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CRM Systems in German Hospitals: Illustrations of Issues & Trends

Author: Raisinghani, Mahesh S; E-Lin, Tan; Untama, Jose Antonio; Weiershaus, Heidi; et al

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Abstract:

German public hospitals face governmental and regulatory pressures to implement efficiency and effectiveness metrics, such as the classification of a Diagnosis Related Groups (DRG) system, by the year 2005. The current average patient stay of nine days in German hospitals is relatively high compared to France with 5.5 days and USA with 6.2 days. CRM will help increase customer satisfaction, loyalty and retention. Multiple case studies, including one German hospital compared to two Dutch hospitals, as well as interviews with the management of two additional German hospitals, reveal that no hospital currently has an integrated CRM system. Rather, separate organizational functions collect and store quantitative and qualitative patient data. Furthermore, the challenges of data sharing and data security are significant barriers for technological changes in hospitals. This study focuses on CRM in a modern German hospital as it realigns its processes and strategies in order to focus on efficiency and customer satisfaction in a very competitive market. [PUBLICATION ABSTRACT]

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(ProQuest Information and Learning: ... denotes formula omitted.)

ORGANIZATIONAL BACKGROUND

The German Healthcare industry is currently undergoing a major change due to the changing demographics of the German population and budget limitations. Due to the aging and/or retired German population, there is less money contributed to taxes. This is resulting in a substantial reduction in the allocation of funds to the healthcare sector. The current cost allocation system, that is, the generation contract, is put in question, and the public healthcare system is forced to charge more of its costs to its clients. The generation contract was the standard structure for the social security systems in many countries including Germany, where the following generation would provide funding for the previous generation. At present, deregulation, increased competition, cost pressures and price reduction from the private hospitals are forcing the public hospital sector to introduce efficient economic processes and systems.

The introduction of the Diagnosis Related Group (DRG) calculation system by the German government requires hospitals to review their strategy in order to focus their communication on the patient of today and tomorrow. The DRG calculation system was initially a collaborative effort of insurance companies to establish a control system for payments for healthcare services provided. With the DRG calculation system, illnesses are categorized and acceptable treatments and standards, such as length of hospital stay, are determined. A fixed cost, or payment amount, is then assigned to each treatment or service. Insurance companies will only pay the specified amount for each service. The purpose of DRG is to provide complete patient care for a standardized disease pattern with a fixed budget. This system should also aid hospitals in meeting their budgets by reducing the length of a patient's stay in the hospital, increasing productivity and using more cost-cutting technologies (Riedel, 2001). In these situations, hospitals need intelligent Customer Relationship Management (CRM) models that interface with the DRG system to help them acquire and "nurse" their customers - both domestic and foreign patients. The key motivator for CRM system implementation is the hospital administration's realization that they have to be customer-oriented and cost-effective to survive the increased competition in the healthcare sector (MCC Health World, 2002).

CRM is an approach that focuses on the acquisition, development and, most importantly, retention of customer relationships through the collection of data and the sharing of this customer information across all areas of an organization. It encompasses both software applications and business strategies that anticipate, interpret, and respond to the needs of current and prospective customers. Access to collected customer information by employees from all areas of an organization provides a complete picture of the customer to everyone in the company and helps employees react to customer inquiries more efficiently. Handling customer requests with ease will increase customer satisfaction, resulting in customer loyalty and, ultimately, an increase in customer retention.

Customer/patient-centric orientation is being adopted by contemporary businesses/ hospitals as a necessary condition for competing effectively in today's marketplace. Despite the steady growth in number of worldwide installations and sales, not all is perfect in the world of CRM applications. Industry studies suggest that approximately 60% of CRM software installations are failures. CRM applications are prone to problems associated with lack of application flexibility that allows for customized integration and updating, and data management as a function of scale (Crosby and Johnson, 2000; Juki et al., 2002).

Structure & Organization of this Manuscript

This exploratory study is fundamentally based on E.M. Rogers' theory of new product diffusion, also known as Diffusion of Innovation (Dol) (Rogers, 1983). The primary research objective of this study is to explore the diffusion and infusion of CRM systems in the hospital environment. Diffusion is defined as the extent of use of an innovation across people, projects, tasks or organizational units, while infusion is the extent to which an innovation's features are used in a complete and sophisticated way (Fichman, 2001 ). In this article, we first discuss the trends and governmental/regulatory pressures that confront public hospitals in Germany. As these problems are very real and directly affect the general public, this topic is of keen interest and has been making headlines in Germany in recent years. Next we discuss the organizational structure of an old German hospital that forms the basis of the economic issues it now faces and the steps it should take in order to prevent a possible financial crisis in today's fast-paced economy. Furthermore, we explain how the implementation of CRM can play a crucial role in bringing the German hospital up to speed with technology and the effective business models of today.

Next, the case studies of five hospitals are presented along with a discussion of the objectives, benefits and costs of implementing a CRM system, the technical and strategic composition, the implementation phases and the pitfalls to avoid during the implementation phase. This is followed by the current challenges/problems facing the organization. The conclusion section summarizes the importance of a CRM system to steer the German hospital in the right direction, as well as outlines the potential of information technology in creating new business value for the hospital.

Market Description

The healthcare institutions in Germany are divided into Akut-Kliniken (general hospitals), Reha-Kliniken (rehabilitation facilities) and nursing homes. Most of the German clinics are owned and administered by public authorities. These clinics are financed by the association of local authorities and the federal state. Moreover, some health insurance companies fund and even run hospitals (HPS Research, 2002). According to a study by Kienbaum Management Consultants (Amblank, 2003), German hospital administrators predict a further reduction of clinical beds, as well as nursing, administrative and non-medical staff. However, it is necessary to increase the number of doctors and information technology personnel in order to implement efficient and cost-effective business processes in German hospitals, especially in the field of general healthcare services. The survey conducted on more than a hundred Akut-Kliniken (general hospitals), with more than a hundred beds, found the following results (Amblank, 2002):

* Process optimization: Hospitals need to focus on the optimization of a processoriented organization while taking into account the internal and external information flow. Clinic-specific processes between horizontal levels, particularly between the activity units and functions of a hospital, must also be considered.

* Hospital cooperation: Hospitals should increase cooperation with other activity units and participants in the healthcare sector, especially with regard to communication.

* Managerial tools for hospitals: In view of the compulsory introduction of a Diagnosis Related Groups (DRG) cost calculation system, the implementation of process- and profit-oriented cost calculation systems for hospitals must be completed in 2004. At present, 76% of the hospitals are still using budgets as their controlling system. The implementation of DRG systems requires changes in hospital IT systems, training of personnel and data-protection measures - approximately 68% of the hospitals have already started to change their processes.

Key Market Statistics

In 2001, the hospital costs in Germany amounted to about EUR 60 billion, a figure that, according to the German Federal Statistical Office, corresponds to the domestic annual sales of the German automotive industry. The limited budgets of the federal states are forcing hospitals to implement efficient communication and information channels in order to reduce resources and to streamline their operations. The introduction of the DRG system should bring about greater transparency and economic efficiency, which the authorities hope will cause a considerable reduction in the time that patients stay in hospitals. In 2001, the average patient stay was of 9.9 days in German hospitals. In comparison, in Austria, the average patient stay is 5.9 days; in France, 5.5 days; and in the U.S., 6.2 days (Amblank, 2002). Table 1 lists the key statistics on German hospitals in 2000 and 2001.

Furthermore, the introduction of the DRG system in Australia in 1992 comprised 667 groups and has continuously improved. As a result, patient stays have been reduced by 20% to 30%, and 20% of the released capacity has been abolished or reallocated to new innovative services (Higbie and Kerres, 2001). In general, a German mid-sized hospital (defined as 100 to 200 beds) settles over 20,000 cases per year, a figure that continues to grow. Consequently, there is a strong need for new, integrated IT systems to streamline all patient-related processes and to integrate, where possible, or even replace the systems currently used in hospitals (Staffers, 2002). Moreover, IT systems must be flexible enough for improvements as the initial number of DRG classifications has already risen from about 600 to 881 in German hospitals (Riedel, 2001).

SETTING THE STAGE

Hospital Management Strategy: Importance of Patients as Customers

In the past, the principal customer of the hospital was the physician. The patient was secondary, merely the physician's customer. However, the trend has evolved to where the interaction has broadened, and patients communicate directly with the hospital, as well as with the physicians. The relationship is now triangular, with relations between the hospital and its customers, and between the physician and the patient. The hospital must therefore focus its efforts on satisfying a more demanding patient, who wants to see quality, cost and value in the products and services delivered by the hospital. Patients today are savvier; they do their own research for information, treatment options and sources where they can obtain the relevant services in the most optimal way. The onus lies with the discerning hospital to take advantage of this fact and to stay ahead of their competitors by collecting, storing and disseminating this information to their key current or potential patients. It is important for the hospital to build a strong and long-term relationship with the patient and pursue referrals from the satisfied patient, which could attract potential new customers.

In terms of information management systems and business models focused on efficient process systems, the healthcare industry is lagging behind other industries. Therefore, it is ever so critical that the healthcare industry review its strategy in order to survive. According to Cap Gemini, Ernst & Young (2002), all industries should adopt a business model that is customer-centric. A customer-centric business model is one in which a company proactively identifies, attracts, engages, serves and covets customers. In their study, the consultancy identifies seven universal elements of this paradigm as follows (Cap Gemini, Ernst & Young, 2002):

* profile, identify and connect with current and prospective customers;

* give customers a choice about how and when they interact with you;

* ensure access to the customer's profile and any information that he or she requests with every interaction;

* ensure that new information is captured, disseminated and used effectively;

* develop mechanisms that minimize customer irritation, such as long hold times, multiple handoffs and unavailable or insufficient information;

* develop the capability to satisfy customers' requests for insights and information at first contact; and

* treat customers as valued individuals by learning about their preferences, interests, concerns and wishes.

All of these elements form the building blocks of a CRM system. According to the German Hospital Institute, DKI (Deutsches Krankenhaus Institut), 70% of hospitals decided in favor of replacing of IT systems because this method allows them to precisely quantify costs (Staffers, 2002). In addition, hospital management strategy should consider a comprehensive, efficient hospital information system, which supports the shift of focus to the patients. Respectively, doctors and hospital staff should be trained to lead patient-oriented discussions in order to provide optimal healthcare service. The reformation of the German healthcare system calls for the participation of the German citizens, health insurance companies and patients. Therefore, all parties involved should have easy access to healthcare information. Independent institutions for healthcare services, call centers of insurance companies, Web-based information services, hospital information services, as well as other networks and institutions, are the main communication channels for distributing this information (Deutsche Krankenhausgesellschaft, 2003).

Work Flows & Cost Drivers in Hospitals

A hospital information communication system should also provide information to the stakeholders and patient care centers, as shown in Figure 1. The information elements flowing across the various entities are the patient's medical records, insurance information, DRG information, government regulations, hospital policy and procedure, and so forth.

The main cost drivers in the hospital are in the areas of accounting, patient administration, procurement and human resource management. For instance, personnel costs account for 70% of overall costs in a general hospital. With the introduction of DRG calculations, the main cost driver for hospitals has changed from bed turnover to treatments per case (Higbie and Kerres, 2001). Research has shown that the average hospital loses between 2% and 4% of its revenues because of poor revenue-cycle management resulting from a lack of system integration (Cap Gemini, Ernst & Young 2002). There are CRM systems available in the market today, which can merge these areas of the hospital into end-to-end processes and integrate them into a seamless network. These CRM systems increase the transparency of cost and resource allocation within the hospital. This increased transparency can be a great aid to hospital management in the reengineering of the fundamental hospital structure, with the objective of minimizing costs, while remaining within the guidelines of DRG.

A major cost reduction area that the CRM system has handled effectively is the mapping of documentation during a patient's treatment, from the moment he enters the hospital until the day he leaves. This information is important in order to have a full picture of the situation, even though DRG is only applied on the day that the patient is discharged (SAP, 2003). IT systems must support the improvement of information flow between patients and physicians, as well as work and decision processes as illustrated in Figure 2.

In the past, some hospitals ignored their relations to their public environment, employees and patients. Today, hospitals are beginning to realize the importance of patients as a source of income. Thus, hospitals are developing marketing instruments in order to compete with other hospitals for the future patient. However, the communication methodology must comply with the German regulations for clinics, which forbid the simple promotion of clinical operations. Moreover, patient data is not allowed to be published, as this would violate the Bundesdatenschutzgesetz - the federal data protection/privacy law.

The installation of CRM systems enables the introduction of patient-oriented marketing measures that allow patients to give feedback to hospitals in order to improve treatment (Torex-Deutschland, 2003). Furthermore, hospitals should not forget that healthcare is a field absolutely rife with emotion because a person's health, and even life, is being addressed. Therefore, an accurate and reliable communication system must be implemented (Barnes, 2003).

Role of Information Technology (IT) in Hospitals

In IT solutions, simulation models that represent organizational processes in hospitals are used to optimize work processes. There are two types of simulation models with different strengths and weaknesses. In the first model, the underlying structure aligns the hospital's organizational processes with the physical layout of the hospital. Patients are viewed as mobile units with assigned plans who move from one location, such as a ward or treatment room, to another, receiving the respective treatment plan at any given location. The treatment facilities are regarded as functional units where specific services are carried out. The physicians and medical staff are considered passive resources in the model. They are simply there to perform medical services. The doctors and medical staff are guided by the established procedures and local assignments in their administrative decision making.

The limitation of this model is that human behavior of patients, as well as medical staff, is not taken into consideration as much as it should be. In this model, the prescribed treatment plans are standardized. There is no room to allow the medical staff to adjust treatment according to individual case, such as a set back or complication. Furthermore, the failure to consider the human element in the hospital's systems and procedures also makes it difficult to accurately forecast and measure performance.

The second simulation model, the agent-based simulation system, is able to support the economic and organizational decision-making process in the hospital domain. Such a system is developed in a two-step process. In the first step, a specific application context is modeled after a real situation in a selected hospital. The basic requirements posed on the simulation model within the hospital domain are analyzed. Based on the information gathered, one attempts to generalize the concepts concluded from this study. In the second step, a general-purpose, component-oriented, agent-based simulation system is developed. It can be used as a general modeling framework in the hospital domain (Sibbel and Urban, 2001).

Technological Infrastructure

The technology component of a CRM strategy is vital to its success. Areas requiring integration in CRM are cross-channels, back to front office and operations to analysis. Therefore, the IT architecture and infrastructure must be reliable, well-designed and easy-to-maintain to meet the present and future needs of the organization. The Enterprise Solution Architecture Model (Cap Gemini, Ernst & Young, 2002) in Figure 3 illustrates how technology supports CRM.

Health CRM applications have operational CRM (that includes analytical CRM) at the center of the model. Operational CRM deals with automation and streamlining workflow. Specific tasks of operational CRM include collecting data, processing transactions and controlling workflow. Some of the elements of operational CRM are described:

* Portal technology: enables customers to connect with a company over the Internet.

* Workflow/workload management rules engines: are instructions set forth by managers that enable computer applications to make decisions.

* Case management/accountability functionality: accounting system used for tracking patient inquiries, from initiation to resolution.

* Knowledge management: deals with software and applications that include analytical tools and databases, and is generally used to solve business problems.

Analytical CRM is sometimes treated as a subset of operational CRM. However, some healthcare providers prefer to use it as a stand-alone application in order to take advantage of its data analysis and management capabilities. Both CRM applications utilize OLAP (online analytical processing) technologies and other tools that aid decision makers in the development and revision of plans. The next component of the Enterprise Solution Architecture Model is the Connected Health Business Model. This component comprises functional tools such as strategy alignment, solution design and change management. Finally, the last component of this model is the Health Integration Architecture. The main purpose of this component is to streamline and link the technologies and processes efficiently and effectively (Cap Gemini, Ernst & Young, 2002).

Rationale for a CRM Solution

Poor revenue-cycle management is one of the major costs of a hospital. CRM can redeem this cost with its enterprise-wide platform of information sharing, customer database, contact management, and system to coordinate and identify payers with external resources. A CRM solution can add business value to the hospital in the following areas (Cap Gemini, Ernst & Young, 2002; L&T Infotech, 2003):

* Reducing transaction costs for processes involving the customer

* Improving patient/physician satisfaction and loyalty

* Optimizing revenue potential by reducing "missed appointments" and via improved care-plan compliance

* Reducing claim refusals by insurance companies

* Lowering accounts receivable balances

* Differentiating itself by offering a better service experience to customers (i.e., patients and physicians)

* Creating a complete 360-degree view of the customer

Implementing a CRM system gives the hospital the capability to integrate its internal processes of marketing, sales, services, analytics, interaction center, field applications, e-commerce and channel management, in order to deliver a people-centric solution leveraged on existing technology and to lower overall costs (SAP, 2003). Since CRM is an approach towards dealing with customers, it is critical for companies to rethink and redesign their basic business processes and organizational structures in order to succeed. Previously, healthcare providers took an episodic approach to their interaction with patients and physicians, where costs and benefits were assessed per episode of care. Today, healthcare is treated as an ongoing mutual value, where relationships between patients and physicians develop over time.

Another consideration before CRM implementation is performance measurement. Performance measures around CRM can be qualitative (e.g., customer satisfaction) as well as quantitative (e.g., percentage of inquiries handled per day). The study prepared by Cap Gemini Ernst & Young identifies efficiency (e.g., developing more customer self-service capabilities, such as scheduling of follow-up appointments, prescription refills, pre-registration, class registrations and concierge service requests), service effectiveness, and market/revenue growth as three objectives on which healthcare providers should focus and are described below (Cap Gemini & Ernst Young, 2002). For instance, a hospital can conduct a patient-focused campaign, with the goal of increasing the number of interactions with patients by cross-selling healthcare services or using current patients as referral sources to their friends and family.

Rationale for CRM: Identification of Organizational Change

In the past decade, hospitals generally evolved through the following three types of organizational focus (Lorenzi and Riley, 1995):

i. Functional-oriented organizational focus - organized around the various healthcare and administrative functions in the hospital as illustrated in Figure 4.

ii. Specialism-oriented organizational focus - organized around the various specialty areas in the hospital as illustrated in Figure 5.

iii. Patient-oriented organizational focus - organized around the patient needs as illustrated in Figure 6.

At present, hospital organizations are categorized into too many different functions and specialty areas. There is a lack of inter-connectedness and communication among the general business functions, specialty areas, administration, finance and customer care. Hence the functional and specialism-oriented organization structures may not be optimal from a business process standpoint. In the patient-oriented organization, processes are categorized by flows of patients, with multi-disciplinary teams and management integrated into a seamless network. The ultimate vision of the CRM system is customer service transformation of the hospital-healthcare organization, which integrates all patient-related data from the different functions (Cap Gemini, Ernst & Young, 2002). Table 2 illustrates the direction in which the hospital must move in order to effectively and efficiently integrate its processes, while keeping costs at a minimum.

Project Team

In a hospital, there is a strong personnel-related type of performance process between medical staff and patients. The employees are the most important factor for a hospital's success in improving the quality of its service and the satisfaction of its patients. A successful CRM-implementation team must consider the following:

* Start with a pilot project that incorporates all the necessary departments and groups that gets projects rolling quickly but is small enough and flexible enough to allow tinkering along the way

* Design a scalable CRM architecture

* Confirm that if the company needs to expand the system, it has the capability and flexibility to know what data is to be collected and stored

* Recognize the individuality of customers and respond appropriately

* Ensure that everyone within the organization, especially the IT department, has a comprehensive understanding of the business strategies and customers' needs

* Implement the CRM project across all departments and make the implementation easy for the customers, not the company

The main reason why the introduction of a CRM system in a hospital might fail is a lack of communication between everyone in the customer relationship chain, leading to an incomplete picture of the customer. Poor communication can also lead to technology being implemented without proper support or buy-in from users. Any change made must involve and come from the people (SRD Group, 2003).

Rationale for CRM: Identification of Technological Potential

A CRM IT system is a valuable tool in the implementation of this new business strategy. The most relevant advantage of a CRM system is its flexibility to adapt to future requirements such as the addition of more DRGs. Furthermore, most CRM systems are designed with expansion capabilities and to interact with other systems such as the supply chain management, enterprise management, knowledge management, and other technologies.

The crucial interaction with the patient is made possible via various technological advances that are popular and ubiquitous today - the Internet (Web page), e-mail, cellphone, personal digital assistant, pager, fax, phone (call center) and electronic kiosk. The patient is able to review his personal information (i.e, billing, scheduling, drug prescription and medication information) and to access relevant information (Web portals, library resources, physician directories, referral requests and community chats for various diseases). A CRM system can also greatly improve the internal process integration through the sharing of patient databases among different departments of the hospital. Doctors and hospital staff can access necessary information about their patients, regardless of their location. This would allow them to integrate their results in real-time, thereby saving the critical hours that may mean life or death for their patient.

Processes Involved in the Implementation

When implementing a CRM system, a hospital should focus its activities on following three different process areas:

* Patient-oriented information -> Patient database

* Hospital facilities marketing -> Quality management

* Development of preventive actions -> Information policy

Hospital management should concentrate on the patient in the following perspectives during the establishment of a CRM system (L&T Infotech, 2003):

* Design and administer health policies for corporate clients

* Process medical claims (insurance/hospital claims, domiciliary claims)

* Liaise with the insurance companies for claims assessment and payment

* Facilitate the services of the network hospitals

* Provide information regarding medical facilities and advise on occupational health

Figure 7 illustrates the different objectives of a CRM system in terms of processes and information flow to patients and physicians and the customer "touchpoints" or channels at the top, where contact with patients begins. Some examples of these customer channels are e-mail, telephone, fax, Internet, mail and walk-ins. Customer Interaction Management, the next component of the model, is basically a desktop platform that allows healthcare providers to manage interaction with patients through all the various "touchpoints." Enabling technologies are the technical devices that arrange and distribute the information. Some examples of enabling technologies are interactive voice response (IVR), computer-telephone integration (CTI), personal digital assistance (PDA) and Web application protocol (WAP). The establishment of a Web-based, information platform for instance, could facilitate the integration of the different inquiries for patients and physicians. Continuous integration feedback facilitates the development of a more customer-oriented hospital organization.

CASE DESCRIPTION

The current healthcare reform in progress in Germany is looking at the financial viability of German hospitals that have to become more competitive in order to survive in the long run. Thus, many private hospitals decline providing any internal financial data as they do not want to inform their current and future potential customers. Five case studies, including one German hospital compared to two Dutch hospitals, as well as interviews with the management of two additional German hospitals, are used to compare and contrast the separate organizational functions that collect and store quantitative and qualitative patient data. The five case studies were chosen since the intent was to explore the breadth of awareness of CRM systems solutions across enterprises (i.e., diffusion), and the depth of penetration of CRM implementations within organizations (i.e., infusion). The first case study is based on the secondary research available on ICT technology in one German and two Dutch hospitals.

The second and third case studies are based on face-to-face interviews with Dr. Schulz, IT Administration Officer of Medizinische Hochschule Hannover (a public hospital); and Dr. Herr Kohnert, managing director of the International Neuroscience Research Institute (a private hospital), Hannover. Furthermore, the challenges of data sharing and data security as significant barriers for technological changes in hospitals are also discussed. The key focus is on CRM in a modern German hospital as it realigns its processes and strategies in order to focus on efficiency and customer satisfaction in a very competitive market.

Leipzig University Hospital (General Hospital)

This former East German hospital has a capacity of 1,500 clinical beds and 4,650 employees, with 15 locations. After the re-unification of Germany, there was a move to restructure and integrate the many systems in the numerous buildings, clinical and ambulant wards, and service facilities using ICT, specifically SAP/R3 modules. Although the Leipzig University Hospital has regional and national collaborations with other general and university hospitals, networking among the centers is uncommon. This lack of integration has caused issues such as unnecessary costs from inefficient and ineffective use of capacity and competence, and poor marketing (i.e., cannot attract the "right" patients). Thus, with ICT, the hospital was looking to solve or at least to reduce these aforesaid problems. The ICT project was controlled by a central team comprising members from IMISE (Institut fuer Medizinische Informatik, Statistik und Epidemiologie), ZMAI (Zentrum fuer Medizinische und Administrative Informationssysteme), and the administrative and ICT departments.

The Leipzig University Hospital evolved from a functional-oriented hospital to a specialism-oriented one (see Figures 3 and 4). Even in this early stage, the main goals of the Leipzig University Hospital centered around the patient (customer) database. At the end of the project, the final design of the network organization that resulted was not able to fully integrate all its information system. The system was based on bilateral agreements and uni-directional data flow (low reach and low range). Some of the problems facing the project were very similar to those commonly faced in the implementation of a CRM system, such as lack of a clear hospital strategy and foresight for future development, for example, to reach beyond organizational boundaries in seamless network projects; lack of clear measures for performance and integration; and/or lack of technical support and expertise since implementation and central computing facilities were mostly in-sourced.

On the other hand, the ICT infrastructure implemented in the Leipzig University Hospital was based on current technology that has the scalability to accommodate future networking projects. This scalability is indeed advantageous as the hospital moves on to the patient-oriented organizational focus that may help the hospital administrators and staff to look into more advanced CRM-solutions. As the trend for implementing CRM systems in German hospitals is relatively new, we reviewed the relevant information on Information and Communication Technology (ICT) for the Leipzig University Hospital and two Dutch hospitals to get a sense of the European contextual perspective (Spanjers, Hasselbring, Peterson, and Smits, 2001; Sibbel and Urban, 2001). Table 3 compares and contrasts the ICT characteristics in one German and two Dutch hospitals.

Medizinische Hochschule Hannover (General/Public Hospital)

The Medizinische Hochschule Hannover (MHH) opened in 1965 and has performed clinical operations since 1972. In 2001, the hospital comprised 1,330 beds, 42,000 in-patient customers, 80% bed use and an average bed stay of 9.4 days. There were approximately 7,000 employees working at MHH and the overall budget was about * 370 million. The organization chart of MHH is available at www.mh-hannover.de/ ueberblick/verwaltung/organigramm/mhh_frame.htm. MHH comprises 18 medical centers with 75 divisions, 13 business units and central administration and the university center. It has university institutions within these medical centers such as dermatology in the Linden hospital and orthopedics at the Annastift hospital. At present, the MHH does not have an integrated CRM system. The transformation into a more patient-oriented organization hospital is planned for the near future. The patient-oriented improvements are controlled and conducted by the department of quality management, a separate division of the MHH.

The biggest challenge faced by the MHH is the integration of its 36 decentralized systems into a more centralized and standardized IT infrastructure. The main systems in use are a hospital information system (HIS) and an enterprise resource planning (ERP) system provided by proKIM and SAP/R3. Figure 8 illustrates the various services offered by MHH and the interface between them. The HIS is linked with a laboratory information system (LIS) enabling MHH to collect and record all patient-oriented data digitally. In 1999, the migration of hardware and software from a mainframe to client-server was completed. At present there are Internet, intranet, mail-servers, directory-list servers and backup servers installed. Data security is achieved by an internal control and tracking system of all user-registration in the hospital matched with personnel data files and a firewall that secures the backbone system. There is an emergency concept for ensuring system operations in the case of an outside attack. The integration of the different functional data is very important for the introduction of DRGs in 2005.

Until 2005, MHH plans to introduce a PAC-System that transfers diagnosis pictures and x-rays within the hospital via both internal networks and wireless local area networks. The exchange of data via mobile work places that are equipped with a laptop and linked over a wireless network with a transfer rate of up to 2 MBit/sec will be extended over the entire hospital. In addition, the AIRONET/Cisco APA 4500 and Artem Compoint permit a codified data transfer at a transfer rate of 11 MBit/sec. A new multifunctional identification card is under discussion to improve access control to internal patient data. The establishment of a digital, comprehensive and integrated CRM-system with its focus on patients is on the medium to long-term horizon, as public hospitals such as the MHH optimize their internal information flow processes.

International Neuroscience Research Institute (INRI)

(Categorical Private Hospital)

INRI provides a comprehensive range of diagnostic procedures and treatment options for diseases and disorders of the nervous system. At the INI a team of internationally renowned specialists provide the full range of modern neuromedical techniques with notable diagnostic and therapeutic neurosurgery, neuroradiotherapy and neuroradiology. A special emphasis of the INI is the interdisciplinary, surgical and interventional radiological treatment of vascular malformations and tumors of the nervous system. The INI also offers highly specialized surgery, including brainstem implants for the treatment of hearing loss and deep brain stimulation for the treatment of Parkinson's disease.

The INRI private hospital uses a patient-oriented strategy but does not have an integrated CRM system in place yet. At present, INRI's quality management department is collecting patient-feedback (questionnaires) in order to optimize internal processes and the treatment of patients. INRI uses scientific opinion leaders and physicians to get access to its potential patients. Its information communication technology comprises an HIS and an ERP system provided by ISHMed and SAP. The ERP system collects the quantified data, and HIS registers all qualitative data related to the patient. In the long run, INRI plans to establish an integrated CRM system. Table 4 compares and contrasts the information and communications technology (ICT) between INRI (a private German hospital) and MHH (a general/public German hospital).

The INRI has a patient-oriented organization and lower operating costs in terms of personnel than the MHH. The investment in a CRM system is postponed because INRI is still screening the market for a standardized software solution.

CURRENT CHALLENGES FACING THE ORGANIZATION

Both Gartner Dataquest and Giga Information Group estimate that failure rates of CRM implementation projects remain at approximately 60% due to unclear organizational goals and a lack of success metrics, made worse by the complexity of enterprise CRM initiatives. In light of the above case studies, a CRM application that is appropriate to the organization in terms of its functional breadth and depth is paramount to a successful CRM implementation. Next we discuss the management and technical issues related to CRM.

Management Issues Related to CRM

CRM is not only about the technology. It is more about organizational and cultural change demands from hospitals to conduct transformations to patient-oriented organizations. Many CRM initiatives fail because senior management lacks the involvement, vision or enthusiasm necessary to achieve the anticipated outcomes. Figure 9 illustrates the transformational change cycle that is applicable to the cases we have discussed in this study.

Cultural changes require a transformational change cycle that involves four phases:

1. Initial phase: It is necessary to have a real focus on the result desired that includes business needs, objectives, strategy and planning; not on the technology. In the hospital, every member of the medical staff needs to understand that the purpose of this change is to increase the number of patients and to maintain the loyalty of the existing ones. Other purpose of this change is to reduce costs and to increase the ROI.

2. Uncertainty phase: The employees need to know, understand, and have the enough time to discuss and accept the change. It is necessary to have good communication levels amongst them. It is important to know that in the healthcare business, the doctors are dealing with patients every working day, and thus, they have a good knowledge of customer relationship. However, they need to know that there are other ways to improve that relationship and to make it more efficient using CRM strategy.

3. Breakthrough phase: Training the staff in this new technology is a good approach, but it is also necessary to evaluate the feedback of this training. In the hospital, it is important that personal staff develop their abilities to manage this new system and to apply it in their normal work.

4. Competence phase: This phase is normally missed and not recognized as important. The impact of this phase deals with the acceptance. In a hospital, it is not easy to measure the acceptance level of the employees and the customers of this new technology, but it is basic guideline to estimate it with the ROI (SRD Group, 2003).

For Healthcare provider services, the customers tend to be much more forgiving, as they will put up with a great deal more than they will in normal commercial situations. Some healthcare professionals may resist the very notion of measuring customer satisfaction. It is not easy to have quick feedback of how a CRM business strategy is doing, but it can be measured using the following parameters:

* Reduced reporting and/or sales cycle

* Reduced expenses/cost of doing business

* Improved external/internal customer satisfaction

* Increased sales and productivity

Technical Issues Related to CRM

The ability to integrate the operational and analytic CRM/the front- and back-end applications, the length of time required for deployment, scalability, ease of maintenance and the potential to upgrade are important technical issues for CRM products. Based on the above case studies, the key challenge areas with respect to technical CRM are patient access and integrated call centers.

Patient Access

Since many customers have access to online information of various healthcare providers, the information needs to be interactive. One of the CRM solutions is to give the customers the option to customize the Web site based on their specific needs. The hospital can interact with the customers easily via personalized e-mails and provide prompt feedback. On those Web pages, the end-users such as patients and hospital administrators/staff/physicians can find a wealth of comprehensive information about the hospital staff, appointment schedules, registration for healthcare programs and library resources.

Integrated Call Centers

Call centers have an important role for patients, their families and physicians, who want a unique point of access to the hospital organization. Normally, the call centers are structured for specific functions and there is little or no interaction with most departments of the hospital. They are also set up to manage call processing, instead of relationship building, and are based on elementary call-routing or automated call-distributor systems, with some basic voice-recognition capability. Now, most healthcare organizations have changed their view of call centers - they are arguably the best way the hospital can improve their customer service and customer relationships and in turn, profits (Cap Gemini Ernst & Young, 2002). Thus these call centers will increasingly be turned into "contact centers" that handle e-mail and Web interaction, as well as inbound and outbound telemarketing.

In summary, the German hospital is now facing many governmental and regulatory pressures as it enters the new technology era. It needs to review its fundamental structure in order to increase its hold on its key asset - the customer/patient. It has to realign its processes and strategies to focus on efficiency and customer satisfaction. In the midst of a highly competitive market, in order to remain in the business, it should not only seek to compete against its rivals, but it should look into cooperating and collaborating with the other healthcare providers. It is essential to share information within the network of the hospital and if possible, to extend to external partners so that it can provide the customers with an optimal service. The goal must be to build a lifetime relationship with the patients and to gain new, domestic and international customers. In this respect, CRM systems and other existing IT solutions that facilitate information sharing and networking are key to the success of a modern German hospital.

Subject: Customer relationship management; Hospitals; Customer satisfaction; Information sharing; Diagnosis related groups--DRGs; Information technology; Studies

Location: Germany

Classification: 5220: Information technology management; 9130: Experiment/theoretical treatment; 8320: Health care industry; 9175: Western Europe

Publication title: Journal of Cases on Information Technology

Volume: 7

Issue: 4

Pages: 1-26

Number of pages: 26

Publication year: 2005

Publication date: Oct-Dec 2005

Year: 2005

Publisher: IGI Global

Place of publication: Hershey

Country of publication: United States

Publication subject: Business And Economics--Computer Applications

ISSN: 15487717

Source type: Reports

Language of publication: English

Document type: Business Case

Document feature: Tables Diagrams Illustrations References

ProQuest document ID: 198678898

Document URL: http://search.proquest.com/docview/198678898?accountid=38610

Copyright: Copyright Idea Group Inc. Oct-Dec 2005

Last updated: 2011-07-21

Database: ABI/INFORM Complete

Document 2 of 100

Development of an Information Kiosk for a Large Transport Company: Lessons Learned

Author: Blignaut, Pieter; Cruywagen, Iann

ProQuest document link

Abstract:

An information kiosk system is a computer-based information system in a publicly accessible place. Such a system was developed for a large public transport company to provide African commuters with limited educational background with up-to-date information on schedules and ticket prices while also presenting general company information in a graphically attractive way. The challenges regarding liaison with passengers are highlighted and the use of a touchscreen kiosk to supplement current liaison media is justified. System architecture is motivated and special services offered by the system are discussed. Several lessons were learned regarding the implementation of such a system in general, as well as in this environment specifically. An online survey indicated that the system fulfils its role of providing useful information in an accessible medium to commuters in a reasonable time. [PUBLICATION ABSTRACT]

Full text:

ORGANIZATIONAL BACKGROUND

The transport of workers between their place of residence and workplace is a worldwide phenomenon, which has been given a unique twist in the Republic of South Africa due to the policy of Apartheid imposed by the previous government. This policy has given rise to cities such as Botshabelo in the central Free State, 47 kilometers from Bloemfontein, the industrial center of the region. Even though Apartheid has been abolished and citizens are free to stay where they choose, practical necessity dictates that Botshabelo, as a legacy of the Apartheid policy, will remain viable and populated for a longtime to come.

The workers of the central Free State, settled far from their workplace and unable to afford private means of motorized transport, use public passenger transport. In the absence of commuter trains in this region, this need is addressed by 16-seater minibus taxis and buses.

Interstate Bus Lines (Pty) Ltd. as a Major Transporting Company

The public transport service provider in the central Free State, Interstate Bus Lines (Pty) Ltd. (IBL), was founded in 1975 as Thaba 'Nchu Transport, and has since grown to a major company with 508 full-time employees. IBL operates a fleet of 62 train and 134 standard buses from the cities of Botshabelo, Thaba 'Nchu, and Mangaung to the terminal building at Central Park in Bloemfontein. A train bus pivots around a center point and may carry 110 seated passengers, whereas a standard bus is rigid and is designed to transport 65 seated passengers. IBL operates 702 trips daily in this area and transports 70,500 to 80,000 passengers weekly between their homes and workplaces (see the map of the operational area in Figure 1).

Depending on the exact area where a person lives or works, it may happen that he or she will have to take more than one bus for a one-way trip. At Central Park, commuters may transfer to other buses heading for various businesses and factories, as well as the traditionally white suburbs. Central Park also serves as the main ticket selling point.

IBL also provides other services to its community, for example, unsubsidized feeder services in Botshabelo, as well as between Botshabelo and Thaba 'Nchu, and the transport of students to and from schools. Passengers living to the north and south of Thaba 'Nchu are also provided with transport services (Figure 1).

Interstate Bus Lines has a fleet of buses fully committed to peak demand, with allowances made for workshop allocation. IBL is equipped to render a service, along with the minibus taxi industry, to satisfy the public demand. IBL itself services and maintains its fleet of buses. The bus fleet is of the most modern in the Republic of South Africa, with an average age of 4.8 years per bus. IBL trains its own drivers during an intensive six-week course. Drivers receive annual retraining and evaluation, lasting a further two weeks.

IBL's income is based on ticket sales along with a government subsidy and a small special trip market, and averages around USD 2 million per month, which amounts to an annual turnover of around USD 24.2 million. IBL's fleet of buses travels approximately 14.5 million kilometers per year while consuming 5.6 million liters of fuel.

Services run from 04:15 to 22:30 daily. The peak requirement is from 06:00 to 07:45 in the mornings and from 15:30 to 18:00 in the afternoons - peak being defined as the time when the total bus fleet is fully committed to the transport of commuters. Figure 2 indicates the times when the largest concentration of commuters passes through Central Park. All commuters must be in possession of a valid ticket, purchased from the Central Park ticket kiosk. These tickets are daily, one-way, weekly or monthly tickets.

Passenger Profile

Interstate Bus Lines conducts frequent surveys in order to determine the profile of its passengers. According to the most recent survey (Breytenbach, 2003), passengers are mostly African (89.1%), Sotho-speaking (51.0%), female (52.3%), and are predominantly domestic workers (20.8%). According to the living standards index, 95.8% have electricity in their homes, and 63.2% earn between $135.00 and $275.00 per month. The average educational level of commuters is grade six, although 27.3% of passengers are enrolled for a post-school qualification. Less than 10% of IBL's passengers have access to computers and less than 5% have access to the Internet, either at home or at work.

IBL transports predominantly domestic workers, although students, part-time workers and shoppers constitute almost half of the company's clientele base (Figure 3). Many passengers are younger than 30 years of age and are studying or have just completed some form of education.

IT Infrastructure

Business processes are fully supported by information technology. IBL uses a system of electronic ticket machines (ETMs) and all ticket sales are recorded in a database. Tickets bear a magnetic strip and when a passenger boards a bus, the ticket is swiped and the passenger recorded for the specific route and trip. Special electronic equipment is installed in the gearbox of every bus that records movement times and speed. The raw data from these devices is processed and used to prepare statistics on passenger numbers and kilometers traveled on a monthly basis. These statistics are then used as proof for the monthly government subsidy claim.

On the passenger liaison side, however, IT applications are non-existent. One would think that potential for a web page exists but the lack of access to computer technology and the limited computer literacy of commuters would make this a futile exercise.

SETTING THE STAGE

Need for Communication

Dora Ramakoatse works as housekeeper in the home of a wealthy Bloemfontein business man. She is 46 years of age and her native tongue is Sesotho. She also speaks some Afrikaans and English. She has formal school education up to grade 5 and has a limited reading capability.

Dora lives in Botshabelo and every morning at 5:00, she boards a bus for a trip of some 50 kilometers to Central Park. There she transfers to another bus for the suburb of Hospital Park where her employer and his family live. At about 6:30 she is just in time to wake the kids, prepare breakfast and start her daily duties of washing, cleaning and ironing. At 15:30, she once again takes a bus to Central Park and from there to Botshabelo. At around 17:00, she arrives at her own home, exhausted but still with the responsibility of seeing to the basic needs of her own family, such as preparing meals for the evening and the day to come.

Dora is entirely dependent on the commuter service to get to and from her workplace. She used to complain about buses being late or not even turning up for scheduled trips. In the winter, she has a problem with buses being extremely cold in the early mornings. Sometimes she complains of buses being overloaded or having reckless or impatient drivers. Being dependent on a basic minimum wage, annual tariff increases hit hard and she does not always understand why these increases are necessary.

What Dora needs is to be able to express her complaints in a medium that will allow her to comment immediately when the problem occurs. Also, Dora needs the assurance that her complaints will reach those who can do something about it. This medium should not only allow commuters to give feedback on IBL's services, but should also present commuters with information on schedules and ticket prices.

Communicating with Commuters: The Traditional Approach

Upon taking up this matter with IBL's management, Dora's employer was told, as part of their customer care drive, IBL has implemented a toll-free hotline, where complaints, questions, and suggestions are handled and processed. Also, George Mokgothu, public relations officer of IBL, holds regular focus group discussions where community leaders can raise their concerns and express their needs on a monthly basis. George takes note of specific complaints, and provides information on relevant items such as route changes, tariff increases, and feedback on previous enquiries. George also hosts a weekly, hour-long radio talk show on Lesedi FM, the radio station patronized by 86.3% of IBL's passengers. As a part of this show, listeners are invited to phone in and question him, live on air, about IBL's service.

Infrequently, IBL also runs advertisements in local newspapers, advertising mostly for the special trip market. Annual tariff increases are communicated via major advertisements in the local media. Need-to-know passenger information, for example, tariffs for specific routes are available for perusal in each bus. Brochures with timetables, routes and stops are available on request at Central Park. These may also be faxed or emailed to passengers on request.

But Dora was still not happy. She does not have the confidence to phone in to the radio talk show and raise her concerns in public. She also does not have personal contact with the community leaders who represent her in the focus groups. She wants a medium of communication through which she can complain about IBL's services, knowing that her complaints will reach the right ears and will be attended to. She wants access to schedules and tariffs without having to wait for an initiative from IBL. She also complains that the brochures are often outdated before they hit the streets. People also remove the brochures from the buses and notice boards.

George confirms that it is difficult to replace brochures on just about 200 buses with updated ones at short notice. He also confirms that he cannot keep up with answering all the queries to the satisfaction of both IBL and its clientele on a regular basis. He needs a way to disseminate information regarding route and schedule changes, tariff increases, and so forth at short notice.

Communicating with Commuters: Alternative Approach

After consulting with George, passenger representatives and local authorities, Interstate Bus Lines approached the Department of Computer Science and Informatics (DCSI) at the University of the Free State (UFS) early in 2003 to assist in a search for a solution. A touchscreen information kiosk (Figure 4) was identified as a way of supplementing the communication techniques mentioned previously while at the same time overcoming some of the disadvantages of these techniques. Additionally, it could also serve the purpose of improving the company's corporate image among commuters and could expose previously deprived people to technology. The idea was that the system should present commuters with the opportunity to query a database regarding routes, schedules and ticket prices. During periods of inactivity, the system should present general company information on a continuous basis. As an added bonus, advertisements from shops in the center could be displayed. Passers-by or people queuing in front of a ticket box should then be able to follow the presentations which are accompanied by attractive graphic animations and sound or video clips.

It was imperative that the system be updatable on a regular basis as ticket prices increase, timetables change, shops change their special promotions, and so forth. Furthermore, it should be possible for George and other staff members of IBL to do these updates themselves after the developers of the system have handed over the completed system. In an attempt to conform to these requirements, a user-friendly switchboard application was integrated with a set of presentations and a single-user database package to set up a comprehensive information kiosk while allowing maintenance by people with end-user skills only.

Because of the centralized location of the ticket office, it was not necessary to connect the system to other information kiosks. Also, because of the non-existence of a web page, no need existed to connect the system to the Internet. Since the complete timetable is in any case maintained in an Access database for scheduling purposes and driver instructions as part of the business process, it was worthwhile exploring the possibility of connecting the kiosk system to this database by means of a local area network.

This case study outlines the impediments, design issues and pitfalls that were encountered during the implementation of the system.

CASE DESCRIPTION

Information kiosk systems are computer-based information systems in publicly accessible places, offering access to information or transactions for an anonymous, constantly varying group of users with typically short dialogue times and a simple user interface (Holfelder & Hehmann, 1994). Depending on the nature of the business, the presence of an information kiosk could be a necessity, but most probably is a supplement to existing means of communication. The success of such systems depends largely on the attractiveness of their user interfaces, how easily they allow access to information and how clearly the information is presented (Borchers, Deussen, & Knörzer, 1995). It is no use having the technology with all the latest information if Dora and others like her cannot access it or do not understand how to use it.

Classification of Information Kiosks

Borchers, Deussen, and Knörzer (1995) propose a classification of kiosk systems according to their major tasks:

* Information kiosks have the primary goal of providing information in a limited subject field, for example, at a railway station where users can find information on a connection to a chosen destination. Users of such systems use the system because they need the information - they do not have to be extrinsically motivated to use the system.

* Advertising kiosks are installed by companies to present themselves or their products to the public in an attractive and innovative way. The missing initial motivation of potential users has to be compensated for by a visually attractive design. The contents should be interesting and entertaining and should motivate the user to explore the system further.

* Service kiosks are similar to information kiosks with the added functionality of information entry by the user, for example, hotel reservation systems where data such as names and addresses have to be entered to make a booking.

* Entertainment kiosks usually do not have a specific task apart from entertaining the user.

Borchers, Deussen and Knörzer (1995) acknowledge that most information kiosk systems will belong to two or more of the previously mentioned classes. The system that was developed for the IBL ticket office can typically be regarded as both an information kiosk and an advertising kiosk with the potential to include the functionality of a service kiosk at a later stage.

System Architecture

Development Tools

Several possibilities regarding the development tools were considered in order to develop a system that would fulfill in the needs as expressed previously. A presentation package such as Microsoft PowerPoint® provides for easy end-user updates while allowing attractive graphical animations and multimedia effects. The preparation of an individual slide for every trip makes this, however, an impractical solution.

A user-friendly front-end system to query the database for the relevant information or a fully-fledged object-oriented database environment to store graphic images, video clips, and so forth as well as the route and timetable information, could have been developed by professional programmers. Another possibility that was considered was a series of HTML and ASP files to be viewed in a browser. Such an environment would have allowed the combination of graphic attractiveness, the use of multimedia and database querying. Although these tools might have done the job, they would have been difficult to maintain for people with end-user skills only.

Finally, it was decided to develop the IBL system by integrating a dedicated enduser application (developed in Delphi®) with a presentation package (Microsoft PowerPoint®) and a single-user database package (Microsoft Access®) inside Microsoft Windows® as operating system. Together with the fact that the complete timetable was already available in Microsoft Access, both PowerPoint and Access were reasonably well known by the staff members of IBL who would be responsible for system maintenance. The integration was done in such a way that commuters would not be aware of transitions between the environments. A diagrammatic representation of the system is shown in Figure 5.

A form at the bottom of the screen acts as a switchboard (Figure 6). Buttons on the switchboard allow users to navigate through the system. Some of the options activate MS PowerPoint® presentations in the upper part of the display. These presentations convey general company information, ticket office hours, contact telephone numbers, advertisements from shops in the center, and so on. Other options enable users to query the MS Access® database for route information, ticket prices, schedules, and so forth.

The use of a dedicated end-user application as switchboard also allows the programmatic capturing of research data such as frequencies of usage, commuters' preferences regarding language, typing speed, as well as a limited user profile. These values are saved into the underlying database and are analyzed periodically by the researchers.

Services Offered

One of the most important needs that Dora expressed was to be able to lodge complaints as they arose. Also, in order for George to be able to communicate passenger needs to management, he has to know what they think and how they experience the services that IBL renders.

The information kiosk allows commuters to register comments, complaints, requests, and so forth by means of an on-screen keyboard (Figure 7). The idea for this technique is accredited to researchers at the Human Computer Interface Laboratory at the University of Maryland (Plaisant & Sears, 1992; Sears, 1991; Sears, Kochavy, & Shneiderman, 1990; Sears, Revis, Swatski, Crittendon, & Shneiderman, 1993). Valuable feedback for IBL has been generated in this way. Although many passerbys use this facility just for the sake of playing around and to get the feel of using a touchscreen, some 800 valid and useful comments were registered in the period May to December 2003. Since the information kiosk is available night and day, Dora is now happy that she has a way to express her concerns the moment that she gets off a bus. Also, George has expressed his satisfaction for getting honest and unbiased feedback on a daily basis.

Route and timetable information is kept in an MS Access® database. Commuters are able to query the database by means of a form that is displayed full-screen, covering the running presentation windows. Figure 8 shows a screen print of this form.

Lessons Learned During Development

Several sources are available that provides guidelines for the design of touchscreenbased information kiosks (Borchers, Deussen, & Knorzer, 1995; ELO Touch Systems, 2002; ELO Touch Systems, 2003; MicroTouch Systems, Inc., 2000). These guidelines are mostly generic of nature and not specific to a particular package or an integrated approach as is proposed here. During the development of this system, several lessons were learned that proved to be critical in an integrated development approach.

Physical Mounting of the Screen

According to ELO Touch Systems (2002), the cabinet in which the touchscreen is installed should be in the company colors, have proper ventilation and should be mounted at a viewing angle that minimizes differences in user height. The design of the cabinet should be attractive and sturdy. In the current study, the system was installed in a metal casing just below average eye-level and mounted against the wall between two cubicles of the ticket office at a slight angle (Figure 4). The screen was placed inside the metal casing in such a way that only the glass part was accessible in order to avoid users tampering with the screen's adjustment controls. The screen could be closed by a lockable lid after hours. This has worked well and to date no incidences of tampering or vandalism have occurred. The continuous presentations attract the attention of passerbys and are visible to people queuing at the ticket offices. This near-vertical mounting also prevents people from putting objects, for example, food, parcels, and so forth, on the screen.

Touch Modes

Potter, Weldon and Shneiderman ( 1988) describe a lift-off strategy for touchscreens that implies that the selection is not made when the user touches the screen but when he lifts his finger from the screen. This allows the user to put his finger on the screen and then make a correction to adjust the position of the pointer. 3M Touch Systems (2002) indicates that the so-called desktop mode is most useful for general-purpose desktop applications. In this mode, a touch positions the cursor in much the same way as a mouse does. Holding the touch steady is equivalent to pressing and holding the mouse button. Lifting off is equivalent to releasing the mouse button.

In the current study, it was found that both these strategies seem to be unnatural to the average user from the IBL commuter community. These users expect a reaction from the system as soon as they press a button. If nothing happens, they tend to press harder without lifting the finger. It was found that the button-mode was the most appropriate strategy for this user group. In this mode, touching the screen is equivalent to pressing and releasing the mouse button. The action occurs as soon as you touch the screen.

System Cursor

The lift-off strategy proposed by Shneiderman (1991) implies that a cursor should be visible on the screen that is not obscured by the finger. The concept of a visible cursor is contradictory, however to the idea of ELO Touch Systems (2003) that there should be no cursor because the user should focus on the entire screen instead of the arrow.

The normal pointing cursor for button-aware applications is the northwest pointer, but for PowerPoint presentations, the default cursor for links is the pointing finger. In order not to confuse commuters, it was essential to change the cursor to a consistent graphic throughout the system. A top-down arrow has its hot spot on the bottom tip of the arrow and presents good feedback with regard to the exact item selected since the cursor is not entirely obscured by the finger. To replace the top-down arrow with a hand with finger pointing downward would, however, suggest an awkward physical position. In the end it was decided that the visual clue of a hand with a pointing finger outweighs the disadvantage of occasional obscuring.

Use of Sound

The effect of sound to attract attention and for purposes of feedback is well known (Preece, Rogers, Sharp, Benyon, Holland, & Carey, 1994). The value added with regard to information conveyed is somewhat less, however. Speech has a transient nature. If you did not catch the message then you did not catch it, while written text has the advantage that it can be read over and over again at the reader's own tempo until he/she understands what is said.

At the IBL kiosk, each one of the running presentations had accompanying sound effects and narration. The facilities that expected user input had short written as well as spoken instructions. Users could at any time press a button to listen to the instructions again.

Touchscreens have no tactile feedback like a button on a soft microwave oven keypad that gives when pressed or a button on an elevator's keypad that can physically be depressed. Sound effects (e.g., an audible click with every valid press) and display changes (e.g., a button that is displayed differently when selected) are important to inform the user that the input was accepted.

The placement of the loudspeakers presented a problem. The speakers were placed inside the metal casing, facing the ventilation holes at the sides of the unit. The kiosk was placed in a public foyer with very bad acoustics, noise from nearby stores, and even a night club. Users complained that they could not hear properly, even with the volume setting at its highest. It would have been better had the casing been made a little wider so that the speakers could fit in next to the screen, facing towards the users behind a grid similar to the ventilation holes. A sound amplifier would also have been an improvement.

One Window with Many Inputs or Many Windows with One Input Each?

Due to users' limited previous exposure to technology and limited educational background, the need to keep the user interface simple and easy to use was identified from the start. For example, it was thought that, whenever a series of user inputs was required, a single screen capturing all the inputs would provide the simplest user interface. It was found, however, that such a screen confused and frustrated the users. The error messages they got due to incomplete inputs caused them to walk away. This approach was then replaced with one where the user inputs were obtained through a series of modal dialog boxes, appearing one after the other (Figure 9). Each dialog box had only one set of mutually exclusive buttons. This was accepted much more easily as users were guided to answer one question after the other.

Navigating Through a Series of Dialog Boxes

Initially, the series of dialog boxes was provided with a set of Previous/Next buttons similar to the typical setup wizards for many software applications. It was found, however, that users at the IBL ticket office did not understand the concept of going back to edit a previous input, became frustrated, and walked away leaving the system halfway through a sequence. The Previous buttons were then replaced with Restart to allow users to start with the query all over again. The Next buttons were taken away when the user made a selection the next box in the sequence was automatically displayed. This approach was much better accepted. This might be another confirmation of the findings of Blake, Stevenson, Edge, and Foster (2001), as well as Walton and Vukovic (2003), that African people have a different view of hierarchies and sequences than Western people have.

Control Types: Buttons, Scroll Bars, Sliders, Radio Buttons, etc.

According to Shneiderman (1991), it is possible to use actions other than clicking a button on a touchscreen, for instance, sliding, dragging, rubbing, etc. He asserts that many actions that are unnatural with a mouse are more intuitive with a touchscreen, for example, dragging the arms of an alarm clock to set the time. Shneiderman (1991) discusses evidence that most users succeed immediately in using a touchscreen information kiosk that utilizes these kinds of interactions.

Our experience with the current study, however, was that users find the single tap on the screen easier than a slide. It was easier for them to adjust the sound volume if the control consisted of a set of discrete values implemented with radio buttons (Figure 6) than when they had to drag a slider along a continuous scale. It must always be kept in mind that users of the IBL system are casual users who are unlikely to use the system time and time again and will, therefore, never have the opportunity to practice the action of dragging.

Do Away with the Windows Task Bar

ELO Touch Systems (2002) recommends that the system should not have a "Windows look". There should be no indication of the operating system and users should not even think of the system as a computer system. In the current system, this lesson was learned the hard way. Initially, the Windows task bar was always available at the bottom of the screen, even though it was set to "auto-hide". Some of the users would press on a specific button and then read the information presented on the screen while dropping their hands off the screen at the bottom edge; this sometimes caused accidental touching of the screen again, which caused the task bar to jump up. For computer literate users, especially teenagers, this presented a challenge to fiddle around with the system, edit the PowerPoint presentations, search for evidence of Internet availability, and even close down the system. For computer illiterate users, the sudden appearance of a bar at the bottom of the screen distracted their attention and even made them uncertain about whether some reaction on their part was expected. When the task bar was removed altogether, these problems were largely solved.

