Tesco plans to use its £100m IP network infrastructure rollout as the platform for a datacentre consolidation programme, a company-wide HR system and plans to trial in-store kiosks offering live interaction with consumer experts.

Starting this month, Tesco will roll out a multi-service IP network from Cable & Wireless that will raise store-level communications capacity from 256Kbit/s to 2Mbit/s, and its warehouse and distribution network from 2Mbit/s to 100Mbit/s, enabling the rollout of business applications and a research and development (R&D) programme in areas such as video services and logistics.

Tesco operates 42 distribution centres in the UK, each running a Unix server. The firm plans to use the network speed to consolidate its servers into “a handful of datacentres that will centrally control our logistics”, said Nick Folkes, IT director of operations and infrastructure at the retailer.

On many levels this is a necessary consolidation exercise brought about by Tesco’s previous policy of multi-sourcing which will see the IP network replacing five voice and five data networks.

A Tesco spokeswoman said plans had not been finalised for the new HR platform, and that a tender had yet to be prepared.

The retail giant, which has a capital expenditure budget of £4.2bn for this year, said it expects to save between £8m and £10m per year in costs through the use of in-store and depot-based communications based on fixed-mobile convergence. Tesco will supply 50,000 staff with GSM handsets that will link to the network, giving virtually tariff-free communications within its premises and seamless roaming based on the O2 network for workers who move between locations.

Folkes was not overly impressed with many of those bidding for the network contract. “Of 14 bidders, Cable & Wireless (C&W) was the only firm that listened to us, understood our needs and sought to provide network solutions tha t met them,” he said.

“A lot of organisations will say: ‘Here is our product, how do you want to use it?’ C&W asked about the business problems. Most of what was offered was inflexible. You then end up bespoking it to the point where you have a proprietary system and all the issues associated with supporting it. This inflexibility is an inherent problem in the IT and telecoms sectors.”

The IP network will not affect Tesco.com, which runs as a self-contained business within Tesco, and Folkes said he is not aware of any business processes being planned with the online operation to exploit the IP network.

Tesco sees IT as a key business enabler. “We don’t have a limitless budget, but we see investment in IT as reaping the benefits for our customers and our 440,000 staff, of which 2,500 work in IT,” said Folkes.

The IP network will be rolled out at a rate of 100 stores per month. “The scale is a challenge, but we have signed a risk and reward contract with Cable & Wireless,” said Folkes.

From the warehouse..to the shelves

In its UK home market the firm operates 1,800 stores supplied by 42 distribution centres.

Increased data capacity will do a lot for distribution centres, said Nick Folkes, IT director of operations and infrastructure at Tesco. Existing equipment includes
arm-mounted PDAs that cannot communicate directly with the depot management system.

The fixed-mobile convergence application, which will run on top of the multi-service
network, means individual Tesco warehouse workers will always be contactable, and those moving between locations will pay lower tariffs through a deal with mobile phone network provider O2.

The firm expects the greater network bandwidth to deliver the necessary quality for mobile voice over IP within its warehouses.

The IP network will go live this month, first by connecting international operations in China, Japan, India, US and Ireland. The system will then roll out across all UK sites, including offices, stores and depots. The international rollout of the network will help Tesco rationalise its procurement processes, said Folkes, citing the UK’s centralised buying model as being repeated in different markets to achieve economies of scale.

The network will also support Cisco telepresence videoconferencing which Tesco expects to cut down on executive travel and allow remote operation of interactive
whiteboards.

The firm is essentially building a mobile network, said Andy Evans, chief technology
officer at supplier C&W. This means Tesco will have the ability to integrate all its applications over a common delivery platform.

At store level, Tesco is going “ubiquitously mobile” with GSM handset-equipped staff who will be more easily managed. A multi-store “staff to check out” system will be deployed. The network is the basis for a planned R &D programme involving in-store interactive kiosks that will carry live IP-based video from consumer experts. In the event that shoppers require guidance on particular products, be they electronics goods, DVDs or wine, they will be given access to an expert who will address their queries.

“We are not sure there is a business model here yet, but in R&D terms we are looking at what kiosks can do for us and we plan to pilot it,” said Folkes.