Morrisons to integrate Co-op IT

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Morrisons’ intention to buy 38 Co-op and former Somerfield stores may hold integration challenges for the UK’s fourth largest supermarket chain.

The £223-million deal – it’s largest since acquiring Somerfield in 2004 for £3 billion – would fit well within its existing, 150-strong smaller store format, the retailer revealed in its 2008 third-quarter trading statement late last week.

It will also presumably be looking to take advantage of the fact that the Co-op is an extensive Oracle Retail software user, as it continues to transition to its own deployment of the suite.

Morrisons announced a major £110-million strategic commitment to Oracle’s retail portfolio in February this year as part of a three-year IT investment project.

But the nature of the Morrisons deployment could test the further integration requirements of the newly acquired Co-op stores, given the fact it is one of the first organisations to undertake a significant new, prototype deployment of the entire Oracle suite of industry specific products.

The retailer’s ongoing migration away from costly legacy products includes the deployment of Oracle Retail merchandising, planning and stores applications, the Oracle E-Business Suite for financials, human resources (HR) and payroll and manufacturing and Oracle's Siebel customer relationship management (CRM) software.

At an infrastructure level, it has been deploying Oracle Fusion middleware, including the vendor’s service oriented architecture (SOA) identity management, and database products on HP hardware.

At the time, Morrisons IT director Gary Barr, said the Oracle deal would “promote a more accurate assessment of business performance”.

In acquiring the Co-op stores, Morrisons said it would also spend a further £98 million on acquisition, integration and refurbishment costs in a six-month phased handover of the stores that will begin early next year.

But the acquisition news and challenges ahead were set in the context of solid sales figures for its third quarter, with sales excluding fuel up 8.1 per cent on the previous quarter.

The figures build on the record £612-million profit it announced in March earlier this year and mark a turnaround in Morrison’s fortunes compared to the £313-million loss it faced in 2006 that led to founder, Sir Ken Morrison standing down as chairman. At the time, Morrisons faced stiff criticism from City analysts for struggling to integrate its Safeway acquisition.

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