Cater for User Ignorance

One of the general design guidelines for information kiosks states that system reaction must be immediate to prevent users from walking away (ELO Touch Systems, 2003). Any presentation must at any time be immediately available on request of a commuter. In this case study, all presentations were activated to run in the memory simultaneously, one behind the other. On request, the appropriate presentation can only be brought forward on the screen with no time delay due to loading.

It was also observed that some of the commuters, especially teenagers, just played around with the system, pressing one button after the other in quick succession. Commuters can press the buttons on the screen much faster than they can click a mouse, thereby expecting the system to switch between the various presentations or query the database and display results in a matter of milliseconds. To cater for these scenarios, it was important to ensure ample resources for the computer system. In this case study a PIII 866MHz CPU with 256 MB memory proved to be stable and efficient enough.

In a typical information kiosk environment, it is always possible that a specific user may leave the system halfway through a process or query. The next user might then be confused and even unable to get to the information he or she requires. It was, therefore, essential to add functionality for the system to reset itself and to return to the main screen after a period of inactivity.

Commuters' Comments

An online questionnaire allows commuters to select their answers from a set of possibilities (Figure 10). Norman, Friedman, Norman, and Stevenson (2001) provides guidelines regarding the layout of such online questionnaires.

Results obtained from this survey revealed that 71.1% of first-time users and 83.8% of follow-up users found the system easy or moderately easy to use. Also, 68.6% of first-time users and 70.6% of follow-up users indicated that they experienced a positive emotion, e.g., satisfaction or enjoyment, while using the system.

A rather low percentage of 40.2% first-time users indicated that they had found what they had been looking for. This was probably because the commuters expected the system to allow them to buy tickets from the machine rather than having to queue for them; something that had not, from the outset, been the intention of the system. The fact that 71.8% of follow-up users indicated that they had found what they had been looking for, confirms that the commuters realize the intention of the system after some exposure.

The fact that 70% of first-time users and 88% of follow-up users indicated that they found the information useful was regarded as an indication of commuters' rating of the value of the system.

In a usability study, selected users were asked to search for information on six specific items that were representative of the available information. On average, firsttime users found 90.1% of the requested items correctly while follow-up users found 97% of the items correctly. The fact that follow-up users could obtain these items in about 41⁄2 minutes can qualitatively be considered as acceptable to good in comparison with the two minutes that an expert user took to complete the tasks.

CURRENT CHALLENGES/PROBLEMS FACING THE ORGANIZATION

When a new IT installation is on the cards, one can always ask the question: Is this a "nice-to-have" or a critical necessity for business survival? How often does one see potential for implementation of an IT solution that promises to work better than the existing manual system with a concomitant saving in time, money and manpower and a positive impact on annual turnaround, but due to the skepticism of management and reluctance of employees to use it, the system is either not implemented or not utilized to the full?

This was and still is one of the biggest stumbling blocks that needed to be overcome with this kiosk system. Despite the fact that management and the PR, George, are convinced that the system adds value to the company, despite the fact that the usability results reported favorably to a large extent, and despite positive feedback from individuals such as Dora Ramakoatse, there are still those who are skeptical about the system. This was especially evident from employees at the ticket office who were assigned the task of ensuring that the system runs smoothly on a day-to-day basis. They were trained to restart the system in cases of power failures or system crashes. Those employees are, however, not enthusiastic about the system. It was found that, if one of the researchers or George or another member of management does not visit the installation at least once per week to prove interest in and the importance of the system, the employees do not consider the effort to keep the system up and running worthwhile. They view the system as an extra (unnecessary) burden that is nice to have but not essential.

Because of this lack of interest on the part of IBL employees, it was extremely difficult to find an individual who was willing to take responsibility for the system on a continuous basis. This meant that the researchers could not easily withdraw from the system once their job was done.

Because of the fact that ticket salespeople work with huge amounts of cash, and because of the high crime rate in the area where the ticket office complex is located, intensive security measures are in place. Among other things the whole environment, inside and out, is under constant surveillance of closed circuit television (CCTV). Because of the risk of insiders working together with criminals to deactivate the CCTV prior to a robbery attempt, the computer for the CCTV system is behind a security door where not even the sales people can enter. For reasons of limited space and power outlets, as well as the existence of a heat extracting fan, the computer for the information kiosk is also behind this security door. This isolation of the information kiosk computer causes a certain amount of inconvenience. It happens quite often that a power failure or, especially in the early days, a malfunctioning system causes the system to shut down. The salespeople cannot solve the problem or restart the computer and the researcher has to be called out time and again.

The public environment in which the system is functioning implies a high risk for potential vandalism and even theft of equipment. Currently the touchscreen is installed in a metal cabinet in such a way that only the glass part is accessible. Furthermore, the touchscreen is also undercover by CCTV. The risk still exists, however, that a person with a vandalistic inclination could hit the screen with a hammer during quiet hours and then disappear. Due to the high crime rate in South Africa, the police would probably not have the time nor the manpower to follow up the TV recording.

Much research has previously been done on user interfaces for touchscreen kiosks (Borchers, Deussen, & Knörzer, 1995; ELO Touch Systems, 2002; ELO Touch Systems, 2003; MicroTouch Systems, Inc., 2000; Sears & Shneiderman, 1991; Shneiderman, 1991). This research was, however, always focused on users with average computer literacy skills and exposure to technology according to Western standards. For an interface to be developed for users from the IBL passenger community, special considerations should be taken into account. As previously indicated, these people are mostly from an African community with very limited educational background. One of the initial research aims for this project was to investigate the ways in which a computer interface must be adapted to accommodate users of this profile. To date, no clear-cut set of guidelines could be formulated and it remains an open question as to how much users of this user community gain from a Westernized interface in a non-native tongue that is not always well understood.

Commuters who travel the same route every day do not have to consult the system time and again to determine departure times or ticket prices. This means that they would not have any motivation to consult the system on a regular basis, thereby probably missing out on important notices that IBL communicates from time to time. It is, therefore, essential to determine effective ways to motivate commuters to use the system on a regular basis.

With reference to the techniques of liaison and obtaining feedback that were in place prior to the implementation of the information kiosk, the ultimate question is whether or not the information kiosk adds value. It is accepted that the existing techniques should not be replaced by the information kiosk and that the kiosk should act as a supplementary source of information, but would the old ways not suffice without the information kiosk? In other words, does the information kiosk system really fulfill the needs of Dora Ramakoatse and others like her?

Subject: Public transportation; Studies; Systems development; Kiosks; Information dissemination

Location: South Africa

Classification: 9177: Africa; 8350: Transportation & travel industry; 9130: Experiment/theoretical treatment; 5240: Software & systems

Publication title: Journal of Cases on Information Technology

Volume: 7

Issue: 4

Pages: 27-45

Number of pages: 19

Publication year: 2005

Publication date: Oct-Dec 2005

Year: 2005

Publisher: IGI Global

Place of publication: Hershey

Country of publication: United States

Publication subject: Business And Economics--Computer Applications

ISSN: 15487717

Source type: Reports

Language of publication: English

Document type: Business Case

Document feature: References Maps Graphs Charts Illustrations

ProQuest document ID: 198651342

Document URL: http://search.proquest.com/docview/198651342?accountid=38610

Copyright: Copyright Idea Group Inc. Oct-Dec 2005

Last updated: 2011-07-21

Database: ABI/INFORM Complete

Document 3 of 100

Challenges of Complex Information Technology Projects: The MAC Initiative

Author: Teta Stamati; Kanellis, Panagiotis; Martakos, Drakoulis

ProQuest document link

Abstract:

Although painstaking planning usually precedes all large IT development efforts, 80% of new systems are delivered late (if ever) and over budget, frequently with functionality falling short of contract. This case study provides a detailed account of an ill-fated initiative to centrally plan and procure, with the aim to homogenize requirements, an integrated applications suite for a number of British higher education institutions. It is argued that because systems are so deeply embedded in operations and organization and, as you cannot possibly foresee and therefore plan for environmental discontinuities, high-risk, 'big-bang' approaches to information systems planning and development must be avoided. In this context the case illustrates the level of complexity that unpredictable change can bring to an information technology project that aims to establish the 'organizationally generic' and the destabilizing effects it has on the network of the project's stakeholders. [PUBLICATION ABSTRACT]

Full text:

ORGANIZATIONAL BACKGROUND

Located on the western edge of London, Isambard University received its Royal Charter' in 1966 and since then enjoys a considerable reputation for research and teaching in the science and technology fields in which it specializes. Close connections with the public sector, industry and commerce characterize Isambard University. These links were built through a commitment to the thin sandwich2 undergraduate degrees which made the University's graduates among the most employable in the country and, by its distinctive competence in applied and strategic research. As a direct result, Isambard University is popular with undergraduates, while its earnings from contract research per member of academic staff are significantly above the national average in most of the cost centers in which it is active.

In the beginning of the 1990s the Higher Education (HE) sector in the UK started to experience dramatic changes. The Secretary of State invited comment on the scale, purpose and structure of HE, and the Government made its views clear through the introduction of numerous policy changes affecting universities' funding, teaching and research. Those were followed by the merger of the Ministries of Education and Employment, and the move of the Office of Science and Technology to the Ministry of Trade and Industry, signifying an increased requirement for public spending on HE to have a demonstrable effect on employment and national economic growth. For example, in November 1995, a 7% overall reduction in universities funding for 1996 was announced, including a 31% fall in capital funding, meaning that over a six-year period the unit of funding for teaching each student would have had to be reduced by 28%. Direct financial support for students was also reduced. The previous students' allowance scheme was terminated, with the balance between student grants and loans moving even more deterministically towards the latter, with the Government signaling its adamant intention to fundamentally review the funding mechanisms.

It was against this background of environmental turbulence that Isambard University, as indeed every other academic institution of HE, operated. Another one of the key environmental changes was the Government's plan to double the number of undergraduate students, from one million to two million, over a 25-year period beginning from 1989. In the medium term this was to be achieved through a strategy of 'expansion with greater efficiency'. Hence, a major challenge for Isambard University was to determine a plan and assure that the necessary infrastructure was in place for participating in this program of expansion in a way that would build upon and strengthen its distinctive characteristics. Associated with this change was the Government's decision to abolish the Council for National Academic Awards (CNAA3). Institutions with degrees validated by this body were now required to seek alternative means of validation, either through the acquisition of chartered status, or through association with an existing chartered institution. Opportunities to validate the awards of other institutions were therefore available for Isambard University.

Isambard University's strategy of actively seeking growth and diversity, by merging and fostering links with other institutions, came into fruition in February 1995, when the West London Institute of Higher Education was incorporated into the University as Isambard University College. This amalgamation marked the beginning of significant restructuring as the College departments had to be molded into a unified faculty structure. By the end of 1995, the Departments of Education from the two institutions were brought together into a single School of Education, and the Department of Design joined the Faculty of Technology. Furthermore, there were plans involving the splitting of the College Department of Human and Environmental Sciences into a Department of Sports Sciences and a separate Department of Geography and Earth Sciences. In addition, Isambard was for the first time planning to establish an Arts Faculty. This re-organization was the cause of considerable instability.

Adding to these was the intensification of the competition for research funding. Changes in the Funding Council's allocation model were directed towards greater selectivity in the use of research funding and an increased emphasis on research quality and proven research success. For these reasons, Isambard was experiencing a shift in its funding arrangements and had to obtain external funding to compensate for a reduction in central funds through the Higher Education Funding Council for England (HEFCE). Whereas in the past there were one or two revenue streams to be maximized, now there were at least five. These included:

* Central funding from the HEFCE based on a series of assessments (for example Research Assessment Exercise)

* Project-driven funding from UK research councils and from the European Community

* Collaborative and contract research for industry and commerce

* Overseas student fee income

* Conference accommodation and catering income

Hence it was towards the end of the '80s and the beginning of the '90s that Isambard University found itself exposed to an operating environment that in many respects was borrowing the business - like characteristics of the commercial sector. In the Vice Chancellor's own words:

"The only cloud on our horizon as we start the new year is the uncertainty of the environment in which we will be seeking to put those values [to continue to be a mixed teaching and research university which is financially sound; and to be characterized by teaching and research which is of relevance to its user community] into practice. 1995 entered with less clarity about the future of the UK Higher Education system than most of us working in it have ever known. " (Sterling, 1995, p. 16)

SETTING THE STAGE

Information systems played a critical role at Isambard University. Its orientation towards engineering and sciences dictated a high level of interest in, and use of such systems, among other high technology facilities. Since the mid-eighties its systems infrastructure developed from a central multi-user mainframe with islands of computation in the various departments, to a distributed computing system linking central and departmental resources and providing user access at required locations, via terminals, PCs, and workstations. Teaching and research staff, partnering with their close links to industry and commerce, demanded 'state-of-the-art' computing at industry standards. The following elements constituted the framework for the University's computing infrastructure:

* UNIX for main service operating systems

* Networks based on X.25 and Ethernet

* IBM compatibility for PCs

* Adoption of UNIX- based workstations

* Application software of industry standards

* Centralized file service

It was also recognized that all administrative work ought to be underpinned with effective information and management systems. Historically, the administrative computing capability had been developed to service the central administrative functions. As management and administrative tasks and activities by departments and faculties increased, so did the need for support in those areas. This change in responsibility brought about the development, within some departments and faculties, of local systems to support their management and administrative activities and needs. In parallel with this, there was an increasing demand from departments and faculties for management information from central administration and support, in terms of access to system facilities. In 1988, it was observed that in terms of hardware, the host machine supported about the maximum number of peripherals it could, and was utilized beyond the normal expected level. This meant that any further expansion of support was not feasible without increasing computing power and capacity. In addition, the terminal access of administrative systems for individual departments provided via the University's network did not provide an adequate response to those remote users, and the service level did not always fulfill their needs. It was not necessarily the case that the information held within the systems was inadequate, but barriers existed which prevented or hindered its use by the departmentally base staff that needed it. There were also issues associated with the data itself, and it was felt that they could probably be resolved by developing new hardware and software architectures to support the differing needs of the users. In summary, the main issues were:

* Format and structuring: Data was not formatted and structured so that it could be presented to the user in a useful and meaningful way.

* Access: There was limited access to the data caused primarily by technical constraints.

* Currency: Data was found to be current for one set of users but out of date for others, due to differences in need and timescale.

* Ownership: There were areas where lack of ownership definition and responsibility had resulted in a lapse in maintenance of the data. Where ownership was at the center, but data was derived from other sources, there were problems in maintaining it. An example was customer records where ongoing information was provided from many sources, but there was no area responsible for collecting the data and no means of distributed input. Any breakdown of communication resulted in central and departmental information being different.

* Completeness: There was a wealth of information in all subject areas held by individual departments and within the faculties, which was not captured effectively. The necessary mechanisms (i.e., coordinated and integrated systems) did not exist to enable this to happen.

The software applications processing this data had been developed over the last 12 years. Their development had been tailored to the specific needs of the users that applied at the time of development or subsequent amendment. As management and administrative roles and responsibilities were undergoing change, new users were bringing in a new set of needs to be satisfied. Similarly, changing circumstances - unpredictable demands from the Universities Funding Council (UFC)4 and changing rules for allocating funds - and pressures were bringing about different needs. During the period of 1988-1990 it became clear that while the existing systems satisfied many of the central administrative requirements, new needs in both the management and administration of the university arose.

CASE DESCRIPTION: MANAGEMENT & ADMINISTRATIVE COMPUTING INITIATIVE

The UFC's Management and Administrative Computing (MAC) initiative was announced in September 1988. The aim of the initiative was to promote the introduction of more effective and sophisticated systems to support the increasingly complex decisions that faced universities and colleges (Kyle, 1992). In addition, the systems were to provide the UFC with the information needed for allocating funds more effectively across the pool of universities. The cost of institutions 'doing it alone' was estimated at £ 0.5 million or more for each. To avoid this, the Universities Grants Committee (UGC5 precursor to the UFC) commissioned a study to develop an information/data specification or 'Blueprint', which aimed to cover 80-90% of the needs of any single institution. A Managing Team was formed, and an initial study based on direct input from five universities and contributions from 20 more was completed. The team, comprising senior computing staff and university administrators, was chaired by the Vice Chancellor of the University of Nottingham.

The UFC decided that they would only fund information technology developments for MAC that were organized to suit 'families' of universities. The objective was to group institutions into five or six families with similar computing requirements. Whilst geographic proximity was helpful in promoting frequent contact between the family members, it was not to be the only consideration. Others included similarity in size, structure, type of institution, existing collaboration (for example on purchasing), and computing development needs.

The Initial Phases

The Blueprint undertaken by Price Waterhouse (now PriceWaterhouseCoopers) delivered at the end of 1988. The five main participants were Manchester University, Strathclyde University, Newcastle University, University College London and lsambard University.

In March 1989 the blueprint was sent to all universities, together with a request that each university prepare a 'migration strategy' report. This would have to include each university's present administrative computing situation, both in terms of its computing hardware and its existing applications, and of its development priorities and requirements for the future and additionally:

* A comparison of the information needs of the University with the generalized blueprint and an identification of gaps between the two

* The identification of the characteristics of the institution in order for the Managing Team to classify it

* The development of an outline strategy for migration from the University's existing systems to the outline architecture in the blueprint

Isambard's migration strategy was prepared with the assistance of two consultants from Ernst and Young and emphasized the importance placed by the University on the provision of management as well as operational information. There were also two additional features that were highlighted: one was the need to conform to the University's own Information Technology strategy6; the other was the fact that a new development platform had to be selected for any future systems, as the existing systems were coming to the end of their useful life. The preparation of Isambard's migration strategy for MAC took place at about the same time and led to a decision to integrate management and administrative computing systems. This decision for integration was one of the principal factors that led to a commitment to the Oracle database platform as it was the one supported by the University's computing services. This migration strategy was sent to the UFC in July 1989.

The Formation of Families

The MAC Managing Team used the migration strategies submitted by all universities as the basis for the formation of different 'families'. A consultant from the National Computing Center (NCC) assisted in analyzing the strategies. As a result of his analysis and at a meeting held in September 1989, it was proposed that the families should be formed around the four main relational database products available at that time and in use in universities, as the universities believed it to be the most important factor regarding their future systems development. In addition it was thought that this would enable them to achieve the objective of developing a common code to run on their hardware. The products were Oracle, Ingres, Powerhouse and secqus. Each university was then asked to choose which family it wished to join, with the UGC hoping "that, in time, all members of any one family will be using the same administrative computing software which they will develop and maintain jointly." The process of forming the families took place during October 1989 and Isam bard joined the largest one - the Oracle Family which represented a wide variety of universities. Other reasons for this were the size of the family itself-the bigger the family, the smallerthe contribution Isambard believed it would have to make - and the viability of the supplier; in terms of sales, Oracle was by far the largest of the four as well as the most 'open'.

In October 1989, the Family was simply a collection of universities that agreed to cooperate on systems development using a particular product. A constitution and modus operandi had to be drawn up for the Family in addition to a plan of its activities. This was necessary in order to obtain funding from the UFC. The constitution established a Management Board in which each university had one representative and one vote. A Chairman was elected from among those representatives, and the Family incorporated as a limited company known as Delphic Ltd.

The Board also decided to form a number of what they called Application Groups, one for each area of the management and administrative systems identified in the Price Waterhouse's Blueprint. This did not mean that the groups had to undertake the development of the systems themselves, but that they were to be responsible for working directly with the commercial contractors employed by the Family. Each member of the Family had to be a member of at least one group, and Isambard took the decision to join the Management Information Application Group.

The Analysis, Design & Delivery Phases

In February 1990, it was decided to contract Mantis UK to undertake the analysis stage of the Family's systems development program. This involved the production of the functional analysis and data dictionary of the members' requirements, under the sections covered by the six Applications Groups set up by the Management Board: Students, Staff, Finance, Research and Consultancy, Physical Resources, and Management Information. The work on this contract commenced in February and ended in June 1990. It involved several consultants from Mantis UK plus many staff from all the member universities of the Family and was supervised by a Project Manager employed on a consultancy basis, together with a small group7 chaired by the administrative computing manager of Bristol University.

The result of all the work - a huge coordinated effort between Mantis UK and the Family members - culminated in an enormous document running into several hundreds of pages which contained everything one ever wanted to know about management and administrative computing requirements in UK universities. It was made up of two main parts. The first was the analysis of all the management and administrative functions that universities needed the systems to help them carry out (the Function Hierarchy). The second identified all the data items required by these functions and the relationships between them (the Entity Relationship Model). These were followed by proposals concerning the development of the required systems. The document therefore comprised the deliverables from the analysis stage on the basis of which the system was to be designed and built.

The next stage was to commission someone to design and build the systems software on the basis of this analysis and data dictionary. An initial description of the work to be tendered was issued by the NCC on behalf of the Family at the end of April 1990, and expressions of interest in receiving a full tender document were invited. The formal invitation to tender was issued in June to three companies expressing interest. These were Mantis UK, Hoskyns and Price Waterhouse. The Family received the three tenders on August 7, 1990, and spent the rest of the month assessing them. A detailed scoring system was used to evaluate the three tenders against a whole range of factors. This evaluation process was followed by a period of intense negotiation over the costs with each of the suppliers and significant reductions over the original tender price were eventually achieved.

The outcome was that Mantis UK was offered the contract to develop the full set of management and administrative systems. The recommendation was formally accepted by a meeting of the Management Board in September 1990, and a contract was subsequently drawn up with Mantis UK with the assistance of specialist legal advice. The complexities of the negotiations over the contract were such that it was not formally signed until May 1991, although the work itself started and continued during the negotiation period.

Although the MAC system was designed as one closely integrated system, its software was to be made available in phases (see Appendix). All applications, with the exception of payroll, would use SQL Forms V.3 with pop-up windows etc. as part of the user interface. The Finance application was based on Mantis's own accounting package that was to be enhanced to cater for the additional functionality requested by the Family. Whenever the Mantis development team finished writing and testing a release of software, this was to be passed over to the appropriate Application Group for them to run their own acceptance tests on it. It is important to note that the '80/2O' rule applied here. A small part of the system was left to the discretion of the programmers working at each of the universities, who after an Mantis software release and in close cooperation with Mantis developers, would attempt to 'tailor' the system to the specifics of the sites (Pollock, 2001). If an institution was encountering problems in running the software, the 'Delphic Support Desk' had to be contacted. This would assess the problem and then pass the solution back to the institution responsible for the particular application. If the problem could not be resolved, it was forwarded back to Mantis which had to redesign and rebuild the application.

Management & Administrative Computing Initiative Outcome for the Delphic Family

Towards the end of 1994 and with the funding for the MAC Initiative nearing its termination date of March 31, 1995, the Delphic members were experiencing severe delays concerning the delivery of the main application packages. The Anticipated Availability Schedule (see Appendix) shows the time slippages. Kyle (1994) summarized some of the main causes for the delays as follows:

1. The design of the Student Structure was found to be flawed, and had to be redone.

2. Mantis's decision to merge its development team responsible for its own Finance package with the one responsible for the MAC's Finance module.

3. The loss of senior Mantis development staff, particularly during critical design stages.

4. The introduction of a new stage: implementation by a test (lead) institute between the end of acceptance testing and the release of an application in its supported state.

5. The decision of Delphic to make modules available in 'baskets'. This meant that the first module accepted had to wait until the acceptance of the last module in the basket before it could be implemented.

Complementary to the above a number of observations can be made regarding this state of affairs concerning the initiative.

Price Waterhouse's approach for conducting the initial feasibility study (i.e., the Blueprint) was considered hardly appropriate for as complex a system as MAC was. On the basis of the knowledge they had acquired about university administration from developing information systems for Durham and Leeds Universities, and because time was of essence, they adopted a 'drive the user base instead of letting the user base drive you' approach. This meant that Price Waterhouse as in effect designing the Blueprint based on its assumptions of what was needed, and then presenting it to the representatives from a cross-sample of universities, inviting them to comment.

However, the representatives did not have the blueprints in advance to study and to comment interactively with the consultants - they were given to them at the meetings, where at the end a decision had to be made. This, coupled with the large size of the project and its Open' structure, resulted in some areas being overlooked and others not being looked at in sufficient detail. The final Blueprint was a huge and complicated technical document, and by large the universities did not check it out as they ought to have done. It was of a hierarchical structure cut down to functions described in little detail, which made it difficult for systems personnel to understand, let alone explain it to their line managers and get the much-needed feedback. The fact that this approach was problematic became evident when the families started their own individual developments. They found out that the result was not as much of the Blueprint as they had thought it to be.

The application of the '80/20' rule mentioned in the preceding section meant that the finalization and successful implementation of the various modules was heavily reliant on the skills and efforts of the programmers who were working the code so as to make it compatible to the specifics of each site. But they were tasked to work with the system only in certain ways, as Mantis wanted to ensure that the code would only be modified in the ways they deemed appropriate. In a sense they were "...attempting to configure the local programmers as their users..." (Pollock, 2001, p. 7) and this gave rise to a lot of friction. The following excerpt from a final report to the Delphic Support Desk regarding an issue illustrates this:

"...As y ou may know, [the University] migrated from [MAC] 1.3 to 1.4 last week and encountered some problems which we helped with. We also advised them to migrate to 1.5, as 1.4 was no longer supported. This they did over the weekend and again had some problems, which I have mentioned in the log. They contacted me on Monday morning and 1 have been looking at the problem (s) over the last day and a half. We have carried out a few checks and offered some advice on overcoming some of the problems, but it would appear that the problem lies in the data that they are working with and not a problem in any of our code... Quite simply, 1 cannot justify any more time on this problem as it does not appear to be a problem with our software, rather a problem on site which may well require a great deal of time to identify... Their current work-around is to me the basket 4 forms against the basket 5 database. I have expressed my concern over this and warned them that this is unsupported but they appear to be confident that they have an adequate work-around. " (Pollock, 2001, p. 14)

Arguably, the causes for the delays mentioned above can be experienced in any project of MAC's scope, scale and complexity. However, the first one on Kyle's list draws one's attention, as it was the result of an environmental discontinuity that could have not been anticipated - that of semesterizationS. It was felt as something that was clearly overdue, a departure from a rigid and inflexible academic structure that originated in the beginning of the last century to a more open and clearly cost-effective scheme. As a result of semesterization, Isambard, for example, was able to increase considerably its student numbers by offering a wider range of choice regarding the structure of its courses, rather than only the four-year thin sandwich course option. This change affected mainly the Student Module. The fact that in 1994 parts of it had not been contracted (see Appendix), although the initial delivery date for the completed module was July 1992, shows clearly the magnitude of the effect that this change had.

The Student Module was driven by what was called "Program Structures" schemes of study. "Program Structures" was designed in such a way that in an attempt to provide for integration, every single module was required to know what the structure was when dealing with student administration. For example, the Student Registration, Student Finance, and the Assessment and Degree Conferment modules related first of all to the Program Structure and its maintenance, and in effect were totally dependent on it. This module's development had to start virtually from scratch again because of semesterization, and it was estimated that its delivery had to be put back by a year to 18 months.

Twenty-six months later and there was still no definite delivery date, although an estimation was that a 'formal' deliverable had to wait for another two years. Needless to say, no member of the Family could afford to bear the cost of a product that had not been proven to work, and in which acceptance tests had to take place throughout a whole academic year and be evaluated against the annual cycle of activities. The metaphor of the old lady who is trying to cross the road and waits for someone else to do it first, in order to see if he gets run over, illustrates the case. Angela Crum Ewing, deputy registrar at Reading University (a member of the Delphic Family), said after they decided to hold onto their in-house applications, rather than implement a MAC solution: "MAC is in a position of transition. We did not want to commit to a new, untried system, when we had our own in-house systems which worked well" (Haney, 1994).

A 'sneak preview' of the modules by Family members resulted in a lot of skepticism about the future, stemming from the fact that continuous disappointment would mean dissatisfied stakeholders who will not stop placing pressure in favor of project abandonment. The effect of semesterization had major repercussions not only on Mantis UK as the system developer, but on all members in the Family who were counting on the deliverables and had already made their migration plans. For Isambard University, only the quantifiable costs amounted to the region of more than £50,000 - two extra man-years of further systems development work that no one had anticipated.

CURRENT CHALLENGES/PROBLEMS FACING THE ORGANIZATION

In September 1994, after almost six years of systems development and six months before the termination of the funding, only one of the Delphic modules that were to be made available was finally adopted by Isambard University (Figure 1).

The state of affairs regarding the seven main areas was as follows:

* Students: Although at the time Isambard's existing system infrastructure could hardly accommodate semesterization, the administration of the University, tired of waiting for Delphic to come up with a deliverable, was pushing persistently for a new system. In November 1993, after 'shopping around' for any Mantis-based student system in use that could be able to satisfy Isambard's own requirements, a decision was made to consider the system of the University of Liverpool. After some time it was found out that for a number of reasons, this was not the solution either. Firstly the system was designed to meet Liverpool's own requirements in a very specific way and it was never developed as a package for other universities to use. Isambard's own requirements were completely different to theirs. secondly, it was developed on an older version of Mantis. This meant that its blind adoption would pose problems in the future concerning its integration with any Delphic deliverables. On the other hand, an attempt to modify it would mean major overhead. Finally, from a technical point of view, the system was not documented - a 'black box' in the systems team's own words. Isambard had no alternative but to develop and design its own in-house student system whose first phase went live in the first week of October 1994 to coincide with the beginning of the new academic year. The system covered the Registration process, but no project was under way regarding the two other main areas - Student Finance and Student Accommodation.

* Finance: The development of the Finance module which was a base offering from Mantis UK and which had been enhanced to meet the extra requirements, was also off schedule. As a result, an Mantis quasi-commercial accounting package was adopted and implemented. The package had nothing specific to offer to universities, and if there were a choice, it would have not been taken on board by Isambard. It was developed by Mantis UK (in much the same way as Price Waterhouse delivered its MAC Blueprint) in an attempt to quickly capture a slice of the off-the-shelf software market when it had decided to enter it a couple of years ago. This meant that several enhancements were necessary and it took more that 200 person hours alone to determine whether or not it could replace the existing system. Subsystems to deal with the maintenance of research contracts, and to allow for the issuing of monthly statements of accounts to heads of departments and senior researchers, were designed, and eventually the system went 'live' in August 1994 - the beginning of the new financial year.

* Staff: Following the installation and assessment of the pre-release version of the first module from Delphic (Posts, People, Appointments and Organization), the implementation team agreed and the old system was subsequently discontinued in September 1993. It was replaced by this and the second module (Skills, Recruitment and USR Return). However, at that time (September 1993) Delphic still had not provided any documentation for the system.

* Physical Resources: The initial Delphic offering proved to be an Overkill' for Isambard's requirements. It provided more than was actually needed, and two key areas had already been covered by in-house-developed Mantis systems. One area was the administration of the University's own housing facilities and the people who occupied them, and the other was an inventory system for mobile equipment. The Delphic offering still held some level of attraction to Isambard's Management Services team, but only when used in conjunction with the Delphic Finance Module, as it offered the facility the option to debit directly a departmental account at a store as soon as an item was issued out. The Stock Control Module was at the time running at test mode, but as these two packages were designed to be highly integrated, there was a deadlock situation as the Finance module had not been delivered. Moreover, as mentioned above, a commitment had been made to the inhouse-developed finance system, which was unlikely to be replaced for at least two years.

* Research and Consultancy: No view had been formed about this module as there had not been a delivery. Supposedly it provided the ability to maintain profiles of staff and possible customers who could require applied research to be undertaken by the University on their behalf. An in-house-developed Mantis system was then in operation centered around publications of Isambard staff and information on customers. The accounting side (e.g., the recording of costs against research projects) was partly accommodated by the core finance system. Again, it was rather like Physical Resources - nothing particularly attractive given the overhead in implementing either of the Delphic modules that tended to be reasonably sophisticated for Isambard requirements.

* Payroll: A bureau service from a leading UK bank catered for the payroll function at Isambard. The consensus of the Director of Financial Services was that it was adequate, and therefore he was cautious and opposed any change. What were however lost by this decision were the integration and the economies, such as saving in paperwork and clerical time that came with the Delphic module, and that were associated with raising the cost of various processes between the two interconnected functions - payroll and personnel. However, the high level of integration offered between Delphic's Payroll (not delivered at that time) and Staff modules were attractive to Isambard, as it had implemented the latter. After some careful consideration it became clear that its adoption was very unlikely to happen, as at the outset it seemed a very general package; again, many enhancements would have been necessary. This was a significant requirement considering the size of Isambard's Management Systems Team and its constrained time scales.

* Management Information: Similarly, no 'final' view was formed. There had been a development where Management Information was considered to be the 'Cinderella' module - the sort of one where by residing within the other modules, management information requirements at a strategic level could be easily accommodated. In September 1994, only statistics of various sorts could be generated for Government use, and those with considerable difficulty. In order to cure the problem, Delphic bought the rights for individual universities to acquire Holis - a powerful expert system, as there was general consent that Mantis UK was delivering 'textbook' systems. This meant that they had gone too far in terms of splitting down to tables for the database, without considering that most legacy systems already in place at universities were hierarchical, thus operating with one table. This transition posed a considerable challenge. It required a lot of effort and man-hours for the Management Services team that had to undergo the process, as Holis was not available when the initial design decisions were made. Holis was generally looked upon as the solution in gluing and running the whole of the independent databases together as it could accommodate any set of computerized data-like spreadsheets and flat files which did not necessarily have to follow Delphic's database format.

The MAC Initiative was funded from 1988 to 1995 and a total of 11 million were invested in those seven years. "Universities snub software policy," read a headline in Computing (September 22, 1994) - a professional trade magazine. "UK universities are going their own way to buy core administrative software after finding a governmentsponsored scheme out of touch with their business needs," the article continued. Birmingham and Reading Universities both confirmed in September of that year that they were moving outside the MAC initiative for their latest developments, and the University of Sussex being dissatisfied with the delivered software for Undergraduate student admissions eventually chose a separate system. With the funding for MAC running out in July 1995, similar moves from other institutions were being planned, as there was no other viable alternative.

The outcome was that although Families continued to exist in a rather informal way, MAC-related activity slowly came to an end after the central funding terminated. The Delphic and Mantis UK Management Boards agreed and concluded their contract at the end of April 1996. The agreement was to deliver all remaining software in an 'asis' state at the end of January in order to be tested at the University of Liverpool. The software was to be accepted at the end of February, with any 'bugs' to be remedied under the warranty agreement. Delphic was to make no further development demands on Mantis (Philips, 1996). It is without doubt that many interpretations can be given regarding the final outcome, and in retrospect each Family managed to achieve the objective of producing software to cover a number of the Data Blueprint areas. Some of these systems did run quite successfully in a number of institutions (Hillicks, 2002). What must be noted, however, is the fact that no University managed to achieve the initial objective of using only the MAC modules exclusively.

The ending of the contract meant that Delphic was in total control of the situation rather than having to work through Mantis, and in 1996 MAC was a far cry from the initial objective for an integrated information system where all the functional subsystems could be seamlessly linked so that one would not end up with a collection of disjointed and ineffective systems (Kanellis & Paul, 1995; Kanellis, 1996). For Isambard University in particular, the main attraction in joining the Delphic Family was the integrated solution that they were offering. Graham KyIe, manager of the Management Services team, summarized eloquently the situation: "...as you can observe, the way we are staggering here at Isambard, there is no sign of integration as far as we are concerned." One feature of Delphic that did not apply to any of the other families was that from day one the deliverable was designed as one system. It caused Mantis UK problems because, when the first major slippage occurred (the Students Module), Mantis had to respond to pressure from the Delphic representatives who demanded some deliverables." This meant that Mantis had to unbundle the system by separating and redesigning the links, a major cause for MAC's failure to meet deadlines. Almost all deliverables were at least two years late, according to the dates quoted by Mantis UK in the original specification, and this caused considerable stress and frustration to Isambard, which had to decide which route to follow regarding its infrastructure: to wait and see how Delphic would handle the situation after the termination of the contract with Mantis, to see how to integrate the various probable solutions described in the beginning of this section or to make a fresh beginning abandoning all previous investments? Difficult choices indeed and hardly the type one expects to be faced with at the end of an information technology development project that started with the best of expectations.

Subject: Studies; Information technology; Project management; Colleges & universities; Systems development

Location: United Kingdom--UK

Classification: 9175: Western Europe; 8306: Schools and educational services; 9130: Experiment/theoretical treatment; 5220: Information technology management

Publication title: Journal of Cases on Information Technology

Volume: 7

Issue: 4

Pages: 46-63

Number of pages: 18

Publication year: 2005

Publication date: Oct-Dec 2005

Year: 2005

Publisher: IGI Global

Place of publication: Hershey

Country of publication: United States

Publication subject: Business And Economics--Computer Applications

ISSN: 15487717

Source type: Reports

Language of publication: English

Document type: Business Case

Document feature: Diagrams References Tables

ProQuest document ID: 198719333

Document URL: http://search.proquest.com/docview/198719333?accountid=38610

Copyright: Copyright Idea Group Inc. Oct-Dec 2005

Last updated: 2011-07-21

Database: ABI/INFORM Complete

Document 4 of 100

New Forms of Collaboration & Information Sharing in Grocery Retailing: The PCSO Pilot at Veropoulos

Author: Pramatari, Katerina; Doukidis, Georgios I

ProQuest document link

Abstract:

In spring 2001, Veropoulos, the third biggest retailer in Greece and three of its top suppliers together with a service provider, started a pilot implementation to experiment with collaborative store ordering. The pilot involved the ordering from the retailer's stores to their central warehouse as well as to the direct-store-delivery suppliers. The four companies together with the service provider were starting an ambitious plan to use the Internet technology in order to enable the sharing of daily POS data between retail stores and suppliers with the objective to streamline the store replenishment process. This effort resulted in significant business results but at the same time several pitfalls and challenges as far as the use of technology was concerned. [PUBLICATION ABSTRACT]

Full text:

ORGANIZATIONAL BACKGROUND

The pilot involving the retailer and the three suppliers, facilitated by the service provider, was initiated based on the concept of sharing the daily sales data (POS data) and other information between retailer and suppliers over an Internet-based collaboration platform. This concept, referred to as Process of Collaborative Store Ordering (PCSO), can be considered as a new form of supply-chain collaboration in the grocery retail sector (Pramatari et al., 2002). The top management of the four companies committed to this project after being presented with the PCSO concept by the service provider, and with the objective to decrease the level of out-of-shelf in the retailer's stores.

On-shelf availability is a critical issue for both manufacturers and retailers today because it improves consumer value, builds consumer loyalty to the brand and shopper loyalty to the store, increases sales and - most importantly - boosts category profitability (Roland Berger, 2002). However, the advances in supply chain management, the initiatives of Efficient Consumer Response (ECR) and category management (Dhar et al., 2001), and the investments in inventory-tracking technology have not-by and large - reduced the overall level of out-of-stocks on store shelves (Gruen et al., 2002), referred to as "out-of-shelf" (OOS).

A number of prior studies (Schary and Christopher, 1979; Straughn, 1991) have examined how product unavailability (via a temporary out-of-shelf) influences sales for a given product (SKU). Bell and Fitzsimons (2000) have studied the impact of OOS on category sales, while other studies have analyzed the possible consumer reactions to OOS from a marketing and retail management perspective (Campo et al., 2002, 2000; Fitzsimons, 2000; Verbeke et al., 1998).

But what are the causes behind the OOS problem? These are classified into the following areas (Gruen et al., 2002; Vuyk, 2003):

a. Retail store shelving and replenishment practices, in which the product is at the store but not on the shelf. This category comprises all reasons relating to shelfspace allocation, shelf-replenishment frequencies, store personnel capacity, etc.

b. Retail store ordering and forecasting causes, i.e., the product was not ordered or the ordered quantity was not enough to meet the actual consumer demand.

c. Combined upstream causes, referring to the fact that the product was not delivered due to out-of-stock situations or other problems with the retailer's distribution center (for centralized deliveries) or the supplier (for direct-store-deliveries).

The first area includes pure out-of-shelf situations, i.e., situations where the product exists in the store but not on the shelf, whereas the last two are out-of-stock situations. The analysis by Gruen et al. (2002), which is a compilation of several global studies, shows that 70-75% of out-of-shelf situations are a direct result of retail store practices, with 47% of the cases attributed to wrong store ordering and forecasting, and 25% to cases where the product was in the store but not on the shelf (Figure 1).

In the following we present the organizations that participated in this case, their incentives in doing so and attitude towards the problem of out-of-shelf.

The Retailer

In the competitive business environment of the Greek grocery retail market, where two international and three national retail chains account for approximately 60% of the total retail market, Veropoulos is ranked in third place. With 200 stores around Greece, Veropoulos covers almost the whole country, with sales estimated at around 710 million Euros for the year 2003.

Veropoulos had been the first and the only supermarket chain in Greece at that time offering Internet and call-center-based services to its customers. The company was open to new ideas and a great supporter of Efficient Consumer Response (ECR) activities, participating in both local and European ECR groups. The top management was young, second generation, and had the ownership of the retail chain.

The company owned a central warehouse serving all the stores around the country with its own fleet of vans. Almost half of the products in the assortment of a big store were replenished through the central warehouse, whereas for the smaller stores the percentage of centralization was around 60-70%.

Before the pilot start, in September 2001, Veropoulos suffered an average out-ofshelf rate of 8.4%, which can be translated into a yearly turnover loss of million Euros, leaving aside the negative impact on shopper loyalty and long-term profitability. More than 70% of these situations were attributed to two main reasons: wrong order quantity, i.e., the quantity ordered was not enough to fulfill consumer demand till the next replenishment cycle, and no-order at all, i.e., the product had not been ordered at the last replenishment cycle although it did not exist in the store (Figure 2).

The situation looked similar both for products delivered through the central warehouse and those delivered directly by the supplier. Clearly, these numbers indicated that there was a compelling need to improve the situation with the store ordering and replenishment practices. According to Nick Veropoulos, the company's owner and CEO, "even a small reduction in out-of-shelf can bring significant results in turnover increase and improved consumer satisfaction; ... clearly this is not a problem we can ignore and the suppliers have to get involved as well; it's not only ours but also their problem."

The Suppliers

Supplier A was a Greek company offering an integrated system of commercial services including sales, marketing, trade marketing, logistics and merchandising. Supplier A was working with companies in Greece, Europe and the USA, representing their brands in many different categories, where the brands were usually positioned in the first or second place. Its sales for the year 2003 were estimated at around 155 million Euros. One of the company's key aims had been to have a leading role in e-trading developments, and to use new technology in a way that facilitates everyday business with customers and enhance collaboration and synergies. Supplier A had a collaborative relationship with the retailer in many aspects and was also a shareholder in the service provider company.

Supplier A's product catalogue was one of the biggest in size compared to other suppliers (around 250-300 active product codes), containing food products but also smaller items usually located around the supermarket check-out counters. Supplier A mainly delivered to the retailer's stores directly, using own logistics facilities and fleet. Because of the large number of products in the catalogue, including also slow-moving products in specialized categories, Supplier A encountered increased out-of-shelf levels, as well as high logistics costs from direct-store-delivery. These two reasons formed a strong incentive for the supplier to pilot with Veropoulos on PCSO, in an attempt to improve the store replenishment process and achieve reduced costs.

The other two suppliers, Supplier B and Supplier C, were multinational companies with strong brands in several home and personal care categories. The two companies were major competitors in main categories and had a similar profile. They were both positioned among the top five suppliers of a supermarket, in terms of both turnover and number of products in their product catalogue (between 300-400 active product codes). They had been pioneers in the use of new ideas and technologies and great supporters of ECR activities.

The two companies delivered to the retail stores through the retailer's central warehouse, and managed the replenishment of the retailer's central warehouse following the VMI/CRP model (Cooke, 1998), which is a technique where the supplier has the sole responsibility for managing the customer's inventory policy, including the replenishment process. In this way, the two suppliers had greatly streamlined the replenishment process in the retailer's central warehouse, achieving great logistics efficiencies, but the positive effect of this had not been brought down to the store. Because of the large number of products in their catalogues and their continuous search for new areas of efficiency, the two centralized suppliers were concerned with the efficiency of the store replenishment processes and the level of out-of-shelf for their products. They were further excited by the idea of having access to the daily POS data, as this was an important piece of information they didn't have until then from any other source and would like to understand the potential usage of by participating in a pilot with the retailer.

The Service Provider

The service provider was a new company acting as an intermediary between supermarkets and their suppliers, supporting their business transactions and exchange of information via its electronic marketplace. The provider would build and operate the Internet-based platform to support PCSO, based on the concept and requirements that would be developed in collaboration with the four companies above. More specifically, PCSO was a new idea and concept upon which the provider wanted to develop and establish its business plan.

The company would then offer its services to both the retailer and the three suppliers following the Application Service Provider (ASP) model. According to this model, ASPs offer and manage outsourcing application services to many organizations via the Internet, while organizations outsource applications to ASPs to reduce upgrade and maintenance costs and to focus their efforts on core competencies (Soliman et al., 2003).

SETTING THE STAGE

The situation with the retailer, regarding the organization of the IT department and the utilization of technology was typical, as one would find it in almost any other Greek supermarket chain but also in many other retail chains across Europe. The internal IT department was located in the retailer's central offices and was responsible for maintaining and running the internally developed central information system. The central Warehouse was running a separate warehouse management system integrated with the central information system via the exchange of data files. Each store was equipped with POS-scanning facilities at the checkout counters and ran its own store information system, which was connected via a Virtual Private Network (VPN) with the central offices.

The data in all the retailer's information systems were maintained at the level of the retailer's internal product code, which resulted in a quite difficult data situation to manage, especially when one wanted to get some information at the level of the EAN product code (i.e., the barcode used for scanning a product through the cashier). The reason for this is that the relationship between the two codes is not one-to-one, as depicted in Figure 3, a situation that becomes even worse when the retailer wants to exchange data with its suppliers, using the EAN level as the bridge between the retailer's and the suppliers' product codes. In such a case, several data validation rules need be applied, and ensuring data quality becomes a challenge on its own.

In regard to the store ordering process, the stores used to follow two different processes for ordering to the central warehouse:

(a) Smaller stores with frequent replenishments were equipped with hand-scanners aimed to support the ordering process. The store personnel responsible for ordering used the hand-scanner to perform a check around the shelves and scan the products to be included in the order. At the end of the process, the order was downloaded from the hand-scanner to the store's computer and was electronically sent to the central warehouse.

(b) Larger stores used a printout of the store's product assortment as a guide while they did the check around the shelves and the store's back-room. Products and quantities to be ordered were marked on paper. At the end, the order was typed in the respective store system and was electronically sent to the central warehouse.

A comparative view of these two ordering practices in relation to the problem of out-of-shelf is provided in the Appendix. In each case, the process was supported by IT applications enabling the store personnel to find a product in the store's product assortment, scan or type in products and quantities to be ordered, and send the order electronically to the central warehouse. The retailer, like almost any other retailer in Greece, did not use the store sales data (POS data) in order to support the store ordering process, nor were the store stock data maintained in the store information system.

On the suppliers' side, each supplier had an internal IT department supporting the operation of the company. Supplier A had just completed the rollout of a new Enterprise Resource Planning System (SAP), while Suppliers B and C followed a global IT strategy, having implemented EDI (Perfett, 1992) for connecting with the retailers.

Overall, the objective of piloting PCSO in practice was threefold:

(1) To investigate the feasibility of timely sharing big amounts of large on a daily basis, and support critical business processes and supplier-retailer collaboration over an Internet-based platform.

(2) To understand the practical implications of this new process for retailers and suppliers, as well as the incentives and barriers for its implementation.

(3) To measure the impact of this new practice on order accuracy and ultimately shelf availability.

CASE DESCRIPTION

The PCSO Concept

In the last few years, CPFR (Collaborative Planning Forecasting and Replenishment) has emerged as the latest business practice aiming to ensure that there is always enough quantity to meet consumer demand, while maintaining optimum levels of stock across the supply chain (Holmstrom et al., 2002). Several CPFR cases to-date (ECR Europe, 2002) have reported the ability to effectively manage the replenishment process through more accurate forecasting. Specific benefits described include inventory reduction, reduced costs, more frequent deliveries, less stock-outs and more effective handling of promotional items.

The Process of Collaborative Store Ordering (PCSO), as briefly presented above, can be considered as a new form of CPFR, aiming to bring the impact of these potential benefits down to store level, affecting not only promotion and special line items but the full product range (Pramatari et al., 2002). This concept also builds on the notion of Vendor Managed Inventory (VMI), where the buyer shares demand information with the supplier who, in turn, manages the buyer's inventory (Cetinkaya and Lee, 2000, 2002). In grocery retailing, the VMI practice has been exercised at the level of the retailer's central warehouse, usually named Continuous Replenishment Program (CRP) (Clark and Lee, 2000). PCSO aims to bring this supply-chain collaboration practice to store level and enable its application on a large scale. In order to do so, it utilizes an Internet-based platform to enable information sharing and supplier-retailer collaboration in the store ordering process.

The following description illustrates the practical aspects of this process. By connecting to the collaboration platform, a supplier can monitor his products per each store, the store's product assortment, the product sell-out data, the in-store promotion activities, the level of stock and so forth on a daily basis. Moreover, the supplier can view the system's proposed order quantities and make an order proposal to the respective store manager. He can also track the order status throughout the fulfillment cycle. All this information is also available in dynamic online reports, allowing statistical analysis of those parameters down to store level.

The store manager, on the retailer's side, has an overview of the full product assortment of his store per category or supplier and can submit an order based on both the system's proposal and the supplier's proposed quantities, as well as on the rest of the information on product sales, promotions, stock, etc. The submitted order is automatically sent to the platform and then forwarded either directly to the supplier or to the retailer's central warehouse. Automatic order-generation tools are also in place to help both the salesman and the store manager identify the right products that need to be replenished on a daily basis. Figure 4 gives an overview of the information that the store managers and the supplier salesmen share for the products and stores they have in common and the unique information each of them has.

The PCSO Pilot

The project started for the Retailer when the top management was presented with the PCSO concept and committed to the idea. Supplier A was the first to commit while Suppliers B and C joined in afterwards, finding the idea interesting and willing to pilot with it. Figure 5 gives a schematic representation of the context in which the PCSO concept was piloted. Five representative stores of the retailer were selected to take part in the pilot. A key role from the retailer's organization, the chief buyer, assumed active responsibility of the project internally in the retailer.

The implementation for the pilot started in Spring 2001, with the definition of the requirements for the Internet-based collaboration platform. Because the project was initiated and managed by the service provider, the objective of the requirements-gathering phase was mainly to understand how to customize an electronic procurement platform to work in the context of grocery retailing, by enhancing it with the data (e.g., daily POS data, store assortment data, etc.) and the functionality (e.g., order suggestions) that are required to support work processes in this context. Based on the PCSO concept presented above, a demo of the system was initially built which was shared with people from the retailer's and the suppliers' organizations. From the retailer's side, the people involved in the requirements meetings were from the IT, the central warehouse, the buying department and the stores' management. The actual users from the stores were not actively involved in the requirements gathering process from the beginning, but only at the latter stages of the process. On the suppliers' end, interdepartmental project teams participated in the requirements meetings, with the salesmen having an active participation.

The implementation and testing of the system took place during the summer and was completed in September 2001. The platform was based on Microsoft technologies, utilizing SQL Server 2000 for the database and the data-loading processes through Data Transformation Services (DTS) and Active Server Pages (asp) for the Web front.

Because of the intense information exchange between the Internet platform and the retailer's information system (e.g., a daily POS data file for all the stores is more than 10 megabytes), back-end integration was necessary to allow for the automatic exchange and import/export of data files. The same applied to the relationship between the Internet platform and the suppliers' information systems for the exchange of the product catalogue, as well as orders and dispatch advice for direct-store-delivery. In summary, the way the system worked during the pilot phase was as follows:

* The system ran centrally on the platform of the service provider.

* The platform was back-end integrated, via the exchange of text files over ftp with the retailer's systems. This communication channel was used in order to send the orders from the platform to the retailer's central warehouse system and in order to receive the following data from the retailer's central information system:

* Daily POS sales data from the stores

* The product assortment of each store

* The mapping between the product EAN code (consumer unit barcode) with the retailer's internal product code (retailer SKU)

* The promotion activities running in the stores

* At this stage, no information regarding the stock of the products in the stores was available.

* The platform received the product catalogue from the three suppliers' systems either in the form of an EDI message (for Suppliers B and C) or ASCII file (for Supplier A). Additional information regarding the products not contained in the EDI message was maintained by the suppliers over the Web, such as the association of promotional products to their non-promotional counterparts (i.e., to mother product codes).

* The platform sent order files in ASCII format to Supplier A over ftp which were automatically imported to the ERP system.

* The update of the sales data as well as other information took place during the night, so in the morning the user could see the sales in the respective store until the night before. The product EAN code (i.e., the unique number identifying the consumer unit of each product, which is assigned by the product manufacturer), was used for data alignment. This means that the EAN code was the bridge between the retailer's internal information system and the suppliers' information systems.

Before the start of the pilot, a lot of effort had to be invested in ensuring that the right products were loaded and appeared to each user. This was quite a difficult task, as the data from the retailer's and the suppliers' information systems had to be aligned. For example, there were centralized products that were not active in the supplier's current product catalogue, but still existed in the stores and the retailer's central warehouse. These products had to appear in the store's assortment so that they could be ordered. Other products were maintained with the wrong EAN code or supplier code in the retailer's system and thus could not match with the supplier's product catalogue. Thus, all the products had to be checked one by one to ensure that the information that appeared to the users was complete and accurate. This was much more difficult to ensure on an on-going basis through the automatic data loading procedures that had to be enhanced with several data-validation rules.

The pilot went live on October 1,2001 and ran in the five pilot stores for six weeks, from the first week of October to the second week of November 2001. At this stage the five pilot stores used the Internet-based collaboration platform for their collaboration with the direct-delivery Supplier A and for ordering the products of the two centralized suppliers, Supplier B and C, to the retailer's central warehouse. For the rest of the centralized products they followed the traditional process.

During the first two weeks, several data-validation issues, such as products that were missing from the platform and thus could not be ordered while they should, frustrated the users, especially since this problem was leading to out-of-shelf situations. However, after the third week, the data-loading processes had become more robust and these issues had been minimized. In the following section we discuss the results from the pilot phase and the issues that remained thereafter.

CURRENT CHALLENGES/PROBLEMS FACING THE ORGANIZATION

At the end of the pilot, shelf availability measurements were repeated to quantify the business impact of the new practice. For the centralized products of Suppliers B and C, these measurements showed a reduction of 59%, from 9.8% to 4%, in the total level of out-of-shelf and a similar (60%) reduction in the OOS caused by 'wrong order quantity' (Figure 6). The results for the direct-store-delivery supplier A were similar, showing a 67% reduction in the total level of OOS from 12% to 4%.

These were significant business results and raised management attention from the various organizations. However, the pilot had also revealed several issues regarding the usability and expandability of the solution. As was coming out from the users' feedback, while they could see the value behind exploiting the daily POS data and collaborating for supporting the store ordering process, they considered that there was still major room for improvement as far as the use of the system was concerned. Their main concern related to the long times it was taking them to complete the ordering process, due to the following reasons:

* As the system was centralized and they connected to it through a dial-up Internet connection, they experienced several problems and delays connecting to the Internet. This problem was due either to the Internet Service Provider (ISP) or the telecommunications infrastructure in the store or in the area.

* When connected, they also experienced delays in the system response. As the system was not running locally but was accessed over the Internet, these delays were mainly associated with the transfer rate of their Internet connection. In many cases the modems used were very slow (less than 19Kbps) so they had to be upgraded to 52Kbps.

* Another delay in the system response, as perceived by the users, was that the products in the system were not presented all at once but in pages. This fact combined with the low transfer rate meant that a user spent a lot of his/her time just waiting for the pages to download, which was not productive.

* As the stock information was not available in the system, they had to review the products on the shelf and in the store's back-room, in order to check the available stock. This fact resulted in further delays in the process, while for the suppliers' salesmen it meant that they had to visit the store in order to place a suggested order.

* During the pilot phase, matching the stock-count to the information on the screen was also a useless and time-consuming task just because the order of the products on the printout did not match with the order the products appeared on the screen. In addition, the system was not optimized at that time for printing and the attempt to print a list of products could take quite long, especially as old-technology printers were used.

