Dixons' easy choice led to hard decision

Speed, attention to detail, the bottom line. Outsourcing deals need all three to make sense

Outsourcing is major surgery for the corporate body, even when it works. When it fails — as happened with Dixons' aborted attempt to divest itself of its internal IT with the help of LogicaCMG's scalpel — the complications can be acute at first, chronic later.

On the face of it, Dixons seems to have made an elemental mistake in assuming a successful conclusion before terms and conditions were agreed. Yet nobody has the luxury of infinite time, least of all retailers with strong seasonal swings in activity. With only a narrow window for action and commercial, personnel and technical issues jostling for attention, the assumption of good faith and competence on all sides is a very tempting position.

For whatever reason the gamble went wrong, and Dixons in general and its ex-CIO in particular are paying the price. With much upheaval to undo and many plans to hurriedly remake, there’ll be a lot of work and trauma to come just to restore the status quo. We can only hope they purchased the extended warranty.

Yet there may be many other companies who have found themselves in a similar position but lacked the grit to pull out at the last minute. It is unthinkable that any consultancy would actually plan for this, relying on inertia and embarrassment to force through conditions unfavourable for their clients.

One therefore has to ask why nobody at LogicaCMG realised that the situation would go so badly wrong, or that there was such a divergence between the two companies’ commercial expectations at such a late stage.

Dixons has never done this before; LogicaCMG sells itself as an experienced, reliable provider of outsourcing expertise. Dixons may take comfort from its demonstration of guts in a difficult albeit self-inflicted position. LogicaCMG still has questions to answer.