GROUP FOUR

CASE STUDY ONE

February 4, 2003

INTRODUCTION

When Marty took over business operations in 1995, she inherited a host of problems, ranging from a hopelessly outdated computer system that was inadequate to the business’s needs, and a non-functioning replacement system from an abortive attempt to update the system in 1993, to a corporate culture that was technologically set in the late 60’s and that stressed short-term frugality above long-term cost effectiveness.

Marty did not understand the fundamental ways in which IT worked within a business in the 1990s, nor did she recognize the difference between technology machines and traditional machines, treating both as workhorses that should be used for as long as possible before being replaced. Technology needs to be updated as the scale between efficiency and cost tips from the former to the latter. When Marty took over Rich-Con, she had to deal with a system that was completely skewed away from efficiency, and it was costing Rich-Con in productivity, knowledge and revenue growth.

HARDWARE

The driving factor behind the decision to replace hardware should be the business processes. As they change, the technology strategy has to change to support them. Rich-Con failed to update and improve their hardware systems as the way the steel industry functioned changed around them. This helped create the situation in which Rich-Con’s operations were inefficient, expensive, and unreliable.

In addition, Rich-Con had failed to look at the real costs of replacing their hardware. With constantly decreasing hardware prices (driving in part by falling chip prices), the replacement costs of Marty’s legacy hardware was quickly decreasing. In addition, the cost of storing information had been growing increasingly affordable. Rich-Con, however, does not even have the capability to store information or conduct business online.

Because Marty was using inefficient business processes, the financial incentive to replace her hardware was certainly there. Marty, however, allowed her current hardware to dictate important decisions. She bought complementary software that did not fit her needs because she wanted it to run on her existing hardware. She failed to weigh the appropriate costs of this decision. Although the hardware might have been expensive to replace, the costs of keeping it (such as software that did not fully fit the business processes) were far more expensive and long-lasting.

SOFTWARE

Marty felt that they should write or purchase software in a compatible language to their current hardware system, the 1993 UNIX and AT&T system. She based her decisions on software on cost and compatibility with existing hardware. The more appropriate values should have been compatibility with business processes and capabilities of the software package.

In addition, Marty underestimated the complexity of the software, and did not fully realize the skill level needed to make the software work for her company. Key functions, such as handling back-orders, were not built into the software. The fact that Marty saved money by foregoing a maintenance contract from the vendor is just another example of how Marty let cost drive a project that was so integral to the business.

DATABASES

Marty wanted databases in order to function without paper orders, gain current access to orders (without having to follow a paper trail), and to be able to analyze historical trends. This indicates that she Marty needed both a Data Warehouse for the historical analysis and an Operational Data Storage to conduct daily business. However, she did not appreciate the difference between the two databases. The Operational was absolutely necessary in order for Rich-Con to function and meet customer needs and should have been the priority. The Analytical Database can’t even be used until the Operational is running and able to feed information into it. In addition, the Data Warehouse should be created with a specific idea of its use, to know which data to archive.

The fact that Rich-Con did not have a workable Operational Database upon implementation of the new system interfered with even the most basic functions at Rich-Con and led to the company’s disarray.

INVESTING IN IT

Marty’s last, fundamental mistake was not taking the new system off-line when it became apparent that business operations were deteriorating. This failure to temporarily give up on the new system until it properly matched and worked with the business processes is what led to Rich-Con’s demise, as Marty lost control of the business. When the Unix-based AT&T system failed to operate properly in 1993, that technology was withdrawn in favor of the inefficient, but workable, legacy system. Had this been done in 1997 with the BAI system, Rich-Con would have survived to try implementing a better system yet again. Proper testing of the system before the implementation would have avoided this problem altogether.

Marty considered herself the eminent technology-minded person at Rich-Con, which should have alerted her to another dire problem within the company. Since there existed no internal knowledge base for current technology, and since the employees of Rich-Con were largely unskilled with technology, Marty should have been aware of the need for outside help and the need for developing the IT aspects of Rich-Con.

Her decision to buy a new system and her notice that her people were not being properly trained should have directed her to seek outside help, either by purchasing a service contract for the new system, or by building up the existing IT department at Rich-Con. This could be done by hiring not only an IT manager who could have brought IT experience and handled this area of the business for her, thus freeing her attention to run other aspects of the business, but also by hiring new, younger programmers that were versed in current programming languages to replace the current employees who’s skills were outdated.

FINAL OVERVIEW

Because Marty was not technologically aware, she failed to understand how best to implement technology in her business. Although Marty may have been well aware of Rich-Con’s business practices, she did not possess adequate knowledge of technology to guide her in purchasing a new system for tracking information throughout the business. She also suffered under the corporate culture of cheap, and colored her decisions on new technology purchases by what assets she already possessed, regardless of how appropriate they were to the business processes.

Marty also failed to match her preferred business processes with the technology she eventually chose for Rich-Con. Marty wanted a system that would track order processes, record sales histories, integrate department communication and lower operating costs for running the business. Despite these clear goals, Marty bought a system that satisfied another, less important requirement first: multiple measurement ability for stock. Instead of looking at a system that could satisfy many of the requirements of her sales-oriented business, Marty bought a system chiefly used by manufacturing companies, and thus implemented a system that did not properly match her company’s business processes.

CONCLUSION

Marty failed to recognize how the entire IT project was interconnected; her software, hardware, and databases should all have had similar objectives of supporting her business processes. In addition, she did not realize that her business processes would also have to change in order to have a successful implementation. She had a short-term focus of cost and did not take into account the long-term affects on basic business functions.

Another important concept is that Marty did not plan first. She should have decided what she wanted before rushing into purchasing and implementation. Rich-Con had a strong reputation of service and responsiveness. Their most important competency was in customer specialization. The implementation effectively destroyed customer relations, and Rich-Con was unable to recover.