All these issues resulted in time delays, both in the use of the system and the new ordering process, which varied from store-to-store depending on the size of the store. The smaller stores, which had a smaller number of products in the assortment and didn't have to check the stock, were experiencing smaller delays with the process than the larger stores. However, all the people in the stores involved were frustrated about these time delays, leaving aside their insecurity that products might be missing from the system. This insecurity was translated into anger in the two cases where the back-end integration between the Internet platform and the retailer's information system didn't work properly, resulting in the orders not being sent at all!

Apart from these usability and technical issues, the retailer had to face one other major concern regarding the expandability of the PCSO concept. During the pilot, the people in the store had to deal with four different ordering processes:

(1) the traditional one for direct-store-delivery products, in which they had to review and confirm the orders prepared by the supplier salesmen;

(2) the traditional one for centralized products, in which they had to prepare the order for all centralized products (from 4.000 to 6.000 products to be reviewed each time) and send it to the retailer's central warehouse;

(3) the PCSO process for direct-store-delivery Supplier A, in which they had to review the salesman's order proposal in the computer and confirm it there; and

(4) the PCSO process for the centralized products of Suppliers B and C, in which they had to prepare the order themselves, using the information that was available on the Internet platform and taking into account suggestions by the salesmen if they existed.

Taking into account that Veropoulos was selling products of around 1.000 suppliers, 500 of whom delivered through the central warehouse, this was too complicated an ordering process for the stores to follow in case there was a gradual adoption of the system by the suppliers. It was thus decided that rollout to the rest of the stores would only take place if the new process would incorporate the total ordering to the central warehouse. In this way, the store would have to deal with just one system when preparing the order for the central warehouse, no matter if the supplier participated in this process or not.

From an IT standpoint, this decision meant that the platform would have to be fed with product information from the retailer's information system, as the respective suppliers didn't participate in the process yet. This fact was a much greater data management challenge than confronted up-to-then. This information was not maintained correctly in the retailer's information system, which is a typical situation for almost any retailer in the supermarket sector. As a reference, we can mention that in the retailer's database there were 700,000 product records, of which only 15,000 should be selected and used, the ones that were actually active in the stores at the moment. Several data validation rules and filters had to be developed in order to deal with this issue. Another challenge had to do with the scalability of the platform, which had not been designed from the beginning to deal with so many products, stores, and the respective POS and assortment data.

With the support of the retailer's top management, the solutions towards overcoming the above problems and reaping the potential business benefits were sought in the following directions:

* The loading of all the centralized products on the Internet platform, to fully cover the internal store ordering process to the central warehouse. This also required the incorporation of an order proposal mechanism to deal with the large number of products to make this process usable for the store users.

* The development of several data-validation rules to initially clean up the data and set up robust data-loading procedures that perform several checks in order to ensure that the information is updated correctly, even in cases of failures.

* The redesign of the platform and upgrade of its user interface to deal with the new requirements.

* The development of robust mechanisms ensuring the reliable transmission of information between the retailer's and suppliers' information systems and the collaboration platform, which should also give notification in case of failure (e.g., by sending an e-mail or mobile SMS message in the opposite case).

There were many more technical barriers to be overcome in this effort to make the system efficient and effective in its use. Nowadays, Veropoulos is using the platform in all the 200 stores of the chain to support the internal store ordering to the central warehouse, while suppliers gradually start getting involved in the process of collaborative store ordering.

Subject: Studies; Information sharing; Retail stores; Electronic commerce; Business to business commerce

Location: Greece

Classification: 9175: Western Europe; 8390: Retailing industry; 9130: Experiment/theoretical treatment; 5250: Telecommunications systems & Internet communications

Publication title: Journal of Cases on Information Technology

Volume: 7

Issue: 4

Pages: 64-79

Number of pages: 16

Publication year: 2005

Publication date: Oct-Dec 2005

Year: 2005

Publisher: IGI Global

Place of publication: Hershey

Country of publication: United States

Publication subject: Business And Economics--Computer Applications

ISSN: 15487717

Source type: Reports

Language of publication: English

Document type: Business Case

Document feature: Charts Graphs Diagrams References

ProQuest document ID: 198719505

Document URL: http://search.proquest.com/docview/198719505?accountid=38610

Copyright: Copyright Idea Group Inc. Oct-Dec 2005

Last updated: 2011-07-21

Database: ABI/INFORM Complete

Document 5 of 100

Information System for a Volunteer Center: System Design for Not-For-Profit Organizations with Limited Resources

Author: Chalasani, Suresh; Baldwin, Dirk; Souderpandian, Jayavel

ProQuest document link

Abstract:

This case focuses on the development of information systems for not-for-profit volunteer-based organizations. Specifically, we discuss an information system project for the Volunteer Center of Racine (VCR). This case targets the analysis and design phase of the project using the Unified Modeling Language (UML) methodology, database modeling, and aspects of project management including scope and risk management. Students must decide how to proceed, including recommending an IT solution, managing risk, managing scope, projecting a schedule, and managing personnel. The rewards and special issues involved with systems for not-for-profit organizations will be revealed. This case can be used in a variety of courses, including systems analysis and design, database management systems, and project management. [PUBLICATION ABSTRACT]

Full text:

ORGANIZATIONAL BACKGROUND

Jeff McCoy, project lead of a four-person project team, was finishing requirements and project status documentation related to an information system for the Volunteer Center of Racine (VCR). Jeff, the information systems team, and the client needed to make some important decisions concerning the future of the project. Jeff needed to formulate his own opinion, but it was getting late. He promised his fiancé that they would see a movie at the new cinema tonight. Recently, his promises have gone unfulfilled.

To this point, the VCR project had progressed smoothly. The focus of the project was the development of an application that helped the VCR place and track volunteers at various volunteer opportunities. The development team used the Unified Modeling Language (UML) to document the requirements of the system (Booch et al., 1999). A Gantt chart and a standardized project status report were used to record progress. The project status report contained fields to record the time, budget, people, process, and technology status of the project (Appendix B). A color code was used in each field: Green meant that the item was on task, yellow indicated concerns, and red signaled a danger. In addition to these fields, the team had an opportunity to specify their confidence in the project. A high score signaled that the project was moving along well and was within budget. The previously filed status reports were all very positive.

Jeff and the other development team members, themselves, were volunteers at the Information Technology Practice Center (ITPC). The ITPC is a consortium of IT professionals from the local university and industry. The ITPC provided consulting services for not-for-profit agencies and small businesses. Some of the consulting engagements, including the VCR engagement, were performed on a pro bono basis. Many of the engagements involved students so that the students could obtain experience with live IT projects. The project status reports were sent to the ITPC executive committee.

Jeff was concerned that the next status report would not be as positive. At the most recent team meeting, several issues emerged. First, the project team disagreed about the quality and adequacy of the UML documentation. Jeff made changes to the documentation produced by some members of the team, and these members took offense. Jeff wondered whether they had captured all of the key requirements and had accounted for these requirements in the project plan. Second, volunteer placement and tracking was not the only need of the VCR. Marilynn, the primary contact at the VCR, also needed a system to track donors and expenses. These additional features were part of the original project scope, but it was not clear whether the IS team could deliver a system with this functionality by the target delivery date in August. Third, other options emerged besides a custom-developed solution, including purchasing an off-the-shelf package. Jeff and the project team needed to recommend a particular approach. Finally, a recent problem emerged regarding the computer network. This problem must be solved before any solution is implemented. Could the team deliver the system within the target timeline?

Client Mission & Organization

The Volunteer Center of Racine (VCR) is a not-for-profit organization located in Racine, WI, a city with a population of 85,000. While it primarily serves the county of Racine, it also services occasional requests from nearby counties. Volunteer organizations have existed in Racine County for a long time, but were not formally managed. That is, it existed as a volunteer organization managed by volunteers, and with no full-time employees on its staff. Since there was no full-time management staff, it was difficult to coordinate activities of the volunteers and obtain the much-needed funds for volunteer activities. VCR emerged as a formal organization only three years ago. Within three years it grew rapidly to list and coordinate thousands of volunteers. It currently has 7,000 active volunteers. An active volunteer is one who has volunteered with VCR in the past 12 months. VCR finds volunteers and places these volunteers at various community events. The community events range from blood donation drives at hospitals to fund raising ceremonies for causes such as leukemia.

The mission of the VCR is stated on their Web site.

Programs and services offered by VCR include:

1. Retired & Senior Volunteer Program (RSVP). This program involves adults, 55 and over. Volunteers use their life experiences and skills to help make the community stronger. These volunteers commonly work with children, adults, or help homeland security activities.

2. Youth with a Mission. This program serves several local organizations such as community centers, medical facilities, faith-based organizations, and schools. Volunteers who work in such programs are primarily from the youth population. The program strives to show how the power of community service can make a profound difference in their lives.

3. Special Projects. This program provides onetime volunteer opportunities for individuals, co-workers, families, or youth. Example special projects include Earth Day and Make a Difference Day, and walks to raise food to feed the poor and the hungry.

4. Volunteer Recruitment. VCR recruits volunteers and matches their interests, skills, and availability to a list of volunteer opportunities from local not-for-profit agencies, organizations, and schools in need of their support.

5. Volunteer Training. VCR provides quarterly training meetings for volunteer coordinators of not-for-profit groups and organizations.

Being a small not-for-profit organization funded completely by grants and donations, VCR has a very simple organization structure. It has a board of directors and an executive director. There are other coordinators and support staff as listed below. Marilynn, the Executive Director, believes that it is important that the organizational structure not be seen as a hierarchy. Rather, she pictures the full-time and part-time workers as a team working together to achieve the organization's goals (Figure 1).

VCR receives its funding primarily from federal/state grants, private companies, and individual donors. Its annual budget is approximately $278,000. Federal and state grants account for 65% of the budget. Corporate and private donations account for 27% and 8% respectively. The $278,000 annual budget is allocated to current employees, facilities, and programs. Additional expenditures, including funding for IT, can only be funded through new grants and donations.

Marilynn, Executive Director, and Cheryl, RSVP Director, are responsible for developing the strategic plan. This plan, as well as progress toward the plan's goals, is discussed with the Board of Directors. Consistent with VCR's mission, the strategic plan identifies activities that will support VCR's mission of finding, encouraging, and placing volunteers. Practically, the plan must also identify grant and other funding opportunities. Successful grant writing is critical to VCR's survival. Over the last year, VCR has focused on operational efficiency. As the size of VCR's volunteer base and opportunities have grown, the task of assigning and tracking volunteers has become more arduous. Success at grants has also resulted in significant administrative work. Grant writing, reports to funding agencies, and submitting reports to the state increasingly occupy Marilynn and Cheryl's time. VCR believed that these tasks could be improved through the use of information technology.

Economic & Organizational Climate

The Wisconsin state budget and the budgets of local businesses, which are primarily manufacturing in nature, were adversely affected by the economy in 2003. These budgets are not expected to improve in the near future. The VCR and other not-for-profit agencies were increasingly under stress to find sources of revenue. Although the VCR has been successful in obtaining grants, the smaller pool of available funds is an ongoing concern.

As a result of the shrinking pool of money and their growth, Marilynn and Cheryl were eager to improve the operations of VCR. They met regularly with the ITPC group and were very appreciative of their efforts to date. Marilynn and CheryPs support helped to motivate the other staff. In October, seven of VCR's employees and volunteers met with the ITPC group to discuss the features of the new information system.

SETTING THE STAGE

Project Team

The IS project team is composed of Jeff McCoy, Lyndsay Nash, Rick Harrington, Judy Taft, Bob Ferguson, and Zoya Alvi. Zoya Alvi is a graduate student in Computer Information Systems, while the remaining team members are senior students of Management Information Systems. In addition, both Jeff McCoy and Lyndsay Nash work full time for a major pharmaceutical company. Jeff has been with this corporation for more than 11 years, and is currently a senior computer software validation analyst. Lyndsay has been working for the pharmaceutical company for more than six years, and is currently a director's assistant. Just as in any project team, different members of the IS team have different abilities and personalities (Whitten, 2004). Jeff and Lyndsay both handled large-scale, complex projects in the past. Jeff is undoubtedly the most experienced person on the team and Lyndsay's experience is next. Jeff, based on his experience, was designated as the project manager. Jeff, by nature, is a very motivated person and seeks perfection from himself and others around him. Lyndsay is a dynamic, outgoing person who works hard to achieve the tasks at hand; however, she at times is not confident of her abilities, and some times has difficulty presenting even nice deliverables in a positive manner. Rick accomplishes tasks that are assigned to him, but lacks the skills to research an open problem and find solutions for it. Judy has no prior IS project experience, and requires an extensive amount of coaching on how to accomplish tasks in an IS project. Bob and Zoya are very well organized, responsible team members who follow any given task until it is satisfactorily completed. Bob and Zoya are recent additions to the project team.

In terms of capabilities, Jeff is skilled in project management, system analysis, system design, database development, and client-server programming. Lyndsay is skilled in project management, system analysis, and systems documentation. Rick is very comfortable with database development and client-server programming. Bob has expertise in implementation, troubleshooting, and network design. Zoya has expertise in project documentation, database design, client-server, as well as Web programming. Judy is skilled at system analysis and design.

The project team from VCR is primarily composed of Marilynn and Cheryl. Marilynn understands the high-level overview of the VCR operations, while Cheryl knows in detail the inner workings of the current systems and paper-based processes at VCR.

Project Initiation

Early in the project cycle, Jeff and his project team met with Marilynn and others from VCR to initiate the project. The VCR team was not familiar with the System Development Life Cycle (SDLC) for constructing information systems (Dennis, 2002). Jeff and the project team explained the concepts behind SDLC and helped Marilynn create a system request (see Figure 2). Jeff forwarded a blank template of the system request to Marilynn, who then created a first draft. Jeff and Marilynn then sat together and refined the first draft into the system request document shown in Figure 2.

After the system request was developed, Lyndsay and Jeff conducted a feasibility study. The feasibility study focused on economic, technical, and organizational feasibility. Lyndsay and Jeff created extensive documentation to support the summary conclusions indicated.

* Economic Feasibility: Based on the current available financial resources from the Volunteer Center, it has been determined that the proposed solution must be relatively inexpensive. Exact numbers were not available from the center; however, indications are that the Center can spend between $500 and $1,000 on this project. The Volunteer Center is in agreement that the value of this project greatly exceeds the allotted budget, but cannot support a larger budget at this time. Even with this budgetary constraint, the project team believed a solution can be obtained.

* Technical Feasibility: With the young technical skills of the project team consisting of senior MIS students, a certain degree of risk appears to be evident. This risk is born out of the uncertainty in the skill-sets of the team (Ward & Chapman, 2003). The project team, however, is working closely with the ITPC members who have significant experience in building large-scale information systems. The faculty resources will guide the student project team in all aspects of the project.

* Organizational Feasibility: An analysis of VCR staff indicates all end users are proficient with PCs. In addition, the VCR staff appears to be very open to accepting a new completely electronic system, as the current processes are highly inefficient.

Based on the above analysis, the project team concluded that the project meets the criteria for economic, technical, and organizational feasibility.

The Current System

Early in the system development process, the project team reviewed the current information systems at VCR. The VCR maintained and processed four general types of information: payroll, expenses, donors, and volunteer information. Agnes, the Finance Administrator, used a PC-based accounting application to process payroll and record expenses. Donors were recorded in a spreadsheet. Jeff and his team focused most of their time on the volunteer system. Information was manually gathered from each system to produce a variety of reports in preparation of grants and in fulfillment of state and national reporting requirements.

The VCR used terminology that was initially unfamiliar to the team. A station is a place where volunteers work by devoting their time and effort. Stations include local hospitals and schools where the volunteers work. A job refers to a specific activity that a volunteer performs at a specific station. Example jobs include driving seniors between a nursing home and a hospital or working at the reception desk at a blood-donation center. Placement is the process of matching volunteers, depending on their skills and interests, with specific jobs at stations.

Currently, VCR uses an electronic system for maintaining senior volunteers, 55 and older, and their activities under the Retired & Senior Volunteer Program (discussed below). Activities of all other volunteers (younger than 55 years) are maintained using paper processes. Jeff and his team documented the current business processes using UML documentation such as the use case diagram. For a discussion of UML, the reader is referred to Arrington (2001). In addition, Appendix A provides an introduction to UML.

Jeff McCoy, leader of the project team, created the following use-case diagram to illustrate the different activities performed by the current electronic system.

The actors in the above use-case diagram include the following: 55-or-older volunteers, VCR-employees, station-coordinators. The current electronic system maintains information only on volunteers who are 55 or older. These volunteers fill out a paper application form to join VCR, indicate preferences on which station they would like to work, and respond to special-event mailings from VCR via phone or e-mail. In addition, volunteers can retire from VCR, and this activity is accomplished by phone or e-mail. VCR employees create volunteer records in the current electronic system for new volunteers who are 55 years or older. VCR employees may also update information on existing volunteers, and search for volunteers who might be interested in a specific job at a specific station. In addition, VCR employees may update volunteer activities including the number of hours spent by each volunteer in a job. Station coordinators communicate with VCR employees most often by phone, and they request volunteers for specific jobs at their stations. Station coordinators also communicate the number of hours spent by each volunteer at their stations in specific jobs by filling out a paper form. Most of these activities do not have any predetermined frequency and take place on-demand.

Note that the tasks performed by the volunteer and the station coordinator do not directly involve the current electronic system. However, the information obtained by performing these tasks is entered into the electronic system by the VCR employee.

The use case diagram on the next page was also created by Jeff. This diagram includes all processes not integrated with the current electronic system. Some of the processes indicated in this use-case diagram do not necessarily involve "paper." However, they use manual processes such as using the typewriter or maintaining documents and spreadsheets that are not integrated with the electronic system described in the previous section (Figure 4).

The actors in the above use-case diagram include the following: VCR-employee and the donor.

As part of the "Generate Mailings" use-case, VCR employees prepare word documents announcing opportunities to volunteers and mailing labels in Microsoft Word; they then mail them to volunteers. To accomplish the "Create Reports for Funding Agencies" use-case, VCR employees obtain information on the number of hours spent by volunteers on the electronic system, and type these hours on a report form that the funding agency provides. VCR employees track expenses in a PC-based financial system, while the donations to VCR and the donor information are maintained in a spreadsheet. Information on volunteers younger than 55 is also maintained in a spreadsheet.

Funding agencies are one source from which VCR gets its support, apart from donations by individual donors. Some of the funding agencies require reports on a regular basis. These reports should include the following pieces of information.

* Volunteer Name

* Station Name

* Station and Job Description

* Hours Worked for the Period

Some of the reports are indicated below.

* United Way Quarterly Report

* RSVP Homeland Security Report

* Wisconsin State Funding Report

From the above use-case diagram, it is clear that there is no comprehensive system at VCR that keeps track of the expenses, donations, and donors. In addition, volunteers who are younger than 55 are maintained in a spreadsheet.

Analysis of the Current System: Problems & Opportunities

Based on their analysis of the current system, Jeff and Lindsay developed a list of the following problems and opportunities for improvement.

* Problem: The Volunteer Center is using a hybrid paper and electronic system.

Opportunity: Combine into one unified electronic system.

* Problem: The current electronic system is on one personal computer that holds data only on retired and senior volunteers (those who are 55 and over). Any remaining volunteer categories, such as youth and adult (under 55), are handwritten and entered on an Excel spreadsheet on a separate personal computer.

Opportunity: Bring all volunteer data into one integrated system.

* Problem: The data is entered manually which can lead to input errors and dataintegrity issues. For example, the same station names are entered differently at different times.

Opportunity: Maintain consistent names and categories in the system, and minimize the user-input in the form of free text in the system.

* Problem: There is no support offered on the current electronic system. Questions about the operation of the RSVP system go unanswered.

Opportunity: For the new system, provide support by creating user manuals.

* Problem: Reports are manually compiled.

Opportunity: Improve the productivity of the VCR employees by generating reports required by different funding agencies electronically from the system.

* Problem: There are many fields of data required for reports that are currently not included in the system. Some of the fields that are not currently available in the existing system include person's ethnicity, driver's license number, actual number of hours for each volunteer, etc. A discussion with Marilynn revealed that there are at least 50 pieces of data not currently maintained by the system.

Opportunity: Deliver a system so that it includes all the data needed by VCR.

* Problem: Security on the system seems to be non-existent.

Opportunity: In the new system, provide security at the user level.

* Problem: The information cannot be shared with other users.

Opportunity: Design the new system so that it is at least a client-server system so that users get their data from a centralized location (see Allamraju, 2001; Chalasani & Baldwin, 2003).

* Problem: There is no automatic backing-up of data in the current system. In addition, data could be typed over or errors made without proper verification at the time of entry.

Opportunity: In the new system, arrive at procedures for backing up of data, and minimize the entry of free text by the users.

With these current processes in place, the Volunteer Center has struggled to perform two of its critical business functions. First, the Center has experienced difficulty in finding "best fit" volunteer candidates for stations requesting volunteer resources. As a result, a station requesting a volunteer may encounter situations where a volunteer's skills do not fully meet their needs. Secondly, the Center has encountered difficulty in accurately managing, tracking, and reporting volunteer resources using multiple systems. Because the Center relies on the volunteer resource reports to procure government funds, a consequence of inaccurate reporting is insufficient funding to the Center.

CASE DESCRIPTION

Jeff and the project team spent a considerable amount of time in the analysis and early design phases of the System Development Life Cycle (SDLC). During this process several standard documents were produced, including use cases, a data model, and a project schedule. In addition, the project team noted other requirements, such as budget requirements, that would impact the choice of alternatives and the ultimate success of the project (Barki, Rivard, & Talbot, 2001). The various tasks required to complete the analysis and early design phases were divided among group members. Once an initial draft of a document was created, Jeff and Lindsay reviewed and integrated the work.

System Requirements

Early on, all parties agreed that the standard way to document the requirements was via use-case diagrams, and by providing details of each use-case (Hoffer, 2002; Prowell & Poore, 2003). After numerous meetings with the VCR team, led by Marilynn, Jeff McCoy, with the help of the IS team, arrived at the following use-case diagram.

All processes, regardless of how they will be implemented, were documented as part of the use-case diagram (McConnell, 1998). There are four primary actors in this use-case diagram: Volunteer, VCR Employee, Station Coordinator, and the Donor. This use-case diagram shows the «includes» and «extends» relationships. For example, when a station coordinator reports hours, it triggers the "Update Volunteer Activity," and hence there is an «includes» relationship between the two activities. Similarly, updating information on a volunteer may cause a VCR employee to search for volunteer opportunities. Hence, there is an «extends» relationship between the "Update Volunteer" and "Search for Volunteer Opportunity" use-cases.

Different members of the IS team documented the details of each use-case (Booch, 1999; Krushten, 1999). For example, the "Join VCR" use-case, developed by Lindsay, is detailed in Table 1. It includes key aspects such as the stakeholders, relationships to other use-cases, normal flow of events, and alternate flows. This use-case has three different alternate flows which model three different business scenarios in which a volunteer may join VCR (including enrolling by telephone, finding an enrollment form on the Web, and enrolling at an external recruiting event).

Table 2 indicates the details of the use-case "Create Volunteer Records."

In addition to the use-cases, the project team documented the following high-level requirements for the VCR information system.

(R1) Need to maintain volunteers and their information

(R2) Need to maintain stations at which volunteers volunteer their time and the activities of the volunteers

(R3) Need to maintain information on the donors to the RVC and the donations

(R4) Need to generate reports for volunteer center management, and donors, which may include government agencies, private foundations

(R5) Need to maintain and track expenses and budget

(R6) Need to convert/transform current data into the new system, once the new system is built

In addition to the use-cases, the IS team developed a data model to highlight the data requirements of the system. The initial data model was developed by Judy. Part of the ER model (Baldwin & Paradice, 2000) is shown on the next page. The main entity in the ER model is the Person entity. Person has many attributes such as name and ethnicity. A person can be of multiple types - "Volunteer," "Donor," "Station Coordinator," and so forth. The type of a person is captured using the PersonType lookup table and PersonPersonType cross-reference table. This model is capable of maintaining multiple addresses, e-mail addresses, and phone numbers for a person. PersonPhone, PersonEmail, PersonAddress are separate entities that capture this data. Since most volunteers are retired and senior volunteers, it is possible that volunteers have some disability that restricts them from certain types of volunteer activities. PersonDisability captures this data, while PersonInterest captures the activities that a volunteer may be interested in (Figure 6).

The entities and the data fields contained in a few example entities are described in Table 3. Judy developed the initial version of the data dictionary (Hoffer, 2002). Jeff modified various entries to correspond to his view of the data requirements.

Special Requirements

Not-for-profit organizations frequently face challenges that may not be faced by for-profit organizations. These challenges most often stem from budgetary and time constraints. For the Volunteer Center of Racine, even though Marilynn and Cheryl were completely committed to the project, they are unable to secure even limited funding to implement the project. For example, purchasing high-end PCs that implement new software is not an option; instead, they depend on local companies to donate equipment such as PCs. In addition, due to budgetary constraints, their current server and PCs are connected by a wireless network. The wireless network itself is supported by Mike Daniels, another volunteer. However, the wireless network is very unreliable with the client PCs losing their connections to the server very often during the day. Thus far, Mike has not been able to spend enough time to come up with a solution to the network problem. Jeff and the project team are confident that they can implement a wired network for the VCR under a budget of $500. However, funding for this has not yet been secured. Such problems are routine in a non-profit organization, and cause dependencies that may affect the project schedules and project timelines significantly.

Another requirement for the project is that it should be completed by August so that Cheryl and others at the volunteer center can start using the system for numerous fall volunteer activities. In addition, implementing the new system in August will also facilitate creation of the year-end reports needed by the funding agencies using this new system.

Proposed Designs

Jeff and Rick arrived at four alternative solutions for the Volunteer Center Project. They presented these alternatives to the IS team, which conducted an analysis of the alternatives. Alternatives range from complete off-the-shelf packages to total custom developed system approaches. The identified alternatives and their analyses are presented below.

Alternative #1. Purchase Off-the-Shelf

This alternative would entail the purchase of commercially available off-the-shelf software that meets all the documented requirements. The product would then be used "as-is" with no additional configuring or modifications to meet the special needs of the business.

* Benefits: Complete system, reliable/proven system, customer support available

* Weaknesses: High cost, proprietary code that cannot be modified easily for future customization or modifications, inability to configure to meet users' needs

Alternative #2. Purchase Configurable

This alternative would entail the purchase of commercially available off-the-shelf software that could be further configured by the user/developer. The product would be modified to meet the special needs of the business.

* Benefits: Ability to configure as per requirements, large selection of vendors, availability of customer support

* Weaknesses: High cost, special skills needed to configure, limited customer support once configured

Alternative #3. Custom Develop

This alternative would entail the purchasing of no software by the Volunteer Center. All software will be built by the project team to meet the special needs of the business.

* Benefits: Low cost, ability to build to meet users' exact needs, standard programming languages can be used (Visual Basic, Java, etc.)

* Weaknesses: Special skills needed to build, special skills needed to support, undefined maintenance responsibilities

Alternative #4. Reengineer Existing System

This alternative would entail the reengineering of the existing system in place at the Volunteer Center. This alternative cannot be considered, as the existing system is a hybrid comprised of electronic and paper business processes. In addition, the existing electronic system uses proprietary code that is not accessible to the project team. A best attempt at reengineering would be to contact the software supplier and review current off-the-shelf offerings (the use of Alternative #1). This alternative was not considered further.

As the project team managed by Jeff pondered on the above alternatives, they needed to choose one of the above alternatives in a logical way (Goseva-Popstojanova, 2003). It appeared to Jeff that purchasing an off-the-shelf component (Alternative #1) will require at least $5,000, and may be as high as $15,000. Alternative #2 has similar costs for purchasing the software. In addition, some of these products require customers to sign a multi-year maintenance deal that can run into hundreds of dollars per year. On the other hand, a custom-developed solution (Alternative #3) will require a significant amount of time to be spent in system design and development. The VCR will not have to pay for this alternative, since this will be done by the IS project team on a pro bono basis.

Project Schedule & Remaining Tasks

In order to help determine the viability of the custom-development approach, Jeff and Lindsay decided to sketch a schedule for this alternative. Their high-level schedule is indicated in Table 4.

Even though the Waterfall method has been followed until the design phase, Jeff and the project team decided to use a phased approach that will implement the system in three different phases at the VCR site. The reason to use such a phased approach is to reduce the risk of implementation facing too many implementation problems, and also to incorporate user feedback into the system before the end of the project (Jorgensen 2004).

Approximately 50 screens need to be developed for the VCR information system. In addition, Microsoft SQL server software will be installed and used to maintain the data. The approximate division of effort among team members to accomplish these tasks is shown in Table 5.

CURRENT CHALLENGES/PROBLEMS FACING THE ORGANIZATION

The ITPC offices were quiet by the time Jeff began to fill in the project status report. The tone of the most recent meeting interfered with his ability to think. Jeff's drive for perfection created friction between him and some of his team members who felt belittled by his criticism of their work (Barki & Harwick, 2001). As an instance, when the data model and the data dictionary completed by Judy were substandard, Jeff spent a large amount of time modifying the models. Jeff felt that he needed to provide feedback and, if necessary, complete the task himself in order to obtain satisfactory results. He could not figure out why members of his team had problems with this approach (Radosevich, 1998).

In addition to the personnel issues, several other issues needed to be considered. Should the team recommend purchasing software or custom developing a solution? What risks face the project and how can the risks be mitigated (Ward & Chapman, 2003; Goseva-Popstojanova, 2003)? How might the risks affect the project schedule? Will the project be completed on time? Are there any omissions in the requirements specification? How should the team manage the project scope?

Jeff glanced at this watch, which now read 6:55. "Late movies are always good, fewer people in the theater," he thought.

Subject: Data dictionaries; Information systems; Risk assessment; Systems design; Studies; Nonprofit organizations; Project management

Location: United States--US

Classification: 9190: United States; 5240: Software & systems; 9130: Experiment/theoretical treatment; 9540: Non-profit institutions

Publication title: Journal of Cases on Information Technology

Volume: 7

Issue: 4

Pages: 80-105

Number of pages: 26

Publication year: 2005

Publication date: Oct-Dec 2005

Year: 2005

Publisher: IGI Global

Place of publication: Hershey

Country of publication: United States

Publication subject: Business And Economics--Computer Applications

ISSN: 15487717

Source type: Reports

Language of publication: English

Document type: Business Case

Document feature: Diagrams Tables References

ProQuest document ID: 198657567

Document URL: http://search.proquest.com/docview/198657567?accountid=38610

Copyright: Copyright Idea Group Inc. Oct-Dec 2005

Last updated: 2011-07-21

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Balanced Scorecard: A Tool to Improve IS Department Planning and Evaluation

Author: Simon, Steven John

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Abstract:

The Balanced Scorecard (BSC) methodology has the fundamental premise that the evaluation of a firm should not be confined to a traditional financial evaluation but should be supplemented with measures concerning the organization's customers, internal processes, and the ability to innovate and grow. The technique while growing in use has seen low levels of adoption in IS departments. This work explores the BSC as a means to improve IS department planning and evaluation while tightly linking the department to the overall goals and objectives of the organization. The method provides a matrix to incorporate intangible measures into the planning and evaluation process. BSC concepts are illustrated through a case study. [PUBLICATION ABSTRACT]

Full text:

INTRODUCTION

The evaluation of the Information Technology (IT) or Information Systems (IS) functions and investments in a corporation remains the subject of many academic and business discussions. Investments in IT continue to grow while business managers worry that the benefits and value of these investments might not be as high as initially planned (Mair 2002). In order to be able to evaluate IT/IS investments, many methods and techniques have been suggested over the years. Traditional methods focus on financial measures that have long been known. The "return on investment" (ROI) - the ratio of average annual net benefits of a project to the hi vested amount of money and the "payback period" (PB) - the period of time that indicates how long an investor will have to wait for the project to repay its initial investment are just a couple of examples.

These types of measures limit themselves to the financial benefits and do not incorporate the value of IT/IS for the corporation. Corporations have begun to adopt techniques that augment the traditional financial measures with intangibles or soft benefits to assess the value of their IT systems. IT must generate value for the company; it must be a component of the business strategy and contribute to achieve the company's goals while improving measures of efficiency and effectiveness. These measures seek to align IT and organizational strategy, the Balanced Scorecard (BSC) is one such measure. The BSC methodology, developed by Kaplan and Norton (1992) has the fundamental premise that the evaluation of a firm should not be confined to a traditional financial evaluation but should be supplemented with measures concerning the organization's customers, internal processes, and the ability to innovate and grow. Results achieved within these additional dimensions should assure future financial results and drive the organization towards its strategic objectives while keeping all dimensions in balance. The issue for companies is how to measure their performance in both tangible and intangible terms.

This paper illustrates the use of the Balanced Scorecard methodology as a means to guide and provide measurement for the reorganization as well as ongoing planning, evaluation and management of the IS department. Extending the BSC, a situational specific matrix is developed providing the organization with direct vision, objectives, and tangible and intangible measures of outcomes. The paper is organized as follows. The first section reviews the shortcomings of current financially driven business measurements. The next section details the development and use of the Balanced Scorecard methodology including the introduction of strategy maps - the BSC's latest evolution. Next the methodology and case are introduced. The case highlights the development of the department's BSC matrix while focusing on the Customer Perspective. A discussion of the case's results and suggestions for future research close the study.

BUSINESS MEASUREMENT

In today's business environment, managing the factors that drive business value has become significant. This is especially critical for information system departments and projects since many metrics are difficult to measure using traditional schemes. Although standard financial measures are the primary factors used to determine total value, they are insufficient for capturing all the critical elements of business worth (Martinsons et al 1999). Thus, it is crucial to establish non-financial measurements of business performance to enhance traditional measures. Performance measurement can provide refined knowledge into the cause-and-effect relationships between operating events and financial results. Such knowledge depends on measures that expand the traditional financial metrics to encompass non-financial elements.

There are many kinds of value and traditional measures such as return on investment (ROI) (Lucas 1999). Studies (Kaplan and Norton 1992, Martinsons et al 1999, Mair 2002, Murphy and Simon 2002, Gary 2003) demonstrate that reliance on financial measures alone is insufficient for managing complex and everchanging business environments. Driven by competition and globalization, organizations are more customer-focused, striving to benefit from their intellectual capital and knowledge-based intangible assets. The higher an intangible asset's strategic readiness and the more it is aligned with the company's strategy, the faster it can be converted into something tangible like earnings (Gary 2003).

An intangible asset, also referred to as intellectual asset, intellectual capital, intellectual property or knowledge capital, is a non-monetary asset without physical substance that is used in the production or supply of goods or services (Murphy and Simon 2002). Intangible assets include copyrights, patents, intellectual property, goodwill, brands, trademarks, ideas and relationships, with the list expanding to include elements like creativity, innovation, professionalism, loyalty, and satisfaction. The IABC Research Foundation's research team has recognized and organized intangible assets, in terms of goods and competencies, in three categories that correlate with the corporate bottom line (Gillis 2003). These categories include Human capital which refers to the experiences and expertise of people who produce knowledge; relational capital, referring to the connectivity and exchange process to produce knowledge; and structural capital, which refers to the organizational infrastructure that allows connectivity of knowledge to take place.

Schiemann and Lingle (2000) claim companies that use a balance set of strategic measures have proven to outperform both strategically and financially those competitors that have not used similar methodologies. It is critical for today's enterprises to focus on strategic capabilities and customer expectations as well as financial indicators (Schiemann and Lingle 2000). A BSC strategy is not only important for an enterprise as a whole. It is critical for management to understand that is essential to align the performance measurement of individuals, teams, business units, and the whole organization (Pollard and Buckle 2000). According to David P. Norton (one of the original co-authors), president of the Balanced Scorecard Collaborative in Lincoln, Mass., alignment with strategy is what creates value for the tangible and intangible assets of a firm (Armitage 2003).

A study by the Cap Gemini Ernst & Young Center for Business Innovation (Low 2004) assessed the portfolio of intangible assets for 200 of the largest public U.S. companies. The study assigns scores to the companies based on how well they manage their intangible assets and confirms that higher scores lead to stronger financial performance. Examples include Citigroup and the insurance company American International Group, which scored near the top of financial services companies in the original research in 1999; their stocks returned 8% and 2% a year since then. In contrast, Bank One and insurer Aon had low scores in 1999 and have had returns of-5% and -12%. Citi and AIG posted net income up 27% and 9% annualized over the past three years. Bank One and Aon were down 5% and 28% (Badenhausen 2002). The issue for companies is how to measure their performance in terms of both tangible and intangible terms.

BALANCED SCORECARD METHODOLOGY

The Balanced Scorecard (BSC) provides a model that translates an organization's vision and strategy into specific strategically aligned objectives, monitored through a coherent set of performance indicators (Kaplan and Norton 1992). Created in the early 1990's, the BSC methodology includes the study, analysis, and metric development of four distinctive dimensions of the organization: finances, customers, learning and growth, and internal business processes. The method places emphasis on capturing the meaning of qualitative and quantitative information while creating a portfolio of measures linking business strategy, operational objectives, and organizational development. Martinsons et al (1999) suggest that the Balanced Scorecard can be the foundation for the strategic management of information systems in organizations.

The BSC is a holistic and evolutionary approach to business development, avoiding the traditional methodology of short-term focus on financial results alone while taking a long range view of the organization. It focuses on the value of services and products provided to customers; therefore BSC has a customer-centric approach. This methodology is a performance measurement system providing a framework to keep an organization competitive within its market place and the tools for a mission-driven, results-oriented and future-directed enterprise. BSC helps managers and individuals be prepared for constant change, helps them seek the best-valued opportunities, and allows them to have an effective and efficient interface with their customers (Kaplan and Norton 1992).

BSC is adaptable to diverse industry sectors and organizational sizes, making it an effective tool across business contexts and environments and as a result is successfully used at hundreds of corporations and government agencies to enhance strategic planning and monitor organizational performance.1 Studies have linked the success of the BSC to the performance of maintenance systems in industrial settings (Tsang et al 1999), knowledge-based organizations (Moore et al 2001), performance measures (Banker et al 2004, Neely et al 2000), communications strategies (Malina and Selto 2001), human resources management (HR Focus 2003), process measurement and design (Sink and Smith 1999), hospitality operations (Denton and White 2000), health care (Auger and Roy 2004, Li and Dalton 2003, Zelman et al 2003, Pineno 2002, Oliveria 2001, Pink et al 2001), and information systems management (Van Der Zee and De Jong 1999, Martinsons et al 1999, Mair 2002). All organizations must perform control and monitoring in today's operations mainly because they will affect tomorrow's development and business results. The BSC is not just a record of the results obtained, but also a prediction of expected results (Wyatt 2004), evolving into a business vision and strategy. Strategy can be viewed as a set of "if-then" hypotheses. If certain strategic activities are performed, expected financial results can occur. Knowing how the strategy is functioning and the degree of its effectiveness is critical for a company's success. The framework of the BSC is ideal for the analysis of cause-and-effect relationships and how they integrate and affect the company as a whole.

The BSC is balanced between the organization's long and short-term objectives and the reciprocal relationship among the four main dimensions: finance, customers, internal processes and learning and growth. Detailed explanation of these dimensions is covered in the next section. The scorecard balances the outcomes the organization wants to achieve (typically in the financial and customer dimensions) and the drivers of these outcomes (typically in the internal processes and learning and growth dimension).

During the development of the BSC, Kaplan and Norton demonstrated an awareness of the underlying principles of business process redesign (BPR) and the transition of businesses into the information age (Martinsons et al 1999). The BSC aims at changing the organization's "as-is" into its "to-be" by placing emphasis on strategy and vision. It establishes goals, not rules, while assuming that people will adopt and enforce whatever behaviors and actions are necessary to achieve those goals. The measures are designed to shift employees and management toward an overall vision. In the continuously changing economic environment, BSC proves flexible, targeting a set of goals and providing both a map with metrics to attain those goals and measuring tools and processes to interpret the effectiveness of the strategy the company has chosen. Figure 1 portrays generic BSC perspectives and their relationships.

Evolution of the Balanced Scorecard Methodology

Since their inception in 1992, the use of scorecards has been slowly spreading. Meta Group (Van Decker 2002) indicates that about 45% of the Fortune 100 companies use the BSC methodology, an increase of 11% over 2001. This section discusses the evolution of the BSC methodology.

First generation Balanced Scorecard: The Balanced Scorecard was initially described as a simple 2 × 2 to performance measurement. In addition to financial measures, managers were encouraged to look at metrics drawn from three other "perspectives" of the business: Learning and Growth; Internal Business Process; and Customers, chosen to represent the major stakeholders in a business. The definition of what comprised a Balanced Scorecard was sparse, and focused on the high level structure of the device. Simple 'causality' between the four perspectives was illustrated, but not used for specific purpose. Kaplan and Norton's original focus was on the selection and reporting of a limited number of measures in each of the four perspectives. Their work suggested use of questions relating to the vision and goals of the organization to help in the selection of measures to be used, and encouraged the consideration of 'typical' areas of interest in this process. The original work made no specific observations concerning how the Balanced Scorecard might improve the performance of organizations; the implication is that the provision of accessible relevant measurement data itself will trigger improved organizational performance (Armitage 2003).

Second generation Balanced Scorecard - Strategic Objectives and Linkages: The practical difficulties associated with the design of first generation Balanced Scorecards are significant, in part because the definition of a Balanced Scorecard was initially vague, allowing for considerable interpretation. Two significant areas of concern were filtering - the process of choosing specific measures to report, and clustering - deciding how to group measures into 'perspectives'.

The most significant early improvement resulted from the need to change the process that yielded appropriate key measures of performance in each perspective. A solution was the introduction of the concept of 'strategic objectives'. Initially these were represented as short sentences attached to the four perspectives, used to capture the essence of the organization's strategy material to each of the areas. Measures were selected reflecting achievement of these strategic objectives. Another key development in the second generation concerned causality. Beyond simply highlighting causal links between perspectives, there was an attempt to indicate linkages between the measures themselves. Measure-based linkages provided a richer model of causality than before, but presented conceptual problems: the use of measures encouraged attempts to 'prove' the causality between measures using various forms of analysis.

Kaplan and Norton recognized this second generation as an evolution from an improved measurement system to a core management system. Maintaining the focus that the Balanced Scorecard was intended to support the management of strategic implementation, Kaplan and Norton (2004) further described this development of the Balanced Scorecard as the central element of a strategic management system. This increased awareness of the need to reflect differences in management agenda within differing parts of organizational structures, and created strategic alignment between management units by developing Balanced Scorecards as part of an overall plan at the Business Unit level.

Third Generation Balanced Scorecard - Strategy Maps: The third generation of the BSC methodology is based on a refinement of previous generation design and mechanisms, giving it better functionality and more strategic relevance. It includes four components; the first was directly inherited from the previous generation and the rest result from issues relating to target setting and the validation of strategic objective selection outlined above.

1. Destination statement: In order to make rational decisions about organizational activity and set targets for those activities, a company should develop a clear idea about what the organization is trying to achieve. A destination statement describes, ideally in some detail, what the organization is likely to look like at an agreed future date.

2. Strategic Objectives: The destination statement offers a clear and shared picture of an organization at some point in the future, but it does not provide a suitable focus for management attention between now-and-then. What needs to be done and achieved in the medium term for the organization to "reach" its destination on time is agreed upon in the form of objectives or priorities.

3. Strategy Map and perspectives: The chosen strategic objectives are spread across four zones or 'perspectives'. The first two perspectives contain objectives relating to the most important activities in terms of business processes, cycle time, productivity etc. and what needs to happen for these processes to be sustained and further developed in terms of people, product and process development.

4. Measures and Initiatives: Once objectives have been identified, measures can be constructed with the intention of supporting management's ability to monitor the organization's progress. Initiatives are special projects with a finite start and end date and are mapped to strategic objectives to give an indication of the projects or actions needed in order to realize those objectives.

Strategy maps are the most important aspect of the third generation BSC. Strategic maps provide a graphical representation of an organization's critical objectives and its relationships between the key performance indicators. The maps constitute a generic architecture for describing a strategy and help the organization visualize a cohesive, integrated, and systematic form. Beyond helping understand a strategy, a strategy map is the basis for enabling management to implement strategies quickly and effectively (Kaplan and Norton 2004). A strategy map can identify the gap between strategy implementation activities and the skills required to translate growth and profit strategies into action. It can become the basis through which an organization translates its strategies and objectives into tangible measures.

The BSC methodology uses strategic cause-and-effect linkage maps that describe how intangible assets are promoted and combined with other tangible and intangible assets to generate value and achieve the expected financial results. The creation of value for the shareholders must be guaranteed through a balance between growth and productivity. BSC develops a framework for describing strategy and puts together tangible and intangible assets in the organization's activities that create value. This combination creates propositions of change and incorporates systematic quality that will help the organization achieve financial results expected by shareholders (Kaplan and Norton 1992).

In today's economy, it is increasingly true that the most significant value lies in what investors cannot see. A growing number of companies now have rich portfolios of intangible assets such as brand names, software, franchise rights or research projects which are not included on their balance sheets. It is only very recently that those assets have been reflected in share prices. Gradually, the proliferation of high technology and service-sector companies has started to change the way investors calculate corporate worth. This is pushing companies to find ways to understand, manage, and capitalize on their intangible assets as well as integrate them into their overall business strategies (McMurdy 1999).

At the top of the strategy map (see Figure 2) is the financial perspective of the organization with both a growth strategy and a productivity strategy. This layer reflects how the organization will deliver value to its stakeholders (shareholders, clients, community and even the employees themselves). A growth strategy could include strategic objectives such as the increase of shareholder value, new sources of revenue from outstanding quality in products and services and an increase of customer value through improvements in those products and services. The productivity strategy could include objectives such as becoming the cost leader in a sector of the industry or achieving maximum efficiency in the utilization of existing assets.

The second layer of the strategy is the customer perspective. This layer reflects how the organization differentiates itself in the eyes of the customer (company's value proposition) and is a key component to the strategy map. It delineates the choices the company is making. For example, it describes the strategic position of a company as a product leader or a follower, the type of market the company wants to penetrate, or the market segment on which it wants to focus.

The third layer from the top is the internal process perspective, mainly driven by the customers or clients. It defines the internal processes required to deliver the company's value proposition. This layer should not be focused on single "silos" in the organization (finance, IT, human resources), but rather on how these silos can work as cross-functional teams to execute the strategy. This new perspective embodies the principles of business process redesign (BPR) which seeks to refocus the organization on cross-functional processes that drive business transactions.

The foundation that supports the strategy map is the organization's learn and growth perspective incorporating the elements of culture, technology and skills required to execute the strategy (internal process perspective). Much like financial sheets describe an organization's health, the BSC and strategy map describe and measure an organization's strategic health and its prospect of growth in the future (Miyake 2002). Advanced BSC applications allow management to drill down from a strategic top level to a forensic analysis of actual vs. target on the various supporting metrics as well as "what-if ' scenarios. Beyond drilling down and creating scenarios, the BSC methodology can also support the integration of the planning and budgeting process or the performance development and incentive processes.

Strategy maps are a tool to enable the organization to meld strategy and vision via the four perspectives defined within BSC (see Table 1). Since all organizations are unique and their application of BSC is situational specific, the objective is to translate the strategy map from a high level abstract tool to a specific instrument through which the organization can plan, organize, implement, and evaluate its strategy in tangible and measurable means. This is perhaps the most difficult step in the use of BSC. Several studies have explored this task and have made practical recommendations. For instance, Pineno (2002) adapted the BSC to create an incremental model for the evaluation of health care management. While developing this quantitatively measurable approach, he recognized that even within an industry such as health care, there are still modifications required for particular situations. Along similar lines, Pink et al (2001) created a BSC inspired tool to measure performance indicators within the Canadian health care system. Their measure has been repeatedly used to evaluate utilization and outcomes, satisfaction, system integration, and financial performance. Kanji (2002) and Kanji and Moura E Sa (2001, 2002) adapted the BSC into a Business Scorecard. The work created a more general measure and validated it using structural equation modeling. In information systems' studies, Martinsons et al (1999) linked the BSC with strategic management of information systems and recommended measures for the BSC perspectives. Interestingly, all these studies indicate the difficulty in converting the strategy maps into a tangible measure to integrate vision, objectives, and measures. The latter sections of this paper explore one company's conversion of its high level strategy map to a tactical and implementable BSC matrix within an information technology context.

METHODOLOGY

The case study methodology was employed for this study. One advantage of the case method is the opportunity for a holistic and impartial view of the situation (Gummesson 1991). This aspect appealed to the author since the BSC was much broader in scope than pervious measurements used by Agilent and allowed the researcher to focus on both qualitative and quantitative methods. A case study examines a management situation in the natural environment in which the phenomenon occurs (Yin 1984) and has been used in a variety of key IS studies since the 1980s (Markus 1981, Benbasat et al 1987). In this study, the researcher was a "guest" of the organization and did not participate in the change that was occurring. Traditionally, case studies have replied on qualitative methods of data gathering, specifically interviews and unobtrusive observation (Bonoma 1985). To insure the reliability of the data gathered for this study, the researcher conducted interviews with members of the organization, observed the organization, and replied on secondary sources of data from internal organization reports and documents. The multiple schemes of data collection helped provide a more complete picture of the organization and their BSC initiative. It should be carefully noted that despite the best efforts of researchers using the case method, results reflect the context and environment of the organization under study and observations are the researcher's interpretation of those events.

Data collection for the study took place over the course of several months with the researcher interfacing directly with managers of Agilent's IT department. At the inception of the study the project was approximately 75% complete being well into the third year. As stated above, the primary vehicles for data collection included unstructured and structured interviews with managers and review of internal corporate documents. Since some of the information provided to the researcher was considered sensitive by the organization, the reporting of details from that material will be limited.

CASE STUDY - THE BSC MATRIX

Agilent Technologies - a "spin-off" of the Hewlett-Packard Company - has a history of innovation and leadership in the communications, electronics, semiconductor, test and measurement, life sciences and chemical analysis industries. Agilent Technologies Inc. is a global, diversified technology company focusing on growth markets in communications, electronics, life sciences and chemical analysis. The company operates four businesses - test and measurement, automated test, semiconductor products, and life sciences and chemical analysis - all supported by a central research group, Agilent Laboratories. Its businesses excel in applying measurement technologies to develop products that sense, analyze, display and communicate data. Agilent's customers include many of the world's leading high-technology firms. These customers rely on Agilent's products and services to make them more profitable and competitive, from research and development through manufacturing, installation and maintenance. Agilent enables its customers to speed their time to market and achieve volume production and high-quality precision manufacturing (Agilent Technologies 2005).

As a result of the 1999 spin-off, Agilent faced the need to completely restructure its information systems strategy for changing economic conditions and a new business environment. The initial objective was to understand the value of IT services within the overall business objectives and strategies. This was approached from a process and system perspective and separated from particular hardware and software assets. This first crucial step was designed to link the activities of IT and compute costs of tangible and intangible IT assets for productivity analysis, profitability analysis, trade-offs, decision making and to measure the overall IT value in the business strategy. This information would become the core data for Agilent IT's measurement system. Given their experience with the spin-off and interaction with customers, corporate and IT managers understood that traditional and historic measures of performance would prove insufficient to access IT's overall worth. The BSC method had been successfully used by other parts of Agilent, e.g. Agilent Labs, and was adopted as a means to guide IT's reorganization.

The Agilent IT organization faced multiple challenges in order to separate the technology infrastructures of the two companies, including telecommunication services and enterprise applications. The IT department lost buying and negotiation power from most of its vendors and suppliers as orders and volume commitments decreased substantially, while the costs of maintaining the IT infrastructure worldwide increased. As a result, Agilent needed to determine the direct impact of the IT services on the success of the business with regard to the contribution to efficiency, effectiveness and innovation.

The decision was made to use the Business Scorecard (BSC) as a framework to outline and measure the success of the strategic alignment. As indicated in previous studies of the BSC, a crucial step was the conversion of the generic BSC model to a tangible and specific measure for this situation. To bridge this gap - using inputs from corporate, IT, and Agilent Labs managers - Agilent developed a situational specific BSC Matrix. This matrix decomposed the perspectives/dimensions of the BSC into key areas - vision, goals (key success factors), strategies, challenges, and critical measures. This matrix allowed Agilent's IS department to analyze the components of each dimension as they related to the organization's overall goals and objectives; plus, it provided the department with a tool to understand the interrelationships of the perspectives and the synergies they created. A copy of the BSC matrix is found in Table 2. In the interest of insuring a realistic project and to assist in project management, a three year timetable was developed to establish goals and milestones.

The IS department's BSC matrix (see Table 2) was developed to guide the department's reorganization. An examination of the matrix illustrates that the horizontal axis is derived from perspectives found in the strategic maps developed by Kaplan and Norton during the BSC's third iteration. These four perspectives represent the organization's overarching objectives that in the case of Agilent, bind the IS department to the firm's strategic plans. The items on the vertical axis present the IS department's critical factors which were designed to illustrate to the organization how each of the four perspectives will be instituted and implemented. It should be noted that the department's BSC matrix is a high level blueprint with supporting matrixes, reports, and tables providing more granularity. Senior management, when developing the department's matrix, envisioned it as a means to quickly share the plan with the organization as a whole and to convey to the department's members a guide for realignment while providing a blueprint to guide the project and create goals, objectives, and critical measures.

The driving objective for these senior managers was to create an IS department that was closely aligned with the corporate "vision" of a more agile, customer oriented organization. To accomplish this objective, managers realized that alignment required coordination with all IS department customers. Therefore, every effort was made to include "customers" in the process with internal customer input shaping an IT strategy that was "weaved into the fabric" of the corporate strategy. A key concept derived from both corporate and external customers was that of value for the service delivered. Value is interpreted as more than just delivery of product and service for a competitive price (also deemed important) with elements measurable in tangible and intangible terms. This concept prompted managers to consider the development of a "relationship" with customers which in turn provided the department with insights from the customer's business as well as IT perspectives (a more holistic view). Additionally, customers offered insights into the organization and composition of the teams Agilent employed. Their suggestions led to an agile department with common elements across teams and projects impacting the internal business and learning perspectives.

The vertical axis is composed of vision, goals, strategies, and critical measures. The specific factors were identified from Aglient's past BSC initiatives and adapted by IS senior managers and department teams. Vision provides the primary deliverable (corporate terminology) for each perspective at the end of the project's three year course. It is critical to note that these deliverables were not created in isolation within the IS department or within the boundaries of the company. Customers, both internal and external, were queried by senior management, project leads, and analysts to obtain input so the reorganized department would be more responsive and cost effective. Senior department managers were clear in their guidance as representatives sought to figure out "ways to work for both business and IT while delivering more for less without delay." Some BSC projects have weighted the factors of the matrix as indicated by Kanji (2002). Many of these projects were designed to produce a static end-state such as the performance measures of hospitals (Auger and Roy 2004), general personal performance measures (Kanji 2002), and measures of R&D effectiveness (Li and Dalton 2003). The Agilent project elected to treat each factor with equal weight since their project was geared to realignment of a department and was viewed as opened-ended. This, in the opinion of corporate managers, provided the organization the opportunity for the "adjustment" of measures and the ability to continue incremental change efforts.

The matrix in its end state provided the department with the blueprint or road map to accomplish their prime objective. Its development and implementation illustrates a potential shortcoming of Agilent's IS department's BSC project. To accomplish the tasks described above the IS department created teams based on the BSC perspectives across the top of the matrix. These teams were tasked with researching the historical actions of the department, interacting with customers, and producing the information found in each perspective's cell (along with supporting documentation). The problem with this approach is that the teams were operating as independent entities with minimal overlap. Some managers indicated that this was done with purposeful intent since they viewed the BSC perspectives as semi-autonomous. Others indicated that by having the teams work independently they increased the probability of unique outcomes giving the department more options to choose.

