How is the work being done? In-house? Outsourced? In the United States? Offshore?
Its predominantly being done in the U.S., but weve been offshoring development work for a number of years. It has grown every year. Weve found that the offshore providers can provide us with high-quality resources at relatively low prices. We established four vendors as our primary vendors offshore. We do project work with them. The model is not mature enough for support and maintenance. There are a lot of security issues. The challenge with offshore providers is theyre not really good on the requirements side of things. So thats a trade-off. You need to leverage what they bring to the table, which is their deep resource pool for development.
What about data warehousing? Is that something that would factor into replenishment?
We built a data warehouse with IBM technology about three years ago. It sits off to the side and provides us with operational metrics and data around how our business is going and is used for planning and analytics.
When talk turns to tracking inventory, RFID [radio-frequency identification] always comes up. What about RFID?
Interesting technology. Our Opinion is that the technology is immature, there are conflicting standards, there are limitations with the technology with respect to range or materials. For instance, ink is in a foil bag, and the technology cant penetrate the foil. And the bottom line is that costs are too high for us to jump into it right now. Thats not to say its not a valid technology. It will have its place, but we just dont think now is the time to do it. Youre going to pay a premium to be an early adopter.
Staples recently bought Globus Office World [plc.] in the U.K. How is the IT integration process going?
We just got approval from the U.K. office of fair trade, so we havent actually started. Its interesting you mention that. One of the things I talk to my team about is that Staples will grow earnings around 20 percent and sales around 10 percent [annually]. Were not going to do that organically. We intend to be a global company. A lot of the growth will be through acquisitions, and Office World is a good example. My team has to think of how we enable integration. Its a matter of converting stores to Staples stores and getting them up on our system and feeding them into our back end.
Which countries look the most ripe for expansion?
You might tune in to our earnings report on Aug. 17.
Lets shift gears and talk about point-of-sale systems.
Our vendor is NSB [Retail Systems plc.]. We actually have relatively new systems, installed in 99 to 2000 or so. The system is built on Microsoft tools, and it has been a good move for us. A lot of competitors are on proprietary POS systems. In that same time frame, we had a big initiative to integrate our dot-com and retail business, so we put kiosks in our stores. The point of integration was the POS. You could place your order at the kiosk and pick it up at the point of sale, making whatever form of payment you chose.
Are there any upgrade plans for those systems?
As I mentioned earlier, were actually replatforming the Web site. At every turn, we look at ourselves as a multichannel retailer. Were leveraging our dot-com platform with knowledge tools. The kiosk will prompt you, say, that youll need a USB [Universal Serial Bus] cable or how long your ink cartridge will last.
Were also leveraging customer intimacy through our loyalty program by making that information available to the customer. You can look at what youve purchased in the past or create a reorder list of frequently purchased items. Were also creating targeted offers through e-mail and direct mail. Customer experience is how were going to differentiate ourselves going forward. You need to offer the customer something more than just good price.
Staples acquired Quill.com a few years back. Its still a separate Web site. How does it factor into Staples strategy?
Its a different brand, but we have a common development group and a common infrastructure. Our technology strategy is to provide the core platform for the different business units to use. We have a lot of different brands, and they interact with their customers differently, depending on where theyre located or how theyre positioned in the market.