Sears Exits $1.6 Billion Outsourcing Deal With CSC
In an SEC filing, Sears says CSC failed to perform as required under the 10-year contract.
Sears Holding Corp. subsidiary Sears, Roebuck and Co. has terminated its 10-year, $1.6 billion IT outsourcing deal with Computer Sciences Corp. less than a year into the agreement.
In a Securities and Exchange Commission filing, Sears said it ended the engagement "for cause, due to CSC's failure to perform certain of its obligations in accordance with the terms of the agreement." A CSC spokesman declined to comment. Sears' officials didn't immediately return calls.
Sears' SEC filing, dated May 13, also revealed that CSC sought a federal court injunction that would have prevented Sears from ending the contract. The court denied the request.
Sears and CSC struck the deal in June 2004. CSC was to provide the retailer with a range of IT services, including support for desktops, servers, and telecommunications systems.
Cindy Shaw, an analyst at securities broker-dealer Moors & Cabot, says Sears' decision won't likely have a major financial impact on CSC but notes that "it could hurt from a PR perspective."
With both sides not talking, speculation is rife over what's behind the deal's failure. The fact that Sears is backing away from the agreement in its early stages may suggest that "the transition has failed," says William Bierce, a New York City-based attorney who specializes in outsourcing contract law.
Others, however, believe internal politics at Sears may be a bigger factor. The company's outsourcing contract with CSC was authored by former CIO Gerald Kelly. Kelly, however, was ousted earlier this year following the merger of Sears and Kmart. Kmart CIO Karen Austin was given the top technology post at the combined company.
At the same time, Kmart chairman Edward Lampert wants to cut administrative costs at Sears and Kmart. Says Michael Guilbault, Technology Business Research analyst, "A $1.6 billion outsourcing deal may have looked like an easy target."
IT's Reputation: What the Data SaysInformationWeek's IT Perception Survey seeks to quantify how IT thinks it's doing versus how the business really views IT's performance in delivering services - and, more important, powering innovation. Our results suggest IT leaders should worry less about whether they're getting enough resources and more about the relationships they have with business unit peers.
What The Business Really Thinks Of IT: 3 Hard TruthsThey say perception is reality. If so, many in-house IT departments have reason to worry. InformationWeek's IT Perception Survey seeks to quantify how IT thinks it's doing versus how the business views IT's performance in delivering services - and, more important, powering innovation. The news isn't great.
InformationWeek Must Reads Oct. 21, 2014InformationWeek's new Must Reads is a compendium of our best recent coverage of digital strategy. Learn why you should learn to embrace DevOps, how to avoid roadblocks for digital projects, what the five steps to API management are, and more.