This approach appears to be somewhat shortsighted and contrary to the BSC philosophy, although it should be noted that the BSC process is highly adaptable to specific situations. As stated in earlier sections, the BSC method aims at changing the organization by placing emphasis on vision and strategy (hence their inclusion in the vertical axis items). This is also the basis for the cause-and-effect linkage of the strategic map which provided the factors for the horizontal axis. The semi-autonomous teams produced what management described as a "rich variety" of potential options and solutions and it was a widely held opinion that the choices would have been limited had the teams been integrated. While this thinking has merit, it is more likely that the scope of the potential solutions would have been narrowed and the quality and implement ability of the solutions increased if the teams were integrated. The rationale for this viewpoint is that by parsing the effort by perspective, the teams were working within silos focusing on a single area as opposed to the prime vision of the department and organization. From experience with process redesign, organizations understand that cross functional teams working across organizational boundaries produce superior results.

An examination of the BSC perspectives may assist in understanding this rationale. A better and typical approach would be to start the examination with the customer perspective. The reason is that Agilent sought to realign the IS department more closely with corporate strategy and to reorganize it into a more customer oriented entity. Customers provided both direction for the type of projects that will be conducted and inputs on the internal business and financial perspectives. Once the customer perspective is examined and the departmental factor cells (vertical axis) completed, the internal business perspective could be tackled. How a department is organized and what critical measures are used are a direct result of customer needs and the types of projects undertaken. A misalignment between the customer and internal business perspectives can lead to the failure to fulfill customer expectations. Once the internal business perspective has been developed, the department can then focus on the development of the innovation and learning elements, which determine the skills mix required, how to obtain those skills, compensation schemes, and right sizing. From the previous work, the department can then determine the best way to deliver the best service for the least cost while providing value to their customers while maximizing revenues and profits. The semi-autonomous orientation of the teams resulted in excellent information that guided the successful realignment, although it is likely that an integrated approach would have been more appropriate.

Customer Perspective Development

This section investigates the process and events that led to the development of the Customer Perspective of the IS Department's BSC Matrix. While the focus is the Customer Perspective, this section will also examine how the information obtained during this endeavor contributed to the development of the other three perspectives. As with most reorganization or realignment projects, the IS department performed an analysis to determine their current strengths and weakness and map their "as-is" state. An internal investigation of this type helps determine the point of origin on the path to reorganization. The investigation began with a survey of the skills of all IS department members. Once the skills inventory was completed a series of interviews was conducted with a random sample of the department. Questions focused on the perceived strengths and weaknesses of the department, levels of satisfaction amongst the workers, type of work they felt most rewarding, various compensations schemes, their perception of past project success, and especially how the project teams functioned. The interviews were conducted by people outside the department and in most cases outside the organization. Information was consolidated with all comments held confidential. The results showed that most interviewees were overall satisfied with their employment with the skills inventory indicating that employees were receiving regular training to maintain their skills although an individual's skills were narrowly focused leaving them little room for applications outside their specific area or advancement (a comment echoed during interviews).

The next phase of the analysis performed similar investigations with the department's customers. As explained in previous sections, the department realized it supported two types of "customers" (internal and external). The investigation began with internal customers using a series of questionnaires seeking inputs on topics such as quality, value, and satisfaction with product and service delivered, experience working with the IS department, soft/people skills of department members, etc. The surveys were targeted at mid-level managers who were asked to seek input from their subordinates and peers before completing the forms. Internal customers were not surprised by the surveys as they had experienced internal surveys before. Once the survey data was analyzed, semi-structured interviews were conducted to provide an indepth understanding of the information and help determine how the IS department could more effectively support the other functional areas.

A similar process was conducted with the department's external customers. Management indicated that customers were quite surprised by the survey since many of them had never seen this type of interest. As with the internal customers, the department sent senior project managers to discuss the findings of the surveys with customers (using semi-structured interviews) to obtain finer granularity of information and determine how Agilent could better support and fulfill their expectations. The information gathered from customers allowed the department to development their "as-is" picture and begin to map and plan their reorganization.

The information derived from the surveys and interviews found that both internal and external customers were satisfied with the quality of work provided. The department was lauded for its attention to detail when providing service and especially in the development and delivery of software with both types of customers commenting on the on-time fulfillment of projects. Despite the perceived levels of satisfaction, external customers sought more from Agilent. The interview notes revealed that these customers felt that there were elements missing, in fact the Agilent teams functioned in the role of traditional contractors. They came into their client's business, performed the function they were hired to do (mostly in isolation), and then left. The customers implied that this was a major drawback in continued business with Agilent with companies indicating they wanted a business partner as opposed to the traditional consult. Additional comments included lack of direct interaction with the team members (customer managers dealt mainly with the project lead), lack of immediate and direct feedback, and lack of understanding of their business resulting in sub-optimized solutions. It became apparent to IS department managers that despite their level of superior project performance, to achieve a position of competitive advantage in the marketplace, their interaction with external customers would have to change from a role of contractor to that of business partner. This realization was a contributing factor in the creation of the department's new vision discussed below.

Once information collection and analysis was complete, senior management (including managers from other functional areas within Agilent) and the Customer Perspective team created the department's new Customer Perspective Vision found in Table 2. The new vision statement was profoundly different from previous department ideas in that it sought to align the delivery of information systems more closely with corporate strategy and stated the desire to improve the customer experience. Alignment with corporate strategy was viewed by management as the key obstacle, especially for the external customers. Clearly, internal customers were part of the same Agilent organization and conscience of it or not the organization held a shared strategy. External customers each had a different strategy along with unique goals and objectives. To accomplish this task the department would have to change their method and benchmarks of how they conducted business. That was the next task of the Customer Perspective team.

Armed with the new vision statement and seeking greater insights into customer desires, the customer perspective team created two questionnaires (one for internal and one for external customers) designed to guide interviews and collection specific information. While similar, the internal customer questions sought insights on core services; the external customer questions focused on aligning strategy, understanding business objectives, and better delivery of service. The teams interviewed across a variety of management levels at major customer locations sharing the new vision and seeking input on how they could fulfill objectives. Once the data was analyzed from each customer, it was integrated into a composite picture leading to the key elements listed in Table 3 which contributed to the development of the information in the strategy and key success factors cells in the BSC Matrix (Table 2). Key elements provided by most customers included supporting change to provide the customer competitive advantage, integration of business and technical project aspects, improving the support of team members while enhancing communications, develop new models for delivering project elements, and creating architecture standards across project boundaries and tied to processes. Interestingly, many of the key elements listed above were outside the domain of the customer perspective. An examination of the BSC Matrix finds that most of the key elements overlap into the internal business and innovation perspectives. This is a reason why a cross perspective approach might have delivered more optimal solutions.

The new vision statement supported by information gathered from customers indicated that the first task of the department's reorganization was to determine how the project teams could better serve the expectations of the external customers. Comments indicated a requirement for teams to focus on the integration with business strategy as well as IT functions. This was different from current project methods which placed teams in a customer's business to perform specific tasks, e.g., develop and implement a system, write code, or assist with short term needs. Current practices focused on the technical skills of department members, placed them on projects for short periods, and measured their performance in quality of work performed and billable hours. To broaden the functions of teams and change from a technically-driven contract model to a strategically-oriented model required a change in the structure of the team itself, integration of new team members or expanding the skills of the current staff, and assigning teams to businesses for longer periods while modifying the compensation structure. Many of these tasks were the purview of the internal process and innovation perspective teams. As a result, members of the customer perspective team shared the interview data with those team members and made recommendations based on their progress. This reorientation of the team/department structure had to be conducted with changes in the delivery of products and services while not compromising the reputation of delivering project on-time and on-budget.

The first task in conjunction with the reorganization was to investigate the new skills requirement, which the team did in conjunction with the innovation perspective team developing the new skill base, performance, and compensation measures. As indicated by the inventory, team members were skilled in technical areas with fewer employees possessing system analysis or business process redesign skills. Hence, two choices were available to management, either hire or develop the skills. A combination of the two was chosen, with several people acquired as solution architects - managers skilled in both IT and business process management with the training to interact with customers and translate their desires into tangible systems - and developing the business process skills of existing members. This was accomplished through classroom and on-line interactive training as well as "internships" with other functional areas within Agilent. It should be noted that the vast majority of the department welcomed the training and viewed this as an opportunity to expand their marketability. Those who were not interested in this career progression were retained in their traditional technically-driven roles.

During skill-base training, the customer and innovation perspective teams developed different models of project team design. At one extreme was a model that placed a permanent team with fixed members with a customer's organization. At the other was the continuation of the "contracting" model. Working with members of the Innovation perspective team and project managers from key external customers, the Customer perspective team developed a hybrid team structure. This new concept placed permanent project teams with customers - using long term contracts - while rotating onto the project team, "subject matter experts" to accomplish technically driven tasks. The fixed team members held a variety of skills including those desired by customers including business analysts, system analysts, project managers as well as technical leads. These individuals were responsible for working directly with their client counterparts and sought to understand the client's business operations, organizational structure, and gather insights into company strategy so that an information technology solution was more adequately aligned with corporate objectives. These individuals were also responsible for the maintenance of the project and most importantly the flow of communication between the client organization and Agilent's IS department. As a result, a new set of communication metrics was developed which is discussed in the measurement section below. Additionally, a new performance-base evaluation and compensation scheme was developed which extended beyond traditional measures of on-time and on-budget performance.

Integral to the success of the reorganization was the ability to measure progress. In the past the department benchmarked itself against quality of work, fulfillment of contract, and time and budget constraints while evaluating performance and compensation on those metrics. Senior management as well as customers was not interested in abandoning those metrics but felt that supplemental criteria were required. Therefore, additional metrics were developed to address this requirement which was applied to the project and its permanent project team members. The "technical experts" were still evaluated based on their specific contributions to a project. The first metric created was a monitor of customer relationship management. An instrument was developed by both the customer perspective team and the key clients from the semistructured interviews discussed in previous sections. While the actual form was not shared with the researcher, it was described as a measure of the involvement of project team members in the understanding of business processes, the development of system to match the business strategy, focused on the flow of communication between the project team members and their clients, and measured the team's performance in satisfying customer expectations including the management of change. Since communication was deemed so important by all the parties, weekly meetings were scheduled to review progress on the project, discuss issues, and identify potential opportunities to enhance the project while insuring a match with organization strategy. As a result of these meetings, management indicated that the team members achieved high levels of understanding of client's requirements and saw changes to the project as a means of continuous improvement while in the past changes as been viewed as an annoyance. The weekly meeting became very popular with some clients as reported by one project manager and was attended by the client's senior management who wished to provide input to project design and suggest changes. The notes from this and other meetings were maintained as part of the project's documentation so that future teams might benefit from the dynamics.

Customer satisfaction was another critical measure sought by the IS department. In the past, the department sought input at the completion of each project using a proprietary instrument that measured the quality of work, perception of the fulfillment of the contract, and overall happiness with Agilent. Measurement of customer satisfaction shifted to a quarterly event with the instrument refined to reflect the new priorities of the client and the project team. Completed by client project leads the quarterly satisfaction report was discussed with client senior management as well as the project team leads. The report was them summarized and reviewed with the Agilent IS department senior management who maintained a running metric of individual and consolidated customer satisfaction. In addition to the customer satisfaction metric, the project team members were rated by the client's project team semi-annually. This performance review examined the individual's part in the progress of the project as well as the management skills of the individual including working as a team member, communication skills, leadership, etc. This performance review was shared with each individual and then forwarded to Agilent and retained as part of the individual's annual evaluation. Annually, Agilent senior management met with the client's senior management to evaluate the goal of match the project to the business's strategy. This meeting set the stage for the annual review of the project teams and the progress they made while setting goals for the coming year.

Collectively, the measures described above provided the department with a gauge to determine if they were meeting the goals and key success factors developed for the BSC Matrix. Additionally, the measures contributed directly to the development of the new evaluation criteria that was created and implemented by the innovation perspective team. The BSC Matrix and the department's reorganization were deemed highly successful by Agilent. Based on the initial indicators customers had much higher levels of satisfaction with the ongoing project work and the team organization. Additionally, Agilent's employees appeared to like the new team structures, change of work style, and the evaluation and performance review system. Management adopted "strategic thinking" as it was termed by one manager with the theory of success as doing many things well, doing many things at the same time, all within a tightly coupled organization. The realigned IS department was viewed as a partner by both its internal and external customer and its reputation for delivering on-time and on-budget was enhanced by the changes. Projects benefited from the changes as common elements from one project were transferred and employees readily shared information as a result of the process. This led to a decrease in expenses and time improving quality while decreasing costs.

DISCUSSION

The BSC method used by Agilent is portrayed as successful and effective but the company's experience is not without drawbacks and limitations. Four barriers to effective BSC implementation include (Kaplan and Norton 1996): 1) visions and strategies are not actionable, 2) strategies are not linked to department and individuals goals, 3) strategies are not linked to long and short term resource allocation, and 4) feedback is tactical not strategic. The managers at Agilent were cognizant of these issues since the organization had pervious experience using the method. Their development of the BSC matrix was critical in overcoming the majority of the barriers although problems were manifest during implementation. For instance the organization found that despite the effort to integrate overall strategies with individuals and project teams, people were focused on accomplishing the tasks at hand and in some cases missed the connection to the corporate "big picture." One would assume that the most apparent solution to this situation would be to publish the BSC matrix and advertise the objectives. This was done via the company's Intranet site and meetings but given the duration of the reorganization the "message was lost in the clutter of daily activity" as stated by one manager. A recommendation to remedy this issue for companies considering the BSC method would be two fold. First, reduce the scope of the project into parts with shorter timeframes while attempting to keep the goals and objectives in the minds of managers and employees. The second would be to improve feedback and flow of information vertically throughout the organization.

The issue of communication flow is mentioned as another potential barrier. Kaplan and Norton (1996) indicate that feedback is tactical and not strategic. Few will argue that it is human nature to focus on issues that are of immediate concern. Not surprisingly, many reward systems (Agilent's included) are oriented in that manner. This was expressed in the human capital survey conducted by the organization. As a result, the structure of work and rewards is undergoing revision. Additionally, organizations should consider that information is political. The members of the Agilent organization had just been spun-off from their parent company HP. The individuals in the organization were under pressure to improve their metrics on performance measures while those measures themselves were being retooled (a point of confusion as reported by a number of employees). Off the record interviews indicated that some managers and employees were reluctant to "swim up stream" when asked for feedback regarding the applicability of the plan and its metrics. Like other techniques, the use of the BSC should be open and transparent with senior management informing lower management and employees of their desires and objectives.

As stated above, the organization was undergoing a reorganization and change management effort at the time of this project. As with any change management effort the ramifications on the organization are arduous at best. Perhaps the most difficult aspect of the BSC effort in the opinion of the participants (derived from interviews) was the conversion of the performance measures from traditional financial measures to the board measures which added intangible factors. This combined with the complexity and duration of the BSC driven reorganization compounded the perceived difficulty of the project. One advantage recognized by Aligent and other companies using BSC (Bank One, The Mayo Clinc, etc) is the flexibility to conform the method and its metrics to organization specific situations. While viewed as a strength, this flexibility can also be viewed as a potential weakness. Organizations must be careful to insure that the tailored BSC matrix incorporates strategic goals along with tangible and intangible measures. Additionally, the matrix and its outcomes must be understandable and reachable to the organization's members. Agilent clearly had an advantage in this aspect since the organization had prior experience with BSC. Organizations new to this method might have difficulty establishing a viable matrix and developing and implementing its components.

CAVEATS AND SUGGESTIONS FOR FURTHER RESEARCH

As with most case methods, the researcher was an unobtrusive observer in this process, meaning that he took no part in the change management and offer no suggestions to the organization until the end of the study. While data collection used multiple techniques, the most widely used methods of collection were interview and company documents. The researcher readily admits that all members of the organization were not interviewed and that organization documents and figures were taken at face value. Although every effort was taken to insure a random sample of interviewees and interview notes were compared for validity, it is possible that the sample was bias in favor of the BSC method. Additionally, it should be noted that with the case study method the results reflect the interpretation of the researcher.

This study should be considered exploratory. This and previous studies illustrate that the Balanced Scorecard is an effective and successful method for guiding reorganization and ongoing monitoring of an organization and its parts. Since this research was concluded before the BSC guided reorganization was complete, future research studies should reexamine Agilent to determine the long term benefits to the organization. Since the metrics for success were detailed in the BSC matrix and other organization documents, a quantitative study to compare those projections with actual results over the long term is in order. A study of this nature would assist in the validation of the method and could be conducted with both tangible and intangibles measures. This quantitative study could be extended to other organizations (in other industries) to further validate the method. The study could additionally query an organization's customers, since many BSC projects are externally focused, to see if the customers themselves have an improved perception of the organization, its practices, and products. Perhaps a more interesting study would be to return to companies highlighted in case studies on BSC and re-interview managers and employees exploring the impact on the organization some time (perhaps years) after project fruition. Since many organization change projects take many years to manifest lasting results, these studies would provide insights to the shortcomings of BSC and make suggestions for improvement.

CONCLUSION

The case study illustrated above demonstrates how the Balanced Scorecard can be used to create a matrix that incorporates both tangible and intangible measures leading to overall success. This matrix transformed general corporate goals and objectives - found in the corporate BSC strategy map - into situational and departmental specific metrics used to guide and measure organizational change. Agilent used the BSC as a means to link the overall corporate strategy with that of the IS department. This holistic view provided guidance to the IS department as it was developing its own strategy. More importantly, the linking of corporate and IS strategy allowed the department to change from its former, computer (departmental) centric organization to a more customer driven orientation.

To accomplish this reorientation, the strategy maps found within the BSC were translated into the BSC matrix. Unique to the BSC technique, the matrix converted the relationships found in the strategy maps to tangible guidelines that the IS department could utilize. This matrix integrated previously disparate elements of the corporate strategy into a tool which guided the reorientation process and established critical goals, strategies, and most importantly a mix of tangible and intangible measures. Explicit in the creation of the BSC matrix is the knowledge that the perspectives/dimensions which embody the matrix are interrelated. There is similarity with the ideals used during business process redesign, since both techniques (BSC and BPR) are process driven and seek to produce a holistic view of the organization, and its goals and strategies, while aligning elements of the organization to tangible measures.

This study demonstrates that the Balanced Scorecard is a viable tool that can be used by IS departments as a means to align with corporate strategy and manage projects. As was discovered in previous research, the technique is quite flexible; however the author believes that since all organizations and projects are unique, the tools illustrated above will need to be adapted to each specific instance. This does not decrease the validity or the generalizability of the technique. Since its application is in the real-world, variables are different for each instance and as is done in system implementations, packages are modified to meet specific needs. The integration of traditional tangible measures with non-traditional intangibles could prove a breakthrough for a variety of IT organizations across industries. As this example has demonstrated, there are clear synergies to the integration of the BSC method.

Acknowledgement

I wish to thank Manuel Basurto who provided material, connection, and permission to Agilent.

Subject: Balanced Scorecard; Return on investment; Project evaluation; Information systems; Electronics industry

Location: United States--US

Company / organization: Name: Agilent Technologies Inc; NAICS: 334515, 334516, 334519, 339112, 511210

Classification: 5240: Software & systems; 8650: Electrical & electronics industries; 9190: United States; 3100: Capital & debt management; 2310: Planning

Publication title: Journal of Information Technology Case and Application Research

Volume: 7

Issue: 4

Pages: 7-29

Number of pages: 23

Publication year: 2005

Publication date: 2005

Year: 2005

Publisher: Ivy League Publishing

Place of publication: Marietta

Country of publication: United States

Publication subject: Computers--Data Base Management, Computers

Source type: Scholarly Journals

Language of publication: English

Document type: Feature, Business Case

Document feature: Diagrams References Tables

ProQuest document ID: 214896587

Document URL: http://search.proquest.com/docview/214896587?accountid=38610

Copyright: Copyright Ivy League Publishing 2005

Last updated: 2011-09-01

Database: ABI/INFORM Complete

Document 7 of 100

THE DEVELOPMENT OF A DATA MART SYSTEM AT A PUBLIC INSTITUTION

Author: Nakatani, Kazuo; Ta-Tao Chuang

ProQuest document link

Abstract:

This paper presents a case in which the College of Business (COB) at a state university in the southern United Sates has implemented an information system (IS) with a data mart. The system has been used to efficiently and effectively manage faculty resources, to control daily operations, and to institute the AACSB International accreditation process with a record-speed. The paper focuses on describing successful factors and issues specifically related to the project in the context of public organizations and higher education. [PUBLICATION ABSTRACT]

Full text:

INTRODUCTION

In today's rapidly changing business environment, the importance of information technology (IT) cannot be overemphasized. IT has been widely employed in the form of transaction processing systems, managerial support systems and inter-organizational systems to support strategic and operational activities in various aspects of firms. Due to keen competition, for-profit companies fiercely adopt IT as a competitive weapon (Porter & Millar, 1985) or to create collaborative advantage (Chuang & Nakatani, 2004; Ferreira & Blonkvist, 2002). Although the public sector is no exception, the development of information systems (IS) in public organizations appears to be more challenging because of tight budget (Kleist, Williams, & Peace, 2004) and the bureaucratic model in most public organizations (Thong, Yap, & Seah, 2000). Furthermore, unique needs of particular sub-units of public organizations are seldom met because public organizations often use enterprise resource planning (ERP) systems in the market to serve the common needs of those organizations.

The lack of support for unique needs for certain sub-units is particularly true in higher educations. Even though the call for systems tailored to the needs of individual higher education institutions had been made two decades ago (Bloomfield & Updegrove, 1981), most ERP systems for higher education fail in this regard. For example, SCT Banner is an ERP system that has been broadly adopted by higher education and that serves general needs of administration in campus well. Yet, it does not provide functions for monitoring and assessing the quality of curricula and faculty to comply standards established by accreditation bodies (e.g., AACSB International). Consequently, although higher education institutions, as information-intense organizations, are presumably adopting IT in their various facets of operations, the reality is short of expectation, as Guan, Nunez and Welsh (2002) said, "despite the availability of powerful computers, advanced network and communication infrastructure, university decision makers, including planning and budget administrators, still lack access to the critical information necessary for informed decision making" (p. 168).

Guan, Nunez, and Welsh (2002) argued that higher education institutions needed to re-examine the use of IS due to the need for better control over internal operations and the demand for greater accountability from external agencies. They indicated that the lack of data accessibility made information scattered in the university unavailable to decision makers in a timely fashion at a sub-unit level. Thus, they suggested that higher education institutions adopt an integrated approach to organizing scattered data so administrators could make decisions based on facts.

This article presents a case of how a sub-unit of a public university with limited resources developed a resource planning support system with a data mart for information sharing and decision support. Also, the case discusses the symbolic implications of the system when the subject organization sought for accreditation. The system presented in this article was recommended by the AACSB International Peer Review Team as an exceptional proactive management tool. The AACSB International Accreditation Website based on this system was recognized by the Business Reference and Services Section of the American Library Association.

The objective of the article is to provide answers to the following questions:

1. What factors contribute to the success of developing a faculty resource planning system with a data mart at a unit of higher education?

2. What issues need to be addressed for successful application development in the context of higher education?

3. What is the symbolic significance and implication of the system?

Due to the complexity of those issues, a detailed contextual analysis of critical events occurring during the development process was deemed necessary to reveal the intricacy of the case. Thus, the case study method (Yin, 1984) was adopted as the research method. By following the method, we conducted a thorough literature review on information system development in the areas of public sector and higher education in order to determine the direction of data collection. The data was collected from the following sources: system documents, users, developers, project managers, and meeting minutes. The findings of previous studies are organized as a contextual framework in which events and issues identified from collected data are evaluated, assessed, and interpreted. Because the project lasted for a relatively long period of time (about four years), in order to provide a better perspective, we primarily identified main events following milestones throughout the process. Specifically, we assessed the events along three stages: project planning and management, project execution, and project evaluation.

The rest of the article is organized as follow: The next section reviews the use of IT at the public sector in general and at higher education in particular. The presentation of systems development follows. Then, critical issues and successful factors in the project are identified. The last section presents implications and limitations of the study, and suggestions for future research.

LITERATURE REVIEW

Issues of Information Systems Development in the Public Sector

The public sector usually encounters more difficulty in deploying IS than the private sector because of differences between them (Bozeman & Bretschneider, 1986; Thong et al., 2000; Margetts & Willcokcs, 1994; Bretschneider, 1990; Cluadle, Gorr & Newcomer, 1991; Hoff, 1992). The public sector and the private sector differ in three categories (Rainey, Backoff & Levine, 1976): (1) environmental factors; (2) organization-environment transactions; and (3) internal structures and processes. Extending from these three categories, Thong et al. (2000) drew several lessons of the deployment of IT in the public sector: (1) public organizations are highly resistant to change; (2) publicity and public pressure are powerful ways to draw full attention of staff; (3) public organizations lack available performance benchmark; (4) approvals from top-management are crucial; and (5) it is difficult to quantify improvement and thus a pilot site implementation is critical to demonstrate the improvement. Cluadle et al. (1991) further elaborated the differences identified by Rainey et al. (1976): (1) the private sector tends to treat IS as proprietary assets while the public sector treats it as shared assets; (2) information requirements are more difficult to identify and unstable due to multiple, intangible, and conflicting goals; and (3) political disruption makes long-term planning difficult.

Bozeman and Bretschneider (1986) proposed an integrated framework for public management information systems (PMIS) research and ten guidelines for planning, developing and evaluating PMIS. Interesting guidelines include:

* The effectiveness of PMIS should be measured using not just economic efficiency, but also political efficiency and policy mission.

* PMIS planning should be incremental/contingent and consider the needs for extra organizational horizontal and vertical linkages.

* PMIS requires a protracted period of testing and prototype development because of the pressures for accountability and the visibility.

Similarly, Hoff (1992) claimed that the result-oriented criteria rather than the traditional economic cost-benefit criteria should be used when the effectiveness of the PMIS is evaluated.

Based on the framework (Bozeman & Bretschneider, 1986), Bretschneider (1990) empirically tested the environmental differences between the public sector and private sector in PMIS. His findings include: (1) the public sector has more interdependence with other organizations such as executive or legislative agencies through control mechanisms such as budgeting and rules, especially on personnel and procurement; (2) the public sector takes longer time to complete the same task than the private sector due to high level of interdependence and accountability; (3) the public sector uses formal planning, which takes care of a higher level of interdependence, more often, but uses steering committees, which deal with prioritization of projects within an organization, less often than the private sector does.

Likewise, Cats-Baril and Thompson (1995) proposed a framework that addressed the needs of managing large-scale IT projects in the public sector and identified lessons learned from a case study: (1) make sure the project is strategically aligned; (2) modular approach; (3) leadership; impossible to succeed without it; and (4) politics.

Nidumolu, Goodman, Voge and Danowits (1996) suggested that adequate trainings on developers and users as well as an innovation champion were critical for the success of implementing IT in the public sector. They found that the political/symbolic perspective and social information processing perspective explained more of the project outcomes than did the functional perspective. Kraemer, Danzinger, Dunkle and King (1993) investigated public organizations and found managers at the public sector were satisfied with the usefulness of IS the most when they used support staff to mediate their IS environment. Thus, they suggested that system design should focus as much on those intermediaries as on the managers themselves.

Margetts and Willcokcs (1994) examined case studies and found that the public organizations might experience all kinds of risks private companies did but the extents of the risks could be worsen by political environments. They summarized the mostly commonly cited differences between the public and private sectors: (1) separation of policy making and administration; (2) no bottom line decision making; (3) large scale; (4) lack of homeostatic control; and (5) problems of accountability. They also identified outsourcing to the private sector might create new accountability problems.

Issues of Information Systems Development at Higher Education

The majority of extant literature of IT-related research in the context of higher education has been focused on distance learning and IT-enabled courses (e.g. Renig, Briggs, & Nunamaker, 1998; Money, 1996; Leidner & Jarvenpaa, 1995; Alavi, Wheeler, & Valacich, 1995; Piccoli, Ahmad, & Ives, 2001). In the realm of administrative use of IT in higher education, not much research, except Guan, Nunez, and Welsh (2002), has been done on data-driven decision support, although many studies had investigated the effectiveness of model-driven decision support. Most of the studies explored the feasibility of developing systems using quantitative models to solve specific problems in budgeting (Soyibo & Lee, 1986; Schroeder, 1974; Franz, Lee, & Van Horn, 1981), scheduling (Cox & Jesse, 1981; Foulds & Johnson, 2000), and project prioritization (Dutta & Burgess, 2003). According to Guan, Nunez, and Welsh (2002), the reasons for the development of data-driven information systems are: (1) administrators at all levels need improved data management strategies to support resource management and strategic planning; (2) faculty and administrators need information that can assist the recruitment and retention of students; and (3) external agencies, such as government and accrediting agencies, need information about the performance of institutions on a variety of indicators. Furthermore, they identified several issues that colleges and universities need to address in order to develop a system that would meet the needs of institutions: (1) complexities of the organization; (2) vast number of stakeholders and appraisers; (3) competitive market place; and (4) resource limitations. They suggested the use of data warehousing to integrate data in a consistent manner so administrators could make fact-based decisions.

Lawson (2003) found that higher education spent about five billions in ERP systems and in IT infrastructure that were mainly used to support financial, human resource and student service transactions. A survey cited by him indicated that there was a lag of six to eighteen months before the benefits of the ERP implementations were perceived. Meanwhile, Fowler and Gilfillan (2003) proposed a three-dimensional project management framework of ERP implementation at higher education and guidelines as a set of questions.

The literature review shows that public higher education institutions generally face several dilemmas: Due to high dependence on external stakeholders, they need a better approach to keep track of their activities and achievements to meet the demands from those stakeholders. On the other hand, issues like tight budget, bureaucratic structure, resistance to changes, and others inhibit their abilities to develop custom information systems to support the unique needs of their sub-units. Consequently, the development of IS for a sub-unit at higher education may require extra care due to its unique characteristics.

By summarizing the existing literature review regarding the IS development and implementation at public organizations, we created a framework of critical factors that might inhibit the successful development of IS for a sub-unit of a public organization (Table 1).

The framework will be used as a context for evaluating and assessing the development of an information system with a data mart in the College of Business at a state university.

FACULTY RESOURCE PLANNING SYSTEM DEVELOPEMNT

This section discusses the background of the university, the College of Business (COB) and development initiatives first. Then, the system development process is described.

Background

The subject university opened its door to the public in 1997 as the tenth state university in Florida. Envisioned as a university for the 21st century, the university was determined to become an IT-enabled organization by using IT in all areas of its operations. Between 1996 and 1998, the university invested a significant amount in IT infrastructure. In addition to a centralized operating organization - Administrative Computing, the University Technology Committee (UTC) was appointed by the President to develop and to ensure the implementation of a strategic IT plan and policies. The Faculty Senate created a Technology Advisory Committee to address technology issues of importance to faculty. Education and training programs were regularly offered to faculty and staff to advance their skills.

The COB is one of the five main units (colleges) at the university. The COB has about forty-five full-time faculty, ten full-time staff, and two part-time IT staff. The dean along with the faculty had a vision that the COB would be an international leader in innovative ways of integrating technology into business education and was dedicated to providing technologically progressive programs to its students. The goal of the COB was to provide high quality education at the undergraduate and graduate levels. As a measure of program quality, the dean set the college on a path towards attaining AACSB International accreditation by the end of the 2002-2003 academic year.

As such, the AACSB International accreditation standards (Ramey, 1993) dictated the COB's planning and resource allocations. Recently approved AACSB International standards (in April 2003) for annual report submission and the trend of facts-oriented strategic planning process made the COB aware of the need for investment in keeping track of outcomes of its activities and operations. In 1998, the COB deemed necessary to develop a Faculty Resources Planning Database (FRPD) and to create a web site called AACSB International Accreditation Website as a centralized place to access accreditation policies and standards.

Development Process

The COB considered and evaluated three alternatives to acquire needed functions. First alternative was to use the iWebfolio component in SCT Banner, which had been the major administrative information system in the subject university. However, this option was abandoned due to the following reasons: (1) high cost, (2) low priority in the Administrative Computing plan; (3) the need for consensus among all colleges; and (4) lack of several functions for certain requirements. The second option was outsourcing. There were several application service providers in the market exclusively designed for the purpose of AACSB International accreditation, such as the Dean's Associate by Octagram Inc. (2000) (http://www.octagram.com/) and the SEDONA system by Woodruff Consulting (2002) (https://www.sedona.bz/). However, the COB decided not to pursue this option because of high cost, uncertainty about the future of outsourcers, fear of loss of controls, and accountability issue. Finally, the COB determined to develop the system in house. This would come with several advantages: First, the college can ensure that the functions would meet its needs. Second, the college maintains control over the location, access to, and maintenance of database. Third, in case problems arise, resident experts are available to fix the problems.

Faculty Resource Planning Database (FRPD) Development: As indicated earlier, the COB aimed to obtain the AACSB accreditation as a measure of program quality by the end of 2002 - 2003 academic year. With this in mind, the FRPD project was initiated with two objectives: It would be an internal management tool and a showcase to external entities, such as AACSB Accreditation delegates. In order to achieve the objectives, the COB selected several measurements for its performance monitoring. An early attempt was to build a system with spreadsheet and word processing software because of their ubiquity and faculty's familiarity with them. However, it immediately became clear that the system was not flexible or scalable enough and it deemed necessary to develop the system with database. Because of the limitation in resources and not quite clear requirements at the beginning, the project adopted an iterative, incremental approach, starting with limited critical functions.

Due to the strategic role of the project in obtaining AACSB International accreditation, the Associate Dean acted as a champion of the development effort. The development team consisted of a faculty member and his graduate students. The department chairs and several members of the faculty and staff were also involved in the requirement analysis. The systems analysis and design (SA&D) was done as part of course requirements of a graduate SA&D course. The project started in August 1999 and released the first version of the FRPD in July 2000. The first version of the system, which was based on Microsoft Access, was installed on the university local area network (LAN).

Data needed for the system came from three sources: First, the course-related data was exported from the university's SCT Banner Student. The data was cleaned by a COB staff to ensure the integrity of the data before the database was populated. Second, data not available in Banner, but in existing reports, such as faculty's annual performance reports, were manually entered into the database. Third, data that was not in a formal document, but existed in various formats, were also manually entered into the database. The system was capable of generating various periodical reports and of exporting selected data into software tools with which faculty or staff was familiar. Periodical reports included those for internal administrative purposes and for compliance to the AACSB International accreditation standards. In 2001, FRPD was presented to the College's AACSB International Candidacy Advisor who visited the COB for the initial evaluation. The advisor valued the flexibility of the FRPD report generator and its usefulness. This validated externally the success of the system, motivating further development of FRPD.

The use of FRPD v. 1 stimulated the need for more functions, which, as well as the suggestions from the AACSB Candidacy Advisor, were incorporated into the second version. There were several enhancements. The first was the expansion of the database to include detailed records of faculty's publications and service records, which were imported from faculty vitae and from spreadsheets, respectively. In order to verify the imported data and input new publication and service data as they occurred, a reporting Active Server Page (ASP) website was created with an integrated website development tool, Macromedia Dreamweaver UltraDev. Second, this version supported the production of the self-evaluation report and additional information as requested by AACSB International. Third, the feature of self-maintenance was added so that the faculty or staff could add, delete and change their own data. Fourth, the capability of search was enhanced and the capability of on-line analytical process was added to the system so the user could not only view summarized course-related information and performance report, but also drill-down to see detailed data. Fifth, the access scope was clearly defined according to the user's job description. For example, the department chair had access to the data of faculty members in his/her department, the dean had authority over the whole system, and the faculty only had access to his/her records. With the database, chairs and Dean's Office could review faculty performance in real-time. During this period of time, the Dean of the COB promoted the system at the university as well as at AACSB International conferences and its usefulness was recognized. At this point, the COB gained informal approvals of further development of the system from all major stakeholders as part of mission-critical activities.

The addition of more functions and increasing volume of data quickly showed that the existing version was not sufficiently responsive and that the data processing activities could be streamlined further. Thus, by the end of 2002, version 3 of FRPD was migrated to Microsoft SQL Server 2000 with ASP technology. The migration was done as part of course requirements of a graduate database course. The system was hosted on a server using Secure Socket Layer encryption. There were several enhancements. The first was that web-based data entry, which enabled a faculty member to view, add, change, and delete his/her own data with a universal interface. The second was expanding the types of data that was collected. For example, from 2002 on, faculty's annual professional development plan, semester faculty activity reports, performance reports and other digitized supporting documents (e.g., acceptance letter of an article, letters of recognition) were stored in the system. Third, the increased scalability came with the use of enterpriselevel database engine, which made the system truly multiple-user system. This version was presented to the AACSB Peer Review Visiting Team and the team acknowledged the FRPD as exceptional management tools for the COB. Later, the system was also presented to a visitor from AACSB International, who was responsible for AACSB data management and he recognized the usefulness of the system.

Further refinement of the system is currently undertaken. One of major enhancements was a desktop application for report generation for Dean's Office that had a secured connection to the university LAN to respond to the concern with security. Second, course assessment detailed data and new reporting functions such as average class sizes and course evaluation were added. Third, under development is to use XML to upload the course data from the SCT Banner system. Figure 1 shows the structure of FRPD version 4 and its data mart. The data model, inputs and outputs are included in Appendix A and B.

Accreditation Website Development: Because of the importance of compliance to AACSB Accreditation standards, the COB created a web site as a central repository for maintaining accreditation-related records based on the system described above. The site contains seven sections of the AACSB International Standards. Several standards are regarding the faculty's performance, which is supported with the data generated from FPRD system using the flexible search/filter/aggregation features. This capability had been recognized by the Business Reference and Services Section of the American Library Association.

Figure 2 summarized the time-line of AACSB accreditation process and FRPD development process.

ANALAYSIS OF CASE

As a pubic institute, the COB faced many issues as others do when developing FRPD. This section examines those issues under the framework developed at the end of the Literature Review section.

Issues in Project Planning and Management

The lack of consistent, stable planning and controlling due to political disruption has been recognized as a critical issue for public institutions (Cluadle et al., 1991; Margetts & Willcokcs, 1994). One such disruption is the turnover of top administration at the organization-level or at the sub-unit level. Because a long-term planning by the IT/IS administration often heavily relies on visions and support of top policy makers, such a turnover at higher education can cause significant changes in resource allocation and priority in IS investment. At the subject university, the President and the Provost were changed once respectively during the period of the system development. Additionally, at the first three years, the COB did experience growth pains, such as the high turnover rate of faculty, re-structure of administration, and shift in the background of students. The Associate Dean of the COB was changed once. However, the COB's strategic goal of obtaining AACSB International accreditation had always been the priority and the development of the system was closely tied to the objective. Twice a year, at least, the goal and the importance of the FRPD were stressed by the Dean and the Associate Dean at college meetings. As shown in Figure 2, the AACSB Accreditation timeline directly corresponded to the development of FRPD. The timeline worked as an overall plan for the FRPD development. Without the goal and timeline on which every member of COB faculty and staff agreed, sustaining the development effort could have been difficult, if not impossible. In general, it may be rare that a public organization has this kind of clear goals and timeline. At higher education, accreditation and re-accreditation from external agencies are critical to its existence and must be done periodically. Thus, the COB successfully leveraged the goal and timeline for obtaining the accreditation status to sustain a consistent and stable long-term plan regardless who the policy maker was. In fact, the recognitions received from regular visits of AACSB International Accreditation delegates became an important motivator for the success of the system.

In addition, public organizations may face a higher pressure from external agencies in terms of budgeting and regulations (Bretschneider, 1990; Guan, Nunez, & Welsh, 2002). Along with the accountability issue identified by Bozeman and Bretschneider (1986) and Margetts and Willcokcs (1994), the pressure might induce the policy maker to centralize the data processing activity for the sake of security. The use of ERP is one way to address the concern. As a result, while the subject university had invested a significant amount in IT and deployed the SCT Banner system, the unique need of the COB was not properly met.

Meanwhile, the COB faced regulations from external agencies regarding the locally stored information and its security. To address this issue, the development team intentionally excluded private and sensitive information such as social security numbers, non-public course evaluation data, student information, and others from its data mart. Some sensitive data, such as grades, were only stored in an aggregated format (e.g. grade distributions). This policy made it easy for the COB to obtain data from different sources; otherwise, the data owners would have been reluctant to give the COB the data. Additionally, even though the data stored hi the data mart is available to the public, access to the system is protected with passwords. Later, the entire system, database and website, were deployed as an intranet system to enhance the security of data. A Virtual Private Network (VPN) was utilized to provide an access from the outside of the campus.

The wide use of formal planning in public organizations (Bretschneider, 1990) is another factor that may delay the IS development for a sub-unit in two possible scenarios. First, a request from a sub-unit tends to receive a low priority at the organization-level. Second, if a request from a sub-unit is not included, its addition is difficult and time-consuming because agreements from other sub-units are often necessary. The subject university created a formal plan in which the priority of IS projects was established and resources for those projects had been allocated accordingly. Because the FRPD project was not part of the plan, the university could hardly allocate resources to it. With a limited COB's IT personnel and tight budget, the rigidity of formal planning made the issue of resource limitations, which will be discussed next, even more critical. Reflecting the FRPD project, the development team believed that the COB should have used the importance of AACSB International accreditation to the COB and the university as leverage and submitted a request for the inclusion of the project in the university plan when the plan was being drafted or even later.

Another factor that affects the successful development of IS for a sub-unit is resource limitation (Guan, Nunez, & Welsh, 2002). Most of IT resources at higher education are used for organization-wide administration and for supporting instructions. Faced with the tight budget, the COB needed to adopt an innovative approach to developing FRPD. FRPD was developed as part of course works and as a professor's service. Graduate students majoring in Computer Information Systems (MSCIS) were recruited to determine the design specification under the supervision of a faculty member. The specification was reviewed and validated by the Associate Dean of the COB and his staff who were in charge of AACSB accreditation process, as well as department chairs. Then, the faculty member and his graduate assistant with qualified programming skills developed the system as part of independent studies and summer assistantships. The concern with the quality of student's work was eased by the approach of iterative, incremental revisions. In addition, the system was thoroughly tested by the instructor, students, and local IT professionals annually. A release-based, incremental development approach helped the faculty member to divide the system requirements into manageable pieces and allow thorough testing to assure the quality of students work. The faculty member learned that student groups could produce a production system with careful planning, thorough testing, and requiring high quality work. Students were also happy with working on the real project, and the instructor had an in-house system to motivate students. The students were also motivated by the fact that they were helping their school to achieve a major accomplishment, AACSB International accreditation at a record-speed. However, the success of the particular project does not mean that a sub-unit at higher education should use students or faculty members as a source of IT personnel. Ideally, the sub-unit needs to develop a long-term plan and allocate sufficient budget for developing mission-critical systems. Nevertheless, as an educational unit, a sub-unit of higher education can use faculty and students as resources and make their experiences as excellent learning opportunities.

Issues in Project Execution

The slow pace of task completion is another issue that public organizations need to face (Bretschneider, 1990). In order to overcome the inertia caused by the sluggish, the timeline developed for AACSB International accreditation (Figure 2) guided the development of FRPD well. The academic calendar, of course, helped managing the project on time because many parts of FRPD were developed as course work. The use of release-based, incremental development approach nicely fit the circumstance.

IS development projects of public organizations tend to be large-scale (Margetts & Willcokcs, 1994) and information requirements are difficult to determine because of multiple, intangible, and conflicting goals (Cluadle et al., 1991). Yet, the difficulty was lessened to the minimum level by deriving the major requirements from the AACSB accreditation standards and progressively identifying additional requirements. Furthermore, the high level of clarity of the goal reduced the likelihood of conflicts between departments. Another issue regarding the requirement determination was the involvement of the information processing intermediaries for the Dean and the Associate Dean in the analysis and design of the system. This significantly increased the intermediaries' acceptance of the system and assured that the output of the system met the information need of administrators and also eased the anxiety of staffs concern with the elimination of jobs accompanying computerization.

One issue frequently faced by public institutions is employees' resistance to change (Thong et al., 2000). An IS project might be taken as a burden by the faulty and staff. For example, some faculty members initially felt that data entry was not their primary responsibility. To reduce the resistance, tangible benefits of the system, such as reduction in time to collect and package same documents several times for different occasions (e.g. accreditation, annual reporting and others), were demonstrated to faculty members at college meetings. Overall, this issue was insignificant in this FRPD project. This could be attributed to the technology-oriented culture of the university. Staff members were accustomed to computerize manual processes and thus this did not create a fear of loss of jobs. Indeed, the staff of the university's computing units was very supportive. The establishment of such organizational culture as continuous effort is critical for successful IS development.

Issues in Project Evaluation

The recognition of the project achievement is critical to the successful deployment of IS. It was indicated that lack of available performance benchmark and proper ROI evaluation measures (Hoff, 1992; Thong et al., 2000), as well as no bottom line decision making style (Margetts & Willcokcs, 1994), were major issues for public institutions. It makes the evaluation of IS effectiveness and thus justification for budgeting relatively difficult. In the case, the FRPD system was regularly presented to the COB faculty and accreditation delegates. Even though the COB didn't quantify the effectiveness of FRPD, frequent recognitions by external agencies such as AACSB International and the Business Reference and Services Section of the American Library Association were used as the measurement for success. Furthermore, recognitions from external agencies became an important motivator for continuous refinements and solidified the support from the administrators. The most important measurement of the project achievement was that the critical role of FRPD in the process of the COB's accreditation process. With well-documented records provided by FRPD, the COB was accredited at a record-speed.

Additionally, accountability (Bozeman & Bretschneider, 1986; Margetts & Willcokcs, 1994) was one of main concerns from the beginning of the development effort for the FRPD project. A high level of accountability was taken care of by the data cleaning process conducted by the COB staff before loading the data to the data mart. Then, each faculty member was asked to verify the uploaded data. As part of the system development, a faculty committee that consisted of Accounting faculty members and a Microsoft Certified Systems Engineer at Administrative Computing were involved in ensuring the inclusion of standards and procedures for the data security and accountability. The backup and recovery procedures were also formalized by this committee.

Finally, it is very important to secure the faculty's willingness to keep their records accurate and up-to-date. In order to motivate the effort to keep record current, benefits of the FRPD system must be perceivable and recognized by the faculty. Specifically, the development team directed its energy to two directions: userfriendly design and frequent demonstrations of the system through face-to-face communications. The design features of FRPD included the use of web-based interface, versatile output formats and minimal effort of data entry. The use of the universal interface, web browsers, enabled a faculty member to update his or her record at any convenient time and anywhere. Additionally, faculty members were able to review their personal data as needed, and made corrections if necessary. The data once entered into the system can be extracted from the system and organized in the format of the faculty member's choice. This reduced the faculty time and effort in the data-reporting phase and freed up time to perform other production related tasks. The design objective of minimal data entry effort is achieved by importing as many data as possible from the Banner so that the faculty only needs to enter data about their current activities. Furthermore, the Dean's Office conducted faculty annual review mainly through the reports generated from the system. The above features/benefits were conveyed to the faculty through frequent meetings and demonstrations.

IMPLICATIONS, LIMITATIONS AND FUTURE RESEARCH

In this section, we first discuss the implication of success factors and issues specifically related to a public organization. Then, limitations of the study and future research direction are presented.

Implications

Table 2 summarizes how the COB addressed the issues identified in the framework (Table 1). The table also shows lessons learned especially when COB did not handle the issues appropriately.

Limitations

The development effort analyzed in this study was one successful case at a unit of higher education. The implications cannot be blindly generalized and the application of them must be done with care. The university had unique characteristics such as highly technology-orientation and flexibility that the founding faculty envisioned as critical features of university of the 21st century. The university was also experiencing a rapid growth and budget-cuts under economic downtime. This motivated the COB to adopt innovative approach to the development of the system. At the same time, the COB had a specific goal that all faculty and staff members agreed upon, which was AACSB International accreditation at a record-speed. Therefore, established universities that do not have similar conditions, cultures or characteristics may experience difficulty to handle the issues the article discussed. However, we believe that those implications we found can be important lessons for other units at higher education that are facing similar needs and issues.

Conclusion

Higher education is charged with the mission of educating the professionals of next generation. The excellence of operations in higher education directly impacts the success/failure of the mission. While the education of use of information technology has been an important component in curricula at most universities, the unique characteristics of public higher education make the implementation of the system more difficult than in the private sector. This article presents a case in which the subject college with limited resources successfully developed a data mart-based information system. Although public institutions face unique constraints, such as higher level of accountability and dependence on external entities, this case shows that the champion of an IS project could take advantage of the constraints and use them as motivational factors. This case also demonstrates several learned lessons that could be borrowed by institutions in similar contexts to develop systems that would modernize their operations and decisionmaking in the information age.

Subject: Data warehouses; Resource management; Public sector; Higher education; Systems development; Information systems

Location: United States--US

Company / organization: Name: Association to Advance Collegiate Schools of Business; NAICS: 813910

Classification: 9550: Public sector; 5240: Software & systems; 8306: Schools and educational services; 9190: United States

Publication title: Journal of Information Technology Case and Application Research

Volume: 7

Issue: 4

Pages: 30-52

Number of pages: 23

Publication year: 2005

Publication date: 2005

Year: 2005

Publisher: Ivy League Publishing

Place of publication: Marietta

Country of publication: United States

Publication subject: Computers--Data Base Management, Computers

Source type: Scholarly Journals

Language of publication: English

Document type: Feature, Business Case

Document feature: Diagrams References Illustrations

ProQuest document ID: 214891543

Document URL: http://search.proquest.com/docview/214891543?accountid=38610

Copyright: Copyright Ivy League Publishing 2005

Last updated: 2011-09-01

Database: ABI/INFORM Complete

Document 8 of 100

The Case of Implementing a CRM System at Indigo

Author: Pliskin, Nava; Ben-Zion, Ronnie

ProQuest document link

Abstract:

Automation of Customer Relationship Management (CRM) is among the most prevalent Information Technology (IT) implementations in recent years. This paper describes the case of a low-budget CRM implementation at The Indigo Division of HP, a leading innovator in the digital printing press industry. Indigo avoided a big-bang all-at-once implementation of the Siebel CRM solution, rolling the CRM application out in phases while reaping immediately apparent benefits. Indigo managed to adopt best-practice processes and out-of-the-box functionality, keeping customization of the CRM application to an absolute minimum, while mobilizing users to embrace the CRM application. The phased out-of-the-box approach was associated with minimum effort, leading to maximum business returns, early management sponsorship, and smooth upgrades. [PUBLICATION ABSTRACT]

Full text:

INTRODUCTION

Before Year 2000, companies spent considerable effort on Enterprise Resource Planning (ERP) systems for automating back-office functions as finance, manufacturing, distribution, human resource management. Since the turn of the century, however, many businesses are looking to leverage Information Technology (IT), in general, and Customer Relationship Management (CRM) systems, in particular, for automating front-office functions as sales, marketing, and customer-service processes (Butler, 2001). In the absence of consensus about the definition of CRM, this case study focused is on automation of the sales force, the most prevalent function in mid-size CRM Implementations (Younker et al., 2004).

As organizations are facing increasingly stronger competitive market pressures, there is a growing need to deploy CRM systems for improving sales effectiveness, expanding distribution channels, raising sales productivity, and increasing revenues. However, some CRM computing initiatives have failed to yield enough business value to justify the invested effort (Boslet, 2001; Conner, 2000). Based on past ERP implementations that spun out of control, grew out of scale, and consumed more cash, time and human capital than anticipated, it is possible to draw the following valuable lessons (Sweat, 1999):

* More user involvement is better than less involvement

* Short implementation projects are better than drawn-out projects

* Light customization is better than heavy customization

* A tight focus is better than a wide-reach focus.

This teaching case study, about implementation of the Siebel CRM solution at the Indigo Division of HP, a leading innovator in the digital printing press industry, aims at substantiating these lessons in the CRM context rather than at introducing new theories, as do research case studies. The next section is devoted to an overview of Indigo, the implementing company, and the third section describes the business and IT challenges faced by Indigo prior to the CRM implementation. Following the fourth section, which describes the case facts, the final section contains concluding remarks for practitioners.

COMPANY BACKGROUND

Founded in 1977 and acquired by the Hewlett-Packard (HP) Company in March 2002, Indigo operates as the Indigo Digital Press Division within HP. The CRM implementation described in this case study took place in years 1998 - 2001, prior to Indigo's acquisition by HP, and the overview included in this section reflects the situation then. Indigo is a global company: its headquarters are in the Netherlands ("Indigo Europe"), its R&D and manufacturing facilities in Israel ("Indigo Israel"), it has a subsidiary in the US ("Indigo America"), its sales offices in North America and Europe employ 150 sales representatives in charge of direct sales, and it has a network of distributors (see Figure 1).

Indigo was first in market to introduce a top-quality digital printing press and remains a leading innovator in the digital printing industry. Indigo's Digital Offset Color technology combines the quality of ink-based offset printing and the performance advantages of electronic imaging. The printing presses that Indigo produces vary in speed, number of colors, print quality, and other features. In addition to these products, Indigo markets proprietary ink, thus providing solutions for commercial print shops. Indigo also sells industrial applications like packaging, plastic cards and labels. Indigo sells to customers in over 40 countries, including commercial printers, quick-printers, in-plants, packaging plants, and labels printers.

As seen in the sales-force organization chart depicted in Figure 2 above, the commercial-printing market includes four geographic regions: East, South, Central, and West, but management of the industrial-printing market is for the entire North America. Smaller geographical areas in every commercial branch typically employ one area manager for every 3 to 5 sales representatives. Most of the sales representatives work out of their home office, covering a well-defined geographic region and spending most of their time on the road. The sales-force organization for Europe has a similar structure, with the commercial market divided by country (e.g. Italy, France, Germany, and UK) and the industrial market managed centrally for the entire Europe. As can be seen in Table 1, while Indigo's revenue figures have grown steadily since 1994, except for a slowdown in the mid 1990s, the number of employees has grown back to where it was in 1994 when revenues were lower.

CUSTOMER RELATIONSHIP MANAGEMENT BEFORE 1998

To support its manufacturing, logistics, and supply chain operations, Indigo successfully implemented QAD MFG/Pro ERP application in Israel, in 1991, and in the Netherlands and in the US subsidiary, in 1994. This application, however, was not capable of supporting the sales and marketing functions.

In 1998, Indigo's management became concerned with the effectiveness and productivity of its sales force and faced a number of business challenges (see Figure 3). First, it sometimes took more than 12 months to close a sale. It was impossible to shorten the very long sales cycle and close sales faster, in the absence of a capability to analyze the sales process and identify its bottlenecks. Second, being remote from the geographically spread out sales force, sales managers needed a clear-visibility capability regarding whether subordinates spent their time wisely and focused on the right prospects. Third, the productivity of sales representatives was not high enough. To increase productivity, Indigo needed to provide its sales force with relevant data and tools to help them focus on selling the product, rather than spending time on gathering information from the main office. Fourth, due to Indigo's expansion into new markets, a relatively high number of new recruits joined the sales force, and their training and orientation took as long as several months. Indigo needed the capability to transfer account history and information about leads to new sales representatives as quickly as possible. Fifth, Sales representatives maintained their forecasts on spreadsheets, hand-written notes, and sometimes even on the back of envelopes. Their managers collected these forecasts by phone or e-mail, compiled them into a consolidated list, and communicated to higher levels of management. As a result, keeping track of sales and leads and accurately forecasting sales was extremely difficult and Indigo needed a capability to generate accurate sales forecasts quickly.

These business challenges, led top management to conclude that Indigo needed an automated tool to increase its sales-force effectiveness and productivity, streamline marketing and sales processes and, improve tracking of new leads. In 1996, Indigo made a considerable investment in implementing a Sales Force Automation (SFA) system based on Lotus Notes aimed at supporting the Sales and Customer Support organizations in North America and Europe. This CRM implementation attempt failed unfortunately, due to extensive customization, lack of senior management support, and technical difficulties, and Indigo was left without an effective CRM solution.

CASE DESCRIPTION

Decision Making Leading to the CRM Implementation

By early 1998, top management at Indigo recognized the immediate need to try again and implement a CRM system. At the time, the CRM market was still shaping up and even the CRM term itself was not yet rooted. Gartner Group's strategic analysis report denoted this market as Technology-Enabled Selling, describing it as "immature, fragmented and unstable" (Close et al., 1997). The main players in the CRM market in 1998 were Clarify (acquired later by Amdocs), Vantive (acquired later by PeopleSoft and recently by Oracle) and Siebel (acquired recently by Oracle). In June 1998, the CFO had charged the IT Department with leading the implementation of a CRM system at Indigo. This meant engaging in accelerated evaluation and implementation processes in order to meet an aggressive deadline for CRM rollout.

