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Cost and compexity sunk Dixons outsourcing deal

Andy McCue silicon.com

Published: 25 Jul 2005 09:50 BST

Electronics retailer Dixons pulled the plug on a deal to outsource its internal IT to LogicaCMG after directors got "cold feet" about the cost and complexity of the deal at the last minute.

Silicon.com, ZDNet UK's sister site, understands that the scope of the deal and a lack of transparency over the cost proved to be an 11th-hour deal breaker.

Sources indicate the Dixons board was uncomfortable with what they were being asked to commit to and wanted more transparency over the margins LogicaCMG would be making and the levels of staff salaries.

However Dixons is also understood to have had difficulties defining the scope of exactly what it wanted to outsource.

As ZDNet UK reported on Thursday, CIO Iain Andrew, who negotiated an IT outsourcing deal with LogicaCMG at his previous company Britannia Airways, has left Dixons to "look at career options elsewhere".

A spokesman for Dixons confirmed: "We haven't been able to agree terms. It is important for both parties that you are able to achieve a satisfactory outcome and we have come to the stage where we couldn't conclude negotiations."

He admitted that some staff had left Dixons' IT department since the outsourcing talks started but denied there had been any redundancies. Up to 250 IT staff would have been affected by the deal.

"It was not a redundancy situation. Some staff may have chosen to leave. People come and go all the time and some people have left our IS function but we employ a substantial number of people and I can't comment on why they chose to leave. It is a matter of individual choice," he said.

In the meantime he said it is "business as usual" within the IT department and added the collapse of the deal has no impact on Dixons' relationship with LogicaCMG.

"We expect co-operation in the future," he said.

Both LogicaCMG and outsourcing consultancy Quantum Plus, which advised on the deal, have declined to comment because of commercial confidentiality and non-disclosure agreements.