With half a dozen major IT projects going simultaneously in 2004, you would think that Blockbuster Inc. CIO John Polizzi could use a breather. Instead, the IT efforts last year may have energized a faltering company, making even some of the most pessimistic industry analysts take notice, and increasing the pace for 2005.

Blockbuster, it seems, will not passively accept the judgment that it is at the head of a "mature," (read that "fading away") industry.

CIO Insight: What made 2004 so pivotal for Blockbuster?

Polizzi: We had major consumer proposition changes. We also separated from our primary shareholder, Viacom. There was no shortage of things to do and accomplish last year, although in reality the separation from Viacom, from an IT perspective, was relatively straightforward. We were really the only retail store in the company. There wasn't a lot of integration of systems.

But any one of the other initiatives is extremely complicated. We were constantly peeling the onion. The more we got into things, the more we realized that there was complexity in everything we wanted to do.

You did much of the work using outside consultants such as Accenture and Infosys. Why?

We've had a good business relationship with Accenture. They've been able to quickly ramp up resources and skill sets that in a normal situation you wouldn't want to carry as overhead. The need to be able to extend your resource capability quickly with strong, skilled and competent people is critical.

How are you continuing the push in 2005?

About a month or so ago we integrated our first set of stores with our online business. You, as an online customer, won't even know it's going on. We are allowing our stores to fulfill orders from our online customers.

And the advantage of that is twofold—one is for the customer in that by using stores we can get product to the customer faster. Second, it allows us to optimize our inventory.

But don't the strict limits that studios set on individual movies get in the way?

There are separate contracts for online and in-store. We have the studios' requirements factored into the integration. Operationally, we know each store's inventory so we can allocate online orders right to the appropriate store.

We have 4,500 stores in the U.S. that we can use to augment our 30 distribution centers. We're using 20 stores to test the program right now and we have a ramp-up plan in place to grow it.

With a program of this size and complexity, we have to understand the operational complexity inside the store as well as managing the inventory and understanding the accounting. Once we get to 100 or so stores we'll decide how quickly we're going to grow it.

Do you plan to let online subscription customers pick up their online orders directly at a store to achieve same-day service?

Our CEO has been pretty open about our direction being toward a fully integrated business. Service and time to the customer is very critical. I don't think there's a limit to what we can do to leverage the capability and convenience of the stores.

We are formulating what our next integration activities will be. We all work closely together. The days of doing things in the store without considering online, and vice versa, rapidly went away last year.

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