For the evaluation processes, Indigo formed a small vendor-selection task force to select the optimal CRM solution. This task force began its mission by considering the Lotus-Notes application, which was the least expensive option since Indigo already paid for the software purchased two years earlier but still needed heavy customization to fit Indigo's needs. Other than the Lotus-Notes application, the vendor-selection task force became aware that market studies from Gartner group and Forrester Research rated Siebel not only to be the undisputed market leader but also to be financially stronger than its competitors. In addition, the task force found Siebel to have, relative to its competitors, comparable software license costs, stronger support for sales functions and a richer user interface. Moreover, given the past failure to implement a CRM system that required customization, the task force viewed the good fit between the Siebel application and Indigo's needs to be another significant relative advantage. In a quick evaluation process, which included demonstrations of both Siebel and Lotus-Notes solutions, the task force recommended Siebel because of its full-blown functionality, out of the box, and its intuitive user interface.

The next step, in July 1998, was to form a steering committee, which included senior managers from the Sales, Marketing and the IT Departments (see Figure 4). In addition, the Director of Marketing in Europe became the project leader and the second author of this paper became the IT project manager and IT analyst for the CRM application. Two marketing professionals, one in the US and another in Europe, took charge of the help-desk and training activities at their respective locations and Indigo hired a database administrator to administer the CRM database. Finally, a Technical Account Manager from Siebel helped the team with the deployment of Siebel's Rapid Application Deployment (RAD) methodology. At the request of senior management, the IT Department made a commitment to complete the CRM implementation project within 3 to 6 months and under $100,000 (not including license costs). Indigo America's president insisted on keeping the CRM system simple and his message to the project team was "Take us from Boston (MA) to Providence (RI) - not to the moon and back." Project team members highly valued top-management sponsorship and involvement in the CRM implementation in the matter project scope and simplicity as well as in other matters that required top-management attention and interference.

The project team kept the Siebel application simple and easy to use not only because of top-management guidance but also because they attributed the failure to implement the Lotus-Notes application to the fact that sales representatives found it too complex and confusing,. By keeping the current CRM application simple and easy, they were hoping to achieve results fast and, to gain user buy-in. They also aspired to effectively manage change, even for users who seemed unhappy to share information, were not computer savvy, or could not foresee the CRM benefits (Agnew, 2000). To keep the implementation project within the budget and time limits and to reduce implementation risk, the project team opted for out-of-the-box functionality and minimized customization. By minimizing customization, they also hoped to increase manageability of maintenance and to lower future investment in upgrades. The project team considered a big-bang implementation approach, launching all application modules at once, too risky and preferred a phased approach. By deciding to phase the implementation project, which seemed less daunting and more manageable, they were hoping to generate good will among business executives. According to Palvia, et al. (1991) as well as Eisenfeld and Zrimsek (2004), combining a phased approach with low complexity of scope is safer in most cases.

The project team also decided to contain the implementation risk by rolling out the system by region, in North America first and, only if successful, in Europe, thus building in a key checkpoint to assess the project status before making further investments in software licenses. Another important decision taken prior to the implementation project was to involve users in all implementation phases by constantly consulting with sales representatives and managers and making sure that the system was meeting their needs. By involving users in all deployment phases and by making them feel that their feedback was important for the system to answer their needs, the project team was hoping to gain users' buy-in. Finally, the project team decided also that the objective of training would be to educate sales representatives about the importance of the system to the organization and not only about how to use the system.

The CRM Implementation Project at Indigo

In July 1998, following the short decision-making process described above, the CRM implementation project began, using Siebel's Rapid Application Deployment (RAD) methodology. The first RAD task was to scope the project in order to focus on the main issues. Scoping meant listing only three objectives: 1) deploying a closed-loop sales process, 2) increasing sales-force productivity, and 3) producing reliable sales forecasts. In retrospect, this was a crucial step since these three objectives served as the basis for decision making later on.

Given the decision not to fit the software to support existing sales processes at Indigo, it was necessary to include in the design phase process re-engineering and standardizing on common sales processes worldwide. Although the sales processes in Europe and US were very similar, the VP Sales in US and VP Sales in Europe were unable to reach agreement on a common set of sales stages until Indigo America's president intervened and the VPs reached an agreement on a common sales process worldwide. Another challenge during the system design phase was to uniformly define sales by postal zip codes rather than let each branch define its territories differently, with some territories defined until then by cities, some by counties, and some by major routes and highways. Part of the system design effort was to convert existing definitions of each territory to definitions by postal zip codes.

Application construction and development started in August 1998, with the objective of making the application easy to use, eliminating features and fields not required by Indigo's sales processes from screens and consolidating some of the views. In parallel, adaptation of the user manual and the training materials to Indigo's sales processes began. Upon completion of the development, a pilot run began in October 1998 with a group of six sales representatives and their manager in the US. The pilot went well with only minor modifications were required.

By the end of October 1998, the training materials were ready in English and translation into different languages commenced. The month of October 1998 was also devoted to developing data migration processes for importing accounts, contacts, and activities from different data sources. This process revealed many duplicate accounts and contacts and led to employment of the DataFlux data quality tool to identify and filter out duplicate records.

In November 1998, the project team began rolling out the system to production in a phased manner, every week to a different sales branch in North America. The first rollout step was to map the branch territories and organizational structure. The second step was to import data from different sources. The third was to install client software on user laptops. The fourth step was user training and support. The phased rollout allowed dealing with a small user group at a time, giving individual attention to every sales representative, to make sure that each becomes a successful user and an avid CRM supporter. A pilot in Europe started around the same time, with the objective of making sure that the system met all the needs for the European organization. Despite the very good feedback from the pilot team and Indigo Europe's management, due to the holiday season in December 1998 and January 1999, the rollout to production in Europe began in February 1999, thus completing the rollout worldwide within 9 months. Table 2 displays the implementation costs.

After the application was up and running, some branch managers were reluctant to use the new CRM system themselves and failed to motivate the sales representatives under their supervision to use it. To overcome these signs of resistance, the Chief Operations Officer sent a clear message to the entire sales organization, stating that: "if it is not in (the) Siebel (database), it does not exist" and demanded submission of CRM-generated sales reports. Middle management, at the same time, adjusted and expanded company policies and procedures to motivate the sales force to use the system. For example, a newly instituted procedure within Indigo required sales representative to enter key information for each prospect into the CRM database in order to get approval for a demo visit with that prospect.

The CRM upgrades at Indigo

For the sake of stability, cost savings, and user satisfaction, Indigo decided at the end of 1999 to avoid upgrading to the next version of Siebel and wait for the release of the next version. In November 2000, Indigo started the efforts toward upgrading to the new Siebel 2000 version. Part of this effort involved conducting a user satisfaction survey, asking sales representatives worldwide about things they liked and disliked about the CRM system (see survey results in Appendix A). Overall, the survey results not only showed that users were satisfied but also provided the upgrade team with a list of needed improvements. For example, streamlining processes, defining a single intuitive way to perform a task, and dealing with flaws in specific views and processes, minimizing data entry time by defaulting values, validating data entered before executing a transaction, and increasing processes automation. Satisfaction with the CRM application, led to many requests from different departments to integrate additional business processes into the upgraded system, such as a new functionality requested the Contract Administration department, to allow them to manage a customer order within the CRM application from the time that the it is signed until revenue is recognized. The decision to avoid customization during the initial CRM implementation paid off and the first upgrade project, to the Siebel 2000 version, was quick and straightforward.

The upgrade team scheduled the rollout of the first upgrade for January 2001, to coincide with the yearly sales kick-off meetings in Europe and in North America, which presented an opportunity for the upgrade team to interact with all the users in several ways. During these meetings, the upgrade team installed the new software version on all users' laptops and trained them with regard to the capabilities of the upgraded system. They also distributed a quick reference guide, which highlighted all the major changes between the old and new version. After these meetings, the upgrade team updated the original User Manual for Siebel and enhanced its contents. Following translation and publication, the new user manuals were ready for distribution to the entire sales organization.

The salespeople and the contract administration group received the upgraded version very well. Integrating the contract administration processes into the CRM system also benefited senior management since the sales contract information led ultimately to accurate sales pipeline reports. In parallel to the first CRM upgrade project, the IT Department worked on developing consolidated CRM reports from different data sources, including Siebel and MFG/Pro, to provide a 360-degree view of the customer. These reports show complete customer information - identity, behavior, and sales and service history - enabling Indigo to focus on the customer, analyze customer behavior, and identify different customer profiles. Thus, three years after the first rollout, the upgraded CRM system has become an integral part of the Indigo business processes. Figure 5 depicts the time line of the CRM implementation at Indigo from 1998 to 2001.

In November 2002, Indigo began its second upgrade project to the new web-based Version 7.5. Due to significant changes in the architecture, database schema, business logic, and user interface, the upgrading process required considerable effort. Similar to the first upgrade, Indigo integrated additional business processes into the upgraded system - this time, focusing on the customer support processes which take place prior to installation of the digital press. As opposed to the first upgrade, however, it was impossible to train the salespeople face to face, and therefore the upgrade team ran several web-training sessions from remote. At first, the salespeople resisted the June 2003 roll out of the second upgrade, mainly since they found the new web-based user interface somewhat confusing and slowing their work. Following additional training sessions offered to clarify key points of confusion and to educate users about the advantages of the new version, salespeople overcame the initial confusion and quickly returned to the same activity levels as prior to the upgrade.

CONCLUDING REMARKS

Despite more intense competition, Indigo continues to maintain its leadership in the Digital Printing Press market. As revealed in Table 1 above, the revenues of Indigo grew substantially since the CRM first rollout in 1998 and continued to grow after HP acquired Indigo in 2001. While it is difficult to establish a cause-effect relationship, it is plausible that the CRM system may have contributed to this growth since it does provide many benefits to Indigo. First, one central database contains real-time data about customers and prospects which is shared across the entire organization and consumes fewer resources than a distributed one. Second, sales productivity has increased since sales representatives can now find all the information they need in one database and can spend most of their time selling while their managers can better manage them due to improved communication. The Sales Effectiveness Benchmark, which defines a recommended benchmark for each type of activity (e.g., eight cold-calls per week) and allows analysis of weekly activities of sales representatives against the benchmarks, has been one of the new processes implemented within the CRM solution that contributed to sales-force productivity. Now, managers can monitor and control activities of sales representatives and performance determines compensation. Creation of special views and reports within the CRM application to support the SPIN sales methodology, which Indigo implemented to improve the performance of the sales organization, has also increased sales-force productivity by allowing better understanding prospects' needs.

Another benefit of the CRM application pertains to information availability and data quality. Managers find value in accessing up-to-date reports on the web from any place in the world at any time. Informative sales reports are available for senior management, including the sales pipeline reports and the sales forecast reports, which show a consolidated view of worldwide sales and offer drill-down capability by country, branch, and even opportunity level. After sending the entire accounts database to a Dun &Bradstreet (D&B) service bureau to match Indigo's accounts with the D&B database and provide company profile information, there was a significant improvement in data quality to the satisfaction of the sales representatives. Maintaining this data-quality level required enhancing every new lead with the D&B information. To this end, Indigo had licensed iMarket, a D&B product, which allows Indigo to qualify new leads quickly and augment the leads data with up-to-date D&B information. Sales representatives have been excited with improved leads quality and became confident with the quality of data in the CRM database overall. In May 1999, not long after the CRM application went live, its positive effect on lead distribution became apparent during the Drupa trade show, the most important event in the Printing industry held every four years in Germany. By participation in this show, Indigo aims at producing new leads. Having an effective CRM system helped to distribute the new leads quickly and effectively to the field and then track the leads progress. The CRM system can automatically alert the sales representative if handling of a lead is not timely, ensuring that no leads fall through the cracks. Finally, the CRM system allows tracking leads by their lead source, and helps analyzing the ROI on different marketing campaigns.

More than six years of successful CRM implementation at Indigo, it is possible to summarize in Figure 6 the key takeaways for practitioners, as already explained above within the case history.

Subject: Customer relationship management; Salesforce automation; Best practice; Printing machinery; Divisions

Location: United States--US

Company / organization: Name: Hewlett-Packard Co; NAICS: 334111, 334119, 334611, 511210

Classification: 8670: Machinery industry; 5240: Software & systems; 9190: United States

Publication title: Journal of Information Technology Case and Application Research

Volume: 7

Issue: 4

Pages: 53-69

Number of pages: 17

Publication year: 2005

Publication date: 2005

Year: 2005

Publisher: Ivy League Publishing

Place of publication: Marietta

Country of publication: United States

Publication subject: Computers--Data Base Management, Computers

Source type: Scholarly Journals

Language of publication: English

Document type: Feature, Business Case

Document feature: Diagrams Tables References

ProQuest document ID: 214895155

Document URL: http://search.proquest.com/docview/214895155?accountid=38610

Copyright: Copyright Ivy League Publishing 2005

Last updated: 2011-09-01

Database: ABI/INFORM Complete

Document 9 of 100

A PROPOSED CURRENCY ARRANGEMENT FOR PALESTINE

Author: Armstrong, Vaughn S; Boyd, Cody G; Gardner, Norman D

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Abstract:

This case deals with a country's currency regime, that is, its arrangements regarding the currency to be used in the country. The objective is to introduce students to the different currency arrangements that are possible and to the advantages and disadvantages of each, to provide them with additional experience researching international topics on the internet, and especially to the use of information available through the International Monetary Fund and the World Bank.

The case is appropriate for use in an international economics or international finance class. Some aspects, e.g., those that deal with managing currency value, may be of inter est to an advanced macroeconomics class. The case has a difficulty level of four, and should take one or two class hours for discussion. Students will require four to six hours of preparation time.

Full text:

CASE DESCRIPTION

This case deals with a country's currency regime, that is, its arrangements regarding the currency to be used in the country. The objective is to introduce students to the different currency arrangements that are possible and to the advantages and disadvantages of each, to provide them with additional experience researching international topics on the internet, and especially to the use of information available through the International Monetary Fund and the World Bank.

The case is appropriate for use in an international economics or international finance class. Some aspects, e.g., those that deal with managing currency value, may be of inter est to an advanced macroeconomics class. The case has a difficulty level of four, and should take one or two class hours for discussion. Students will require four to six hours of preparation time.

CASE SYNOPSIS

One decision a country must make regarding its economy is what type of currency regime it will adopt. That decision and the world's response to the stability or weakness of the country's currency can dramatically affect the lives of its citizens.

Countries have been relatively active in the last several years in changing and adjusting their currency regimes. Students are likely to be aware of some of those changes; e.g., the euro was introduced as a cash currency replacing the national currencies of twelve European countries, Ecuador and East Timor "dollarized", and Argentina abandoned its currency board, adopting a floating currency regime, all in 2002. Students may also know that China recently adjusted its dollar "peg", that Turkey revalued its lira (1 new Turkish lira = 1,000,000 old Turkish lira), or that the Gulf Cooperation Council countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates) plan to unify their currencies in the next few years. Although students may have heard of the "gold standard" and of floating exchange rates, they will not generally be familiar with the variety of exchange rate regimes that a country can choose from, nor with the factors that affect the decision.

This case presents those issues in the context of a future independent state of Palestine. As the formation of an independent Palestinian state appears to be only a matter of time, the question of an appropriate currency regime is one that will, in fact, be answered in the not too distant future. This case allows students to evaluate the same question that policy makers governing Palestine will consider.

Publication title: Allied Academies International Conference. International Academy for Case Studies. Proceedings

Volume: 12

Issue: 2

Pages: 1

Number of pages: 1

Publication year: 2005

Publication date: 2005

Year: 2005

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 1948-3198

Source type: Conference Papers & Proceedings

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 192411608

Document URL: http://search.proquest.com/docview/192411608?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2005

Last updated: 2013-09-16

Database: ABI/INFORM Complete

Document 10 of 100

THIS PIZZA PARLOR'S FOR SALE

Author: Beggs, Joyce M; Jernigan, I E; Calvasina, Gerald E

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Abstract:

The primary subject matter of this case concerns the human complexities of deciding whether or not to purchase a small business. Secondary issues are: determining the value of a business, evaluating the pros and cons of small business ownership, romance in the workplace, interpersonal relations, ethics, and small business management. The case has a difficulty level of four. The case is designed to be taught in one class hour and is expected to require one hour of outside preparation by students.

Full text:

CASE DESCRIPTION

The primary subject matter of this case concerns the human complexities of deciding whether or not to purchase a small business. Secondary issues are: determining the value of a business, evaluating the pros and cons of small business ownership, romance in the workplace, interpersonal relations, ethics, and small business management. The case has a difficulty level of four. The case is designed to be taught in one class hour and is expected to require one hour of outside preparation by students.

CASE SYNOPSIS

Ann graduated from college with Bachelors of Business Administration Degree in General Management. She was also recently divorced and had a settlement check from the separation of the marriage assets. She returned home to care for her ailing father and started to work part time for Antonio's Pizza. She is at a crossroads in her life and must decide what to do with her newfound freedom and education. Working at Antonio's is like going back in time since she worked there as a teenager. As a teenager, Ann had a crush on the owner of the pizza parlor. The pizza parlor owner asks her if she would like to buy the business. She is excited about the possibilities and plots strategy for the new establishment. The decision focus of the case is whether Ann should or should not purchase Antonio's Pizza.

Publication title: Allied Academies International Conference. International Academy for Case Studies. Proceedings

Volume: 12

Issue: 2

Pages: 3

Number of pages: 1

Publication year: 2005

Publication date: 2005

Year: 2005

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 1948-3198

Source type: Conference Papers & Proceedings

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 192411570

Document URL: http://search.proquest.com/docview/192411570?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2005

Last updated: 2013-09-16

Database: ABI/INFORM Complete

Document 11 of 100

WHAT NEXT FOR KROGER?

Author: Bertsch, Thomas

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Abstract:

This case focuses on the goals and strategy needs of the nation's largest grocery store chain. The subject matter is appropriate for courses in retailing, marketing management, marketing strategy, and management problems. The case is suitable for junior and senior undergraduate students and has a difficulty level of 4/5. It can be used for a 75-minute class discussion session, a take-home exam, or as the basis for team oral and written presentations.

Full text:

CASE DESCRIPTION

This case focuses on the goals and strategy needs of the nation's largest grocery store chain. The subject matter is appropriate for courses in retailing, marketing management, marketing strategy, and management problems. The case is suitable for junior and senior undergraduate students and has a difficulty level of 4/5. It can be used for a 75-minute class discussion session, a take-home exam, or as the basis for team oral and written presentations.

CASE SYNOPSIS

The Kroger Company has retail stores in 35 states. Its retail activities focus primarily on supermarket customers, wide assortment of grocery products, moderate assortment of services, low prices, many locations, and savings-oriented promotions. Management wants the company to continue to be the largest supermarket chain in the nation. However, Wal-Mart has become the largest seller of groceries in the nation, based on dollar sales. The company is also under pressure from discount membership warehouse chains and traditional supermarket chains. Consequently, adjustments are needed in Kroger's strategy. Students are asked which changes should be made in Kroger's publics, products, places, prices, promotions, processes, and performances.

Publication title: Allied Academies International Conference. International Academy for Case Studies. Proceedings

Volume: 12

Issue: 2

Pages: 5

Number of pages: 1

Publication year: 2005

Publication date: 2005

Year: 2005

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 1948-3198

Source type: Conference Papers & Proceedings

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 192411631

Document URL: http://search.proquest.com/docview/192411631?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2005

Last updated: 2013-09-16

Database: ABI/INFORM Complete

Document 12 of 100

ENTERPRISE NATIONAL BANK: A STUDY IN COST CONTROL

Author: Bexley, James

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Abstract:

The primary subject matter of this case concerns cost control. Secondary issues involve considerations of bank profitability; In addition, decisions must be concerning goals for the bank and how they relate to peer organizations. The case has a difficulty level of three, appropriate for junior level students. It is designed to be taught in two and one-half to three hours and is expected to take from four to six hours of student preparation.

Full text:

CASE DESCRIPTION

The primary subject matter of this case concerns cost control. Secondary issues involve considerations of bank profitability; In addition, decisions must be concerning goals for the bank and how they relate to peer organizations. The case has a difficulty level of three, appropriate for junior level students. It is designed to be taught in two and one-half to three hours and is expected to take from four to six hours of student preparation.

Publication title: Allied Academies International Conference. International Academy for Case Studies. Proceedings

Volume: 12

Issue: 2

Pages: 7

Number of pages: 1

Publication year: 2005

Publication date: 2005

Year: 2005

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 1948-3198

Source type: Conference Papers & Proceedings

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 192411732

Document URL: http://search.proquest.com/docview/192411732?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2005

Last updated: 2013-09-16

Database: ABI/INFORM Complete

Document 13 of 100

RYANAIR (2005): SUCCESSFUL LOW COST LEADERSHIP

Author: Box, Thomas M; Byus, Kent

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Abstract:

On Thursday, May 26, 2005 Ryanair Holdings, PLC (Ryanair) celebrated its 20th birthday in a central Dublin hotel with a birthday cake and a party. At the celebration, Ryanir's CEO - Michael O'Leary - confidently predicted that Ryanair would overtake British Airways by carrying 3.5 million passengers a month in 2005. He went on to say, "The very fact that a Mickey Mouse Irish airline can start in a field in Waterford 20 years ago, and in 20 years, overtake the world' s self-styled, self-proclaimed favourite airline is testament to the demand for low-airfare travel around Europe." (Business Ticker, 2005)

Full text:

INTRODUCTION

On Thursday, May 26, 2005 Ryanair Holdings, PLC (Ryanair) celebrated its 20th birthday in a central Dublin hotel with a birthday cake and a party. At the celebration, Ryanir's CEO - Michael O'Leary - confidently predicted that Ryanair would overtake British Airways by carrying 3.5 million passengers a month in 2005. He went on to say, "The very fact that a Mickey Mouse Irish airline can start in a field in Waterford 20 years ago, and in 20 years, overtake the world' s self-styled, self-proclaimed favourite airline is testament to the demand for low-airfare travel around Europe." (Business Ticker, 2005)

EARLY HISTORY OF RYANAIR

Ryanair was founded in July, 1985 by Cathal and Declan Ryan with the financial backing of their father, Tony Ryan. The elder Ryan had, for many years, been Aer Lingus' leasing manager and had gone on to found Guiness Peat Aviation which eventually became the largest aircraft leasing company in the world. Ryanair began operations with a staff of 25 and a single 15-seat Bandeirante turbo-prop flying between Waterford and London. In 1986 Ryanair received permission from the regulatory authorities to begin flying four flights a day on the Dublin-London route with two 46-seat BAE748 turbo-props. In doing so, they challenged the high cost monopoly of British Airways and Aer Lingus with fares that were set at half the prevailing fare of £209. Ryanair's strategy (initially) was to offer simple, low-cost fairs and exemplary customer service. In 1986 (the first full year of operations) they flew 82,000 passengers and began negotiations to acquire their first jet aircraft and additional routes.

During the later part of the 80s Ryanair continued to compete vigorously with British Airways and Aer Lingus while adding additional routes and j et aircraft. By the end of 1989 Ryanair had 6 BAC-111 jets and 3 ATR 42 turbos. In 1990 Ryanair suffered a £20 million loss and was forced to completely restructure. A new, brash CEO - Michael O'Leary - was brought in to manage the turnaround and the Ryan family invested an additional £10 million. O'Leary, at the suggestion of Tony Ryan, visited Southwest Airlines in Dallas, TX to learn the fundamentals of Low Cost Leadership in the airline industry. Southwest, of course, was by far the most profitable of the American carriers and their business model was quite different than the traditional flagship carriers.

Gulf War I (Desert Storm) broke out in Ianuary of 1991 and airline traffic around the world collapsed. Despite the decline in overall airline traffic, Ryanair made a profit of £293,000 for the year and carried 651,000 passengers with a total workforce of 477 people. In May 1991, Ryanair switched its London base from Luton Airport to Stansted Airport in Essex. By 1999, Ryanair had added a number of European destination, had switched the aircraft fleet to Boeing 737s and carried over 5 million passengers - profitably.

INTO THE 21st CENTURY

In Ianuary 2000, Ryanair introduced Europe's largest travel website - www.ryanair.com. Within three months the site was recording 50,000 bookings per week The web site also facilitated car and hotel rentals, rail services and travel insurance at low prices. In September, the first new base since 1991 was established at Glasgow Prestwick (Scotland) and three new Boeing 737-800s were stationed there. The base provided Scots customers direct flights to Paris, Frankfurt, Dublin and London. In 2000, Ryanair carried over 7 million passengers with a workforce at year end of 1,262 people. Ryanair had, by the end of 2000, formalized its business model to include:

* All Boeing aircraft (primarily 737-800s)

* No "free" amenities such as snacks and drinks.

* Non reclining seatbacks.

* Quick flight turnarounds - averaging 45 minutes.

* An in-flight magazine that was really a catalog for food, beverage and a multitude on duty free products - sold at a considerable profit by the cabin attendants.

* Minimum baggage allowances.

In 2001, Ryanair opened its first European base at Brussels' Charleroi Airport with five more new Boeing 737-800s. Service was provided from Charleroi to Dublin, London, Glasgow, Shannon, Venice, Paris and Carcassonne (France). The agreement at Charleroi was negotiated with airport authorities at a considerable savings in landing fees and gate charges in addition to subsidies for Ryanair. Despite the cost advantages, many predicted failure for Ryanair because the airport is located about 65 km the capital (Brussels). This, however, was not the case. In August, the airline carried more than 1 million passengers - more than the total passengers carried in the year 1993. The terrorist attack of September 11th marked a downturn in airline traffic around the world and an enormous upward spike in the cost of oil - leading to substantial increases in operating cost for all airlines. Ryanair carried over 9 Million passengers in 2001 with a staff of 1,477 at year end.

Frankfurt (Hahn) was selected as the second European base in 2002. It was necessary to prevail in the German courts to overturn Lufthansa's high price monopoly of German aviation and customers responded enthusiastically. During this year, Ryanair increased an order at Boeing from 45 to 125 737-800s with an option for an additional 125 aircraft. In 2003, Ryanair acquired Stansted-based Buzz Airlines from KLM and as a result of the acquisition, got access to an additional 1 1 French regional airports. By 2004, Ryanair was the largest low cost airline in Europe flying almost 25 Million passengers with a staff (at year end) of only 2,288.

RYANAIR'S VISION AND MISSION

Ryanair does not publish a formal vision or mission statement, but in accordance with Jack Welch's advice, "Strategy is simply finding the big aha and setting a broad direction. . ." Michael O'Leary's broad direction - communicated in public statements - is to simply continue to be the largest Low Cost Leader in the European airline industry and to carry 50 million passengers by 2009. Implementing this vision is a function of many individual tactics including an absolute dedication to low cost performance in every element of the value chain, quick gate turnarounds, nonunion operations, performance-based incentive compensation plans, standardization on one type of aircraft and flying (in most cases) to secondary airports which provides significant savings for Ryanair.

BUSINESS ETHICS

Despite its remarkable success, Ryanair and particularly Michael O'Leary have been criticized on a number of issues. One of the areas of concern is human resource management. Ryanair is a non-union operation based in Dublin, Ireland. Ireland, of course, is a strongly pro-union environment. Taoiseach (head of the Irish government) Bertie Ahern described O'Leary's orientation toward labor as "tooth and claw capitalism" during the baggage handler's strike at Dublin Airport in 1999. In addition, compensation for pilots and flight attendants is comprised partly of salary and partly based on efficiency issues such as number of flight segments flown and, for flight attendants, amount of revenue generated from sales of items in the in flight magazine.

O'Leary has been a harsh critic of government officials in Ireland and Europe. He is particularly disdainful of officials at Aer Lingus (www.aerlingus.com) - Ireland's publicly owned airline and officials at the airline authority (Aer Rianta). As a result of the fees imposed by the Irish government, Ryanair has actually reduced the number of flights in its home country over the last four years.

A recent criticism of Ryanair was its refusal to supply wheel chairs for disabled passengers at Stansted airport. The airline argued that this provision was the responsibility of the airport authority and that 87 of the 93 airports that they fly to provide wheelchairs for those requiring them. In 2004, a judge ruled that the responsibility should be shared by the airline and the airport owners.

Perhaps the most significant (potentially costly) criticism of Ryanair was the deal they negotiated for landing rights at Charleroi. In February, 2004, the European Commission ruled that 4 million of the 15 million in incentives paid to Ryanair constituted illegal state aid. In October, Ryanair agreed to put 4 million in an escrow account pending its appeal of the ruling.

OPERATIONS

In 2004, Ryanair achieved a number of important milestones. They launched two new European bases (Rome and Barcelona) and added 73 new routes bringing their total to 150 routes. They took delivery of 18 new Boeing 737-800s and acquired a competitor - Buzz Airlines from KLM. In July 2003, they carried a record number of passengers - 2 million -and for the year out carried British Airways in the UK/European market. At the end of the year they had 2300 employees and an industry leading 10,049 passengers per employee.

INDUSTRY COMPETITORS

Aer Lingus Group PIc (AL) is owned (85%) by the Irish government. They fly about 7 million passengers per year to 50 destinations in Ireland, the UK, the US and Europe. In 2004 they generated $1,236, 900,000 in revenues with 3,906 employees. AL began flight operations in 1936 with De Haviland biplane, flying between Dublin and Bristol, England. In 1958, AL bought Aerlinte Eireann and began Atlantic service to New York City. The airline grew rapidly until 1993 when revenues and profits eroded substantially. A restructuring plan was introduced and the Irish government invested an additional 222.2 million in equity. Following the financial crisis related to the September 11, 2001 terrorist attacks, AL implemented a survival plan which included a staff reduction of over 2,000 employees, a pay freeze and sales of non-essential assets. The airline also adopted a new lower fare strategy which has resulted in significant increases in revenue and profits.

British Airways Plc (BA) is a very large, full service airline based in Hammondsworth, England. It traces its history back to 1919 when its predecessor, Aircraft Transport and Travel, launched air service from London to Paris. Today, BA flies to 1 54 destinations in 75 countries with a fleet of 300 aircraft. In 1998, BA invested $25 million in a new, low cost airline subsidiary named Go. Go was headed by an American woman, Barbara Cassinni, and had an eventful five year history till it was sold (in 2003) to Stelios Haji-Ioannou, owner of easy let, for $375 million. Interestingly, the market cap of BA is slightly less than the market cap of Ryanair - a much smaller airline.

easyjet Plc (EI) is primarily owned by Stelios Haji-Ioannou and began operations in 1995 when Stelios - as he likes to be called - was 28 years old. EJ began as a low cost airline, although it does offer some amenities not offered by Ryanair. In 1998, Stelios founded easyGroup to extend the low cost concepts used at easylet. easyGroup is invested in hotels, car rentals, internet cafes, credit cards and is constantly exploring additional opportunities. EJ flies 100 Airbus aircraft to 70 destinations and expects to fly 30 million passengers in 2005 in Europe and the UK.

Other competitors include Sir Richard Branson's Virgin Express, Lufthansa (Germany's flagship airline), Air France and the 60, or so, small airlines in Europe that have been created since the EU deregulated the airline industry in 1998.

CONCLUSION

It was March 17, 2005 - the start ofthe four day national holiday honoring St. Patrick, Ireland's patron saint-and Michael O'Leary was stretched out on a couch watching an old rugby match being replayed on the telly. On a yellow legal pad, O'Leary had jotted down issues that needed consideration at Ryanair: fuel prices, expansion to Eastern Europe, his future at Ryanair and the regulatory battles with Irish politicians and the EU.

REFERENCES AVAILABLE UPON REQUEST

Publication title: Allied Academies International Conference. International Academy for Case Studies. Proceedings

Volume: 12

Issue: 2

Pages: 9-13

Number of pages: 5

Publication year: 2005

Publication date: 2005

Year: 2005

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 1948-3198

Source type: Conference Papers & Proceedings

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 192411748

Document URL: http://search.proquest.com/docview/192411748?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2005

Last updated: 2013-09-16

Database: ABI/INFORM Complete

Document 14 of 100

START-UP CULTURE AT TOPS

Author: Brown, Steve; Brewer, Peggy; Tabibzadeh, Kambiz

ProQuest document link

Abstract:

Dave Davig, a co-owner of TOPS, had just hung up the phone and was wondering what he should do. He just received a disturbing phone call from his partner, Terry Coffman. It seems one of their company's best supervisors, Sarah, who had been dismissed a couple of weeks earlier has filed a complaint with the local employment security office claiming termination without just cause and is asking to be reinstated with back pay. Even more disturbing was a letter they had received from a professor at a local university at which both partners taught. The content of the letter explained that the terminated supervisor was a student at the university and had complained to her professor that she had treated unfairly. The professor taught industrial psychology and was sure that Sarah had been a subject of sexual discrimination. In addition, the professor was known to the partners as an activist in the feminist movement and was encouraging Sarah to go to the newspapers with her complaint and encouraging her to bring suit against TOPS.

Full text:

THE TERMINATION

Dave Davig, a co-owner of TOPS, had just hung up the phone and was wondering what he should do. He just received a disturbing phone call from his partner, Terry Coffman. It seems one of their company's best supervisors, Sarah, who had been dismissed a couple of weeks earlier has filed a complaint with the local employment security office claiming termination without just cause and is asking to be reinstated with back pay. Even more disturbing was a letter they had received from a professor at a local university at which both partners taught. The content of the letter explained that the terminated supervisor was a student at the university and had complained to her professor that she had treated unfairly. The professor taught industrial psychology and was sure that Sarah had been a subject of sexual discrimination. In addition, the professor was known to the partners as an activist in the feminist movement and was encouraging Sarah to go to the newspapers with her complaint and encouraging her to bring suit against TOPS.

THE START-UP

TOPS was a drive-through fast food restaurant that had opened just six months before the termination incident occurred. Dave, a Small Business Development Director, had been approached by the owner of a well-known franchise to evaluate his plan to start opening smaller versions of the fast food chain. The proposed restaurant chain, Checkers, would have a limited menu, be strictly drive through, and sell ninety-nine cent hamburgers. Shortly after helping evaluate the proposal, Dave was approached by Terry Coffman with a similar idea. Terry's son, Bob, worked for a local food distributor who processed hamburger patties and sold them to local chain restaurants. The food distributor had his pulse on trends in the market and was gearing up for a growth in the type of fast food concept Dave had recently evaluated.

Dave and Terry had been business partners before, and Terry thought they should look in to developing a chain of their own. Terry's son had the inside information on who was planning to open up this type of restaurant, where they would be located, and what it would cost to build and operate one because the company he was working for would be a primary supplier. Terry felt they could catch the trend in its infancy and use his son's position and knowledge to gain an edge over the other start-up firms. After five months of planning, they opened up their first restaurant in late summer right before school started.

Although not a new concept, restaurants of this type were becoming popular. Within a year, six different companies had opened up fifteen new stores in the greater metropolitan area of Nashville, Tennessee, and similar operations were beginning to spring up through the southeastern and mid-western regions. Three other entrepreneurs had opened similar restaurants before TOPS opened theirs. Dave and Terry felt confident the insight his son had gained from the other start-ups would give them a big edge in the design and operation of their own restaurant. After a slow first week, business pick up to point where they had to have help from the local police directing traffic in and out of the establishment at lunch time.

HIRING PRACTICES

In their first venture, Dave and Terry hired only college graduates and individuals having advanced degrees. These employees were expensive and did not live up to expectations. They then agreed to hire only applicants that had a high school education or less and to hire mangers who had experience in the restaurant industry. Terry ' s son Bob was hired as TOPS general manager. He had a high school degree and experience as former manager of a local Golden Corral. He brought his former assistant at the Golden Corral on board to help him with the supervision and the firm's start-up phase. This proved to be a big help as they organized, developed job descriptions, pay scales, recruited, filled positions and trained new employees.

Many of the people they hired had former restaurant experience, but not all. Some of the other people hired were friends of Bob's. Unlike the hiring shortages experienced by other companies in the fast food industry, TOPS did not have a problem in hiring qualified people. The first store was located in a college town, and there were always plenty of students looking for jobs. In the beginning, most of the supervisory positions went to Bob' s friends. Over time attrition took its toll on both supervisors and other employees. However, the turnover at TOPS was considerably less than that at other local restaurants.

CREATING A FUN ENVIRONMENT

When setting up the business, Bob took pains to see that the average pay was slightly higher than TOPS' competitors. However, he did not attribute the relatively low turnover to the pay scale. The differential was just not enough to make a major difference in job satisfaction. Bob felt the difference was due to the "fun" work environment that he and the other supervisors had created. In keeping with the fun environment, Bob asked the partners if it would be all right for the managers to sponsor a Christmas party for all ofthe employees and hand out bonuses to deserving employees for their contributions to the restaurant' s overwhelming successful start-up. The partners reluctantly agreed to allow the party to be held in the company's commissary as long as there was no drinking. They did not want to be held liable for any alcohol -related incidents that might result. However, the partners suspected that some of the employees were sneaking drinks at the party. They discussed their suspicions with Bob and vowed never to sponsor another company Christmas party.

Almost all employees, including the managers and supervisors, were in their early twenties or younger. Teams of workers were created for each shift. It was a hot, crowded, fast paced work environment, but the teamwork resulted in a fun place to work. So much fun, in fact, that the work relationships spun into personal off-the-j ob relationships. As might be expected from a young group of men and women working in close quarters, there was a lot of bantering and pranks being played on one another. For instance, one of the employees stuck a quarter pound hot dog in a drinking cup and covered it with a condom, to the delight of most ofthe employees working on that shift. After a brief investigation, it was discover to be the act ofthe company ' s youngest female employee. This caused enough concern to Dave and Terry that they cautioned Bob about the fact that someone might be offended by the behavior taking place at TOPS and encouraged Bob to develop a personnel manual outlining policies and guidelines for recruiting, hiring, training, compensating, evaluating, and disciplining employees.

Bob created a policy/personnel manual patterned after those of other restaurants using materials furnished by the partners and had the manual reviewed by an attorney specializing in employee relations. Over time, the manual proved helpful in handling all types of personnel issues. Like all businesses, TOPS had personnel problems from time to time. Employees were late for work, and the high school kids were notorious for not showing up for work when it conflicted with a big school event. The manual/handbook was always referred to when disciplining this type of behavior. It also provided guidelines for dealing with on-the-job behaviors such as employee theft and not following health department rules and policies, which are crucial in the restaurant business. Bob distributed a compact version ofthe employee handbook for each employee outlining company policies, what was expected from them, and guidelines for behavior at work.

BOB'S LEADERSHIP

Bob's personality, personal demeanor, and leadership style also contributed to the positive work environment enjoyed by TOPS' employees. Over time, he rewarded good performance and replaced vacancies in supervisory position with individuals who showed initiative, enthusiasm, and loyalty. He was easy going, patient, empathetic, and impartial. He had to fire one of his best friends, a restaurant supervisor and the son ofthe county's attorney general, because he came to work intoxicated. Bob also had a soft spot for people who needed a hand up. He hired a mentally challenged individual to prepare condiments, but had to let the employee go because he had trouble using sharp objects and severely cut himself. Bob testified as a character witness for one ofthe minority employees who was being tried for an accessory to a robbery at a local convenience store. Later, this employee broke into a TOPS restaurant and did over four hundred dollars worth of mischievous damage. Bob also took pity on an ex-convict who was having trouble finding work and hired him to clean the store at night only to have to fire him because ofthe lewd remarks he was making to some of the female employees.

Bob felt bad about terminating Sarah for her behavior. She was the company's most competent supervisor and was well liked by everyone in the company. It was spring and she had been taking advantage of the warm weather and happy hour at one of the campus hangouts. Unfortunately, Sarah decided to come by and see her friends at TOPS on her way back home froma drinking bout. She used her master key to let herself in the rear door of the store and created quite a disturbance as she joked with the work crew and fell against the soft drink machine. The shift supervisor helped Sarah up and steadied her as she helped her out the back door. All employees were aware that drinking on the job or coming to work intoxicated was grounds for dismissal. This was especially true for supervisors who were expected to set examples for other employees. Bob felt his decision was clear-cut; after all he already fired one of his best friends for showing up for work intoxicated.

Publication title: Allied Academies International Conference. International Academy for Case Studies. Proceedings

Volume: 12

Issue: 2

Pages: 15-18

Number of pages: 4

Publication year: 2005

Publication date: 2005

Year: 2005

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 1948-3198

Source type: Conference Papers & Proceedings

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 192411658

Document URL: http://search.proquest.com/docview/192411658?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2005

Last updated: 2013-09-16

Database: ABI/INFORM Complete

Document 15 of 100

JEFF GILLUM'S NEW VENTURE

Author: Brown, Steve; Loy, Steve; Randles, Theodore

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Abstract:

Jeff Gillum was facing his greatest challenge since opening Players Club ten months ago. Most ofthe students had left school for the summer, and his revenues were drying up. Cash flow had become critical. Payments for this month's supplies and rent were coming due, and he did not have enough cash to cover them nor did he know where the money was going to come from. Jeff had no leverage for borrowing money and had maxed out his credit cards. He was considering throwing in the towel and closing his business.

Full text:

JEFF'S DILEMMA

Jeff Gillum was facing his greatest challenge since opening Players Club ten months ago. Most ofthe students had left school for the summer, and his revenues were drying up. Cash flow had become critical. Payments for this month's supplies and rent were coming due, and he did not have enough cash to cover them nor did he know where the money was going to come from. Jeff had no leverage for borrowing money and had maxed out his credit cards. He was considering throwing in the towel and closing his business.

JEFF'S BACKGROUND

Jeff grew up in Hazard, Kentucky where he was an outstanding athlete. His mother was a teacher in the Hazard school system, and his father owned a construction business. Jeff entered Eastern Kentucky University on an athletic scholarship and majored in business administration. He did not need the scholarship because his parents were independently wealthy and his grandfather owned a coalmine. However, he was independent and determined to make it on his own. Jeff was well known throughout the campus community, succeeding both as an athlete and scholar. Jeff became the starting quarterback on the OVC championship football team and a pitcher on Eastern's baseball team. In addition, he carried B plus average in his management major.

During his junior year he took a small business management class under Dr. Eric Davig where he wrote a business plan and participated in a SBI consulting project. Jeff also took the capstone class under Dr. Davig where he completed another field study by developing a strategic plan for a mobile home park in Louisville where his father was directing a construction proj ect. Jeff became excited about the possibility of becoming the park manager and a partner of the park's current owner as well as implementing the expansion plan that he had designed. He found out later the park's owner had no real intention of bringing him in as the manager or partner.

Jeff was not sure what he was going to do when he graduated. He decided that he might like coaching and started graduate school at Eastern majoring in business education. While he was attending grad school, Jeff became Dr. Davig' s assistant and participated in a regional small business research project. To further supplement his income, he became a bartender at one of the local bars. At the end of his first year in graduate school, Jeff approached Dr. Davig with a business plan he had developed to open a bar of his own in Richmond, Kentucky. If he did, he would likely have to quit school.

THE BLUES BAR

His concept for the bar was structured around a music theme. Although he was from Hazard, Kentucky in the heart of bluegrass music country, Jeff detested it. What he really liked was j azz and blues, and explained to Dr. Davig that he had dreamed for the past several years to open a blues bar. Jeff did not have much money saved up and wanted to know if Dr. Davig would be interested in partnering with him. It was obvious that Jeff had done his research because the plan was well thought out. He had sought out advice from a local beer distributor, other bar owners, his attorney, and real estate dealers.

However, the financial projections did not show the bar making money. When Jeff projected his revenues for his plan, he stood in front of the site he planned to locate the bar and counted cars. He figured he could get one percent of them to stop and come into Players. He combined this with an estimate of the spillover from other bars he had observer when bartending to predict the number of patrons he might expect. He combined the average number of patrons with the average expenditure of patrons in downtown Richmond bars to estimate his weekly revenue. Dr. Davig declined the offer and encouraged Jeff to go back to the drawing board and rethink his plan before quitting school.

Bar competition in Richmond was fierce. The city had a reputation as the place where students throughout eastern Kentucky came to party. Eastern Kentucky University almost always appeared on Playboy's list of top party schools. Business boomed on Thursday, Friday and Saturday nights. In the downtown area alone there were already eight bars that catered to the college crowd. All of these bars were within walking distance of Eastern's campus. Some of these bars had been there for years while others were start-ups. The ownership and names of the established bars changed frequently.

Dr. Davig returned from summer break expecting to find Jeff back at school ready to finish his master's degree. Within a week of his return, he received a call from Jeff asking him to meet at Players Club. This was a surprise to Dr. Davig. He thought Jeff had probably given up on the idea of opening up a bar because he did not have enough money to get the business started and did not anticipate positive cash flows for several years.

When he arrived at Players, Dr. Davig found Jeff and his father finishing up a homemade bar made out of glass blocks and plywood. The interior of the entire building was under construction. It had been a former office building owned by a local attorney. The building was not situated among the other downtown bars but close enough to get spillover from the other establishments and far enough away to avoid some of the crowding and rowdy behavior experience in the three block area where most of them were located. It met the zoning requirements for bars and was situated between the college and the other bars.

Jeff explained that he had this location in mind when he developed his business plan, but it was obvious that monthly rent was prohibitive and a major cost driver in his financial projections. He felt the location and smaller size would set his bar apart and establish Players as a more up-scale bar. Players did not have any off street parking, but neither did any ofthe other bars. However, it was located across from a city parking lot for a local bank, attorney offices, and retail shops. Since this lot was not being used at night, it would be available for his customers. Jeff envisioned a mix of patrons. He felt a blues bar would attract both students and Richmond residents. Still, the location was not as up-scale as Jeff would have liked. There was an old rundown rental house next to Players and a small old abandoned house immediately behind it.

BOOTSTRAPPING

It occurred to Jeff that the owner was asking too much rent for the building so Jeff conducted a rental survey ofthe surrounding business. He found rent was substantially less than what was being asked for the office building. When Jeff presented this to the owner, he was impressed with Jeffs initiative and agreed to a much lower rate and offered Jeff an option to buy the building. It had set empty for almost a year, and the building's owner was eager to have it rented. In fact, he agreed to help pay for part the renovation if Jeff would do the work.

To further save money Jeff convinced his father to take a few weeks off and help him with the renovation and convinced a couple a college students to help with the promise of free beer when he opened. Most of the renovation materials were salvaged from his Dad's construction sites, and the rest were bought with his father's construction discount. Tables and chairs were an odd lot, pieced together from what he could borrow from family and friends. Plus, he used the furniture he had accumulated as a student at Eastern. This included pictures, lamps, a hi-fi system, televisions, and his living room suite. Jeff also entered into an alliance with a pool table and electronic game distributor because he did not have enough to buy them. Rather than lease them, he agreed to share profits with the distributor.

To cut cost even further, he did his own plumbing and wiring. Unfortunately, this backfired because the city inspectors would not pass his work, and it had to be torn out and redone by licensed plumbers and electricians basically depleting his start-up capital.

In all, Jeff was able to start his new venture on just three thousand dollars of his own money. Jeff opened up, the third week of fall semester. He was disappointed in the number of customers he was able to attract. As he expected, he got some spillover from the other bars and a few of the Richmond residents, including local business and professional people, who knew Jeff personally. Jeff offered discount coupons in the student newspaper, posted messages on Players' marquee, and offered dollar beer specials. However, most of his business came from word-of-mouth and the spillover. Business picked up very slowly providing just enough cash to get by. Other bars had both beer and liquor specials, live bands, and food. He had a grand opening during homecoming and had a party for a lot of his buddies that he played football with. After the grand opening, business began to improve.

Unfortunately, Jeff, he no longer had enough money to rent an apartment. It was OK because he had moved most of his household furnishing into Players anyway. Since opening he had been sleeping on his couch in the bar after it closed. Jeff did not mind because he was running the bar by himself. When he got up in the morning, he cleaned the place up, restocked, and completed his bookwork. He was bartender, bouncer, janitor, and d-jay. Jeff worked hard to differentiate his bar from the others in the downtown area by doing his best to keep an up-scale atmosphere by playing a good selection of music using his own CDS, keeping the place spotless, upgrading the décor whenever possible, and prohibiting swearing and horsing around. He dressed the part. Jeff always showed up in casual business attire. His business continued to pickup as the year progressed attracting a small but loyal customer base, which he knew by name. Eventually, even some of his customers started dressing in casual business attire when they came into the club.

THE SUMMER SEASON

By the end of spring semester, things were looking up for Jeff. Business was good. Through his contacts, Jeff discovered that a piece of property near the new interstate exchange in Richmond was available and could be developed into a three hundred lot mobile home park. He put together a business plan similar to the one he put together for the Louisville park and sold the idea to a financial backer, only to get aced out on the deal by some local business men who had better connections. This happened just before Eastern adjourned for the summer. Jeff was very disappointed because the deal would have made him wealthy overnight.

Once summer school started, business fell liquor licenses, and the full quota had already been allocated. Jeff was sure he could double or triple his revenue in a month's time if he could serve liquor by the drink. Unfortunately, the last time a liquor license to make ends meet, Jeff contracted to install lockers ar a local school. This was not what Jeff had envisioned. It was hard running Players by himself while holding down a fulltime job.

Publication title: Allied Academies International Conference. International Academy for Case Studies. Proceedings

Volume: 12

Issue: 2

Pages: 19-22

Number of pages: 4

Publication year: 2005

Publication date: 2005

Year: 2005

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 1948-3198

Source type: Conference Papers & Proceedings

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 192411699

Document URL: http://search.proquest.com/docview/192411699?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2005

Last updated: 2013-09-16

Database: ABI/INFORM Complete

Document 16 of 100

JAVA & HOLES: AN INSTRUCTIONAL CASE TO REVIEW FINANCIAL ACCOUNTING AND COST OF CAPITAL CONCEPTS

Author: Burns, Clare D; Moss, Gisele J; Moss, Jimmy D

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Abstract:

The primary subject matter of this case concerns a review of earnings per share, ratio analysis, and cost of capital concepts. A secondary issue includes evaluation of alternative strategies within the constraints of debt covenants. The case was designed to use as a review of financial accounting concepts in a MBA managerial accounting course. However, the case has a difficulty level appropriate for seniors or first or second year graduate students. The case is designed as a review and should be completed entirely outside of class. Depending on financial background, students will require approximately ten to fifteen hours to complete the case.

Full text:

CASE DESCRIPTION

The primary subject matter of this case concerns a review of earnings per share, ratio analysis, and cost of capital concepts. A secondary issue includes evaluation of alternative strategies within the constraints of debt covenants. The case was designed to use as a review of financial accounting concepts in a MBA managerial accounting course. However, the case has a difficulty level appropriate for seniors or first or second year graduate students. The case is designed as a review and should be completed entirely outside of class. Depending on financial background, students will require approximately ten to fifteen hours to complete the case.

CASE SYNOPSIS

The case describes a setting in which a company is examining several strategies in an effort to increase earnings per share. Java and Holes is a fictionalized version of an actual company. Students assume the role of an employee assigned to evaluate the effectiveness of these strategies in meeting management's objective, while continuing to meet the provisions of the company's debt agreements. In this role, students are required to perform analytical procedures by calculating financial ratios and weighted average cost of capital as well as consider other financial implications of the strategies from a managerial accounting viewpoint.

Java & Holes (the Company) is a publicly-owned corporation specializing in retail sales of premium quality donuts and gourmet coffee. They operate 400 stores across the United States and are located primarily in Metropolitan areas. The established stores consists of company owned and franchised store locations. In addition to selling their product on-premises, the company markets their product off-premises to convenience, grocery and discount stores under branded and private labels. Over the past 3 years, the Company has focused their expansion efforts into major markets. Management believes they have currently exhausted this strategy.

Because of the recent focus of Americans on low carbohydrate diets, donut sales have been below anticipated levels over the last 3 quarters, resulting in lower than projected earnings. Benjamin Hayward, Chief Executive Officer, called a management meeting to discuss potential strategies to increase earnings per share (EPS) to the projected level of 2004 of .95 per share. After extensive discussion of plausible strategies, management narrowed their focus to three options for further consideration: opening mini-cafes, closing or selling stores, and a treasury share buyback program.

Publication title: Allied Academies International Conference. International Academy for Case Studies. Proceedings

Volume: 12

Issue: 2

Pages: 23

Number of pages: 1

Publication year: 2005

Publication date: 2005

Year: 2005

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 1948-3198

Source type: Conference Papers & Proceedings

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 192411576

Document URL: http://search.proquest.com/docview/192411576?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2005

Last updated: 2013-09-16

Database: ABI/INFORM Complete

Document 17 of 100

THE CASE OF THE DIMINISHING BUDGET

Author: Carter, Cynthia; Jones, Beth H; Jones, Gary H

ProQuest document link

Abstract:

"Connie, I need you to respond to this letter", Joyce Johnson said with obvious concern in hervoice. "Our agency is doing quite well, but we can't take a hit like this. A5 or 10 percent budget decrease would be terrible! " She hoped her accountant Connie Davis could help her avert disaster. Connie reached for the letter and noted it was from Whitfall County Area Services Authority (400 Billable Road, Grace ND, zip 67890) and dated two weeks earlier, 1/08/05. She was not pleased with what she read, although she wasn't too surprised given the weak state of the economy.

Full text:

CASE BACKGROUND

"Connie, I need you to respond to this letter", Joyce Johnson said with obvious concern in hervoice. "Our agency is doing quite well, but we can't take a hit like this. A5 or 10 percent budget decrease would be terrible! " She hoped her accountant Connie Davis could help her avert disaster.

Connie reached for the letter and noted it was from Whitfall County Area Services Authority (400 Billable Road, Grace ND, zip 67890) and dated two weeks earlier, 1/08/05. She was not pleased with what she read, although she wasn't too surprised given the weak state of the economy. The letter read:

Dear Ms. Johnson;

I am sure that you are aware of the difficult financial situation facing our nation, our state, and Whitfall County. The budget shortfalls are affecting the Area Authority and, in turn, may affect you as a contracted provider with the Whitfall County Area Services Authority. The purpose of this letter is to ask for your assistance and understanding in facing our financial challenges.

It is a distinct possibility that Whitfall County Area Services Authority will have a constricted budget for fiscal year 2005, starting this July. As a partner with the Authority, it is likely that you will be impacted as well. To prepare for this possibility, I am asking you to prepare an impact statement for two possible scenarios:

(1) A 5% across the board rate reduction in your 2005 contract.

(2) A 10% across the board rate reduction in your 2005 contract.

Please consider the ways that your agency can continue to provide maximum service under these scenarios. I am asking for you to please consider any alternative resources that may be available to you and your agency as we face this difficult challenge ahead. You know and understand your operation and will be able to determine how to lessen the impact of these potential changes.

I would appreciate receiving your impact statement by the end ofthe month. This will allow me to review potential resources and service availability against the developing budget. My goal is to meet a maximum of service needs within our allotted budget, and I am prepared to ask your assistance in doing so. Please contact me if you have any suggestions or questions. I also plan to be at the March 6th Quarterly Provider Information Sharing Conference and present on the State Plan and current budget situation. I hope to see you there. Thank you.

With sincere regards,

John P. Marshall

Area Director

As company accountant for Community Support Services (P.O. Box 828, Cold Mountain ND, 67888), it is Connie's job to prepare payroll, pay bills, monitor receipts, record transactions and prepare financial statements. Another important aspect of her job is to prepare the budget. She was going to have to look closely at the 2005 budget to make a case against having their contract rates cut.

A "contract rate" is the amount paid to Community Support Services (CSS) by the Whitfall County Area Services Authority for services provided by CSS. The service CSS provides is to run community residences for mentally and physically disabled persons. These residences have varying levels of supervision and care. (In Level I living conditions clients have the most independence, in Level III a much higher level of care is required). The income to run the houses and other properties comes from Whitfall County Services Authority, Social Security, and Medicaid. CSS receives no private funding, grants or other types of income.

CSS pays four types of expenses: Client Living Expenses, Personnel Expenses, Operating Expenses, and Administrative Expenses. Because CSS is a non-profit organization, any excess in revenues over expenses is spent on improvements. One goal of CSS is to own rather than rent its properties, so when possible excess funds are put toward the purchase of properties or paying off debt on properties already owned.

