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U.K. Grocery Chain Terminates Big Outsourcing Deal with Accenture

J Sainsbury plc ends its troubled $3.2 billion outsourcing agreement and says it will rebuild its in-house IT expertise.

U.K. supermarket giant J Sainsbury plc is checking out early from its problem plagued $3.2 billion outsourcing agreement with Accenture, the companies said in a joint statement Friday.

"The IT services currently provided by Accenture will be migrated back to Sainsbury together with a number of Accenture employees," the statement said.

Sainsbury originally outsourced its IT operations to Accenture in 2000, and the deal was slated to run through 2010 following an extension signed in 2003. However, Sainsbury last year publicly revealed that the relationship was in trouble after an effort to modernize its supply chain foundered, resulting in bare shelves in some stores.

The problems ultimately led Sainsbury to take a $500 million charge against earnings last year as it was forced to write off a number of IT systems that didn't work as planned. Sainsbury now says the decision to terminate the contract will have a material impact on its profits in 2006. Accenture said it does not believe the loss of the contract will have a material impact on its financial results.

As part of the statement, Sainsbury said its IT "focus has changed and it has decided that it is the right time to rebuild its expertise back in-house." Spokesmen for Sainsbury and Accenture were not immediately available for comment.

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