Home Depot Looks To SAP As It Modernizes

The Home Depot will implement retail merchandising and supply-chain-management software from SAP as the next step in modernizing its IT infrastructure, an effort that has cost the nation's second-largest retailer $1 billion in the past three years.

Home Depot executive VP and CIO Bob DeRodes, speaking at SAP's Sapphire conference in Boston last week, said his company is trying to transform itself "into a more information-based company." DeRodes, who joined the retailer four years ago, joked that when he was hired, the most advanced technology in some Home Depot stores was a No. 2 pencil.

Under an extensive deal with SAP, Home Depot will use the vendor's applications wherever possible, said Bill McDermott, president and CEO of SAP America Inc. As an SAP Global Alliance Account, the $73 billion-a-year home-improvement retailer also will work with SAP to design leading-edge capabilities for future releases of the applications it uses.

"We think Home Depot is the ultimate 'lighthouse' in the retail industry," McDermott said, using SAP's term for the customers it relies on to help gauge the direction of IT within specific industries. He touted the deal with Home Depot as a major victory in SAP's increasingly fierce competition with Oracle, especially in the market for retail-industry applications.

Oracle acquired Retek Inc., a developer of retail-management software, in March for $670 million. SAP initially had a deal to acquire Retek but was outbid by Oracle. At Sapphire, SAP discussed some of the work it's doing with retail customers, including Brookshire Grocery, Wawa Food Markets, and Wickes Furniture.

DeRodes, speaking during a customer-panel segment of a speech by SAP CEO Henning Kagermann, said Home Depot lacks merchandising, inventory, and supply-chain-management capabilities, as well as visibility into its supply-chain operations. Home Depot isn't electronically connected to its suppliers, said Karen Etzkorn, Home Depot's VP of IT merchandising and marketing systems, in a question-and-answer session at Sapphire.

Home Depot will begin installing SAP for Retail merchandising and supply-chain applications in August, Etzkorn said. The company decided that using "best-of-breed" applications or building them in-house was too risky and would take too long. The company opted for SAP over other vendors because it needed a scalable system that could stretch across its consumer and contractor businesses and expand beyond the United States as Home Depot grows, she said. It installed SAP's financial applications last year.

Joshua Greenbaum, principal with the Enterprise Applications Consulting firm, said he was surprised that DeRodes didn't say more about improving Home Depot's inventory-management system, since that's a key data source for many businesses' operational IT systems.

DeRodes, who was CIO at Delta Air Lines Inc. before joining Home Depot, said the entire IT overhaul effort, which is known within the company as "Digitizing the Depot," will continue for eight to 10 years.

In 2002, Home Depot disclosed that it was building a 10-terabyte data warehouse to help managers analyze everything from sales to salaries. At the time, DeRodes acknowledged that Home Depot was behind other retailers, notably Wal-Mart Stores Inc., in assembling such a system. But he said such delays could be advantageous because implementation methodologies had matured, and Home Depot could learn from others' mistakes.