Client Living Expenses include rent, utilities, telephone, water and sewer, maintenance, and equipment for the properties where clients live. This category also includes client mental health care, pharmaceutical drugs, an allowance, and activities. Activities would include client outings such as the annual vacation, 4th of July cookout, Valentines party, Thanksgiving and Christmas parties, movies, bowling, dining out, etc.

The Personnel Expenses category includes salaries and workers' compensation insurance for the direct care staff, one direct care staff manager, one program director, two residential coordinators, one driver and one full-time qualified mental health professional (QMHP). The direct care staff works with the clients under the oversight of the direct care staff manager. The staff manager's job is a big one, as there is 100% turnover ofthe direct care staff annually. The residential coordinators oversee all sites. This includes regular visits as well as spot visits to the facilities during all shifts, scheduling and supervising staff, planning client activities, as well as covering direct care shift as needed. Additionally, they compile payroll information, maintain client funds and account records, etc. The QMHP must be on staff to approve all documentation of services submitted to Medicaid for payment. This paperwork covers each property, each staff member, for each client on a daily basis. Also included in the personnel expenses category are wages paid while each worker attends state-required mandatory training and any mileage allowance paid to them for using their personal vehicles for client transportation. The last budget item is the amount paid for alternative family living. This situation occurs when a client is placed in a host family's home, like a foster home. The family is paid a daily rate by CSS as an independent contractor (as opposed to being paid as an employee, with benefits and taxes withheld).

The third category of costs is the Operating Expenses. Operating expenses are the liability insurance, state-required mandatory training costs (paid to vendors), and the costs of the four company vehicles used for transporting clients. CSS owns a Dodge Neon, Chevy Malibu, Chevy Cavalier, and Chevy Van and budgets their lease, insurance, gas, and maintenance costs.

The last category of expenses is Administrative Expenses. This category includes salaries and benefits of Connie, Joyce, one office assistant, the required annual audit, and the costs of the office lease, insurance, utilities, phone, etc. for the administrative office. In non-profit organizations a normal administrative fee runs about 17% of revenues and CSS is no exception.

As Connie looked over her budget, wondering how the cost cuts could affect it, she knew several of the costs on her budget were committed, i.e., not easily changed. First, one guideline she was going to use was not to cut salaries. The organization would operate with fewer people before it would cut salaries and benefits across the board. With that in mind, she examined the Administrative Expense area. There were no possible positions to cut, and moving into another location was not feasible at this time. Actually, their rent was very reasonable because they had occupied the same location for several years and their rent increases had not kept pace with the market, plus it included utilities. Other operating costs such telephone and the annual audit were reasonable and necessary.

Were there any discretionary costs in the Operating Expenses area? Certainly the liability insurance was necessary, as was the mandatory training. "Could we operate with fewer vehicles?" she wondered. No, the program needed those vehicles. Not only were all four vehicles being used to meet current program needs (19 clients at 1 1 sites plus periodic services), but a new site with one additional client would be added by March 1, 2005. More program expansion was planned in the near future. She felt they would be doing well to continue getting by with only four vehicles.

That left two areas: Personnel and Client Living Expenses. Could they operate with fewer personnel? The direct care staff was only hired as needed, and with the 100% turnover rate annually, all hiring was done on an as-needed basis. Connie did not see how they could survive with fewer workers unless they fired one of the two residential coordinators. This would allow for a 5% budget decrease. If both residential coordinators were dismissed, the 10% budget decrease would be achieved. Connie shuddered to think of their program director's workload if CSS lost even one of their supporting residential coordinators, let alone both! If anything, with the planned growth, she would like to be adding another residential coordinator. Clearly, that wasn't a possibility now. In the Client Living Expenses area, Connie felt there were few discretionary expenses other than activities and allowances. Cutting down on activities such as picnics, outings, holiday festivities, etc. would be possible but not desirable.

Community Support Services Consolidated Programs Budget is presented below:

Revenue Breakdown:

ASSIGNMENT

Your task is to write a two to three-page single space letter, in good form, to Mr. John P. Marshall at Whitfall County Area Services Authority from Community Support Services (under Chief Executive Officer Ms. Joyce Johnson's signature). Your letter should discuss how the potential 5% and 10% decreases in revenue will impact CSS' budget. You are not required to prepare proforma budgets; you may respond verbally. A suggested approach is to explain the four expense areas, what costs are/are not discretionary, what you would have to eliminate in order to cope with a decrease in revenue, etc. Your goal is to sound like a willing team player while making every effort not to have your budget cut.

Publication title: Allied Academies International Conference. International Academy for Case Studies. Proceedings

Volume: 12

Issue: 2

Pages: 25-29

Number of pages: 5

Publication year: 2005

Publication date: 2005

Year: 2005

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 1948-3198

Source type: Conference Papers & Proceedings

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 192412194

Document URL: http://search.proquest.com/docview/192412194?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2005

Last updated: 2013-09-16

Database: ABI/INFORM Complete

Document 18 of 100

THE PROPOSED MERGER OF AMERICA WEST AND US AIRWAYS: WILL IT FLY?

Author: Cobb, Richard; Gooding, Carl; Parker, Jeffrey

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Abstract:

Wide swings in financial performance have been the pattern for the airline industry since the late 1970s. Operating profit averaged only 1.9% during the 1980s and 3.2% during the 1990s while operating losses have averaged over $5 billion per year since 9/11 (The Airline Handbook). Many industry analysts conclude that the restructuring of airline networks and fleets based on cost must be the central theme for the industry's long-term strategy for survival (Kangis and O'Reilly, 2003). Given this changing environment, what critical merger issues need to be addressed for these two airlines to best achieve lower operating costs through merger?

Full text:

INTRODUCTION

Wide swings in financial performance have been the pattern for the airline industry since the late 1970s. Operating profit averaged only 1.9% during the 1980s and 3.2% during the 1990s while operating losses have averaged over $5 billion per year since 9/11 (The Airline Handbook). Many industry analysts conclude that the restructuring of airline networks and fleets based on cost must be the central theme for the industry's long-term strategy for survival (Kangis and O'Reilly, 2003). Given this changing environment, what critical merger issues need to be addressed for these two airlines to best achieve lower operating costs through merger?

OVERVIEW OF THE AIRLINE INDUSTRY

The low profitability of the airline industry during the modern era was not evident during the growth years following WWII. However, with route structures and ticket prices controlled by the Civil Aeronautics Board (CAB), the airline industry began to record poor financial results during the 1970s. This factor in combination with growing public dissatisfaction with airline service quality led to the passage of the Airline Deregulation Act in October of 1978. This act placed the industry under the control of the Department of Transportation (DOT), an entity focused primarily on issues of operating procedures and safety. In this newly deregulated environment, the number of certified air carriers grew from 37 to 100 between the years 1978 and 1984 (The Airline Handbook). Many of these new carriers entered the market using low-cost models.

During the 1980s, most established carriers chose not to adopt low-cost models. Instead, they chose to employ innovative marketing and operational strategies to differentiate their service, attract business travelers, and entered the 1990s with the top ten major carriers controlling 90% of the market (Das and Reisel, 1997).

As the measured growth of the industry began to stabilize during the 1990s, airline analysts began to consider life-cycle effects. The 13% growth rate in passenger traffic recorded during the 1970s slowed to a 6% annual growth rate during the 1980s and then down to a 4.0% rate during the 1990s. As the industry matured, yield began to decrease, and the rate of passenger growth became equal to the rate of economic growth. The effects of a mature market led the major airlines to employ more aggressive yield management techniques aimed at business travelers.

INDUSTRY FINANCIAL CRISIS

A major industry recessionary cycle began in 2000 as business travelers began to seek alternatives to the increasingly higher and higher fares charged by the major carriers. Also, the terrorist attacks of 9/11 lead to a reduction in all travel and accelerated the industries decline. By 2004, the effects of the industry's worst financial downturn in history left low-cost carriers controlling 20% of the U.S. market (Velocci, 2004). In this environment of dramatic industry change, both merger partners seek the reorganization needed to support a low-cost operating network. In an interview with the Associated Press, David Bonner, CEO of the Retirement System of Alabama, a major investor in US Airways, concluded that because they would complement each other geographically, a combined US Airways - America West would compete better against discount carriers (Flynn, 2005). The CEO of America West, Douglas Parker, said that "the merger will create the first nationwide full-service, low-cost airline" (Reed, 2005).

Company Profile - America West Airlines

America West entered airline service in August of 1983. Based in Phoenix, the carrier expanded rapidly and achieved major-airline status by 1990 when, with over 12,000 employees, it generated annual revenues exceeding $1 billion. To grow during the early 1990s, the company added service and entered into cooperative agreements with several other carriers. By 1999, the company grew revenues to over $2 billion (Table 1).

Under the terms of the merger proposal, America West would retain managerial control, and the merged companies would retain the name of US Airways. Still, many issues remained to be addressed by the management team, including the mixture of aircraft types, creditor requirements, government oversight requirements, stockholder acceptance, and employee representation (see Table 3 & 4) (www.americawest.com).

Company Profile: US Airways

In 1939, US Airways began airmail service as All American Aviation. The airmail carrier grew and in 1949 added passenger service using modern DC3 aircraft to serve Pennsylvania and the Ohio valley areas. All American became Allegheny Airlines in 1953 and continued a period of growth through mergers and acquisitions that would allow it to reach sixth largest in terms of passengers. In 1979, following passage of the 1978 Airline Deregulation Act, Allegheny changed its name to US Air. During the 1990s, revenues grew (see Table 2) as additional transatlantic routes and new Airbus aircraft were added. US Air officially changed its name to US Airways in 1997.

The terrorist attacks of 9/11 were especially hard on US Airways and its east coast market concentration, which included Washington and New York. The company filed for Chapter 11 bankruptcy protection on August 11, 2002 (www.usairways.com).

CONCLUSIONS

Combined, these carriers would be the fifth largest when measured in terms of revenue passenger miles. However, with record high debt and overcapacity, size alone does not guarantee success in an industry that is restructuring to compete more on the basis of lower operating costs and higher quality.

ASSIGNMENT

Use data or information available from company, industry, and government sources to answer the following questions.

Question 1. Evaluate the internal and external environment and analyze major obstacles to making this merger successful.

Question 2. An increase of $1/barrel increases the merged airline's costs by $36M. The merger model was based on $50/barrel. At $66/barrel, how much does this increase the merged company's fuel costs? What options does it have to offset this increase?

Question 3. Does the data presented in the case indicate any areas wherein the merged management team may be able to improve overall operating results? The team would accomplish these improvements by applying differing managerial practices to the larger portion of the merged company which was US Airways?

Publication title: Allied Academies International Conference. International Academy for Case Studies. Proceedings

Volume: 12

Issue: 2

Pages: 31-36

Number of pages: 6

Publication year: 2005

Publication date: 2005

Year: 2005

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 1948-3198

Source type: Conference Papers & Proceedings

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 192411679

Document URL: http://search.proquest.com/docview/192411679?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2005

Last updated: 2013-09-16

Database: ABI/INFORM Complete

Document 19 of 100

ACCOUNTING FOR CAPITAL FORMATION: FINANCIAL ACCOUNTING AND INCOME TAX ISSUES OF RELATED PARTY LOANS AT UNREALISTIC INTEREST RATES

Author: Coffee, David; Lirely, Roger; Swanger, Susan

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Abstract:

This case illustrates the need for accountants to look beyond the mere form of how transactions are structured and to search for their economic substance if they are to achieve the objective of presenting financial statements which have representational faithfulness. The student is confronted with ethical issues and financial reporting and tax issues and must make judgments based on research and sound professional reasoning. The case has a difficulty level of five and is appropriate for graduate level or strong intermediate students.

Full text:

CASE DESCRIPTION

This case illustrates the need for accountants to look beyond the mere form of how transactions are structured and to search for their economic substance if they are to achieve the objective of presenting financial statements which have representational faithfulness. The student is confronted with ethical issues and financial reporting and tax issues and must make judgments based on research and sound professional reasoning. The case has a difficulty level of five and is appropriate for graduate level or strong intermediate students.

CASE SYNOPSIS

Blackaddr Extreme is in the planning stages as a start-up company with two key assets: (1) a patent for a revolutionary break-through molding process which will make it possible to manufacture Whitewater kayaks out of a very light and strong composite material of carbon fiber and other lightweight fibers; and (2) the financial backing of Steve Bullock, an adventure capitalist with substantial resources and a track record of successful entrepreneurial endeavors. Steve Bullock is an experienced and successful investor, and has some creative, and, at least from Steve's perspective, innovative ideas about the capital formation of Blackadar Extreme. The student is placed in the role of Donald Faircloth, a Certified Public Accountant who is asked to give an opinion as a consultant, about the proper financial reporting of Steve's proposed unorthodox transactions and how the proposed transactions will impact income taxes. Students must research generally accepted accounting standards in the financial accounting literature and research the federal tax code. They must make professional judgments based on their findings and make ethical judgments in arriving at a proposed solution.

Publication title: Allied Academies International Conference. International Academy for Case Studies. Proceedings

Volume: 12

Issue: 2

Pages: 37

Number of pages: 1

Publication year: 2005

Publication date: 2005

Year: 2005

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 1948-3198

Source type: Conference Papers & Proceedings

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 192411604

Document URL: http://search.proquest.com/docview/192411604?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2005

Last updated: 2013-09-16

Database: ABI/INFORM Complete

Document 20 of 100

ONE STEP FORWARD, TWO STEPS BACK?

Author: DeLaat, Jacqueline

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Abstract:

Iin Xiaoqin reached for a sip of her herbal tea and tried to calm herself. Her life had built in a crescendo to a point of decision, and like many Chinese women, the reality of having the power to make serious life choices was both new and anxiety producing. So far, she reflected, her story had been a largely fortunate one.

Born to rural parents in the early years of the People's Republic, her initial expectations had been modest. She dutifully attended school, even into the second and third levels not usually completed by girls, especially in the rural, mountainous areas such as hers. Now, of course, things were different in China, with higher numbers of girls enrolled in school. In pre-primary education, 88 girls were enrolled for every 100 boys, in 1995; the ratio was 90 to 100 in early primary grades, but dropped to 66girls for each 100 boys in second level, with data unavailable for the third level, pre-college, training (United Nations, 1999). But in the I960' s the idea of girls pursuing education had still been unusual; Jin had encountered resistance and even censure in her small farm community, but because her parents had supported her aspirations she had continued. She knew their encouragement was in part due to the lack of a son, which would have made them far happier, and she did her best to compensate by achieving to the best of her abilities.

Completion of the third level, of course, usually meant admission to college, though the field of study and the institution of enrollment were traditionally selected by formal testing and procedures, rather than individual students and their families. In the 1970's, however, the "Cultural Revolution" had gripped China. The college admissions tests had been suspended between 1970 and 1976, leaving only two avenues into college: waiting until the exams would be given again (which did occur in 1978) or being selected for college as a "peasant scholar." Jin Xiaoqin fortunately fell into the latter category.

Full text:

BODY OF CASE

Iin Xiaoqin reached for a sip of her herbal tea and tried to calm herself. Her life had built in a crescendo to a point of decision, and like many Chinese women, the reality of having the power to make serious life choices was both new and anxiety producing. So far, she reflected, her story had been a largely fortunate one.

Born to rural parents in the early years of the People's Republic, her initial expectations had been modest. She dutifully attended school, even into the second and third levels not usually completed by girls, especially in the rural, mountainous areas such as hers. Now, of course, things were different in China, with higher numbers of girls enrolled in school. In pre-primary education, 88 girls were enrolled for every 100 boys, in 1995; the ratio was 90 to 100 in early primary grades, but dropped to 66girls for each 100 boys in second level, with data unavailable for the third level, pre-college, training (United Nations, 1999). But in the I960' s the idea of girls pursuing education had still been unusual; Jin had encountered resistance and even censure in her small farm community, but because her parents had supported her aspirations she had continued. She knew their encouragement was in part due to the lack of a son, which would have made them far happier, and she did her best to compensate by achieving to the best of her abilities.

Completion of the third level, of course, usually meant admission to college, though the field of study and the institution of enrollment were traditionally selected by formal testing and procedures, rather than individual students and their families. In the 1970's, however, the "Cultural Revolution" had gripped China. The college admissions tests had been suspended between 1970 and 1976, leaving only two avenues into college: waiting until the exams would be given again (which did occur in 1978) or being selected for college as a "peasant scholar." Jin Xiaoqin fortunately fell into the latter category.

Jin was at that time part of a farm cooperative, near the village of Caijiacun, about 200 miles from the capital of Jiangxi Province, her home community. (Later, in the 1990's, the youth of this community left it in massive numbers to pursue better opportunities in the cities in the east of China.) In the early 1970's, however, all remained at home, struggling to eek out a living in the broken farm village. Further, many urban youth were sent to rural areas such as Jiangxi Province, with the goal of increasing their understanding of the rural peasant's life. Jin's village friend, Cai Songquan, longed to move away from the area, but was not allowed to leave because he was an only son and the sole provider for aging parents. Some of her friends from the city did not really survive their rural experience with their educational motivation intact; rather they faded into relative obscurity, sometimes marrying and remaining in their transplanted or originally rural lives, or returning to the cities with less lofty aspirations, identifying more completely with the working masses of their country.

Jin counted herself lucky to return to her previous status as a student by being admitted to the foreign studies college in Beijing. There the key faculty and administrators determined that her major area should be English and another concentration in international relations. (The "worker-peasant scholars" of this period were given no choice in their areas of study.) Secretly, Jin hoped for a career in China's diplomatic core, but she realized that such ambitions must be subdued, and contained within the goals and positions established for her by the state. She entered into her college experience enthusiastically and gratefully, competing fiercely for grades and accomplishments that would enhance her future.

While in college Jin met and fell in love with Gong Liu, another student of international affairs with aspirations to government service. Gong was an outgoing and ambitious young man, though his academic achievements were not as compelling as Jin's. Upon graduation the two married and were both assigned to the Chinese Foreign Service. Jin was encouraged to accept a teaching position at the Foreign Affairs College, where excellent teachers, also members of the Foreign Service, taught future Foreign Service recruits. Educated workers had somewhat more choices in China by this time. Before economic reform in 1978, labor mobility, employment and wage levels in China were fully controlled by the government, and no one had a choice over the type of work undertaken. After 1978, however, the educated groups could choose the privately controlled enterprises, and even, as in Jin's case, have some choices if they were still in a government cadre of workers (Meng, 69). Jin was happy about her teaching opportunity because the teachers received far better housing assignments than did the rank-and-file diplomats while in Beijing. Jin had a small, heavily subsidized, basic apartment with private bath, while single diplomats were assigned to shared quarters.

Gong, who entered the diplomatic core at the same time, was aware that his housing was superior to that of his colleagues only because he was married to Jin. While enjoying the better accommodations and lifestyle, he felt diminished to have received this benefit through his wife. Even after the Revolution in the 1940' s, many Chinese retained their traditional views of gender roles, and Gong shared many of these opinions. Traditionally, Chinese men expected to be the major providers and to have their spouses and families dependent and grateful to them; women had no authority or say in the management of important family matters, nor should they participate as individuals in social, political and economic activities. Although increased access to education and employment outside the home had resulted in significant improvements in the status of Chinese women, particularly in the eastern urban centers, the traditional values and norms which had relegated women to an inferior position within the family and in society continued to prevail among many social groups in China (United Nations, 1998, p. 13). Clearly Jin's role as faculty at a respected institution was somewhat threatening to Gong, and some tension in the marriage resulted from her privileges.

Early in her faculty appointment, Jin also began study to obtain her Master's degree, really a necessity in order to fully secure her teaching position. Her status among faculty had originally been somewhat reduced by her never taking the college entrance exam. Receiving her Master's fully established her academic credibility among the faculty. Gong also enrolled in graduate studies. Iin completed her Master's degree first, another development that was not particularly pleasing to her husband.

Gong also began to receive assignments abroad. At first these were of limited duration, usually only a few months at a time. Shortly, however, he was assigned to a two-year posting in an embassy abroad. There was little question of Jin accompanying him, since families of diplomats below the rank of Counselor generally were expected to remain in China. Single men were welcomed in postings abroad, but unmarried women were not; it was believed that single women could too easily be compromised in an international setting. They could not have a normal social life, as rumors about them might jeopardize their reputations and thus harm the foreign policy undertakings of their embassy. They could also, it was felt, be subjected to blackmail. Additionally, it was common knowledge that women were also less hardy and less able to adjust to foreign cultures and the demands of living overseas. Thus, single and married men were greatly preferred for foreign postings. Service abroad was clearly "man's work," and Gong and Jin accepted that they would live apart much of the time. This was only to be expected. This common attitude also affected Jin's decision to stay in teaching, rather than pursuing her original dream of a Foreign Service career.

Jin meanwhile was doing well at her college. Women were a minority among the faculty in the early 1980's, since a small percentage of women completed the necessary education. Among members of the diplomatic core, however, teaching positions were highly desired by women who did qualify, because they appreciated the housing benefits and the greater flexibility of hours and assignments compared to those of mainstream diplomats.

Iin and Gong conceived a child, and their son, Yuan, was born in 1986. Because of the one child policy, the couple had strictly practiced birth control until deciding to conceive their child. (They were totally in tune with their generation on this matter, as 72% of Chinese females of childbearing age practiced modern birth control in 1983, and 83% didsoby 1990.) (United Nations, 1998, p. 23) The one child policy was strictly adhered to by anyone in government service, so the couple was grateful their child was a son. Legislation stipulated that urban couples should generally have only one child and violators face fines. As of the turn ofthe century, China reported that the one-child policy had been responsible for preventing 300 million births in the previous 20 years and is still essential to avoiding a population explosion and starvation (BBC). The policy began as an open letter issued by the Central Committee of the Chinese Communist Party 20 years ago and the population growth rate has declined since the policy began. As loyal government employees, there was no question that Jin and Gong would have only this child.

Jin was able to initially spend time with the infant, but shortly returned to her teaching. All four of Yuan's grandparents were happy to care for the child when his parents had work responsibilities. Often in China the lack of child care programs made working difficult for mothers, but this was more the case among the less educated groups. Jin was able to see Yuan after her teaching hours, and enjoyed somewhat more time with him than did some of her friends in office bound positions. Gong loved the boy but regarded planning and arranging for his care as his wife's responsibility. When he reached school age he was admitted to a public kindergarten, and he even had a nursery school available the year before kindergarten.

Jin left China when Yuan was one year old, to study for a year at Harvard University, in the Fletcher School of Law and Diplomacy, one of the highest ranked international relations programs in the United States. Graduate study in the United States was highly valued, for both the education itself and the greater understanding of westerners it provided. In the Chinese diplomatic core, such opportunities were very competitive and highly prized. While Jin was away, Yuan resided with his mother's parents, a common arrangement among Chinese assigned overseas.

In the United States Jin lectured some, and also collaborated with political scientists at the University. She grew in confidence, and in her competence in the English language. Upon her return, her English was rated at the highest level, a skill that usually would place her in important overseas work at Chinese embassies in western countries. However, Jin remained in her teaching post in order to keep the security and benefits it provided and avoid the stress and problems encountered by female Chinese diplomats seeking overseas postings. Jin also knew that if she sought overseas assignments, she and Gong would very likely be posted to different countries and not encouraged to take Yuan with either of them. While his grandparents would care for him whenever necessary, Jin did not want to be separated from her son on such a regular basis.

After another decade of teaching, however, Jin again had occasion to study in the United States, this time at the University of Virginia. She pursued graduate work in English and also taught in collaboration with faculty there. Again her skills and confidence increased, and she returned happy that she had taken the opportunity.

Jin found China much changed in the mid-1990s. Women accounted for 45% of the total workforce, and 40% of the total industrial labor force; about 22% of the members of the Chinese parliament were female, a higher percentage than in most countries of the region (United Nations, 1 999, p. 1 5 1 , 1 74). About 32% of all government employees were female by 1 994 (United Nations, 1998, p. 58). However, in the ministerial ranks of government, including the high-level foreign policy positions of most interest to Jin and Gong, less than 10% were female. Most of the women in the ministerial ranks (about 62%) were entrusted with social affairs, such as social services and welfare, health, education, and women's affairs; they were rare in the economic development field or in foreign policy and defense related positions (United Nations, 1998, p. 67).

Increased privatization had opened many opportunities for the educated class, as joint ventures between Chinese and western companies entered the economic scene and political and economic reforms allowed Chinese to make more professional choices on their own, to buy their own apartments, and for some fortunate ones to make substantial incomes they had only dreamed of previously. Women in urban areas were still better educated that in rural areas; in Beijing, 73% of working women now had a high school degree and 17% have a university education (Statistical Yearbook of China, 1998). However, despite progress, in the Chinese mainland organizations women are employed in 50% fewer professional jobs and about 11% of the managerial jobs in which men are employed (Honh, 1 995). By the mid- 1 990' s there was an abundant workforce and 73% of women 15 and older were economically active. Jin realized that in the rural areas most of these benefits were not yet realized, and that education was the reason for the new opportunities she saw. Even in the countryside, primary school dropout rates for girls had decreased to between 3 and 5%, an improvement, though because of the large population, still leaving a large number of uneducated women (United Nations, 1998, p. 39; Dowd, 1995).

Gong was increasingly spending his time abroad, and the couple grew apart. Shortly after lin' s return they formally separated, though neither seemed immediately motivated toward a divorce. Formal separation from her husband actually made little impact on lin' s life, since the couple had been often apart and both Jin and son Yuan were accustomed to this. Jin did realize, though, that China's new laws gave her certain formal rights, such as those found in the new marriage law of 2001 . The new law outlawed married people living with an opposite gender person not their spouse. Further, a man found guilty of divorcing his wife to live with his mistress can be sued by his former wife for financial compensation. This prompted many lawsuits. The Chinese Supreme Court ruled in 2002 that simply having affairs or keeping a concubine was NOT excluded by the new law, which narrowed the law' s application (China News Digest).) It remained to be seen if any of this might become relevant, should Jin and Gong decide to divorce.

Yuan, now a bright and self-sufficient teenager and level-three student, required less and less of Jin's time and energy. Her parents, however, were becoming elderly and increasingly dependent upon her, their only child, both financially and emotionally. No public support really existed that would ensure their care as they continued to age. Jin also felt increasing pressure to further develop her personal life and opportunities on her own, particularly after her separation from Gong. She became involved in a variety of community groups, and sought responsibility on the neighborhood council of her urban community. She was also part of a wider movement toward political participation among Chinese women at this time. In 2002, People 's Daily, a voice of the government, clearly called for more such efforts to push women's rights, stating: "More women should participate in the deliberation and administration of State affairs. More female cadres should be trained, selected and play a role at various levels. In this way women can better enjoy their political rights." (China Daily, May 14, 2002).

Challenging work in this capacity brought home the realization that she was stagnating a bit at the university. Her job was secure, yes, but also lacking in challenge. She had been easily promoted to the Associate Professor level and anticipated no difficulty in achieving the highest rank of Full Professor. As she had not served for more than a few weeks at embassies abroad, however, she could not aspire to policymaking or top administrative roles at her college all of which required actual Foreign Service experience abroad. Many of her college contemporaries were advancing and exploring new opportunities, some in the Foreign Service and others in the private j oint ventures that were thriving in the new economic structure. But women were still disadvantaged in China's Foreign Service. As of 2002 about 4000 staff members were included in the Foreign Ministry, among which about 1200 were female cadres, with 800 based in the ministry and only 400 on foreign posts. Of those assigned abroad, 45 held the rank of counselor or above; six of these were ambassadors, five counsels-general. (Sun Jing Li, 2003)

As she sat on her rooftop this sunny May morning, Jin considered the meeting she had had last week with a cousin who was part of the executive team of a new j oint venture in electronics with an American firm. The enterprise was expanding very rapidly, with more need for middle managers and technical staff competent in English. Xin Meng had called Jin and asked to meet to discuss hiring her as a Vice President for staff development. The salary would be triple her current one, and there would be frequent trips to the United States, which Jin always enjoyed. Still, she would need to give up her years of accrued seniority, her comfortable and subsidized housing, and most importantly her job security. Jin knew of many, such as her engineering friend Liu, who had ventured forth into the newly emerging private sector only to be unemployed and scrambling for an income a few years later, when economic developments or poor, inexperienced management of the new enterprises brought severe downturns or even collapse of the ventures. The western partners, of course, also suffered in these events but could absorb the losses far more easily than the new entrepreneurs within China itself. The political and legal systems, also, were just beginning to address many issues of a partially free market, and individual workers and companies were often at risk due to lack of a stable legal framework.

Thus, even in the new China, Jin realized there were hurdles professional women would encounter. (Shaffer et. al., 2000) The Chinese mainland has a long history of equal rights legislation; the first constitution (1954) provided women with equal rights with men in economic, cultural, social and family arenas. Insofar as this is more a statement of intent rather than a guarantee of rights (Pearson), several amendments, including the Law on Safeguarding the Rights and Interests of Women (1992) have been designed to further guarantee women's rights and promote equality with men. However, Jin knew that these amendments have been criticized for lack of penalties and general imprecision (Pearson). Indeed, despite legal protections, differential treatment of women and sexual harassment in the PRC still seemed widespread (Honh). Further, conditions are worse for women in the countryside, where 75% of Chinese women still resided in 2000. (Wu Qing, China Daily, May 14, 2002)

The recent economic reforms have stressed efficiency, and women have been discriminated against in terms of hiring, layoffs, and wage and pension systems (Summerfield; Zheng). Sexual harassment has increased, especially among rural women moving to urban areas and suffering exploitation and harassment (Iacka; Zhong). Movement from a planned, controlled economy to a market economy has also resulted in loss of administrative controls and protections, which have been replaced by personal wishes and rule of managers, the majority (89%) of whom are male (Honh). A study by the All-China Women's Federation Research Institute had shown that "Women' s mobility in their life-long career tends to be horizontal while men' s mobility is upward" (Zheng, p. 73). In layoffs, the proportion of laid-off female workers has been higher (59%) than that of male workers (Zhang and Zhao, cited in Cooke). This research also found that women were discriminated against in retirement, and often compelled to retire at an earlier age than men. Thus, Jin feared she might be more at risk, in terms of long-term security, in a private sector position. She could see that the new saying about women' s overall progress in China, "one step forward, two steps back," might apply to her.

All her life others had made most of the choices: her work in the countryside, her matriculation at a particular college, the choice of her fields of study, even her assignments to study in the United States, had primarily been dictates of her government. She recalled how, in college, she had dreamed of a diplomatic career which had never materialized for her; she knew that, had she been male, she would have pursued assignments with the Foreign Service abroad. Now, in the middle of her life, the new economic and political conditions in China presented her with a serious professional alternative, and a somewhat frightening choice. What should she do?

Publication title: Allied Academies International Conference. International Academy for Case Studies. Proceedings

Volume: 12

Issue: 2

Pages: 39-45

Number of pages: 7

Publication year: 2005

Publication date: 2005

Year: 2005

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 1948-3198

Source type: Conference Papers & Proceedings

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 192411652

Document URL: http://search.proquest.com/docview/192411652?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2005

Last updated: 2013-09-16

Database: ABI/INFORM Complete

Document 21 of 100

RIVERSIDE COUNTRY CLUB, PRIVATE OR SEMI-PRIVATE: MUTUALLY EXCLUSIVE DECISION MAKING UNDER UNCERTAINTY

Author: Dow, Benjamin L; Newsom, Paul

ProQuest document link

Abstract:

Chris Johnson's purchase of Riverside Country Club in 2003 was the culmination of a longtime dream of one day owning a golf course. Mr. Johnson has been in the insurance business since graduating with a degree in marketing on a golf scholarship. Mr. Johnson is an accomplished golfer with statewide recognition, having won State Amateur Player of the Year awards on three different occasions. Now Johnson's time is split between the insurance agency and overseeing his investment in Riverside Country Club. Johnson' s decision to purchase Riverside for $2.4 million was reached only after a thorough valuation conducted by a local investment banking firm specializing in private company acquisitions. Two years into the purchase of Riverside, Johnson is considering a change in operating strategy. At present, Riverside is operating as a co-purpose semi-private club that generates revenues from both members (who pay a fixed monthly fee for unlimited golfing privileges) and the general public (who pay a daily per-use fee). Johnson's business plan at the time of purchase included the eventual conversion the club from a semi-private course to a private course as homesite development and interest in the club grew. Although his original forecast projected a five-year outlook for this conversion, higher than anticipated growth and profitability has now pushed up the potential timetable for conversion. However, Iohnson is uncertain as to whether an earlier change operating strategy will lead to an even greater return on investment or merely set back profitability over the next three years.

Full text:

CASE BACKGROUND

Chris Johnson's purchase of Riverside Country Club in 2003 was the culmination of a longtime dream of one day owning a golf course. Mr. Johnson has been in the insurance business since graduating with a degree in marketing on a golf scholarship. Mr. Johnson is an accomplished golfer with statewide recognition, having won State Amateur Player of the Year awards on three different occasions. Now Johnson's time is split between the insurance agency and overseeing his investment in Riverside Country Club. Johnson' s decision to purchase Riverside for $2.4 million was reached only after a thorough valuation conducted by a local investment banking firm specializing in private company acquisitions.

Two years into the purchase of Riverside, Johnson is considering a change in operating strategy. At present, Riverside is operating as a co-purpose semi-private club that generates revenues from both members (who pay a fixed monthly fee for unlimited golfing privileges) and the general public (who pay a daily per-use fee). Johnson's business plan at the time of purchase included the eventual conversion the club from a semi-private course to a private course as homesite development and interest in the club grew. Although his original forecast projected a five-year outlook for this conversion, higher than anticipated growth and profitability has now pushed up the potential timetable for conversion. However, Iohnson is uncertain as to whether an earlier change operating strategy will lead to an even greater return on investment or merely set back profitability over the next three years.

GOLF INDUSTRY BACKGROUND

Prior to 1970, the golf market had two different types of courses- lower budget courses operated mainly by municipalities, and more upscale private country clubs. In the earlier 1970's a new trend known as "A Country Club for a Day" began to emerge as the title for newer upscale daily fee courses. These courses were open to the public and provided high quality design, maintenance and service. At present, most ofthe industry research is based on a three segment framework, which classifies courses as municipal, daily-fee, or private. In reality, the golf course market now contains many more market segments. These market segments are based on several interrelated factors with a focus on the type of customer served. For example, a private club may serve local residents in a certain income bracket, while a similar private club may be structured to serve corporate clients.

On the demand side, the total number of golfers in the United States has remained fairly flat over the last five years, but has increased from 10 years ago. In 1994, an estimated 23 million Americans were classified as golfers having played 421 million rounds of golf at approximately 1 1 thousand courses. By 2004, the number of American golfers has grown to 27.4 million and the number of rounds played increased to approximately 498 million. Ofthe 27.4 million total golfers in the US, 12.8 million are classified as core golfers (playing more that seven rounds per year) and 14.6 million are occasional golfers (playing one to seven rounds per year). The average core golfer plays 37 rounds per year.

From an operational viewpoint, golf course revenues are generated from five main sources: green fees, cart rentals, range ball fees, food and beverage sales, and pro shop sales. Most golf courses operate as either a public daily fee, semi-private, or private course. Daily fee courses are open to the general public and charge customers on a per use daily basis. For example, a customer playing a daily fee course might pay $30 for the green fee, $10 for use of a cart, $5 for a bucket of range balls to practice before playing the round, and $10 for a sandwich and drink. At a private course, play is restricted to members and guests. Members typically pay a fixed monthly fee for unlimited golfing privileges (green fees), but they continue to pay for cart fees, range ball fees, food and beverages, pro shop purchases, and guest fees. A new trend in private course operations includes an all-inclusive membership, in which members pay a higher monthly fee that includes unlimited golfing privileges, cart usage and range balls. A semi-private course allows play by both members and the general public, but usually affords special privileges to its members.

RIVERSIDE COUNTRY CLUB

Riverside Country Club opened in 1995 as a semi-private golf course located in Maumelle, Arkansas, a growing suburb located in the greater Little Rock metropolitan area. Riverside offers an 18-hole championship golf course spread out over 151 acres along the Arkansas River, complete practice facilities, a full-service snackbar with an ability to provide catering services, and a pro shop offering top quality merchandise. Riverside Country Club was originally built by Golf Corp LLC to take advantage ofthe surging popularity of golf that occurred during the early 1990's.

Since inception Riverside Country Club has continued to operate under a co-purpose semi-private operating strategy. Total revenues in 2004 were $1.31 million, of which member dues attributed $297,000, daily-use green fees attributed $578,000, cart fees attributed $200,000, pro shop sales attributed $106,000, food and beverage attributed $1 19,000 and range ball fees accounted for the remaining $10,000.

THE SITUATION

One rainy Friday afternoon, Chris Iohnson was reviewing the most recent financial records of Riverside Country Club when he began to entertain the thought of converting Riverside from a semi-private club to a private club. Although Riverside currently has 165 members and member dues accounted for almost $300,000 in revenues in 2004, non-member green fees had accounted for almost $600,000. Iohnson wondered how many actual new members it would take to increase profitability beyond what was currently generated.

Iohnson quickly realized that any decision to change Riverside's operating strategy would involve risk and should not be done hastily. He decided to call Brad Story, a financial consultant with ADA Management Services, and explain his idea. Story recommended that Johnson come in next week with last year's financial statements and detailed operating data as well as projected financial statements for 2005 under the current semi-private operations. Story would then create a financial model for both a traditional private membership and all-inclusive private membership to use as a comparison with the current semi-private operating structure. In addition, Story would perform a sensitivity analysis on the financial models to determine the risk involved in each proposed operating strategy.

Iohnson remarked that Riverside currently has 165 members who pay $150 per month, play an average of 45 rounds per year and in his estimate account for about 30% ofthe total rounds played. Under current operating forecasts for 2005, the total number of rounds to be played at Riverside is estimated at 25,000 (See Table One for a summary of 2005 projections). While daily fee rounds are projected to be 17,575, Johnson noted that weather and local competition might affect the actual number of daily fee rounds. Johnson estimates a margin of error of plus or minus 2,000 rounds.

A private membership operating strategy would eliminate the revenue uncertainty of daily fee rounds, but in turn would be almost completely dependant on membership revenue. Under a private membership operating structure, Johnson assumed that each member would continue to play an average of 45 rounds per year as well as pay for about 10 daily fee guest rounds per year at $25 per round. In addition, Riverside would continue to sponsor a number of corporate/charity outings each year and over the last three years Riverside has averaged 4,500 corporate/charity daily fee rounds at $25 per round from corporate/charity outings. Both member and daily fee rounds would be subject to an $8 cart fee, and Johnson continued to believe that 85% of rounds would utilize a cart. Pro shop sales, food and beverage sales, and range fee revenue would continue to be estimated on a per round basis. The cost estimates for the private membership would remain unchanged. Iohnson mentioned that his marketing research of other private clubs in the region would likely support a private membership monthly fee of $190 per month. At this rate, Johnson estimated he could attract 300 members and wondered what the effect on Riverside's cash flow would be compared with the current 2005 projections. However, Johnson realized that the actual number of members might fall somewhere between 250 and 350 and was concerned about how much risk was involved if fewer than expected members joined the club.

Johnson was also interested in a new trend in private membership that incorporated an all-inclusive membership strategy. An all-inclusive membership would work exactly like the traditional private membership except that members were charged one monthly fee for their golfing privileges, use of carts, and use of the golf range. Guest fees would increase to $35 per round, but guests would not be charged for cart usage or use of the range. Corporate/charity outing round fees would increase to $35 but there would be no charge for cart usage or use ofthe range. Iohnson estimated that members would average 1 0 guests per year and corporate charity daily fee rounds would remain at 4,500 per year. Johnson estimated that he could charge $250 a month for the all-inclusive membership and attract 265 members to this format, although anywhere from 215 to 315 members was possible.

Story recommended to Johnson that a mutually exclusive decision such as this be analyzed by comparing operating cash flows under the different proposals because the proposed changes resulted in an adjustment in operational strategy and did not include any changes in financial structure or capital improvements. Johnson was both familiar and comfortable with this approach and added that depreciation for 2005 was estimated at $125,000 and the marginal tax rate used by Riverside is 30%.

THE TASK

At the conclusion of the meeting, Story suggested Johnson come back at the end of next week. Story said he would put together a preliminary financial sensitivity study to help Johnson decide on the appropriate operating structure for Riverside. Story turned over a copy of his notes from his meeting with Johnson to a young associate and asked his associate to prepare a report containing the following information:

1) Calculate projected operating cash flow for Riverside remaining a semi-private club using the data provided in Table One.

2) Create a spreadsheet model for the semi-private plan that will allow for a sensitivity analysis of the operating cash flow to a change in the daily fee round inputs.

3) Calculate the operating cash flow for the semi-private plan using a:

a) low estimate of daily fee rounds = 15,575

b) base projection of daily fee rounds = 17,575

c) high estimate of daily fee rounds = 19,575

4) Modify the spreadsheet model to calculate operating cash flow for Riverside operating as a traditional private membership allowing for a sensitivity analysis of the operating cash flow to a change in the number of members.

5) Calculate the operating cash flow for the traditional private membership plan using a:

a) low estimate of 250 members

b) base projection of 300 members

c) high estimate of 350 members

6) Using the traditional private club model, calculate the breakeven number of members required in order the match the operating cash flow of the base projected semi-private operating strategy.

7) Modify the spreadsheet model to calculate operating cash flow for Riverside operating as an all-inclusive private membership allowing for a sensitivity analysis of the operating cash flow to a change in the number of members.

8) Calculate the operating cash flow for the all-inclusive private membership using a:

a) low estimate of 215 members

b) base projection of 265 members

c) high estimate of 315 members

9) Using the all-inclusive private club model, calculate the breakeven number of members required in order the match the operating cash flow of the base projected semi-private operating strategy.

10) Discuss the risk associated with each business operating strategy and prepare a recommendation for Johnson.

Publication title: Allied Academies International Conference. International Academy for Case Studies. Proceedings

Volume: 12

Issue: 2

Pages: 47-51

Number of pages: 5

Publication year: 2005

Publication date: 2005

Year: 2005

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 1948-3198

Source type: Conference Papers & Proceedings

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 192411594

Document URL: http://search.proquest.com/docview/192411594?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2005

Last updated: 2013-09-16

Database: ABI/INFORM Complete

Document 22 of 100

BOGART'S MARINA

Author: Dye, Janet

ProQuest document link

Abstract:

BOGART'SBogart's is a local business catering to boaters. The business is split into four main areas - the marina, a deli/bar, a small convenience store, and boat repair services. The firm accepts cash, major credit cards, and personal checks on local banks as forms of payment.

The marina has 300 slips which are each rented for $1200 for the year. Due to a shortage of slips in the area, there is a waiting list for slips. To make the rental fee more manageable, renters can elect to pay an extra $50 handling fee and then pay $100 on a monthly basis rather than having to pay all $1200 at one time. All ofthe slips have electricity and water provided. Limited short-term moorage is also available for $20 per day. The short-term moorage is always full from May through September.

The marina also sells gasoline and diesel fuel to boaters.

The deli and bar are in the same building and sell each other's products. They offer limited menus of sandwiches and burgers and serve beer and soft drinks. The bar also features hard liquor. The Sam Spade Sandwich and the Bogie Hoagie are favorite menu items among local residents and the deli does a fairly heavy take-out business year round. The deli is smaller in square footage than the bar and intended to appeal more to families. The bar has several big screen televisions tuned to sports events and gets the majority of its customers off the boats. All ofthe food is prepared on site by Bogart's two cooks.

The convenience store is in a section of the building which holds the general administrative offices for Bogart' s. It sells an assortment of toiletries, fishing supplies, alcoholic beverages and food items to customers off the boats. It also has shower facilities and a Laundromat, both of which are popular with boaters. The general and administrative offices house the management, accounting, and maintenance staffs.

The boat repair shop is the fourth business area and is housed in a large building on the water. It's peak season runs from the spring, getting boats ready for launch, through the beginning of fall when many owners remove their boats to storage. Bogart's keeps their two chief boat mechanics on payroll all year to be assured of their services during the peak season. The co hires several additional mechanics to meet demand during the busy season.

Full text:

BOGART'SBogart's is a local business catering to boaters. The business is split into four main areas - the marina, a deli/bar, a small convenience store, and boat repair services. The firm accepts cash, major credit cards, and personal checks on local banks as forms of payment.

The marina has 300 slips which are each rented for $1200 for the year. Due to a shortage of slips in the area, there is a waiting list for slips. To make the rental fee more manageable, renters can elect to pay an extra $50 handling fee and then pay $100 on a monthly basis rather than having to pay all $1200 at one time. All ofthe slips have electricity and water provided. Limited short-term moorage is also available for $20 per day. The short-term moorage is always full from May through September.

The marina also sells gasoline and diesel fuel to boaters.

The deli and bar are in the same building and sell each other's products. They offer limited menus of sandwiches and burgers and serve beer and soft drinks. The bar also features hard liquor. The Sam Spade Sandwich and the Bogie Hoagie are favorite menu items among local residents and the deli does a fairly heavy take-out business year round. The deli is smaller in square footage than the bar and intended to appeal more to families. The bar has several big screen televisions tuned to sports events and gets the majority of its customers off the boats. All ofthe food is prepared on site by Bogart's two cooks.

The convenience store is in a section of the building which holds the general administrative offices for Bogart' s. It sells an assortment of toiletries, fishing supplies, alcoholic beverages and food items to customers off the boats. It also has shower facilities and a Laundromat, both of which are popular with boaters. The general and administrative offices house the management, accounting, and maintenance staffs.

The boat repair shop is the fourth business area and is housed in a large building on the water. It's peak season runs from the spring, getting boats ready for launch, through the beginning of fall when many owners remove their boats to storage. Bogart's keeps their two chief boat mechanics on payroll all year to be assured of their services during the peak season. The co hires several additional mechanics to meet demand during the busy season.

REQUIRED

1. You have recently been hired as the new manager of Bogarts with just the general knowledge of the company listed above. What specific items of managerial accounting and general management control information would you request?

2. Explain how each item of information would be useful.

Publication title: Allied Academies International Conference. International Academy for Case Studies. Proceedings

Volume: 12

Issue: 2

Pages: 53-54

Number of pages: 2

Publication year: 2005

Publication date: 2005

Year: 2005

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 1948-3198

Source type: Conference Papers & Proceedings

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 192411740

Document URL: http://search.proquest.com/docview/192411740?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2005

Last updated: 2013-09-16

Database: ABI/INFORM Complete

Document 23 of 100

ELEVEN: A START-UP RESTAURANT CASE STUDY

Author: Goede, Bryan; Olson, Philip D; Olson, Jennifer J

ProQuest document link

Abstract:

The primary subject matter of this case concerns entrepreneurship. Secondary issues examined include human resource selection and training. The case has a difficulty level of four, appropriate for senior level. The case is designed to be taught in one class hour and is expected to require three hours of outside preparation by students.

Full text:

CASE DESCRIPTION

The primary subject matter of this case concerns entrepreneurship. Secondary issues examined include human resource selection and training. The case has a difficulty level of four, appropriate for senior level. The case is designed to be taught in one class hour and is expected to require three hours of outside preparation by students.

CASE SYNOPSIS

Eleven is a healthy fast food restaurant that was started by Terry Jones in 2002 in Pocatello, Idaho. Terry, 26 years old at the time of the start-up, had worked in the restaurant industry though out high school and college. In college, he obtained a business management degree. Before starting his business, Terry talked to advisors, including an accountant, insurance agent and several food vendors. He also formulated a business plan that was used to attract outside funding.

The business-level strategy Terry pursued for Eleven was to offer healthy fast food (primarily salads and sandwiches) to health conscious people who are a slave to a fast paced world. Although he wanted to target or cater to people of all ages, he predicted that much of the sales would come from the college students at Idaho State University because his business location was very close to campus.

Eleven's pre-start-up went quite smooth. Of course, some activities (e.g., remodeling his business location) took longer than originally expected to complete so he had to postpone the opening. Prior to opening, Terry interview ed and hired employees in an informal way, mainly based on his network of college friends. Several months after opening, however, he began to experience a growing number of employee problems. The increasing human resource problems he faced included turnover, absenteeism and training. Training was an issue because customers complained that menu items were not uniformly prepared from one day to the next day. The chief focus of the case study is on how Terry can correct these human resource issues.

Publication title: Allied Academies International Conference. International Academy for Case Studies. Proceedings

Volume: 12

Issue: 2

Pages: 55

Number of pages: 1

Publication year: 2005

Publication date: 2005

Year: 2005

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 1948-3198

Source type: Conference Papers & Proceedings

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 192411758

Document URL: http://search.proquest.com/docview/192411758?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2005

Last updated: 2013-09-16

Database: ABI/INFORM Complete

Document 24 of 100

ID PRO SYSTEMS: DISCIPLINING OFF DUTY BEHAVIOR

Author: Haggard, Carrol R; LaPoint, Patricia A

ProQuest document link

Abstract: None available.

Full text:

OFF DUTY BEHAVIOR: A CASE OF DISCIPLINARY ACTION AT ID PRO SYSTEMS?

Despite the dot.com bust, parts ofthe computer industry are still hot. ID PRO SYSTEMS was a moderately successful, but little known computer software division of a conglomerate until Identity theft became front page news. The division has five functional departments- games, security, decision support applications, technical applications, and robotics (the most recent and cutting-edge product group). While all ofthe departments have contributed to the division, some in profits and others in terms of visibility, the most successful and profitable portion ofthe division has been the games department. While none of ID PRO's games have been blockbusters, they have done well enough to contribute to the division's profitability. However it is the security department which has brought some notoriety to ID PRO, as they won recognition within the industry for their early development of a Spyware detection program. Since the division foresees an impending boom in security software it changed the division's name from Computer Software Systems to ID PRO SYSTEMS to reflect the future strategic importance of this product group.

The security department is headed up by Eric Chambers. Eric is not your typical computer programmer. He holds a reputation as being a somewhat eccentric iconoclast, as evidenced by the fact that he has unkempt long hair and beard yet wears designer clothing. Eric is also somewhat of an enigma. He is a "health nut" and works out religiously. This fits in with his strong views on the environment, as he doesn't own a car, refuses mass transit and walks or rides a bicycle everywhere. While a proponent of recycling, he doesn't think twice about littering as he tosses banana peels and apple cores when moving around the city. While not religious, Eric is a strong believer in and activitist for the pro-life movement. Eric believes so strongly in the sanctity of life for all beings that he is a vegan. He takes his belief to the point that not only does he refuse to swat a fly or step on a bug, but also he refuses to wear mosquito spray.

Eric frequently shares his intently held views with anyone who will listen. One of those who listened is the Regional Director of Human Resources, Marian Wilcox. Eric had presented research demonstrating that healthy employees were cost effective employees as he pushed for a company supported health program. Partly as a result of Eric's efforts, employees were given time off to exercise. Many ofthe company's employees and especially those in the security department admired Eric for the results of his tenacious persistence in seeking the health program.

Eric is an extremely talented programmer. He led the team that produced the Spyware program which received recognition. Eric is perceived by ID PRO's vice president as being instrumental in writing the Spyware program. His team is working on the next generation of Spyware detection and destruction software. If they can be first to the market then ID PRO SYSTEMS has the potential to dominate the market and be recognized as an industry leader. Since ID PRO is staking a large part its future on computer and identity security, the vice president ofthe division thinks that Eric is an extremely valuable employee. Therefore, the vice president has given Eric certain perks/privileges which have not been shared with others in the division. This has created a mild sense of both resentment and jealousy among other employees.

Employees in the other departments of ID PRO respect and value what Eric and his group have accomplished. Eric's department consists of a group of the top young programmers and computer science interns. The department is viewed as being very capable and innovative, as evidenced by their award.

While the department has been successful, it has not been without controversy. The department has been plagued by turnover, as a number of very talented computer programmers in Eric's group have resigned and left the company to work for rival companies. Although high turnover rates are not uncommon for high tech companies, the rate of turnover in Eric's department is significantly above the average as compared to other departments in the division. Some employees of other departments view this as a result of Eric's combative management style combined with his outspoken advocacy of his views. Yet, those who have remained have an intense loyalty and allegiance to Eric. For them, Eric's management style and views are very compatible. In fact, several ofthe interns have adopted many of Eric's positions on issues. Some ofthe employees in other departments wonder whether Eric has actually developed a cult-like following especially with his interns.

There is also considerable speculation as to the actual extent of Eric's personal contribution to developing the Spyware detection program. In fact, several employees have openly questioned Eric's role in the success of the programming team. Specifically, they wonder as to how substantial was the role the interns had in conceptualizing and developing the program? Could a different team leader have produced the same result? Such questions have been fueled by comments made by programmers during exit interviews who have suggested that Eric may be taking the credit for the work of others. While there is growing speculation among the employees of the other departments, Eric's immediate supervisor, Clinton Shaw, Regional Products Group Director, dismisses such comments as jealously of Eric's success and envy over the rewards that he has received.

Some of these same employees also have personal issues with Eric, as not everyone gets along with Eric and his outspoken advocacy of his views. It is very common for Eric to get into arguments over his views at divisional gatherings. He is not at all shy about pushing his political views on others. In fact, Eric is perceived as actually thriving on his frequent arguments and debates concerning his political agendas. While some of the other employees recognize the strength of his beliefs/convictions and can respect his attempts at persuasion, others see him as, at a minimum, a nuisance while others are offended at this tactics. While there is disagreement over his positions, although some share Eric's views, there is near unanimity in opposition to Eric's approach. Eric seems to want to argue for the sake of argument, placing a high value on winning, no matter how insignificant the topic. Perhaps most frustrating is the attitude that Eric takes, "if you don't agree with me, you are wrong," and its attendant implication of "you are not as smart as I am."

As an example, recently in the break room, two of the employees were discussing the pronunciation choices of the disc jockey on the radio. Eric interjected himself into the discussion and proceeded to convert it into an argument over the importance of "correct" pronunciation. During his presentation, Eric went into long diatribes about this position. He would interrupt others, not allowing them to develop and explain their positions. Eric became loud and used profanity in advancing his position. As people left the break room, they were shaking their heads wondering what had just transpired.

Eric left with a smug look on his face content in another "victory" and in the triumph of his position.

Due to the success of Eric's department and his relationship with the division's vice president, many of the other employees tolerated Eric's argumentative behavior. Some even respect the fact that he is such an outspoken advocate for his beliefs. However, his behavior exceeded the limit during one of the recent Friday night outings. It is a frequent occurrence for employees to gather at a bar near the office to relax and socialize after a long week's work. This particular Friday, Eric joined the group. After a while, and a few drinks, the topic turned to the upcoming city election. What started as a discussion of various issues and positions quickly developed into a very heated argument when Eric got involved. Eric and two female employees became involved in a frenzied argument over the merits of the candidates' positions on potholes. Eric had had several drinks and was becoming very loud and obnoxious as he advanced his position. It was obvious to those there that the women, who weren't familiar with Eric and his argumentative style, were becoming uncomfortable. As Eric paused to take a breath in one of his diatribes, the women got up to go to the restroom. Eric followed them and was able to corner them in order to continue his tirade. He had them trapped in the narrow hallway leading to the women's restroom and wouldn't let them pass. He started yelling and screaming profanities as he berated the women. He called the women "idiots" for supporting their candidate, reducing the two women to tears. At this point the bouncer intervened and threw Eric out of the bar.

At 8:00, Monday morning a group of 14 employees are in your office. The group consisted of eight employees who had been at the bar Friday night, but not the two women Eric had cornered, three employees who had witnessed the incident in the break room and three interns from Eric's group. The group is demanding that you fire Eric immediately for his abusive behavior. As the group sits in your office, a number of issues run through your mind, including: Is this a group of jealous, envious employees who are trying to take advantage of a situation in order to get an outcome they desire? Whether Eric's behavior warrants termination? And if so, whether you have the authority to fire Eric for off the job behavior? And if you fire Eric will you be overruled by the vice president ofthe division? As Regional Products Group Director, you know that you must do something about this situation, but what?

COMPANY POLICY: OFF-DUTY BEHAVIOR

"Employee conduct during off duty hours is a reflection on the company's image. As such, we expect all of our employees to behave in a responsible manner outside their normal work hours. Failure to do so, may result in disciplinary action.

