Much needed retail therapy

Life has not been easy for KarstadtQuelle, the German department store chain and mail order group that has been hit by a sharp decline in the country’s consumer spending.

One area stands out as an exception: information technology, where the company has outsourced much of its computer operations in a move to focus on its core retail business.

It is a move that is being mirrored across Germany as numerous companies seek to reduce costs to survive one of the country’s worst bouts of economic stagnation and consumer malaise.

Last year, Essen-based KarstadtQuelle agreed to outsource two-thirds of its extensive information and communications infrastructure to Atos Origin in an eight-year contract worth €1.2bn.

Under the deal, the French IT service provider took over the IT infrastructure division of Itellium System und Services, the IT services subsidiary of KarstadtQuelle. Itellium, in turn, was put in charge of developing and managing group specific applications and handling business critical SAP software applications.

The infrastructure services provided by Atos Origin include network operations, desktop and mainframe management services, application management services and user helpdesks. These services are provided to more than 80 companies in the retail group both inside and outside Germany, including the travel agency Neckermann, the music store WOM and KarstadtQuelle Bank.

“We are able to provide substantial cost benefits to KarstadtQuelle by integrating its IT infrastructure business with our existing operations in Germany to achieve economies of scale,” says Gerhard Fercho, managing director of the Atos Origin German subsidiary. Over the past few years, Atos Origin has won outsourcing contracts with several large German companies, including mobile phone operator E-Plus, filling station operator Deutsche BP and logistics company Schenker.

In the process, the company has built up a tightly knit network of seven data centres in Germany, including two from KarstadtQuelle, which share capacity with customers on a nationwide basis. It has also established an extensive network of local support technicians, who are on the ground to meet the time-based conditions of its extensive service level agreements with the German retail giant.

Atos Origin offers KarstadtQuelle savings, however, that go beyond consolidated data centres, according to Mr Fercho.

These include standardising the company’s hardware and software systems, centralising its server landscape, consolidating office space and replacing subcontractors and other independent consultants with its own resources.

As part of the outsourcing deal with the German retail group, Atos Origin acquired more than 900 employees, bringing the total of its German workforce to 3,100.

One of the features of the outsourcing contract with KarstadtQuelle, according to Mr Fercho, is flexibility - something that helped the French company beat IBM and T-Systems, the IT service unit of local German carrier Deutsche Telekom.

Perhaps the biggest challenge of the KarstadtQuelle outsourcing contract, though, is not technology but people, says Mr Fercho. Bringing staff from corporate cultures as diverse as E-Plus, Deutsche BP and KarstadtQuelle and establishing new process with them requires a skilled hand, he admits.

Mr Fercho knows the risks. Several big outsourcing contracts in Germany have been abandoned, partly because of failed attempts to integrate unlike corporate cultures.