not pure cost – it is about delivering a service in a way that really works.”

For example, most stores have multiple tills, which are there to meet the demand during the few weeks of Christmas when the retailer sees peak trading. Swann says it is unnecessary to pay a premium for a maintenance contract where an engineer will come out to fix a broken till within four hours, when most of the time the next day will do. However, he adds that in those few peak trading weeks he wants an engineer out within three hours.

“Sometimes we have to keep asking those leading questions and we would love the vendor community to start overtly asking those questions themselves,” he says.

The IT factor

When Swann talks about the IT projects that he has been involved with for the past few years, there is surprisingly little technical detail. Everything is described in terms of what it has achieved for the business.

WHSmith’s finance systems have been re-engineered and a shared services model introduced to support the different business units in a simpler and more cost-effective manner. Supply chain initiatives are described in terms of their goal of lowering the total cost of the retailer’s catalogue, enabling WHSmith to widen the product range it sells. A sourcing system was introduced to “enable us to buy better and get better margins” and a system from Connect3 has been introduced to drive flexible promotions. It makes the IT function all sound so simple, yet
integral to the success of the business.

The IT department has not only cut its own operating costs, but also allowed other areas of the business to cut theirs.

Swann says one aim has been to look at ways to genuinely reduce tasks in stores. WHSmith has worked with Nordic ID and BT Expedite on a handheld device loaded with multiple applications, which has been low-cost to deploy. It is used for managing tasks such as shelf-edge labelling, stock management and selling on the shopfloor.

Swann says that these tools allow for good, targeted replenishment processes, which reduce errors, improve availability and address what was a high-cost staff base.

“There are huge appetites from store teams for things like this – but we have to make sure that it doesn’t get over complicated. We don’t want something that requires staff to have a PhD to operate it,” he says, explaining that the IT department must act as a broker between users and suppliers to ensure that the business gets the maximum value out of any technology deployed.

Some 35 people work in WHSmith’s IT department, broken down into several areas. Service management staff sit either within the business as an interface to the IT department or manage relationships with suppliers to make sure they are delivering on a day-to-day basis. In addition, there is a small programme management team, a team managing the architecture of the retailer’s IT and a finance and procurement function.

But the retailer’s partners extend this headcount considerably. Swann says Accenture has about 25 staff working on the account in Bangalore, in addition to Capgemini and BT Expedite staff.

He says that for a retailer the size of WHSmith – not huge but with a lot of complexity in its business and the need to be extremely efficient – partnerships are crucial. “When you look at being really efficient, the need to work creatively with your partners is even more important,” he says.

These extra resources allow the retailer to flex when it needs to. Swann says: “There is not a lot of margin in our business. If we have an opportunity to open new stores we need to land that as soon as the business does the deal.”

When WHSmith took over the ex-Borders airport concessions the IT department was given little notice, and likewise when the company took on 26 units from Alpha Retail last summer there was only one month to get the necessary technology up and running.

To get things moving swiftly, an architectural template has been created with a variety of models that can be used; for instance hospital shops, travel shops, high street or franchises within motorway service stations.

The result of all the work that’s been done on re-engineering systems and controlling costs, Swann says, is that WHSmith has come into “a difficult economic situation fairly well set”.

Peter may be the less well known Swann, but his work has been crucial in ensuring IT has played a key part in his namesake’s transformation of the business.