Best Buy Rebuilding IT Capability It Outsourced, Starts Hiring

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E-commerce, mobile computing, tablets and other emerging channels have become so important to Best Buy that the company is rebuilding internal IT resources it outsourced seven years ago.

Best Buy is hiring some 200 IT professionals as part of this effort, and expects its IT department to increase to as many as 350 employees once this round of hiring is completed.

The electronics retailer, which saw its online revenues grow 13% in the last quarter, is putting IT at the heart of a strategy to respond to the expanding e-commerce market.

"IT is becoming a focal point for Best Buy to compete in the marketplace," said Scott Heise, vice president of application maintenance and development at Best Buy. "A key component of that is us retaking control of IT."

The strategy is illustrated by the people the company intends to hire.

Specifically, the IT skills Best Buy wants internally are what it calls "top of pyramid," or people with leadership qualities who can translate business strategies to IT needs, have strong technical expertise, take ownership of the technology and interact with business leaders strategically. The company will still use outsourcers to provide more direct technical needs, such as coding.

Seven years ago, Best Buy, which is no. 47 on the Fortune 500 list, outsourced most of its technology operations, in a deal it announced with Accenture . The agreement was an eye-opener for its scope. Best Buy had 820 people in its IT department prior to the agreement, and said, at that time, that it planned to reduce its IT staff to about 40 people, with most of the jobs shifting over to Accenture.

Heise said the move doesn't mean Best Buy is doing a broad brush in-sourcing of all of its IT.

"We're still going to leverage strategic partnerships, but it is an acknowledgement that we feel passionate about having critical key leadership resources, from an IT perspective, back within Best Buy," said Heise.

Having direct control over the company's strategic direction and its road maps, said Heise, "is a critical differentiator that we believe at this point [we should] maintain ownership of."

By bringing certain roles back in-house, the company will be able to eliminate steps in the process that come "when you work in a highly outsourced model," he said.

Heise said the change will allow the company to bring new services to market faster, with tighter alignments in the organization.

Best Buy's decision to expand its IT department may be part of a broader trend among retailers, others of which are also hiring. In May, Lowe's Companies Inc. said it planned to create 150 new IT positions to prepare for future platforms. Macy's is expanding its e-commerce technology staff.

Home Depot hasn't announced any specific IT hiring plans, but the company has more than 100 IT jobs listed on its careers page. The company is working on both internal and external IT capabilities. It recently rolled out, for instance, new handheld devices across its stores that can provide everything from business intelligence capabilities to customer receipts.

At a quarterly meeting with financial analysts this month, Home Depot Chairman Frank Blake said the company has an "entire focus" around what it calls "interconnected retail" that involves more than selling online and providing research help. "They get project knowledge online, so there's a lot of ways in which our bricks connect with our online presence and we want to make sure we have the best experience in all of retail for that," he said.

Home Depot said it is "always looking for good IT talent," said Steve Holmes, a spokesman. "We've been working diligently to transform our IT on many levels, so we're certainly in search for talent to help us with this mission," he said.

Jimit Arora, a research director in Everest Group's service provider intelligence group, said retailers are working to respond to mobile computing, social media and other technology changes.

"A lot of the new consumer demand is being driven to a great extent by some of these new technology paradigms," said Arora.

A robust online presence is particularly critical to a businesses like Best Buy that sell to the technology-aware millennial generation, said Arora. These firms can't necessarily rely on service providers, who might not be able to respond as readily.

Sucharita Mulpuru, an analyst at Forrester Research, said it will be a challenge for large retailers to build this capability, "because often the best development talent gravitates not to a retail environment but to start-ups and trendy places like Twitter."

"I think more than anything, this speaks to the complex environments that will be needed to make changes in the future -- any single change to any digital aspect of a business reverberates through so many channels and touch points, and all of that needs to be changed at the same time," said Mulpuru.

Heise believes that the company will be an attractive employer to IT professionals.

"This is a once-in-a-lifetime opportunity to build an IT organization, or rebuild an IT organization, for a Fortune 100 company," said Heise.

Patrick Thibodeau covers cloud computing and enterprise applications, outsourcing, government IT policies, data centers and IT workforce issues for Computerworld. Follow Patrick on Twitter at @DCgov or subscribe to Patrick's RSS feed . His e-mail address is pthibodeau@computerworld.com .

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