Dixons won't be outsourcing IT to India just yet

Electronics retailer Dixons has pulled out of a plan to outsource its UK IT operations to India, creating chaos for hundreds of IT staff.

Negotiations with LogicaCMG are believed to have collapsed last week after senior Dixons management found details of the contract unacceptable.

Dixons CIO Iain Andrew left the company at the start of this week and has not yet been replaced. It is understood that in expectation of the contract being agreed, a number of Dixons IT staff have already been made redundant and some of those who had chosen to move to Bangalore have already rented out their houses.

A Dixons spokeswoman said today that the retailer is now "reviewing [its] options".

"We can confirm that we have ceased negotiations with LogicaCMG regarding the potential outsourcing of our internally facing IS support function. We have been unable to agree terms," she said.

Dixons announced plans to outsource its internal IT in June, as part of a drive to achieve savings of £30m over the year, with further savings anticipated.

According to one source familiar with the plans, Dixons will have to put its outsourcing plans on hold until next year.

"We only have one chance every year to do something of this magnitude, in the quiet time before the autumn, and we've blown that. We'll have to try again next year. Lots of people have left, others are working out their redundancy and now we're going to have to work out how to undo that. It's all in the hands of human resources," the source said.

Dixons, though, has denied that any staff have already been made redundant. Around 250 IT staff would have been affected by the outsourcing deal.

It is also understood that Dixons was very unhappy with the terms and conditions proposed by LogicaCMG.

"The contract was a foot and a half thick but clause after clause wasn't acceptable. By the time we'd struck out a dozen or so without getting very far into it, it was clear that the deal wasn't going to hold together," said the Dixons source.

LogicaCMG declined to comment on the collapse of its talks with Dixons, citing client confidentiality.

Graeme Wearden writes for ZDNet UK