Publication title: Allied Academies International Conference. International Academy for Case Studies. Proceedings

Volume: 12

Issue: 2

Pages: 57-60

Number of pages: 4

Publication year: 2005

Publication date: 2005

Year: 2005

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 1948-3198

Source type: Conference Papers & Proceedings

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 192411760

Document URL: http://search.proquest.com/docview/192411760?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2005

Last updated: 2013-09-16

Database: ABI/INFORM Complete

Document 25 of 100

INTERLANDDATA WEB HOSTING: STRUCTURING THE ORGANIZATION FOR GROWTH

Author: Kargar, Javad

ProQuest document link

Abstract:

The two entrepreneurs responsible for InerlandData' s success were Mark Hamidi and Susan Hamidi, founder and Chief Technology Officer, and CEO/Director of Marketing, respectively. They have worked as a team since 1995, when Mark founded InterlandData. Initially, Mark operated the business on a part time basis from his home.

Through word of mouth and various search engines in the initial stages ofthe Internet boom, businesses requested services from InterlandData. By lune 1996, it had 100 customers and Mark had moved the business out of his basement into the company's first office. In 1998, the company became incorporated, and by lune 1999, it had reached a milestone of 1,000 customers. In the first quarter of 2004, the company had grown to a client base of more than 2500 in 42 countries, and the owners believed that the business was only operating at about 60 percent capacity.

Full text:

INTERNAL ENVIRONMENT

Brief History

The two entrepreneurs responsible for InerlandData' s success were Mark Hamidi and Susan Hamidi, founder and Chief Technology Officer, and CEO/Director of Marketing, respectively. They have worked as a team since 1995, when Mark founded InterlandData. Initially, Mark operated the business on a part time basis from his home.

Through word of mouth and various search engines in the initial stages ofthe Internet boom, businesses requested services from InterlandData. By lune 1996, it had 100 customers and Mark had moved the business out of his basement into the company's first office. In 1998, the company became incorporated, and by lune 1999, it had reached a milestone of 1,000 customers. In the first quarter of 2004, the company had grown to a client base of more than 2500 in 42 countries, and the owners believed that the business was only operating at about 60 percent capacity.

Management and Personnel

There were five employees at InterlandData including Susan and Mark Hamidi. Susan was President and CEO of the company. She joined the venture in 1996 and had previously worked as a Staff Accountant at a network-marketing firm for three years. Her managerial responsibility included direct supervision of two employees, Mary and Pam. Susan's primary goal was to increase the customer base in North Carolina in which the company operated. She worked diligently towards her goal by exhibiting at various trade shows and networking at local professional association meetings.

Mark had only one employee under his direct supervision, Bill, and hence identified his main weakness as his lack of desire and ability to manage people. Yet, Mark felt that his main strength was the ability to analyze and correct technical issues. He felt that one of his biggest accomplishments was the continued growth and profitability of the company despite the economic downturn. Mark a Masters in Computer Science from the University of London.

Mark and Susan owned 100 percent of the stock in the company. They had not set any long-range goals. The company had no written business plan, and the management team did not feel that a formal plan was necessary. "We have been too busy surviving to think about where we should be five years from now," says Mark. "But now that the company is on its feet, we're going to think about the future."

Products and Services

InterlandData's operations consisted of Web hosting, Web design, IT solutions and other Web services. Under Web hosting, the company offered both dedicated and virtual Web hosting packages. Dedicated plans started at $149 per month, while virtual plans ranged from $19 to $60 a month. A standard dedicated hosting package included generous amounts of bandwidth, several email accounts, user accounts, virtual hosts, large amount of disk space, a back-up server, SSL certificate, and 24/7 technical support. These features were relatively consistent among competitors in the hosting industry.

Unlike most of the Web hosting firms, InterlandData did not have an established fee for every feature or service. After a potential client noted where his/her interests lay, the company would begin negotiating procedures with the customer until an agreement was formed between them. The company was also able to offer e-commerce websites, which often included flash animations and database driven features.

With regard to IT solutions, the company offered the independent services of systems programming, computer cabling/networking, secure certificate installation and custom software development. These services like e-commerce services were charged on a project-by-project basis with factors such as time and intensity ofthe project being weighed. The same tactic was often utilized when providing Web design services.

Operations

InterlandData's office included a reception area, three offices and one room dedicated for servers and technical equipment. The company owned and operated the servers guaranteeing them with a 99.99% uptime.

The company's Data Center was outsourced to a local company. Although InterlandData had back up files, it was very difficult to switch the Data Center if the need should arise. The Data Center staff provided continuous observation through a closed circuit TV system to protect against unauthorized entry. The Network Operations Center was the central nervous system for the Data Center, and it included servers that were housed in a high-tech, locked cabinet with customer security at heart. Onsite diesel-powered generators were ready and waiting to prevent service interruption at the first sign of loss power. In the event of power disruption, the Automatic Transfer Switch would power the generators within seven seconds for continuous operations.

InterlandData's Customers

The customers served by InterlandData were both individual resellers and businesses around the world. Susan estimated that about 2,500 customers used the Web design and Web hosting services of the company in early 2004. In the USA, the largest customer concentrations were found in the states of Texas, North Carolina, California, New York, and Florida. They had only 216 customers in their own state of North Carolina. Of the USA' s customers, eighty percent were small businesses (less than 500 employees), fifteen percent were medium sized companies (between 500 and 1000 employees), and large businesses (over 1 000 employees) accounted for about five percent. In the foreign market, the larger customer bases were located in Germany, Australia, England, West Africa, Portugal, Sweden, and Thailand.

Marketing and Advertising

InterlandData's marketing objectives were to attract more users, to retain the business of current users, and to enhance the company's brand awareness. In 2002, the company's marketing and advertising budget was about $19,600, the majority of which was focused on growing the customer base. The company did not have much success with the use of dedicated sales staff in promoting the company's services. According to Susan, the resulting sales volume and the return on investment was not sufficient to support the costs of a sales position. In addition, Susan found print advertising too expensive for the company. She creatively arranged cheaper advertising in some high profile publications.

InterlandData's most effective means of attracting customers was through referrals from existing customers. One of the company's incentive programs was tied to the referral business segment. Some customers who referred others received free hosting services for a designated number of months, others received deep discounts on service charges, and still others received cash rebates. Historically about fifty five percent of the company ' s new sales had been a direct result of word of mouth.

Customer Service

InterlandData's management believed that attentive customer service was critical to retaining and expanding its customer base. Customer service representatives were available 24 hours a day, seven days a week to provide assistance via e-mail or phone. Although there was no on-site staff at the company's office twenty-four hours a day, the company had a system that received calls after business hours. Customers needing tech support would either email or call InterlandData. After business hours, the on call person who was designated according to rotation, would be responsible for checking the email messages from home and carrying the pager that indicated when the company had received telephone calls. Each server was checked every 2.5 minutes by an automated machine, and if there were a problem, the machine would page the person on duty.

Historical Financial Performance

Like many new ventures, InterlandData's first three years of operation were financially unstable, in part because their services were new to the market. Early marketing efforts generated positive publicity as well as numerous word-of-mouth referrals among clients. By the fourth year of operation, the financial picture had stabilized as a result of improving operations.

Historically, the business' growth had been financed through retained earnings, and a line of credit with Bank of America. In 2001, the company had its highest amount of long-term debt of $26,038. As of 2000, the company had no long-term debt. In general, the management did not like debt, but occasionally they drew cash on a credit line and paid it off within two weeks.

In particular, operating profits in year 2003 had declined. Further, even though total revenue had been growing in previous years, it became evident that its rate of growth had started to slow or remain at 28 percent. Mark and Susan wanted to reverse these trends and insure a strong position for their business in the future. The company had been making positive profits, and there still existed a lot of upside potential.

INDUSTRY AND COMPETITIVE ENVIRONMENT

The Web hosting industry was characterized by a wide variety of different types of providers, most of them small. In 2004, it was estimated that there were over 10,000 Web hosting providers worldwide. Providers ranged from One-Source Providers, to Application Services Providers and Managed Service Providers. Products and services from One-Source Providers included custom Web site design, custom programming, strategic consulting, marketing and promotion. Application Service Providers incurred the costs of building and maintaining applications and databases for their corporate clients. With Managed Service Providers, the clients had their own servers with full monitoring and maintenance services and around the clock technical support.

In 2004, the Web hosting market was highly competitive, in part because the market was saturated, supply remained greater than demand and there was a high degree of fragmentation. The existing players in the market in addition to pure Web hosting companies included Application Server Providers (ASP), Internet Service Providers (ISP), telecommunications companies, computer hardware suppliers and large information technology firms. Ofthe thousands of companies in the industry, some of the major players included Verio, AT&T, IBM, Sprint, Dell Host and Navasota. Although there were big names, there were no big profits within the industry. They intended to serve the market by achieving economies of scale in their operations.

Despite the declining trend in the Internet economy, which began during 200 1 and continued through the first quarter of 2004, the hosting industry continued to grow because businesses were increasingly using the Web for commercial activities. International Data Corporation, a leading market research firm, predicted that the Web industry revenues would increase from $5 billion in 2001 to over $19 billion in 2004.

Between 2001 and 2002, the largest threat to Web hosting providers was the poor state of the economy, which generated little consumer confidence in any business. The new trends in 2003 had included substantial price discounting, more standardization of Web hosting products and services and use of do-it-yourself software and books. The competition became more intense with the 2002 launch of small-business hosting providers such as Yahoo! with its "business-class Web hosting service" and AOL with its "AOL for Small Business" offering for small-office/home-office customers.

Outsourcing marketing functions and public relations of Web hosting providers were also developing trends in 2004. Marketing agencies could assist Web hosting firms with all components of marketing communications, from developing the marketing plan and strategy to actual execution of advertising plans or public relations. Advertising and marketing agencies could negotiate media-buying rate discounts of up to 40 percent on behalf of Web hosting clients. These volume discounts provided an economies-of-scale cost savings that even large Web hosting companies could not achieve on their own.

POSSIBLE GROWTH STRATEGIES

Susan and Mark believed that timely decision-making was critical to the long-term growth of the firm. Given the competitiveness of the Web hosting business, it was foreseeable that Web hosting would become as competitive in the future. Mark believed that the companies that provided low prices would eventually decline and go out of business due to the lack of qualified support staff. They felt they needed to make plans and could not afford to wait another year and adopt a "wait and see" attitude.

Mark and Susan were considering franchising the company's operations thinking that it would increase profits with minimal investment on their part. Another possible growth option was to grow via expansion, such as through branch offices, or through licensing of the concept. Still, another option was to pursue niche strategy through focusing on either one attractive industry globally or all small businesses in the state of North Carolina.

With all of these alternatives facing them, Mark and Susan knew they had to make some choices and begin planning InterlandData's future. With financial and managerial resources a primary concern in this decision, the question was which direction to choose and how to best plot a path toward a successful future. To Mark and Susan, none of the choices sounded all that great. Maybe there was something they were missing.

Publication title: Allied Academies International Conference. International Academy for Case Studies. Proceedings

Volume: 12

Issue: 2

Pages: 61-65

Number of pages: 5

Publication year: 2005

Publication date: 2005

Year: 2005

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 1948-3198

Source type: Conference Papers & Proceedings

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 192411630

Document URL: http://search.proquest.com/docview/192411630?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2005

Last updated: 2013-09-16

Database: ABI/INFORM Complete

Document 26 of 100

TRANSFORMATION AT BTR

Author: Kerr, Gerry

ProQuest document link

Abstract:

The primary subject matter of this case concerns the viability of the transformation being undertaken in a large, widely diversified company with a storied past. Secondary issues include assessing merger and/or acquisition partners and the ability to assess organizational "fit" with its environment, between its headquarters and businesses, and across the portfolio. The case has a difficulty of six (appropriate for the second-year graduate level). The case is designed to be taught in three class hours and is expected to require six hours of outside preparation by students.

Full text:

CASE DESCRIPTION

The primary subject matter of this case concerns the viability of the transformation being undertaken in a large, widely diversified company with a storied past. Secondary issues include assessing merger and/or acquisition partners and the ability to assess organizational "fit" with its environment, between its headquarters and businesses, and across the portfolio. The case has a difficulty of six (appropriate for the second-year graduate level). The case is designed to be taught in three class hours and is expected to require six hours of outside preparation by students.

CASE SYNOPSIS

The story of BTR spans exactly 200 years and includes some of the most prominent leaders in British industry. The decision to be made in the case is the direct result of a successful corporate strategy coming out of phase with the changes going on during the 1990's. New management attempts to refocus the firm, but the plan is not well formulated initially, requiring adjustment and a protracted period of implementation.

The case describes the recent history of BTR in two major phases. The short first section begins in 1965 and is marked by the application of a niche-oriented business acquisition policy. Management scanned the environment for wayward businesses that would respond to BTR's methods. Heavy reliance was placed on sound financial reporting and oversight, after a period of transformation.

By the end of 1995 - after exactly 30 years - BTR's performance had sharply deteriorated. Forces outside and inside the firm incite mammoth change in the company. Initially, BTR was to be an "international manufacturing and engineering company, "a more focused firm, better able to exploit relationships between the businesses. The depth and pace of the changes required were underestimated, however, and corporate management was forced to re-develop BTR the following year into a "leading global engineering company". But, the difficulties of the changes, and the complicating factors of BTR's decreased dividend and an over-extended warrant program, suggest that time and patience may have run out on the firm. At the end of the case, management is left to decide whether to finish implementing the current strategy or to seek partners for merger.

Publication title: Allied Academies International Conference. International Academy for Case Studies. Proceedings

Volume: 12

Issue: 2

Pages: 67

Number of pages: 1

Publication year: 2005

Publication date: 2005

Year: 2005

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 1948-3198

Source type: Conference Papers & Proceedings

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 192411617

Document URL: http://search.proquest.com/docview/192411617?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2005

Last updated: 2013-09-16

Database: ABI/INFORM Complete

Document 27 of 100

STONEBRIDGE COUNTRY CLUB: CASH... IS THERE ENOUGH?

Author: Kunz, David; Dow, Benjamin L

ProQuest document link

Abstract:

Stonebridge Country Club opened in 1979 as part of a 450-acre residential real estate development in Abilene, Texas, a west Texas community located 190 miles from Dallas/Ft. Worth. Abilene, like many Texas cities, had benefited greatly from soaring oil prices during the late 1970's and early 1980's. In 1979, Abilene had a population of over 100,000 and only 36 holes of golf, one 18-hole private course at Abilene Country Club and one public 18-hole municipal course. Mike and Iosh Andrews, owners of LaMiss Inc., a 40,000 barrel-a-day refinery located in Louisiana on the Mississippi River, were the primary investors in Stonebridge. The Andrews brothers reasoned the time was right to build an additional private course in Abilene. San Angelo, a smaller city to the south of Abilene, already had five golf courses in 1979. In addition, Abilene Country Club was known more for its dining and social aspects rather than quality golf. The Andrews brothers had hoped the community would respond to a high quality, golf oriented country club. Initially, their assumptions proved correct and during its peak, Stonebridge attracted over 400 members. However, even as early as 1982, there were signs that the oil boom was nearing its end. The gradual decline of oil prices made it less and less profitable for many companies to continue operations in the oil patches of West Texas. By the late 1980's, LaMiss Inc. had ceased operations as giant competitors were refining 500,000 barrels of oil a day more economically.

Concurrently, Stonebridge's membership had steadily declined and the Andrews brothers eventually sold the club in 1990 to a local civic-minded philanthropist, Jane Nichols, who continued operating the club while Stonebridge members set about trying to increase membership to raise money and buy the club. Nichols realized if Stonebridge Country Club closed, the property values around the club might drop which would reduce school funding and limit growth during an already turbulent economic period.

Full text:

STONEBRIDGE COUNTRY CLUB BACKGROUND

Stonebridge Country Club opened in 1979 as part of a 450-acre residential real estate development in Abilene, Texas, a west Texas community located 190 miles from Dallas/Ft. Worth. Abilene, like many Texas cities, had benefited greatly from soaring oil prices during the late 1970's and early 1980's. In 1979, Abilene had a population of over 100,000 and only 36 holes of golf, one 18-hole private course at Abilene Country Club and one public 18-hole municipal course. Mike and Iosh Andrews, owners of LaMiss Inc., a 40,000 barrel-a-day refinery located in Louisiana on the Mississippi River, were the primary investors in Stonebridge. The Andrews brothers reasoned the time was right to build an additional private course in Abilene. San Angelo, a smaller city to the south of Abilene, already had five golf courses in 1979. In addition, Abilene Country Club was known more for its dining and social aspects rather than quality golf. The Andrews brothers had hoped the community would respond to a high quality, golf oriented country club. Initially, their assumptions proved correct and during its peak, Stonebridge attracted over 400 members. However, even as early as 1982, there were signs that the oil boom was nearing its end. The gradual decline of oil prices made it less and less profitable for many companies to continue operations in the oil patches of West Texas. By the late 1980's, LaMiss Inc. had ceased operations as giant competitors were refining 500,000 barrels of oil a day more economically.

Concurrently, Stonebridge's membership had steadily declined and the Andrews brothers eventually sold the club in 1990 to a local civic-minded philanthropist, Jane Nichols, who continued operating the club while Stonebridge members set about trying to increase membership to raise money and buy the club. Nichols realized if Stonebridge Country Club closed, the property values around the club might drop which would reduce school funding and limit growth during an already turbulent economic period.

Stonebridge members eventually arranged to purchased the club in 1993 from Nichols, but were not able to completely pay off the debt until 1999 when members, after several years of disagreement concerning the club's future, finally agreed to sell Stonebridge to Golf Corp LLC, a private company specializing in country clubs. According to a former member, "There were a lot of arguments about why membership was stagnant and who we should borrow more money from, and it appeared that there was really no other way out".

In January of 1999, Golf Corp LLC purchased the club and grounds, and invested over $1 million in renovations, repairs and remolding in order to boost membership. Golf Corp LLC was founded in 1991 with a strategy to acquire and manage golf courses in "demand driven" markets that provide opportunities for revenue growth and margin improvement through Golf Corp's integrated marketing and operational programs. The essence of Golf Corp's strategy is to "market" each course as a separate brand with well-defined customer segments, distinctive positioning, tailored "one-to-one" programs - and responsive tracking and follow-up. However, by 2004, Stonebridge was not expected to provide the return required by Golf Corp's investors and once again, Stonebridge Country Club was up for sale.

BUYERS BACKGROUND

Paul Sparks is sixty-one years old and recently sold the family run drug store he opened 30 years ago. Sparks graduated from the University of Texas' College of Pharmacy in 1965 and a few years later returned to Abilene to open Hillsdale Pharmacy. Mr. Sparks is an accomplished golfer with regional recognition, having won numerous local amateur tournaments over the past 20 years. Traditional retirement activities were not enough to completely satisfy Sparks and when the opportunity to purchase Stonebridge Country Club arose, he decided to pursue a lifelong dream of owning a golf course.

Sparks lived in the residential community adjacent to Stonebridge Country Club and had been a member of the club on and off over the last 20 years. Initially, Stonebridge was a fabulous golf facility with adequate dining, clubhouse and pool facilities, but the decline in oil prices led to a decline in membership and eventually a decline in capital improvement spending needed for maintenance and upkeep. Sparks had dropped his membership in 1992 and joined Abilene Country Club even though it was less conveniently located across town. Sparks, like many of his friends, had become increasingly frustrated by the deterioration of Stonebridge's golf course conditions over the years. Sparks decided to rejoin Stonebridge in 1999, when the club was sold to Golf Corp LLC, under the impression that Golf Corp LLC would have the financial resources to return the golf course to its previous splendor.

Reportedly, Golf Corp LLC had invested over $1 million in renovations and improvements, but in Sparks' opinion, course conditions remained adequate at best. Most of the revitalization efforts were targeted at the dining facilities, club house, and pool. Although membership numbers at Stonebridge had risen to around 200, up from 160 in 1999, the club was no where near the over 400 members seen during the oil boom years of the late 1970s and early 1980s.

GOLF INDUSTRY

Prior to 1970, the golf market had two different types of courses, lower budget courses operated mainly by municipalities, and more upscale private country clubs. In the earlier 1970's a new trend known as "A Country Club for a Day" began to emerge as the title for newer upscale daily fee courses. These courses were open to the public and provided high quality design, maintenance and service. At present, most of the industry research is based on a three segment framework, which classifies courses as municipal, daily-fee, or private. Table One provides a historical perspective on the number of golf facilities under each ofthe traditional market segments. Over the last 30 years, the golf course market has gradually emerged from a three segment market to one that contains many market segments.

In reality, the golf course market now contains many more market segments. These market segments are based on several interrelated factors with a focus on the type of customer served. For example, a private club may serve local residents in a certain income bracket, while a similar private club may be structured to serve corporate clients.

On the demand side, the total number of golfers in the United States has remained fairly flat over the last five years, but has increased from 10 years ago. In 1994, an estimated 23 million Americans were classified as golfers having played 421 million rounds of golf at approximately 11 thousand courses. By 2004, the number of American golfers has grown to 27.4 million and the number of rounds played increased to approximately 498 million. Ofthe 27.4 million total golfers in the US, 12.8 million are classified as core golfers (playing more that seven rounds per year) and 14.6 million are occasional golfers (playing one to seven rounds per year). The average core golfer plays 37 rounds per year (see Table Two for a year by year comparison of growth).

THE SITUATION

Sparks and Golf Corp LLC have tentatively agreed on a purchase price providing Sparks can arrange financing. During the negotiation process with Golf Corp LLC, Sparks was assisted by Rick Scott, an associate with Williams Ine; headquartered in Little Rock, Arkansas. Williams Inc. is one of the largest investment banking firms off of Wall Street and has a long historical record of assisting firms arrange financing for new ventures. Williams Ine maintains over 30 offices in key financial cities throughout the United States, including Dallas and Austin.

Sparks, with the help of Scott, developed projected income statements, balance sheets and cash flow statements for the first four years of operation for his new company and approached a local commercial bank for a revolving credit agreement of $200,000 and property and equipment mortgage loan of $1,200,000 (no principal payment is required until maturity). Sparks would invest $600,000 as equity. The projected income statement, balance sheet and cash flow statement for the first year of operation is provided in Tables Three, Four and Five. The bank has expressed an interest in providing the credit but asked Sparks to prepare a cash budget for the first year of operation to ensure the requested financing is adequate. Sparks was unsure how to begin and requested Scott's assistance. Scott stated that similar to preparing forecasted financial statements, they needed to prepare a list of operating assumptions.

THE TASK

Prepare answers to the following questions:

1) Construct a monthly cash budget for Stonebridge for the period Ianuary through December 2005. Assume that all cash flows occur on the 15th of each month. Is the requested $200,000 revolving credit agreement sufficient to meet the needs of Stonebridge during the year? Explain your answer.

2) The cash budget contains both cash inflow and cash outflows. Which do you feel are likely to be the most accurate? Explain your answer.

3) Scott thought it would be beneficial to prepare two additional cash budgets, one based on 75 new members and another with 125 members. Construct two additional monthly cash budgets using the different levels of new members and again assume that all cash flows occur on the 15th of each month. How do the different new membership numbers impact Stonebridge's cash needs? Will the $200,000 revolving credit agreement be sufficient? Explain your answer.

4) Without constructing a new cash budget, explain the impact on Stonebridge's cash requirements if the 100 new members are recruited but there is a three month delay when they join (e.g. expected January members don't actually join until April, February members join in May, etc.).

5) Why is depreciation expense not part of the cash budget?

6) The monthly cash budget prepared assumes that all cash flows occur on the 15th of each month. Suppose most of Stonebridge's outflows are at the beginning of the month, while its collections are toward the end of each month. How would this fact alter the cash budget?

7) Suppose the bank refused to grant the revolving credit agreement what options are available to the company?

8) Temporary excess cash can be invested in marketable securities. What are the characteristics of marketable securities? If excess cash is projected to be continuing rather than temporary, are marketable securities the appropriate investment? Explain your answer.

9) Once again assume all cash flows occur on the 15th of each month. How large of a revolving credit agreement would you recommend Sparks arrange with the bank? Defend your answer.

Publication title: Allied Academies International Conference. International Academy for Case Studies. Proceedings

Volume: 12

Issue: 2

Pages: 69-72

Number of pages: 4

Publication year: 2005

Publication date: 2005

Year: 2005

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 1948-3198

Source type: Conference Papers & Proceedings

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 192411775

Document URL: http://search.proquest.com/docview/192411775?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2005

Last updated: 2013-09-16

Database: ABI/INFORM Complete

Document 28 of 100

WHITTAKER MEMORIAL HOSPITAL

Author: Makamson, Edwin L

ProQuest document link

Abstract:

The primary subject matter is strategy under adverse conditions for a small community hospital. The case examines operational, financial and market factors for strategy development. Issues of governance and stakeholder claims for a non-profit, community organization are also examined. As a student case analysis assignment the case is appropriate for an undergraduate capstone course in business policy presented in the context of strategy for non-profits, single business strategy, or governance topics, and for a senior or master's level course in health case management. While class presentation depends on the instructor's choice of scope of the subjects covered, a full discussion and analysis can be rendered within a 50 minute period. A student should anticipate a 2-3 hour commitment to complete the case questions.

Full text:

CASE DESCRIPTION

The primary subject matter is strategy under adverse conditions for a small community hospital. The case examines operational, financial and market factors for strategy development. Issues of governance and stakeholder claims for a non-profit, community organization are also examined. As a student case analysis assignment the case is appropriate for an undergraduate capstone course in business policy presented in the context of strategy for non-profits, single business strategy, or governance topics, and for a senior or master's level course in health case management. While class presentation depends on the instructor's choice of scope of the subjects covered, a full discussion and analysis can be rendered within a 50 minute period. A student should anticipate a 2-3 hour commitment to complete the case questions.

CASE SYNOPSIS

Whitaker Memorial Hospital is a small community hospital created to serve the health needs of the African American community in the early 1900's. The hospital has over time expanded but by the 1980's has experienced declining demand and growing financial problems which result in an attempt to reorganize under Chapter 11. The Hospital Director Dr. Bryant in 1995 has successfully led an attempt to save the hospital from a merger by contesting the authority of the sitting board and pledging to continue the hospital's operation as a community institution.

The case narrates in background the history of a unique American institution, the African American hospital, and traces through the case of Whitaker Memorial the complexities of surviving in a changed society. The case presents the hospital's difficulties with management, operations, and changed market conditions. As the original "community" ofthe East End has changed by 1995 the issues of "Who is the 'community' served by the hospital? " and "Who has a claim to govern the community hospital?" are raised and resolved in the narrative.

Publication title: Allied Academies International Conference. International Academy for Case Studies. Proceedings

Volume: 12

Issue: 2

Pages: 73

Number of pages: 1

Publication year: 2005

Publication date: 2005

Year: 2005

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 1948-3198

Source type: Conference Papers & Proceedings

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 192411650

Document URL: http://search.proquest.com/docview/192411650?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2005

Last updated: 2013-09-16

Database: ABI/INFORM Complete

Document 29 of 100

ZEIT SAIC: THE ENTREPRENEURIAL HISTORY OF A FAMILY BUSINESS IN ARGENTINA

Author: Marshall, Paul S; Balfhor, Christian

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Abstract:

The muddy water of the Rio de la Plata slapped against the hull of the old British freighter as the city of Buenos Aires (BsAs.) came gradually into focus through the morning mist. The long and dangerous journey from Southampton was nearing its end. German U-boats prowled the Atlantic and would have liked nothing better than to send this or any English ship to the bottom. The year was 1940 and an eight-year-old boy, George Brown, his extended family and all of their limited physical possessions were aboard. They were about to begin a new life in what most would then agree was the greatest city in the richest country in the southern hemisphere. Even though their prospects appeared bright, Buenos Aires was a very foreign place. None of the Browns spoke Spanish; in fact, only the children were truly fluent in English. Six years prior the Browns, then known as the Brauns, left Germany ahead of Nazi oppression of the Jews. The Browns were not only smart to leave Germany early enough to assure their safety; they were smart enough to get a substantial sum of money converted to British pounds sterling and have it wired to Barclays Bank in London. Despite that money was frozen in the bank because of the war prohibitions, it acted as a guarantee for a big loan from a distant relative and provided the cushion necessary to re-establish themselves in their new home.

Full text:

ZEIT SAIC: THE ENTREPRENEURIAL HISTORY OF A FAMILY BUSINESS IN ARGENTINA

THE BEGINNING.

The muddy water of the Rio de la Plata slapped against the hull of the old British freighter as the city of Buenos Aires (BsAs.) came gradually into focus through the morning mist. The long and dangerous j ourney from Southampton was nearing its end. German U-boats prowled the Atlantic and would have liked nothing better than to send this or any English ship to the bottom. The year was 1940 and an eight-year-old boy, George Brown, his extended family and all of their limited physical possessions were aboard. They were about to begin a new life in what most would then agree was the greatest city in the richest country in the southern hemisphere. Even though their prospects appeared bright, Buenos Aires was a very foreign place. None of the Browns spoke Spanish; in fact, only the children were truly fluent in English. Six years prior the Browns, then known as the Brauns, left Germany ahead of Nazi oppression of the Jews. The Browns were not only smart to leave Germany early enough to assure their safety; they were smart enough to get a substantial sum of money converted to British pounds sterling and have it wired to Barclays Bank in London. Despite that money was frozen in the bank because of the war prohibitions, it acted as a guarantee for a big loan from a distant relative and provided the cushion necessary to re-establish themselves in their new home.

Argentina in 1940 was very different place both absolutely and relatively than it is in the early days of the third millennium. The country's population was only 15 million and ofthat 4.5 million were Portenos, versus 36 million and 11.3 million respectively in 2001 . Some would argue that Argentina had passed its peak position in relative wealth prior to their arrival. In the late 1920s it was estimated that GDP per capita was equal to that of France and not far behind the U.S. or the U.K. In 2001, the Argentine per capita GDP was 38%, 28% and 41% ofthat in France, the U.S. and the U.K. respectively. The Great Depression, still going strong in most of the world, had not been kind to any country, but the associated falling prices for commodities such as wheat and beef, particularly devastated the Argentine economy. Good prices and high demand had not yet returned. In 1940, Argentina produced little sophisticated manufactured goods. Yes, it was self sufficient in its simple needs such as pots and pans, soap and furniture, as well as fully competent to process its agricultural based exports. Most high technology manufactured products such as high-tension electrical cable, light bulbs, telephones and gas turbines were imported, up until the year before mostly from England; more recently from America. Furthermore the war, just really beginning in Europe, would both greatly increase the demand for Argentine foodstuffs, but perversely make its delivery to market almost impossible. The Brown family, since the early days of the 20th century, had an involvement in the German electrical fixtures and components manufacturing industry. The hope was that this expertise would be valuable in Argentina.

THE ZEIT SWEET TIME.

The protectionist environment existing all over the world in 1941 permitted the Brown family to discover a business opportunity in Buenos Aires. The production and distribution of technology based manufactured goods such as telephones and other electro-mechanical devices in an expanding and protected market was a niche crying out to be filled. In partnership with another family, the Weiss's, who immigrated at the end of the 19th century, the Brown' s bought 40% of Zeit stock. Despite the crisis of the Second World War, the Argentine domestic market was growing rapidly. Although The Browns were dealing with a new business culture, their commitment to hard work and their wise businessjudgment permitted them to improve their financial situation. In 1951, George's father bought an additional 10% of the stock, reaching 50% control of Zeit.

Other than three years spent in Germany in the mid-1950s working as an apprentice at Lichtlighter, a Hanover based manufacturer of time recorders, George had been educated in BsAs., married, raised a family and felt himself to be fully Argentine. Over time, George gained more experience in the family business, but as the youngest son of one of the partners he found it difficult sometimes to have his business ideas taken seriously by his father. In 1959 his expectations started to be fulfilled when the management offered him the possibility of running a new business as CEO of Roticator Co., a new affiliated company. At that point, Zeit management discovered a new market challenge through the development of a new product, the "Tele-Communicator". Their business technology was so innovative that it permitted customers to easily make external and internal calls on one single device for the first time. At Zeit this product line was usually referred to as the "intercom." In order to minimize risks Zeit decided to divide the company into two business units. They settled on a new corporation called Roticator with George the 27-year-old CEO. While Zeit continued offering their mechanical time recorder and other mechanical devices, this new product line set Roticator free to explore and experiment with new markets. Obviously, in order to preserve and nurture the new business, Zeit was prepared to give financial support in the early years. Fortunately, the business was a success from the beginning. In five years, Roticator became the clear market leader in a new growing market: business telecommunications. By helping their customers fulfill their needs in communications, Roticator conquered their competitors and dominated domestic market share. The business became so strong that Roticator was in a position to open branch offices all over the country. Within ten years, Roticator offered their services in most populous Argentine cities: Rosario, Cordoba, Santa Fe, Mendoza, Parana, Mar del Plata and La Plata.

The secrets of their success were based in two strategies: the rental equipment system and ultimate quality support maintenance. Through the former, the company was able to rent medium and small devices to their wide range of customers. Through rental systems, both parties got several benefits. The customers got updated equipment (though not as often as today) and excellent technical support without paying a heavy initial investment. Roticator received an increasing and steady cash flow and loyal customers. Literally, the latter strategy was a sine-qua-non condition for the success of the former. Without excellent technical support, nobody would ever have trusted Roticator as their strategic partner to propose and implement communications solutions.

Everything was almost perfect until the mid-1970s. By then the political and economic environment of Argentina had shifted outrageously. A violent political environment and growing economic instability created an inadequate framework for innovation and business success. At that time, George was really worried. He was afraid that the business would not be able to survive these joint threats. George was preoccupied not only with external threats, but also with their own company internal weaknesses. The Zeit shareholders were really delighted with the high dividends paid over the last ten years and they were not capable of suffering a reduction. Even though Roticator profits were "juicy", shareholders hardly recognized that the underlying technology was becoming old. In a market closed to imported goods, such as in Argentina over that period of time, sometimes seeing true world competitive reality was difficult. George was the only one who identified this as the major challenging problem for the future of Zeit.

During October 1978, George reached a tough conclusion about the required future direction of Zeit. He decided to force the issue and announced an ultimatum to the shareholder Board of Directors at their November meeting. Either Zeit would modify their short-term business focus and invest substantial funds into the R&D needed to update the product line, even if dividends had to be substantially reduced, or George would present his resignation. Unfortunately, the Board accepted his resignation. The major shareholders were unreceptive, particularly to the idea of reduced dividends. The intercom business was a great cash cow! Perhaps at that stage of their lives, the older generation viewed sure cash now as far superior to uncertain cash later.

GOING BACK TO THE BATTLEFIELD.

The convulsive situation in the 1980s demonstrated that George was "right on" about the problems facing Zeit. Since 1975, triple-digit annual inflation (an sometimes even higher) was the norm in Argentina, lasting until 1992. All the economic uncertainty (high inflation, huge interest rates, increasing governmental liabilities) adversely impacted the political and social order. Within this crisis environment, the enterprises and entrepreneurs were forced to modify their business practices. At this point, all their efforts and decisions were focused to survive the inflation not to serve the client needs. All companies' profits were made from financial operations, such as investing in junk and government bonds and other high-risk investments, not from the normal reality of making and selling products. Zeit was not an exception in this speculative game.

After some successful personal entrepreneurial activities during the 1980s, George returned to his first love: Zeit, and its time recorders and telecom equipment. At his return inl991, the Board was quite different. His father and the Weiss' were retired and his brother Jerome ran the business. As Commercial VP, George, now age 59, carefully analyzed the then current situation and discovered that the company was far away from its earlier operating margins. George inspired the preparation of a short-term plan in order to reach the break-even point. The first measure of the plan was to merge Roticator back into Zeit in order to reduce fixed costs and an unproductive organizational structure. Secondly, the plan initiated a profound downsizing process all over the company. Employment went from 142 to 91. At first, these initiatives were well accepted by the Board.

FACING THE CRUEL REALITY: ZEIT IN THE NINETIES.

In 1992, the macroeconomic environment was modified once again. The Argentine government stopped the high inflation and opened the market wide to all kind of imported capital and consumption goods. Zeit not only still had a substantially out-of-date technology (electromechanical vs. digital controls), but also their overheads were inefficiently high and costly. At this point, without high inflation, which they had learned to live with, and being thrown into a competitive market now opened to imported goods, George and the Board quickly realized the real dimension of the enterprise's crisis.

The telephone ringing on the morning of May 6, 1992 in the Zeit office on Calle Alsina was eventful. It was not just another customer notifying the Browns that their Zeit intercom system was no longer needed. This cancellation took the Zeit installed base of intercom systems to four digits from five. At their peak in 1987,Zeithad 12,348 systems in almost every Argentine business of any size and each generated an average monthly rental payment to Zeit of approximately $42*. In that year, intercom systems, first

All monetary values are translated into 2005 based U.S. constant dollar amounts.

introduced by Zeit (really, their Roticator subsidiary) made up 87% of revenue. From 1960 until 1990, cancellations were rare and the installed base continued to grow as the Zeit sales force successfully "beat the brush" for new customers. What was disturbing in the early 1990s was that other than the normal amount of bankruptcies, cancellations were mostly from their technically most sophisticated customers. They claimed that the Zeit systems were primitive and that much better and cheaper intercom communication systems were available from new Asian suppliers. The writing was on the wall! It was only a matter of time until the main product of Zeit, that product that sustained the Browns and allowed them to prosper financially, would be at the end of its product life cycle.

Even more disturbing, the electronics and telecommunications revolution that was just beginning to sweep the world in the early 1990s seemed ever accelerating. The Zeit installed base of intercom systems was melting away at an ever-increasing rate and the ability of the sales force to find new customers was falling even faster. Exhibit 1 shows the pattern of the annual lease revenue from the installed base of Zeit intercom systems over the years. Fortunately though, over time Zeit had added new products to their line. In 1956 they purchased the right to produce and sell the mechanical time recorder (AKA "time clock") system of Lichtlighter, Gmbh, of Hanover Germany. Over time Zeit refined and expanded its offerings of time recorders. Exhibit 1 also shows annual sales revenue related to time recorders over the same 1965-2002 period.

Under George's management as Commercial VP, performance of the Zeit time recorder business in the 1990s was good and getting better. Unfortunately, the intercom business continued its steep decline. Manufacturing of both time recorders and intercoms was sited in a Zeit owned 1200 square meter facility in suburban Bs. As. Most products were assembled from foreign imported electrical components and domestically produced mechanical parts. The success of the time recorder business could primarily be attributed to Zeit' contacts with thousands of Argentine businesses through the customer's use of Zeit intercoms. Of course, the 1989 withdrawal of their major foreign competitor, Bailey Controls of Boston, USA, certainly helped. Early versions of time recorders also provided auxiliary (and very profitable) sources of revenue such as proprietary paper time cards specially printed to accept time records. Overtime though, as time recorders became more electronic and particularly as data began to be processed by download to computers, this "gravy" declined in importance. Exhibit 2 shows details of time recorder, auxiliary businesses and the declining level of intercom rental operating margins over most of the 1990s.

DOUBLING THE BET: 100% of ZEIT AND A FIVE-BULLET STRATEGIC PLAN.

On the cool rainy evening of August 12, 1998 George sat in his favorite restaurant, Pedemonte, on Avenida de Mayo awaiting the arrival of Richard Brown, the eldest son of his brother Jerome. Over the past two years, Jerome, in declining health, had gradually withdrawn from the day-to-day management of Zeit, leaving George

(The remainder of this case along with Instructors' Notes is available on request. For a copy please send your e-mail address to: paul.s.marshall@widener.edu)

Publication title: Allied Academies International Conference. International Academy for Case Studies. Proceedings

Volume: 12

Issue: 2

Pages: 75-79

Number of pages: 5

Publication year: 2005

Publication date: 2005

Year: 2005

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 1948-3198

Source type: Conference Papers & Proceedings

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 192411636

Document URL: http://search.proquest.com/docview/192411636?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2005

Last updated: 2013-09-16

Database: ABI/INFORM Complete

Document 30 of 100

MR. FAHAD AL BANNAI, VICE PRESIDENT AXIOM TELECOM

Author: McLaurin, J Reagan

ProQuest document link

Abstract:

Leaders make a difference in organizations. They can simply use their leadership skills and abilities to turn the organizations around. They are the ones who make things happen. When looking closely at the success of leading organizations, one usually observes the leadership process applied by upper-management personnel. Axiom Telecom has proved itself as the leading company in Telecom Products in both the wholesale and retail business in the United Arab Emirates (UAE). In order to understand the success story behind this flourishing company, an interview with Axiom Telecom's Vice President, Mr. Fahad Al Bannai, was conducted. This report provides a background overview about the company and presents a profile of one of the leaders behind the success of Axiom Telecom.

Full text:

INTRODUCTION

Leaders make a difference in organizations. They can simply use their leadership skills and abilities to turn the organizations around. They are the ones who make things happen. When looking closely at the success of leading organizations, one usually observes the leadership process applied by upper-management personnel. Axiom Telecom has proved itself as the leading company in Telecom Products in both the wholesale and retail business in the United Arab Emirates (UAE). In order to understand the success story behind this flourishing company, an interview with Axiom Telecom's Vice President, Mr. Fahad Al Bannai, was conducted. This report provides a background overview about the company and presents a profile of one of the leaders behind the success of Axiom Telecom.

INDUSTRY OVERVIEW

Before exploring the business Axiom Telecom operates in, it is essential to understand the industry in which the business runs in. Axiom Telecom's main products and services are related to telecommunication services and products provided by the telecommunication services companies and telecom devices manufacturers. The company is best known for the sale of leading brands of Mobile phones and wireless devices.

The mobile service in the UAE is probably the fastest growing telecom service provided by Etisalat (The local telecommunication company). The mobile phone penetration has been increasing rapidly for the past few years. It reached 86.8% (against the UAE population figure of 4 Millions) by the end of year 2004. The increase in the number of mobile subscribers demands for an increase in the number of wanted mobile devices. Also, the introduction of new mobile technologies such as 3G would require the availability of new types of mobile phones that supports such technologies. As a result, new opportunities are created for mobile devices retail stores.

The wireless related services have also showed an impressive growth during the past couple of years. The introduction of Wireless DSL and Wireless Cable services by the Internet Service Provider (eCompany) requested the retail businesses to offer Access Point devices and Wireless cards for sales. The popularity of GPRS and WAP services also allowed the telecom related companies such as Axiom Telecom to expand their creativity and innovation to offer services that are directed to GPRS and WAP customers.

COMPANY OVERVIEW

Axiom Telecom was established in 1997 as part of a UAE local corporation, Al Bannai Enterprises. Al Bannai Enterprises is a family owned group of companies that started operations in 1960, in Dubai. The Group has fourteen different business operations in a diversified marketplace.

Today, Axiom Telecom is a leading authorized distributor for many International recognized Brands of Mobile and Wireless devices such as Nokia, Sony Ericsson, Samsung, Motorola, i-Mate, Siemens, Palm and Thuraya. The company started its wholesales business in 1997. However, with a potential growth in Retail Market and the attractiveness of this industry, the company decided to invest in a retail business in 2001, after overcoming a number of obstacles. Recently, the company added another service to its line of business, a service that they call "Value Added Service".

Axiom Telecom specializes in wireless telecommunication products such as mobile phones, satellite handsets and wireless access devices and network cards. The firm has more than 40 outlet stores in prime retail locations such as major shopping malls and business centers as well as more than 65 accessory points in Emarat Service Stations across the UAE. Between the UAE and Saudi Arabia, Axiom Telecom has a little more than 650 employees.

COMPANY'S SERVICES

Axiom Telecom has divided its target market into four categories: Corporate, Distribution, Retail, and Value Added Services.

Corporate: Axiom's Corporate Division targets small, medium and large companies. The division bases its service on three main concepts: dedication, value for money and advanced Services (1-website). In order to capture a large portion of business clientele, the company offers them reasonable rates for a variety of business solutions. This strategy has been very effective in the retention of its business customers. The retention of business clientele is of prime importance as the revenue and profit generated from this target market is the highest.

Distribution: Axiom Telecom has built its brand name around quality and value added services. These qualities enabled the company to be the major distributor of mobile phones and accessories not only in UAE, but also in Pakistan and Jordan. The world leading mobile devices manufacturers trust Axiom Telecom to distribute their products in the countries where Axiom Telecom operates. Dawn Robson, i-Mate's General Manager has stated recently in a press release after declaring a strategic regional partnership with Axiom "We are looking forward to extending our existing relationship with Axiom and building relations between the two companies. Axiom us well known, trusted name and this is of ultimate importance as a distributor of i-mate devices as customers want to buy their devices from a reliable source with market experience and excellent after sales support." The company has also recently started its operation in Saudi Arabia, while studying to open operations in other countries in the Gulf and Middle East. The distribution division of Axiom Telecom is being operated through both direct and indirect channels. The company's obj ective is to maximize its market share through building a flow of communication and cooperation between the company and its dealers.

Retail : Since 200 1 when the management of Axiom Telecom envisioned the potential market growth in the retail business, the company started heavily investing into the retail business. With the managements' great achievement of breaking the monopoly contracts, which the UAE Local agents had with major mobile phone manufacturers, the company started adding different brands of mobile phones and accessories to its line of products. It started with Nokia Mobile phones, and then Sony Ericsson followed by Siemens, Motorola and others. Axiom Telecom was the first company to be an authorized dealer for multiple brands of mobile phones. It was also the major reason for influencing Nokia mobiles manufacturer to change the contents of its trade contract with Emirates Computers. The outcome ofthat pressure was that Axiom Telecom was awarded a Nokia mobile distribution contract for distributing, selling and repairing Nokia mobile phones and accessories.

Axiom's retail stores fall under two main categories: -

1. Grade "A" Stores - These are basically the full blown stores offering a wide array of services to the customers and are located mostly in shopping malls. The target customers of these stores are those who look for value added services and are not sensitive to devices' prices.

2. Kiosks - The kiosks offer a limited range of products and services and are operated through partnership arrangements with various supermarkets like Spinneys, Lulu Centers, Union Co-op etc. Despite the fact that these kiosks are small in size and limited in service provision, they play a vital role for the success of the firm and add a good amount of revenue to the organization. This is due to the fact that they are both cost-effective and target a higher penetration of customers than the Grade "A" stores. The target market for such kiosks is the middle to low-level customers who in a way are price sensitive. Besides these kiosks at major supermarkets, Axiom also sells mobile phone accessories, on consignment basis, across 65 Emarat Service Stations in the U.A.E.

Value Added Services: In a competitive industry and market, the best way to distinguish the company is through a high level of customer service and by offering services that are unique. The wireless technology itself has been booming in the past few years and it is predicted to keep growing in the following years especially with the introduction and implementation of new wireless technologies such as 3G, GPRS and WiMax.

The new designed mobile phone devices and other wireless technology devices support different value added services such as games, customized ring tones, Internet connection, Bluetooth and many more. Axiom Telecom introduced Axiom Plus, which is targeted at mobile users. Axiom Telecom offers mobile users with a wide range of new and exciting services such as wallpapers, picture messages, animated MMS, operator logo, and games. In addition to these services, which are primarily directed to mobile phone users, Axiom Telecom offers other value added services to its general customers. These services are:

Theft Insurance: a new (same model) phone is given to the customers who are a victim of a robbery.

Two Year Warranty : the first and the only retail business who offer a two year warranty on their products

Price Protection Guarantee: if the price of the product drops within 5 days of the purchase, a credit note that covers the difference will be given to the customer

Standby Phone : during the repair, a standby phone is given to the customers whose phones are covered with the Axiom Warranty.

In additional to these services, Axiom Telecom established a world class repair center which is the biggest repair center for mobile phones in the Middle East. The repair center is: equipped with the latest state-of-the-art servicing equipment, run by qualified and experienced Electrical and Computer engineers, and staffed with service employees who focus on customer satisfaction.

COMPANY'S PRODUCTS

Axiom Telecom is an authorized distributor of the following products/brands.

Mobile Phone and Accessories: Nokia, Samsung, Siemens, Sony Ericsson, Motorola, i-mate, and Thuraya

Wireless Devices: HP and Palm

Wireless Connectivity: Nokia, 3COM, and Anycom

Flash/Multimeda cards and readers: SimpleTech

Multimedia Devices: IVC and Kodak

AXIOM TELECOM MANAGEMENT

Axiom Telecom CEO: Mr. Faisal Al Bannai, currently 37 years old, holds a bachelors degree in Business from Boston University. He also has a Masters Degree in Business Administration, which he obtained from a university in London. Mr. Faisal Al Bannai founded Axiom Telecom LLC in 1997. He started Axiom Telecom as a wholesale business because the telecom products retail business was operated through certain authorized dealers who had valid contracts with telecom products manufacturers. Despite the fact that the company was generating profits in the wholesales business, Mr. Al Bannai envisioned a potential attractiveness in the retail business. He faced many obstacles during the planning stage of shifting the company from only a wholesales business to a wholesales plus a retail company. One major obstacle was the fact that the UAE Telecom products market was monopolized, and maj or brands of mobile manufacturers already had exclusive contracts with UAE Local agents. Mr. Al Bannai believed that in order to gain a good market share, he should be awarded distribution and sales contracts with dominant mobile manufacturers. Nokia mobiles at that time captured around 70% of the UAE mobile phone market share. Thus, Mr. Faisal Al Bannai tried to have a contract with Nokia to sell its products in the UAE. After several failing attempts, Axiom Telecom was given a challenge by the manufacturer of Nokia Mobiles. The challenge was that if Axiom Telecom could achieve the highest sales volume of Nokia 9210 Communicator, they would be awarded the contract. The challenge was accepted and it was met. Hence, the company was awarded the contract of selling Nokia mobiles in the UAE.

Mr. Faisal Al Bannai was also awarded Shaikh Mohammed Bin Rashid Al Maktoom prize for the lifetime achievement award for his outstanding success and accomplishment with Axiom Telecom.

Axiom Telecom Vice President: Mr. Fahad Al Bannai completed his Bachelor and Master degrees in Business Communication from Boston University. He joined Dubai Police force after his return from the United States in 1 997 while working part-time for Axiom Telecom. For the last three years of his employment with Dubai Police, he was the Financial and Economic Crime Section as the Head Assistant. While working for this section he developed his leadership skills. Working in the Financial and Economic section helped him to appreciate the essence of hard work and dedication. Late in 2004, Mr. Fahad Al Bannai decided to resign from his job at the Police force in order to join his brother, Faisal Al Bannai, in looking after the family business, which was quickly moving from one milestone to another.

INTERVIEW ASSESSMENT

Mr. Fahad Al Bannai identified a number of key characteristics that produce a successful leader who would be qualified to handle such demanding tasks that pertain to a higher level of management. The key factors specified by Mr. Fahad Al Bannai are stated below.

FOCUS: In the year 2000, the upper management of Axiom Telecom shifted its focus from wholesale business to a new line of businesses. The management drew a vision for the company, which stated that in order to survive and be profitable in such a competitive industry it was essential to grab the end customers' business. Therefore, the company approached the leading mobile phone manufacturers trying to have trade contracts with them. They kept trying till they succeeded in their aim in 2001 when they established three retail stores. Focusing on the need of the end-users, the company improved its services year by year. Today, Axiom operates approximately 230 retail stores in U.A.E. and Saudi Arabia. This is a monumental achievement on the part of the management of Axiom Telecom considering its humble beginnings. Mr. Fahad Al Bannai stated that he keeps his focus on Axiom Telecom's mission, vision, values and strategic goals. He, as a leader, does not get too involved with the method used to achieve the desired outcome. He, however, makes sure that the organization is being built in a capacity that allows it to reach the desired outcome. To further succeed, this capacity building need not be extremely rigid as to adopt structures, policies and processes; conversely, it should be flexible, creative and innovative.

AUTHENTICITY: Axiom Telecom's Vice President Mr. Fahad Al Bannai believes that "being yourself is an important characteristic of leaders. It enables them to project the same image to their followers and thus urges them to perform better and adopt innovative styles in performing their duties. Being an authentic person allows the followers and subordinates to know when and what is expected from their leaders. Understanding their leaders' expectation and performing to meet these expectations, promotes, builds and maintains the trust between the leaders and the followers. Mr. Fahad, Al Bannai mentioned that, in the very same day that the interview was conducted, he was at the Axiom Telecom branch in Deira City Centre joining his sales staff with their duties and tasks. Mr. Fahad's modest action enables the staff to feel close to the Vice President of the company they work for. His action also helps him understand and experience the problems that his sales staff may be going through. Fahad was "being himself' while interacting and dealing with both the staff members and customers. Fahad's attitude encourages the subordinates to speak up when having problems since they would feel that their leader would understand them. This enhances the morale of the employees and would make them feel that their leader is always backing them up.

COURAGE: Mr. Fahad Al Bannai believes that any fear should be overcome by having the courage to take risky and big steps. This quality is also evident in Fahad's brother, Mr. Faisal Al Bannai, Axiom Telecom's CEO, who was able to make a risky decision of entering into the retail market in 2001. Had Faisal not taken this opportunity due to not having enough courage for such a step, Axiom Telecom would not be in the position they are in now, a 4 billion-dirham company. When Fahad was asked where his source of inspiration and influence stems from, he mentioned it was from his elder brother, Mr. Faisal Al Bannai.

Courage is what it takes to witness a huge growth and to overcome challenges facing many organizations. A factor that also coincides with courage is the ability to take initiatives. A leader should have the courage and the bravery to be the first to present a certain idea or a concept to the market. An effective leader does not simply react to situations and try to remedy them, conversely, effective leaders always have a back up plan, which in times of need, they take the initiative to use instead of just following everyone else in the same direction.

Fahad admits that people make mistakes, but he thinks that as long as the person admits that he was wrong then there is no problem. He stated, "We are all humans, and mistakes are expected to happen, so long that they are admitted."

When asked about the motto in life that Mr. Fahad Al Bannai had followed, which enabled him to reach where they are today, he mentioned that he has always believed that life is full of opportunities. People just need to see them and grab them. He stated as a response to this question that his motto is "Grab opportunities. Don't be afraid to go into a certain area. If you believe in something, go ahead, but be ready to work hard for it day and night to achieve your goal." He has also given us an example of a simple opportunity that he envisioned and turned to be a successful business for the company. It was related to selling mobile phone accessories in Emarat Service Stations. It was a simple idea, yet it accounts for a significant portion of the company's profit.

EMPATHY: Fahad has an open door policy in his organization, specifically in his office. In fact, he encourages his employee to communicate with him and inform him of any problems they may experience. He does not even mind if his employees talk to him about different issues whether they are business related or not. His office door is always open as long as he is not extremely busy in an important meeting or so. He implied that he listens to his employees and he takes their suggestions into consideration. In fact, the suggestions are always studied and evaluated. He mentioned that a number of employees' suggestions were implemented after they were found to be beneficial to the organization. He believes that everyone is included in the loop and everyone should be given the chance to express him/herself

During the interview it was obvious that Fahad had a great belief in communication and the wonders it can lead to. He believes that through communication everything is possible. When asked how he influences others to make decisions that he wants, he replied "through communication"

TIMING: According to Mr. Al Bannai "timing is of the essence." Although he finds that all the other factors are important, timing is the most important because what differentiates leaders from non-leaders is knowing when to make critical decisions and when not to. Once this decision is made, all other factors are then considered. Fahad supposes that things shouldn't always be done immediately but one should be able to prioritize and get ones' team to prioritize as well.

In Fahad's opinion, another factor that adds to the list of factors mentioned above is that one should be passionate about what he/she does. Leaders should love what they do in order to be effective and good in what they do. They must feel that what they contribute to the organization plays a significant role in its success. They need to believe that their efforts and leadership styles are essential requirements that influence the employees' level of motivation, which in turn increases their satisfaction, and improves their performance.

