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Infrastructure Management Outsourcing

The IT infrastructure at Sephora USA needed a make over. Sephora, a major beauty retailer with 97 stores in the U.S. and 400 stores in Europe, had infrastructure in the US that was over five years old. Manufacturers no longer supported several components of the infrastructure. "We were worried about the stability of the environment," says Janet Borghuis, Vice President and CIO.

In addition, the retailer had a difficult time attracting and retaining talented IT professionals for a complex legacy environment. The retailer needed experts in several server platforms, networking, failover, etc. "It was ambitious to think a midsize retailer could build a world-class infrastructure team at an affordable price," reports the CIO.

And the timing was right for outsourcing. In 2002 the world economy was in the depths of a down cycle. Borghuis felt she needed to focus on the pressing demands of that business cycle--cutting costs and supporting new business initiatives. "I didn't want to manage complex refreshes or study hardware infrastructure. I needed to concentrate on strategic initiatives," she explains.

It seems IT requirements, like cosmetics, change every season. Replacing the hardware was going to require a significant capital investment, and it would have been difficult at that low point in the business cycle. Yet Sephora had to do something because the out-of-date infrastructure "was beginning to disrupt our business," notes the CIO.

Many retailers are looking to technology to help them compete. According to an April 2004 Gartner report, "The influences of Wal-Mart and Wall Street are focusing the retail sector on IT technology as never before. IT's value as a competitive tool means the industry can no longer afford to be an underinvestor in technology."

Borghuis called a team meeting and discussed the situation. At first the team rallied and recommended building the infrastructure and support in-house. But after living with that scenario for 30 minutes, the group realized building the systems themselves was far too expensive, especially since retailing requires 24/7 support. Outsourcing was the best option.

In July 2002 Sephora outsourced its entire data center to (i)Structure, an IT infrastructure service provider. "We felt it made a lot of strategic sense to put our IT in the hands of someone who was an expert at it," Borghuis explains.

Outsourcing allowed Sephora to upgrade its entire infrastructure to the latest technology, speed up both response and processing time, and increase capacity for the same IT cost. For example, analytics took the old system eight hours. The (i)Structure equipment produces it in just two. Nightly processing that used to take six hours now requires only two.

Outsourcing Positions Sephora for Growth

But most importantly, outsourcing positioned Sephora for growth. Today, the retailer is enjoying a growth phase; business is plumped up as skin after a facial. Borghuis says outsourcing to (i)Structure was a factor in upswing. "(i)Structure is an extension of Sephora's IT team. We worry about the day-to-day operational issues," says Bob Newman, Senior Vice President over service delivery for (i)Structure. "Janet and her staff know the beauty business. Outsourcing operations to (i)Structure enables Janet and her staff to focus on strategic business initiatives. Janet can rely on our operational capability as she implements initiatives."

In addition, Sephora now has a partner to help it make important IT decisions that affect its growth. Borghuis says she is relying on her "trusted outsourcing partner" to help her select new vendors. Newman and his team come from an applications as well as an operations background. On the (i)Structure team are previous CIOs of large organizations. This combined applications and operations depth is of value to Janet across her responsibilities. "We understand the technical details of how Sephora's platform works," says Newman. "We will be there as she selects new products to validate they perform at the level she expects."

Allowing a buyer to deal with strategic issues is where outsourcing delivers the most value. Outsourcing helped Sephora succeed at both ends of the business cycle, positioning the company to weather the next change. Just like a good skin crème.

Publish Date: November 2004

Copyright © 2004 - Everest Partners, L.P.

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