PERSISTENCE: Fahad's opinion is that a person should not be disheartened by failure and instead should strive even harder to achieve their goals/ambitions. In its former years Axiom Telecom was mainly involved in the wholesale trade of mobile phones and despite their numerous efforts they were unable to enter into the retail market. This was primarily due to the existence of exclusive distribution rights, which prevented Axiom from entering into the retail market. Fahad mentioned in the interview that Axiom had to go and "bang on the doors of mobile phone manufacturers" for several years and then finally in 1998 they were offered the distribution rights for selling Nokia handsets in Pakistan. This was not exactly what Axiom was looking for at that time but nonetheless they were not disheartened and saw this as an opportunity to establish themselves and gain a foothold into the retail market. A few years later, the break that Axiom Telecom was looking for came when mobile phone giant, Nokia, decided to hold a competition for selling its 9210 Communicator model. Axiom ended up selling the most number of units and emerged as the clear winner. Subsequently Nokia offered Axiom distribution rights and the concept of exclusive distribution rights in the UAE market was scrapped.

HUMAN CAPITAL: Fahad attributes most of Axiom Telecom's success to the strength of its human capital, namely the employees. Therefore Axiom has a very thorough screening process before hiring for a job. During the interview when asked as to what were the qualities that Axiom looked for when hiring a person in a managerial or leadership position, Fahad responded by saying, "We look for 3 things: -

1 . He/she should be an expert in their field.

2. He/she should be a team player.

3. He/she should have people skills."

Fahad pointed out that he always consults his upper management staff before taking major decisions and encourages them to speak up and give him their valuable feedback. He mentioned that the company does not discriminate on the basis of gender and women occupy upper level managerial positions in the company, most notably the Head of the Export Department of its satellite phone division Thuraya.

Axiom also employs people of different nationalities from Britain, Australia, India, Pakistan, Philippines etc.

Axiom Telecom makes concerted efforts to develop its employees by offering numerous training programs and encouraging its employees to strive harder by providing them with promotions and other benefits.

Leadership style is the manner and approach of providing direction, implementing plans and motivating people. Three different styles of leadership exist, namely, authoritarian (autocratic), participative (democratic) and delegative (free reign). When Fahad was asked which leadership style more reflects the way he deals with his employees, he pointed to the Participative Power Style.

This type of style involves the leader and the employees together in the decision making process although the final decision is up to the person with the most authority, the leader. This leadership style is not a sign of weakness; in contrast it is a sign of strength that employees respect. The Participative style of leadership is used when the employees have some of the information and their leader has the other part of the information and when put together a better decision is made. Also, the participative style of leadership encourages the employees to feel that they are part of the team. It encourages them to take ownership of their project.

When Mr. Al Bannai was asked what motivation does he give employees to enable them to perform their certain duties with satisfaction, his response was that he motivates them financially and as mentioned earlier he tends to communicate with his employees and spend more time with them at their allocated branches. By motivating them financially, each employee has a basic salary but on top of that each sales person has a monthly sales target set for him/her. If the employee achieves his/her target (100% or above) he/she is entitled to a monthly commission related to the staff performance. Also, employees who achieve the yearly target are awarded a yearly bonus at the end of the year.

In Fahad's opinion the rewards of being a leader is that one gets to witness the achievements, or as he called it, "the fruits", that he/she worked hard to achieve. As for the penalties of being a leader, in a joking manner he mentioned the depression that comes from the handling of such a position. In his own words: "It is tough. You have to juggle things here and there. At some times it is so much pressure and it requires hard work."

Problem solving process: Problems are faced with rationality and a great deal of thinking at axiom. In case of problem, the first stage is to gather information from different sources and levels of the company to have a better understanding of the problem. Second, solutions and suggestions are discussed through a meeting with the related departments and stuff in order to arrive to the best possible solution. The decision is taken with the participation of the involved people to get a high quality decision with a higher better commitment.

By categorizing himself as a participative leader, Mr. Fahad "open door" policy engages him in behaviors that enhance his stuff fillings of personal worth and importance. Also, it helps him to achieve a higher goal accomplishment by such activities as scheduling, coordinating, planning, and providing the necessary resources to the right people.

Honesty and Integrity: Mr. Fahad believes that honesty is the key for a good communication between a leader and his stuff. Both good and bad news are communicated with a complete free environment at axiom. This open communication environment between the leader and his employees will save the company resources, because it is cheaper and more efficient to deal with problems and bad news today than in the future.

Axiom's Future Plans: Axiom plans to expand its operations to the following countries by the 1st Quarter of 2006: - Kuwait, Bahrain, Qatar, and Oman.

Publication title: Allied Academies International Conference. International Academy for Case Studies. Proceedings

Volume: 12

Issue: 2

Pages: 81-87

Number of pages: 7

Publication year: 2005

Publication date: 2005

Year: 2005

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 1948-3198

Source type: Conference Papers & Proceedings

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 192411599

Document URL: http://search.proquest.com/docview/192411599?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2005

Last updated: 2013-09-16

Database: ABI/INFORM Complete

Document 31 of 100

ADEL ALI, CEO, AIR ARABIA

Author: McLaurin, J Reagan

ProQuest document link

Abstract:

Though the global airline industry has been through its darkest hour since the turn of the new century, airlines in the Gulf have fared considerably well. However, one airline that caught the attention of one and all was Air Arabia - the first low cost airline in the Middle East. After drawing tremendous media attention for its pioneering way of promoting air travel, the airline carried over half a million passenger in a span of one year and also reached break even in the same period. The purpose of this study is to analyze the leadership philosophy of the person under whose helm this airline was conceived, developed and is being presently run-Adel Ali, CEO of Air Arabia.

Full text:

ABSTRACT

Though the global airline industry has been through its darkest hour since the turn of the new century, airlines in the Gulf have fared considerably well. However, one airline that caught the attention of one and all was Air Arabia - the first low cost airline in the Middle East. After drawing tremendous media attention for its pioneering way of promoting air travel, the airline carried over half a million passenger in a span of one year and also reached break even in the same period.

The purpose of this study is to analyze the leadership philosophy of the person under whose helm this airline was conceived, developed and is being presently run-Adel Ali, CEO of Air Arabia.

Ali's past record gives ample reasons to comment that he possesses "the right stuff" which, as per earlier studies, differentiates leaders from non leaders. Furthermore, having spent over 25 years in the airline industry in various parts of the world, Ali's leadership style also portrays a good mix of task and people orientation. His exposure to varied situations - e.g. war, organizational crisis, extreme deadlines, poor project management etc. - has only helped him to understand better the importance of being at the forefront, supporting one's associates, and taking bold steps which others may not dare to take.

Ali is undeniably a "people's person," being a strong believer in open communication, team work and empowerment. The factors that distinguish Ali are his unmatched passion, drive and determination to lead his followers towards immensely challenging goals - the strongest example being his success in launching an airline operation right from scratch in 6 months when the industry standard lingered around 1 1⁄2 years!

Truly an outstanding performer and a team player, Ali fosters an environment for able, ambitious, achievement oriented, hard working and passionate individuals to excel in.

Publication title: Allied Academies International Conference. International Academy for Case Studies. Proceedings

Volume: 12

Issue: 2

Pages: 89

Number of pages: 1

Publication year: 2005

Publication date: 2005

Year: 2005

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 1948-3198

Source type: Conference Papers & Proceedings

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 192411589

Document URL: http://search.proquest.com/docview/192411589?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2005

Last updated: 2013-09-16

Database: ABI/INFORM Complete

Document 32 of 100

MORE THAN JUST A SOFT DRINK

Author: Paul, April L; Gulbro, Robert D

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Abstract:

Coca Cola was born in Atlanta May 8, 1886 when pharmacist, Dr. John Stith Pemberton produced the syrup for Coca Cola. He carried his formula to Jacob's pharmacy. There it was sampled and pronounced "excellent". It was placed on sale for five cents a glass as a soda fountain drink. The syrup was teamed with carbonated water to produce a drink that was immediately "Delicious and Refreshing" an idea that continues to echo today wherever Coca Coal is shared.

Dr. Pemberton' s partner and bookkeeper suggested the name and penned the famous trademark "Coca Cola" in his unique script. During the first year sales averaged a moderate nine drinks per day. Never realizing the potential and future impact that his product would have, Dr. Pemberton, gradually sold portions of his business to various partners and just prior to his death in 1888 he sold his remaining interest to Asa G. Chandler. Mr. Chandler bought additional rights and soon acquired complete control of Coca Cola.

Full text:

PROCEEDINGS

Coca Cola was bon in Atlanta May 8, 1886 when pharmacist, Dr. John Stith Pemberton produced the syrup for Coca Cola. He carried his formula to Jacob's pharmacy. There it was sampled and pronounced "excellent". It was placed on sale for five cents a glass as a soda fountain drink. The syrup was teamed with carbonated water to produce a drink that was immediately "Delicious and Refreshing" an idea that continues to echo today wherever Coca Coal is shared.

Dr. Pemberton' s partner and bookkeeper suggested the name and penned the famous trademark "Coca Cola" in his unique script. During the first year sales averaged a moderate nine drinks per day. Never realizing the potential and future impact that his product would have, Dr. Pemberton, gradually sold portions of his business to various partners and just prior to his death in 1888 he sold his remaining interest to Asa G. Chandler. Mr. Chandler bought additional rights and soon acquired complete control of Coca Cola. (Heritage/Chroniclebirth 1)

The time following the acquisition is referred to as the Chandler Era in the Coca Cola history. By 1892 Chandler had boosted sales of Coca Cola syrup nearly ten times. His complete focus was on the soft drink and in order to maintain the level required he sold his pharmaceutical business. The business continued to grow and prosper and in 1 894 other syrup manufacturing plants opened outside of Atlanta including plants in Dallas, Texas, Chicago, Illinois and Los Angeles, California. Three years after Coca Cola's incorporation Chandler had the pleasure of announcing in his annual report to the shareholders that Coca-Cola is now drunk in every state and territory in the United States. In 1894, in Vicksburg, Mississippi bottling machinery was installed and cases of Coca-Cola were sold to farms and lumber camps along the Mississippi River; this was the first time that Coca-Cola was bottled. The plants grew to over 1,000 over the next 20 years. Coca-Cola searched for the container that would best represent the genuine Coca-Cola drink. The bottle shape that we all have come to recognize Coca-Cola by was granted a trademark by the U. S. Patents Office in 1977. (Herritage/Chroniclethechandlerera 1) Chandler sold the Coca-Cola Company to an Atlanta banker named Ernest Woodruff for $25 million in 1919. Under Woodruffs leadership the Coca-Cola Company soared to commercial success. (Heritage/chroniclemannamedwoodruff 1)

Coke sales slowly began slipping over the next 15 years, Coca-Cola's preference was dipping and so was consumer awareness. The summer of 1985 would soon change the course that Coke was currently on. On April 23, 1985 Coke introduced New Coke, and took the biggest risk in consumer goods history (Heritage/cokelorenewcokeinclude 1). This change came after the same formula had been sold for 99 years. The changed was preceded by taste tests of more than 190,000 consumers in 25 different cities in both the U. S and Canada (Demott 2). Unfortunately these tests failed to take into account something that would make the success of the new formula fizzle under the critical eyes of the consumers. The tests didn't expect the consumers to so fiercely protest even Coca-Cola changing the unique taste that had been the landmark of the company. The public's outcry was heard all across America from the formation of protest groups such as the "Society for the Preservation of the Real Thing" and Old Cola Drinkers America (Heritage/cokelorenewcoke 2). Chairman and Chief Executive Officer Roberto Goizueta actually received a letter addressed to "Chief Dodo, The Coca-Cola Company"; he said the thing that most upset him was that the letter was delivered to him (Heritage/cokelorenewcoke). All at once all eyes were on Coca-Cola, realizing how important Coke was to them.

The experience taught everyone a lesson, what Coke didn't realize was who actually owned Coke, the consumers. By lune The Coca-Cola Company consumer hotline was receiving 1 ,500 calls per day compared with 400 calls prior to the introduction of New Coke. Everyone seemed to hold any Coke employee personally responsible for the change. (Heritage/cokelorenewcoke) On IuIy 11, 1985, a mere 79 days after the introduction of New Coke, Coca-Cola brought back the original. Two top executives at Coke pulled together to make the decision to bring back old Coke, giving it the name Coca-Cola Classic (Greenwald 3). Coca-Cola Classic was sold alongside Coca-Cola and had two different target markets and therefore two distinct advertising campaigns. The youthful market of New Coke encourages consumers to "Catch the Wave" while the more emotional more nostalgic market of Coke Classic is encouraged by the slogan "Red White and You" (Heritage/cokelorenewcoke 2).

Coke now recognizes that the test marketing was flawed. It didn't properly inform the consumer the consequences of their choice; choosing New Coke meant giving up the old favorite. Coke emerged stronger than ever and was fighting its fiercest competitor from both sides. It backed into the one of the most powerful strategic positions in the consumer marketplace; after all they can satisfy the die-hard Coke customers and the consumers who like the sweeter taste of New Coke (Greenwald, 6).

The future looked brighter than ever for Coke as it continued to take it products global and expanded in several directions. In 1990 Coca-Cola relaunched new Coke with a new name Coke II, and with its new look it sent another crushing blow to its rival Pepsi. Coke had become as much a part of America as apple pie and fire works on the 4th of IuIy. It will remain unfaultered by this decision and will continue to hold a strong place in the U. S soft drink industry as well as worldwide markets.

The decision to introduce the new formula was a non-programmable decision; it was a unique problem with no clear-cut criteria or adequate information other than the flawed survey data and the stagnant numbers in the industry. Coke was forced to take action and the executives felt the decision must be made rather quickly to maintain their stronghold; this led to a more behavioral type decision, it looked at how the consumer was responding to taste tests. (Daft, 444)

Coca-Cola's culture most resembles a clan culture. Everyone is working together to achieve the goals set by the executives (Daft, 358). Coke's strategy for interacting and maintaining an edge in the competitive market was driven by the consumers' lack of enthusiasm for soft drinks in general. Coke had to reenergize the population's interest in soft drink products (Daft, 50 and 134). Coke encouraged trying new and innovative ideas by sending the message that it is ok to take intelligent risks even if they don't work out as intended" (heritage/cokelorenewcoke 1). Goizueta urged employees to take intelligent risks in their jobs, saying it was critical to the company's success (heritage/cokelorenewcoke 2). The culture allows employees to take an active part in the processes that affect their daily work (Daft, 358). The fact that they are involved in the decision process and the implementation of the change helps to foster the change and improves the overall success rate of the change. Mr. Goizueta states that "Coke set out to change the dynamics of sugar colas in the United States, and we did exactly that -albeit not in the way we planned." (Heritage/cokelorenewcoke). He further states that the most significant result of the "New Coke" was that it sent an incredibly powerful signal. . . a signal that we really were ready to do whatever was necessary to build value for the owners of our business (Heritage/cokelorenewcoke). This lets the employee know that they are important and they matter. This will foster better employee confidence in themselves and in the organization they work for.

The decision to introduce New Coke utilized different dimensions of the decision models discussed in textbooks. It had an element of a trial and error model in that they did go back and renounce their decision, brought back Coke Classic and pulled New Coke from the shelves. This trial and error however did prove to be beneficial because it gave them more insight into their external environment and allowed them to see what the consumer expected. They gathered information from their consumers before making the decision and realized that more information should have been disclosed and gathered in order to make the most informed decision.

However; in keeping the consumer happy, the stock prices and profits increased and ultimately the stockholders were pleased. It also allowed for participative decision making because the decision to produce and sell Coke Classic was not made by one individual, it was a top down decision in that the individuals involved were two executives (Daft, 444). The requirements for a successful change appeared to be stacked in Coke' s favor. They had the need for a change because the market was becoming lethargic, and the results from the taste test indicated that the population in general would like the smoother, sweeter taste of New Coke. Another element required for a successful change is management support. Coke not only had management support they also had the support of the employees. They made the decision from the top but including involvement at all levels. They were prepared for resistance internally but didn't expect it to occur externally and with such force. They had a change agent who not only supported and believed in the decision but had the authority to make decisions during the process (Daft, 398).

Organizations looking to Coke as an example could take several lessons to heart. First be sure that the external environment is carefully monitored and that the entire story is passed on to the consumer. Conflicts with change are generally expected from the internal environment however, in this instance the greater conflict came from the consumers, not realizing the impact they had by choosing the taste of New Coke. They rejected the change and demanded that the original product be brought back. Organizations need to realize that even with all the technology that is available to organizations today the decisions are still made by humans and therefore are highly susceptible to human error. Other organizations could learn to expect the unexpected and when that occurs to bow out gracefully and recover as much as possible, all the while holding on to as much dignity as possible.

The events of the decision to market New Coke in 1985, which some hail as the marketing blunder of the century, with consumers hoarding the "old" Coke, and calls of protest by the thousands changed forever The Coca-Cola Company's thinking" (Heritage/cokelorenewcoke 1). The Coca-Cola Company was able to take what could have been a major failure and turned it into something positive for the organization. They proved to their employees and the public that they are a learning organization, which promotes communication and collaboration so everyone is engaged in identifying and solving problems, enabling the organization to experiment, improve and increase its capability (Daft, 28). It was able to move forward with new products and come out of the situation a better company because the public saw them in a different light. It also allowed them to teach a valuable lesson to their employees, one that will hopefully help to shape the future at Coca-Cola. It taught the employees that it is ok to make a decision that doesn't work out the way it was anticipated.

QUESTIONS

In class discussion the following questions could be addressed:

1 . How could a firm make a major change like this without adequate information?

2. Should a change of this magnitude only be made by a CEO?

3. What methods of information gathering should a firm use to stay abreast of its customers wants and needs?

4. What can a firm learn from these kinds of mistakes?

Publication title: Allied Academies International Conference. International Academy for Case Studies. Proceedings

Volume: 12

Issue: 2

Pages: 91-94

Number of pages: 4

Publication year: 2005

Publication date: 2005

Year: 2005

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 1948-3198

Source type: Conference Papers & Proceedings

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 192411634

Document URL: http://search.proquest.com/docview/192411634?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2005

Last updated: 2013-09-16

Database: ABI/INFORM Complete

Document 33 of 100

COOKIE JAR RESERVES-THE CASE OF CALLAWAY GOLF COMPANY

Author: Reed, Brad; Rose-Green, Ena

ProQuest document link

Abstract:

Callaway Golf Company was founded by Ely Reeves Callaway Jr. Mr. Callaway came up with the idea of a stainless steel golf club taking its name from a World War I German cannon known for its long-distance capabilities. The club was known as the Big Bertha Driver. Callaway Golf also produces putters, balls and clubs. During 2002, Callaway Golf Company had a disagreement with the auditing firm of KPMG Peat Marwick over the accountingfor $17 million of warranty reserve costs. At issue was the reduction of Callaway Golf's warranty liability. Callaway Golf determined that the liability should be reduced by $17 million. Callaway's management believed that the reduction should be accomplished by an increase in the current's period's income of $17 million. KPMG agreed that there should be a $17 million reduction in the warranty liability but felt that the reduction of the liability should be treated as a cumulative error and corrected retroactively and additionally KPMG felt that the financial statements prior to 2002 should be restated. This case examines the accounting issues raised by the disagreement between Callaway Golf and its auditor and discusses the relevant sections of GAAP. Additonally, the case discusses the use of cookie jar reserves in accounting and recent SEC statements regarding such accounting.

Full text:

ABSTRACT

Callaway Golf Company was founded by Ely Reeves Callaway Jr. Mr. Callaway came up with the idea of a stainless steel golf club taking its name from a World War I German cannon known for its long-distance capabilities. The club was known as the Big Bertha Driver. Callaway Golf also produces putters, balls and clubs. During 2002, Callaway Golf Company had a disagreement with the auditing firm of KPMG Peat Marwick over the accountingfor $17 million of warranty reserve costs. At issue was the reduction of Callaway Golf's warranty liability. Callaway Golf determined that the liability should be reduced by $17 million. Callaway's management believed that the reduction should be accomplished by an increase in the current's period's income of $17 million. KPMG agreed that there should be a $17 million reduction in the warranty liability but felt that the reduction of the liability should be treated as a cumulative error and corrected retroactively and additionally KPMG felt that the financial statements prior to 2002 should be restated. This case examines the accounting issues raised by the disagreement between Callaway Golf and its auditor and discusses the relevant sections of GAAP. Additonally, the case discusses the use of cookie jar reserves in accounting and recent SEC statements regarding such accounting.

Publication title: Allied Academies International Conference. International Academy for Case Studies. Proceedings

Volume: 12

Issue: 2

Pages: 95

Number of pages: 1

Publication year: 2005

Publication date: 2005

Year: 2005

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 1948-3198

Source type: Conference Papers & Proceedings

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 192411697

Document URL: http://search.proquest.com/docview/192411697?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2005

Last updated: 2013-09-16

Database: ABI/INFORM Complete

Document 34 of 100

GELATO NATURAL S.A.

Author: Smith, D K; Aimar, C; Davalli, A G; Barbero, R

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Abstract:

Ariel Davalli is the Vice President of Gelato Natural S.A., a company which (at the time of the case) was selling Chungo (it 's high-quality homemade ice cream) from several locations in the northern suburbs of Buenos Aires, Argentina. Based on high demand for its products from individual consumers living in the northern suburbs, the company invested $2,000,000 U.S. dollars to significantly increase the capacity of its factory. This $2,000,000 expansion was funded by borrowing $750,000 U.S. dollars (the loan comes due in four years) and by shifting the local-currency equivalent of $1,250,000 of working capital into fixed assets. Unfortunately, just as the expanded factory started production, the economic environment in Argentina deteriorated significantly. In addition, the exchange rate of the peso with the U.S. dollar fell from 1-to-1 (at the time of the loan) to 3-to-1. Currently, demand for Chungo is stagnating, and the new factory is operating at only 30% of capacity.

Full text:

ABSTRACT

Ariel Davalli is the Vice President of Gelato Natural S.A., a company which (at the time of the case) was selling Chungo (it 's high-quality homemade ice cream) from several locations in the northern suburbs of Buenos Aires, Argentina. Based on high demand for its products from individual consumers living in the northern suburbs, the company invested $2,000,000 U.S. dollars to significantly increase the capacity of its factory. This $2,000,000 expansion was funded by borrowing $750,000 U.S. dollars (the loan comes due in four years) and by shifting the local-currency equivalent of $1,250,000 of working capital into fixed assets. Unfortunately, just as the expanded factory started production, the economic environment in Argentina deteriorated significantly. In addition, the exchange rate of the peso with the U.S. dollar fell from 1-to-1 (at the time of the loan) to 3-to-1. Currently, demand for Chungo is stagnating, and the new factory is operating at only 30% of capacity. Additional data and information in the case include:.

1. For Argentina: Historical overview, a sample of recent statistics from the World Bank, and (for benchmarking purposes), comparable statistics for the United States.

2. On the company: Historical overview, current performance, and numerous factors impacting that performance.

3. Characteristics of the company's current strategy, including descriptive information on the product line, characteristics of the distribution system, information on the promotion and pricing strategies the company is currently using, etc.

4. Characteristics of the current competitive situation.

6. Detailed data on the attitudes and behaviors of buyers of homemade ice cream in Argentina.

Publication title: Allied Academies International Conference. International Academy for Case Studies. Proceedings

Volume: 12

Issue: 2

Pages: 97

Number of pages: 1

Publication year: 2005

Publication date: 2005

Year: 2005

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 1948-3198

Source type: Conference Papers & Proceedings

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 192411627

Document URL: http://search.proquest.com/docview/192411627?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2005

Last updated: 2013-09-16

Database: ABI/INFORM Complete

Document 35 of 100

JONES' MARKETS, INC.

Author: Smith, D K

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Abstract:

This case challenges students to review policies used by Jones' Markets Inc. to evaluate the performance of produce managers (that is, the individuals in charge of fresh fruits and/or vegetables) in its many supermarkets. In particular, students are asked to review the guidelines Jones' Markets uses to charge back against produce managers the costs of fresh fruits and vegetables which have spoiled. The case is appropriate for senior-level undergraduates as well as students in MBA and Executive Development programs. The case could be taught in a one hour and a half class session; if handled this way, it is likely to require at least a couple hours of preparation by students. Alternatively (because it is very short), the case could be distributed in class, prepared (on the spot) by the students, and then discussed (on the spot) by the class.

Full text:

CASE OVERVIEW

This case challenges students to review policies used by Jones' Markets Inc. to evaluate the performance of produce managers (that is, the individuals in charge of fresh fruits and/or vegetables) in its many supermarkets. In particular, students are asked to review the guidelines Jones' Markets uses to charge back against produce managers the costs of fresh fruits and vegetables which have spoiled. The case is appropriate for senior-level undergraduates as well as students in MBA and Executive Development programs. The case could be taught in a one hour and a half class session; if handled this way, it is likely to require at least a couple hours of preparation by students. Alternatively (because it is very short), the case could be distributed in class, prepared (on the spot) by the students, and then discussed (on the spot) by the class.

CASE SYNOPSIS

The case consists of an e-mail received by the author. In this e-mail, the produce manager from the Jones' Market in the author's home town describes the policies used to handle the charging back (against produce managers like him) of the costs of fresh fruits and vegetables which have spoiled and must be thrown away (that is, "pitched"). The produce manager then raises the question of whether the policies governing the charging back of spoiled fruits and vegetables are a "valid way of interpreting data to reduce shrink at the store level. " As it happens, the key issue raised by his question relates not so much to "shrink" but much more directly and importantly on the way Jones' Markets, Inc. evaluates the performance of its produce managers. There is very little data in this case; the data which is available consists of 1) A description of the policies Jones' Markets, Inc. currently uses to evaluate the performance of its produce managers; and 2) A few comments/questions regarding these policies which the product manager posed to the author.

Publication title: Allied Academies International Conference. International Academy for Case Studies. Proceedings

Volume: 12

Issue: 2

Pages: 99

Number of pages: 1

Publication year: 2005

Publication date: 2005

Year: 2005

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 1948-3198

Source type: Conference Papers & Proceedings

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 192411783

Document URL: http://search.proquest.com/docview/192411783?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2005

Last updated: 2013-09-16

Database: ABI/INFORM Complete

Document 36 of 100

REIT VALUATION: THE CASE OF DUKE REALTY CORPORATION

Author: Stotler, James

ProQuest document link

Abstract:

This case will require the student to value the equity of Duke Realty Corporation, (NYSE: DRE) and make a buy or sell recommendation as an independent analyst. The data given should be examined to determine whether or not the company's stock is valued above or below the market price in order for investors to make a buy or sell decision. The student must assess the real estate industry environment using Porter's five-force model of competitive strategy and the DuPont identity. Valuation techniques employed include the capital asset pricing model, the two-stage dividend-discount model, the P/E valuation approach, and the Gordon model. The student is placed in the role of an equity analyst and asked to prepare a buy or sell recommendation for Duke Realty Corporation (NYSE: DRE) stock. DRE is the a large office and industrial property owner and manager operating in the midwest and southeast. The student must assess the competitive environment of DRE using the DuPont identity and Porter's five force model of competitive strategy as well as estimate the value ofthe stock. All information in the case is publicly available.

Full text:

ABSTRACT

This case will require the student to value the equity of Duke Realty Corporation, (NYSE: DRE) and make a buy or sell recommendation as an independent analyst. The data given should be examined to determine whether or not the company's stock is valued above or below the market price in order for investors to make a buy or sell decision. The student must assess the real estate industry environment using Porter's five-force model of competitive strategy and the DuPont identity. Valuation techniques employed include the capital asset pricing model, the two-stage dividend-discount model, the P/E valuation approach, and the Gordon model.

The student is placed in the role of an equity analyst and asked to prepare a buy or sell recommendation for Duke Realty Corporation (NYSE: DRE) stock. DRE is the a large office and industrial property owner and manager operating in the midwest and southeast. The student must assess the competitive environment of DRE using the DuPont identity and Porter's five force model of competitive strategy as well as estimate the value ofthe stock. All information in the case is publicly available.

Publication title: Allied Academies International Conference. International Academy for Case Studies. Proceedings

Volume: 12

Issue: 2

Pages: 103

Number of pages: 1

Publication year: 2005

Publication date: 2005

Year: 2005

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 1948-3198

Source type: Conference Papers & Proceedings

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 192411765

Document URL: http://search.proquest.com/docview/192411765?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2005

Last updated: 2013-09-16

Database: ABI/INFORM Complete

Document 37 of 100

VENDOR REBATE MANAGEMENT: KHF, INC.

Author: Stretcher, Robert; McLain, P Michael

ProQuest document link

Abstract:

The primary subject matter of this case concerns the notion of vendor rebates and their effect on the financial reports of the firm. The activities surrounding this particular situation are essentially "window dressing" efforts designed to meet profitability demands through creative accounting techniques. The case has a difficulty level appropriate for intermediate and advanced undergraduate accounting and finance courses. The case is designed to be taught in one class hour and is expected to require two hours of outside preparation by students.

Full text:

CASE DESCRIPTION

The primary subject matter of this case concerns the notion of vendor rebates and their effect on the financial reports of the firm. The activities surrounding this particular situation are essentially "window dressing" efforts designed to meet profitability demands through creative accounting techniques. The case has a difficulty level appropriate for intermediate and advanced undergraduate accounting and finance courses. The case is designed to be taught in one class hour and is expected to require two hours of outside preparation by students.

CASE SYNOPSIS

Jim Layton, controller for Kitty (Hawk Food), Inc. for the past five years, is faced with a demand from KHF's bank that KHF increase profitability from the prior years. If the profitability of KHF is not increased, the bank has indicated that it will withdraw line of credit funding for KHF's operations. Without the line of credit, KHF would face severe financial distress. While credit from other sources might become available, it would be at less desirable terms, partly because the firm's current band had forwarded the most favorable term several years prior, but also because the bank's withdrawal of funding would influence other creditors in future funding requests. Jim is approached by one of the firm's suppliers concerning vendor rebates, a scheme of questionable integrity, but one that could present more favorable financial results without the firm actually performing better.

Publication title: Allied Academies International Conference. International Academy for Case Studies. Proceedings

Volume: 12

Issue: 2

Pages: 105

Number of pages: 1

Publication year: 2005

Publication date: 2005

Year: 2005

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 1948-3198

Source type: Conference Papers & Proceedings

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 192411672

Document URL: http://search.proquest.com/docview/192411672?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2005

Last updated: 2013-09-16

Database: ABI/INFORM Complete

Document 38 of 100

MONOCHROMATIC PERSONNEL SCANNING AT TECHMARK

Author: Switkin, Robert; Armandi, Barry; Sherman, Herbert

ProQuest document link

Abstract:

"Mike, I need you and Pat to come to my office immediately," said Iim Taylor, Senior Director of Employee Relations and EEOC, over the phone to Mike Arend, Senior Director ofthe Telesales Group of TechMark. "We have a serious problem regarding possible discrimination in your group."

Full text:

INTRODUCTION

"Mike, I need you and Pat to come to my office immediately," said Iim Taylor, Senior Director of Employee Relations and EEOC, over the phone to Mike Arend, Senior Director ofthe Telesales Group of TechMark. "We have a serious problem regarding possible discrimination in your group."

BACKGROUND OF TECHMARK

TechMark was a global, integrated provider of mobile computing, wireless networking and barcode scanning products sold to an array of customers in several core markets. TechMark' s products were used to amass, access and distribute information throughout an organization, thereby increasing efficiency and minimizing human error.

As TechMark' s sales and scope, both geographically and technically, continued to expand throughout the 1980s and early 1990s, it became clear that the company needed partnerships to adequately address the marketplace. While servicing large retail and government clients on a direct basis had always been the core business, TechMark did not have the headcount, software development, integration skills, or the geographic reach to penetrate new markets and develop new applications on its own.

Perhaps the most critical benefit of being a loyal TechMark partner was the receipt ofthe "golden nugget," i.e. a sales lead. Potential customers who contacted TechMark for a product or solution to a business problem (route accounting, inventory management, access control, etc) were directed to a partner for fulfillment.

THE TELESALES GROUP

In 1999 this investment in partner relationships was realized through the large expansion of the Telesales Group. The group was formed in 1994 by Mike Arend, with the assistance of Pat Hagen. Telesales was a polyglot, performing both customer service and marketing activities. Most ofthe staff was comprised of older women who had risen through TechMark' s ranks, often coming off of the manufacturing floor. In many ways their job was administrative: answering calls, sending out product literature and calling prospects culled from tradeshows, direct mailings and other corporate marketing efforts. To assist in this effort, a third-party call-center (ETI) was employed and did much ofthe outbound calling. In 1994 the annual quota was 4 million dollars. By 1999 it had grown to nearly $40 million and the workload, or growth expectations, showed no signs of diminishing.

THE NEW HIRE

Katherine Anderson was quite pleased she landed a job with TechMark. The job, as it was positioned to her by her recruiter, allowed her to learn many aspects of TechMark' s business, played a key role in directing sales activity, and prepared her to take an official management position within a two-year time frame. The job was phone-intensive, but Katherine was very sociable and thought that speaking with customers was interesting, if not fun.

When Katherine went to Pat with questions about her job or TechMark' s products, she was always referred to Gloria or one of the other older women for answers. As the other new hires - Tara, Rob, and Rhonda -joined the team, they were instructed to do the same.

PRODUCT TRAINING QUESTIONS

When Katherine asked Kerri how she managed to deflect calls requiring product knowledge she simply shrugged:

"I tell them that it's not my job to know, but that I can get them help. I either transfer them to tech support or get a partner to talk to them..."

Katherine replied, "I thought that tech support was only for customers who already purchased equipment, not présales....and aren't we supposed to send qualified prospects to business partners, and not people just fishing for information?"

Kerri shrugged, "I haven't gotten too many complaints yet ..... "

Unsatisfied, Katherine approached Pat.

Katherine: "Pat, I wanted to talk to you about something that keeps coming up - and the rest of the new hires are experiencing it too."

Pat: "What is it Katherine?"

Katherine: "I was wondering about getting some formal product training for us. Quarterly sales training is coming up for the field sales force. I was wondering if we could attend."

Pat: "Well, Telesales never has before. . .Besides, we need to have people on the phones. . ." Katherine: "But the customers are asking questions that we don't know the answers to. Sometimes I feel stupid that I can't answer questions about our own products."

Pat replied, "How you feel is your concern. We all know that you are not stupid. In your job, we find it is counterproductive to know too much about product... we diagnose, we don't prescribe ... ."

Soon, however, tech support was sending callers back to Telesales, as they were being told not to spend their time on pre-sales inquiries. One afternoon, after a particularly frustrating call, Katherine popped her head into Mike's office.

Katherine: "Mike, sorry to bother you...do you have a minute?"

Mike: "Sure, Katherine. When the door is open I am always available. You look concerned. . .is there a problem?

Katherine: "Well, the group and I feel that some product training will really help us do our jobs better. Callers are asking us questions about our products all the time, and we don't know how to answer them. Tech support is refusing to take any more présales calls and my partners are complaining about being used as a help desk."

Mike asked: "Product knowledge has never been that important before... has something changed?"

Katherine: "I think it' s always been important, only that the women in the group have tried to get bits and pieces on their own... besides, in the four months I've been here, the levels of inquiries keeps increasing....buyers are getting smarter...."

Mike: "Does Pat know about this?"

Katherine: "I talked to her twice but she doesn't think it's a problem."

Mike: "I'll see what I can do."

TELESALES INTERACTIONS

Through the remainder of 2000 Katherine continued to do well. She had consistently made her quota and received bonus pay at the end of each quarter. The group had continued to grow, with two new graduates joining the Telesales group. Though the NASDAQ had swooned, TechMark seemed secure in its core markets and all the talk in the hallways centered on expansion, growth and new opportunities.

Though required by HR, no formal performance reviews were done at year' s end. When she asked Gloria about this, Katherine was told: "Pat doesn't like doing those too much. In a couple of months HR may notice that no forms were filed. . .then Pat may have you do your own and she will sign them."

Katherine: "That's the way she does it every year?" "Yup" chirped Gladys.

AN INTERNATIONAL OPPORTUNITY FOR KATHERINE

Shortly after, Katherine was asked to take on responsibility for Mexico and Latin America, while transitioning her existing territory to the other team leaders. "It's going to be a lot of work, but Pat and I think that you are up to it, "Mike commented. "I think this is going to be an area of tremendous growth and we want you there to help drive it."

Katherine and Cathy stayed late nearly every evening for several weeks to handle the backlog. Rob and Tara worked diligently during the day as well, though they, like Pat and Kerri, were out the door by five.

Cathy sent several emails to Pat asking her to make sure that everyone was shouldering an equal share of the workload. Pat sent out a single missive asking that everybody pitch in. The situation improved temporarily but soon deteriorated. After returning from an unannounced and unscheduled 30-minute coffee break, Kerri found herself the target of Cathy's frustration. A shouting match ensued.

Upon hearing ofthe disturbance, Pat pulled Cathy aside and chastised her for her outburst in the workplace. When pressed about the personal phone calls, long lunches and unscheduled breaks taken by "certain members ofthe team," Pat's response "Work it out."

INITIAL DISCUSSION WITH HUMAN RESOURCES

From that point on, Katherine was certain that there was a definite undercurrent of hostility directed toward her. Uncertain as to its cause, she began to talk with Iim Taylor, in charge of employee relations and EEOC issues at TechMark. She did not want to lodge a formal complaint; she was simply looking for some advice and support. There were few black associates at TechMark and she started to feel quite isolated.

Over the next several months Katherine would find much cause. Among the incidents she noted: Others, generally Kerri, Tara and Pat, took extended lunches and coffee breaks. Katherine was cited the one time she returned 15 minutes late in the afternoon.

While others regularly had friends from other parts of the company sit in their cubes and chat, Katherine received an email from Pat informing her that she was not to be visited during the work day. On two occasions Katherine walked over to Tech Support or Product Management to ask a product question and was cited for leaving her desk without letting the other group members know where she was going. Pat would often pull Kerri and Tara into unscheduled meetings at the last minute with no explanation, rationale or advanced notice. This was perhaps most painful of all, as Katherine distinctly felt like an outsider, unable to contribute to the group or participate in steering its direction.

At Jim's urging Katherine scheduled a meeting to sit down and talk with Mike to solicit some feedback. She heard nothing but positives. When Katherine conveyed her impression that Pat did not like her, Mike told her to dismiss the notion out of hand.

"She thinks the world of you," Mike commented.

Later that week Pat pulled Katherine aside and complimented her on the work she was doing. "Is there anything I should be doing differently?" asked Katherine. "Nothing at all" Pat replied.

Yet the ill feelings seemed to linger and Katherine repeatedly documented instances of what she deemed unequal treatment and expectations. As her morale was fading, TechMark was going deeper into a tailspin. Executive management was being purged and the organization seemed directionless and drifting. With Mike on the road all the time and Pat effectively absent, Telesales seemed rudderless. Instead of feeling like a young manager Katherine was feeling more and more like an administrator - forced to handle unanswered customer service calls and send out marketing literature. The fact that others in the group were doing far less made her feel more and more resentful. She accessed a manager's report from the calling system that TechMark used. It showed that she had taken 3300 calls in the first reporting period of 2002; Kerri had scarcely taken 800.

Soon Katherine found herself soliciting Tony Sassone for a position reporting directly for him. While Tony was too mindful of corporate politics to actively poach her from Mike, he let her know that he was open to the change when "the time was right."

FEEDBACK TO THE TOP

As new management swept into power, a series of "all-hands meetings" was held. Their purpose was to introduce the new executives, address questions of strategic direction and, importantly, raise employee morale. TechMark Associates were once again encouraged to "take risks, challenge the status quo, and commit to personal and professional growth."

"Tell us how we are doing," CEO Gable exhorted, "and how we can do it better."

Katherine took his words to heart and sent emails directly to Gable; they also found their way to Bill Naughton and Al Tracy. In her missive she introduced herself, the Telesales Group, and made several suggestions for needed improvements. She neglected to copy Pat or Mike on any of her letters.

Surprisingly enough, Gable responded and asked Katherine to schedule a meeting to discuss Telesales. Surprised and pleased with the response, Katherine sent the CEO's reply to Mike. Pat was never copied. Later that day Pat was in Katherine' s cubicle with a printed copy of the email thread.

Pat snapped. "What are you trying to do?"

"Nothing at all. Gable asked for feedback and I thought I might have something to say that could really help out," Katherine replied, somewhat taken aback by the forcefulness of Pat's approach. "I thought this was a good thing."

Pat: "Now he wants a meeting! What do you plan to tell him?!?"

Katherine: "I just wanted to talk about what this group does and how we could do our jobs a little better - perhaps with a dedicated tech support resource to answer customer's presales questions."

Pat: "We've been doing just fine for all these years. What makes you think that you need to change it?"

Pat walked away, shaking her head "you're going to get us all fired...."

Katherine' s private meeting soon would include both Pat and Mike who insisted on crafting the agenda. Katherine did not openly object but was distraught and sought Gloria's council.

Katherine: "Why does this keep happening to me? Why does Pat hate me so much?

Gloria: "Hate you? She's terrified of you...."

THE LAST STRAW

Soon morale was on the rise, both within the company as a whole and inside the Telesales group in particular. Mike's job in distribution development was given to a new hire, and he was tasked with turning Telesales into a focused Inside Sales team. He would be given the resources to hire 20 new employees. Clearly, Katherine had every reason to believe that nearly three years of unflinching service would finally be rewarded.

To her dismay, when applicants for the new jobs were being brought in, Pat, Rob, Kerri and Tara were doing all of the interviews. She was not asked to do a single one. Disturbed, she approached Pat.

Katherine: "Pat, I could not help but notice that I was not being asked to interview any of the job applicants. Should I be worried?"

Pat: "Not at all" was the warm and reassuring reply. "You are our Latin American champion...These applicants are not bilingual."

Somewhat reassured, Katherine tried not to think about events at headquarters as she flew down to Brazil for a week long tour of territory operations. Coming back, she was shocked to learn that there would be no promotion. While Kerri, Tara and Rob had been promoted to supervisory status, she was still frozen in the same pay "zone." Where the three would be directly reporting to Mike, she was still under Pat.

Though she tried to bear up, she found herself so distraught that she had difficulty functioning. Getting no satisfaction from Pat and no audience with Mike, Katherine finally picked up the phone:

Later that afternoon, Mike was shocked to learn that both he and Pat had been implicated in a formal racial discrimination claim (discrimination against an African-American). Pat knew immediately who filed it.

Publication title: Allied Academies International Conference. International Academy for Case Studies. Proceedings

Volume: 12

Issue: 2

Pages: 107-111

Number of pages: 5

Publication year: 2005

Publication date: 2005

Year: 2005

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 1948-3198

Source type: Conference Papers & Proceedings

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 192411717

Document URL: http://search.proquest.com/docview/192411717?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2005

Last updated: 2013-09-16

Database: ABI/INFORM Complete

Document 39 of 100

FITNESS PRO: MANAGING A GROWING BUSINESS

Author: Tompkins, Lee; Kent, Russell; McDonald, Michael

ProQuest document link

Abstract:

The primary subject matter of this case concerns entrepreneurship. Secondary issues examined include operations, finances, marketing, distribution, warehousing, policies, procedures, and information systems. The case has a difficulty level of four. The case is designed to be taught in one and one-hour hours and is expected to require two hours of outside preparation by students.

Full text:

CASE DESCRIPTION

The primary subject matter of this case concerns entrepreneurship. Secondary issues examined include operations, finances, marketing, distribution, warehousing, policies, procedures, and information systems. The case has a difficulty level of four. The case is designed to be taught in one and one-hour hours and is expected to require two hours of outside preparation by students.

CASE SYNOPSIS

The case examines how a physical therapist started an exercise equipment and personal fitness business: Fitness Pro. Eventually, the sone takes over the business and moves it to the Hilton Head Island, South Carolina, and Savannah, Georgia, areas ofthe Southeast United States. As the business begins to grow, the founder's son looks for growth opportunities that fit his business model. He finds it in a similar business located in Tallahassee, Florida: Fitness Master. As these two businesses merge into one named Fitness Pro, they later start a new business in Jacksonville, Florida.

Within a few years, the business has three retail stores in Savannah, Tallahasee, and Jacksonville, and several outside who focus strictly on commercial accounts. With growth, however, comes growing pains. Major problems facing the two owners are what to do about rising shipping costs, warehousing, inventories, and financial control. The partners decide to bring in a more experienced partner to help them negotiate with their supplies. Also, the new partner is trying to help the business develop accounting and financial information systems.

The case ends with the three partners trying to develop a strategic plan for the future of the business.

Special thanks for research provided by Sharon Locklear, Ryan Martin, Rick Page, and Patrick Razuri, all of Georgia Southern University.

Publication title: Allied Academies International Conference. International Academy for Case Studies. Proceedings

Volume: 12

Issue: 2

Pages: 113

Number of pages: 1

Publication year: 2005

Publication date: 2005

Year: 2005

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 1948-3198

Source type: Conference Papers & Proceedings

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 192411800

Document URL: http://search.proquest.com/docview/192411800?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2005

Last updated: 2013-09-16

Database: ABI/INFORM Complete

Document 40 of 100

RFID AT RODNEY STRONG VINEYARDS

Author: Atkin, Thomas

ProQuest document link

Abstract:

This case investigates a decision that a winery had to make concerning whether it should implement Radio Frequency Identification technology (RFID). The push for RFID implementation has been led by Wal-Mart and other large retailers. The winery management had to wrestle with economic issues as well as the possibility of losing an important customer.

The first issue to investigate was cost. RFID is a very expensive technology to implement. There are some savings to be achieved by using RFID but it may never pay for itself. John Leyden must spell out all of the costs in order to perform a breakeven analysis. Many companies performed this same type of analysis when Electronic Data Interchange was rolled out in the 1990's.

Secondly, John has to look at the actions of his competitors to see if and when they are going to adopt RFID. With any new technology, there is usually a tipping point where it becomes a necessity for remaining competitive.

Most important, however, he needs to assess the needs of his customers. There was a potential to lose sales if his customers viewed RFID as a requirement for obtaining futur e business. From a supply chain management perspective, protecting relationships with customers may be the most important issue.

Full text:

ABSTRACT

This case investigates a decision that a winery had to make concerning whether it should implement Radio Frequency Identification technology (RFID). The push for RFID implementation has been led by Wal-Mart and other large retailers. The winery management had to wrestle with economic issues as well as the possibility of losing an important customer.

The first issue to investigate was cost. RFID is a very expensive technology to implement. There are some savings to be achieved by using RFID but it may never pay for itself. John Leyden must spell out all of the costs in order to perform a breakeven analysis. Many companies performed this same type of analysis when Electronic Data Interchange was rolled out in the 1990's.

Secondly, John has to look at the actions of his competitors to see if and when they are going to adopt RFID. With any new technology, there is usually a tipping point where it becomes a necessity for remaining competitive.

Most important, however, he needs to assess the needs of his customers. There was a potential to lose sales if his customers viewed RFID as a requirement for obtaining futur e business. From a supply chain management perspective, protecting relationships with customers may be the most important issue.

CASE OBJECTIVES

This case is suitable for an undergraduate or MBA level Operations or Supply Chain Management class. It is designed to facilitate discussions about breakeven analysis, supply chain management, and technology adoption. Although this case is specifically about the wine business, the underlying concepts are general enough to fit most companies facing a technology decision. It provides and excellent example of a breakeven analysis as well as listening to the voice of the customer in a business-to-business relationship.

It will also make students aware of a dynamic new technology that may change the way business is transacted in the near future.

Publication title: Allied Academies International Conference. International Academy for Case Studies. Proceedings

Volume: 12

Issue: 2

Pages: 115

Number of pages: 1

Publication year: 2005

Publication date: 2005

Year: 2005

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 1948-3198

Source type: Conference Papers & Proceedings

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 192411619

Document URL: http://search.proquest.com/docview/192411619?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2005

Last updated: 2013-09-16

Database: ABI/INFORM Complete

Document 41 of 100

Social Construction of Information Technology Supporting Work

Author: Ramos, Isabel; Berry, Daniel M

ProQuest document link

Abstract:

In the beginning of 1999, the CIO of a Portuguese company in the automobile industry was debating with himself whether to abandon or to continue supporting the MIS his company had been using for years. This MIS had been supporting the company's production processes and the procurement of resources for these processes. However, in spite of the fact that the MS system had been deployed under the CIO's tight control, the CIO felt strong opposition to the use of this MIS system, opposition that was preventing the MIS system from being used to its full potential. Moreover, the CIO was at lost as to how to ensure greater compliance to his control and fuller use of the MIS system. Therefore, the CIO decided that he needed someone external to the company to help him understand the fundamental reasons, technical, social, or cultural, for the opposition to the MIS system. [PUBLICATION ABSTRACT]

Full text:

THEORETICAL BASIS FOR THE STUDY

Innovative, organization-transforming software systems are introduced with the laudable goals of improving organizational efficiency and effectiveness, reducing costs, improving individual and group performance, and even enabling individuals to work to their potentials. However, it is very difficult to get these software systems to be used successfully and effectively (Lyytinen et al., 1998; Bergman et al., 2002). Some people in some organizations resist the changes. They resist using the systems, misuse them, or reject them. As a result, the goals are not achieved, intended changes are poorly implemented, and development budgets and schedules are not respected. Misguided decisions and evaluations and less than rational behaviour are often offered as the causes of these problems (Norman, 2002; Dhillon, 2004). Bergman, King, and Lyytinen (2002) observe (p. 168), "Indeed, policymakers will tend to see all problems as political, while engineers will tend to see the same problems as technical. Those on the policy side cannot see the technical implications of unresolved political issues, and those on the technical side are unaware that the political ecology is creating serious problems that will show up in the functional ecology." They go on to say (p. 169), "We believe that one source of opposition to explicit engagement of the political side of RE [Requirements Engineering] is the sense that politics is somehow in opposition to rationality. This is a misconception of the nature and role of politics. Political action embodies a vital form of rationality that is required to reach socially important decisions in conditions of incomplete information about the relationship between actions and outcomes."

The implementation of complex systems, such as enterprise resource planning (ERP) systems, are rarely preceded by considerations about:

* the system's degradation of the quality of the employees' work life, by reducing job security and by increasing stress and uncertainly in pursuing task and career interests (Parker and Wall, 1998, pp. 55-70; Davidson and Martinsons, 2002; Thatcher and Perrewé, 2002);

* the system's impact on the informal communication that is responsible for friendship, trust, feeling of belonging, and self-respect (Goguen, 1994; Snizek, 1995; Piccoli and Ives, 2003);

* the power imbalances the system will cause (Bergman et al., 2002; Dhillon, 2004); and

* the employees' loss of work and life meaning, which leads to depression and turnover (Parker and Wall, 1998, pp. 41-49; Bennett et al., 2003; Davison, 2002).

Recent work by Marina Krumbholz, Neil Maiden, et al. (2000) considers some of these issues after implementation of ERP systems. Specifically, this work investigates the impact on user acceptance of ERP-induced organizational transformation that results from a mismatch between the ERP system's actual and perceived functionalities and the users' requirements, including those motivated by their values and beliefs (Krumbholz et al., 2000; Krumbholz and Maiden, 2001).

This case study describes an on-site examination of one particular ERP-induced organization transformation. The prime champion of the ERP system in one company was surprised by the resistance to the system's use shown by the employees of the company. He ended up asking the help of the first author of this case study to understand the sources of this resistance and what to do about it. The present report is a distillation of the first author's final report to the champion and of her PhD dissertation (Ramos, 2000). The focus of the study is on understanding the technological, social, and cultural reasons of the employees' resistance against the ERP.

ORGANIZATIONAL BACKGROUND

The reader should consult the organizational charts shown in Figures 1 and 2 in Annex I as he or she is reading the following narrative. With the exception of the proper name Isabel, that of the first author, none of the proper names in the narrative, including of the company and of software products, is real. However, each proper name does refer to one real person, company, or product that participated in the events narrated.

One cold morning in February 1999, Pedro was talking with a friend, Sérgio, about Pedro's professional path as director of the Information Systems (IS) Department of ENGINECOMP, a Portuguese subsidiary of a Brazilian company in the automobile sector. Pedro was not able to decide what else could be done to ensure that MaPPAR, the information system that was currently supporting the management of production processes and the procurement of the associated resources, was used to its full potential.

Pedro had started working for ENGINECOMP at its very beginning in 1992, when the Brazilian company's administration decided to build a plant in Europe. They chose Portugal for its linguistic and cultural similarity, and for the relatively low salaries that would be paid to a young and educated workforce. See Annex II for details about the Portuguese automotive sector and about the company.

Rafael, the president of the Brazilian company, liked to have close control of the company and of all its branches. He felt especially comfortable with Pedro's past experience and thus hired Pedro. He also admired Pedro's creativity and close attention to details. Soon, Pedro earned the power to define the work processes, plant design, management practices, and the information systems that would support the work.

The building of the plant was finished in the beginning of 1993, and the plant was already manufacturing seven months later. It produced a small but essential component for the car engines. This component requires a high-quality production line, since even a small variance in the required measures implies that the product would not be accepted by the client.

The plant satisfactorily supplied several of the most important automobile builders in Europe. For each car model, the engineers of the plant, assisted by the client, designed the specific dimensions and shape of the product to be delivered each time it was ordered by the client. Simultaneously, the client and the plant administration negotiated the percentage of items that the client could cancel or add to an order already in production. This percentage was very important, since it helped the client to react quickly to a sudden drop or increase in the demand for that specific car model. For the plant, this variability added considerable difficulty to production planning, but the aggressive competitiveness of the automotive sector forced acceptance of these margins.

The raw material was shipped from Brazil, where the mines were located. The material was shipped by sea and arrived at ENGINECOMP three months later. This delay forced careful stock management and production planning.

Every time a new order arrived, ENGINECOMP's capability to produce the required product was carefully assessed. Following this assessment, the manufacture of the required product was planned to fit the delivery dates agreed upon with the client, and production orders were drafted and delivered to the plant. The production processes were designed in accordance with international norms and the best practices of the sector. These processes were regularly subjected to quality controls, in both external and internal audits.

Management of materials acquisition for the plant machinery was also an important task, since the plant could never stop or reduce its production from what was planned. Three employees of the Logistics Department were assigned to negotiate continually with actual or potential suppliers. These employees were responsible for keeping the materials at adequate stock levels.

Whenever ordered products were finished, they were packaged and were stacked in the warehouse for delivery. The finished goods were then delivered to their clients by ENGINECOMP's own trucks, by train, or by airplane.

Pedro decided that the complexity of all these activities required an integrated production management system. He convinced the Brazilian administration to buy a well-known and highly utilized off-the-shelf system, MaPPAR, to manage all the production processes and associated resources. See Annex III for details about MaPPAR. MaPPAR was configured and deployed under Pedro's tight control, with the assistance of the directors of several of ENGINECOMP's other departments, namely, Engineering, Quality Control, Finance, Logistics, and Warehousing.

Pedro told his friend, Sérgio, about all the difficulties and successes of the first two years. Pedro was really proud of his work and of his good decisions. ENGINECOMP was considered one of the best suppliers of its products in all of Europe and was supplying the most successful automobile manufacturers.

However, MaPPAR was never used to its full potential. In fact, resistance to MaPPAR's use seemed to grow steadily since its deployment. In parallel, Pedro's authority was being continually questioned despite his many past good decisions, his hard work, and his undeniable contributions to ENGINECOMP's success.

During 1998, a large fraction of ENGINECOMP's shares were sold to a German company. Now, the Brazilian company owned less than 40% of ENGINECOMP's shares and was thus losing control over what happened at ENGINECOMP. By the end of 1998, the only relics left of the Brazilian company's administration of ENGINECOMP were framed posters in the Brazilian Portuguese language encouraging employees' creativity and participation in decision making.

The new administrator, Fritz, distributed his control and support evenly over the directors of all departments that reported to him including the IS, Engineering, Quality Control, Finance, Logistics, and Warehousing departments. That is, Fritz treated Pedro for what Pedro really was, the director of the IS Department, one of many departments. Pedro resented this treatment, and he believed there was a close link between his loss of power and the growing opposition to the use of MaPPAR. He wanted to counter this opposition, but was having "difficulty reasoning unemotionally about the current situation and past events." Then, Sérgio told Pedro about a researcher who might be interested and able to help Pedro analyze the situation. The researcher was Isabel, who entered the scene in early March 1999.

SETTING THE STAGE

When Pedro first talked with Isabel, he told her about an important movement within ENGINECOMP against the use of MaPPAR to support production management. MaPPAR was very versatile and included modules that could support engineering tasks, order processing, production planning, assessment of production capabilities, production management, product shipment, management of stocks, accounts payable to suppliers, accounts receivable by clients, and finances and accounts management.

While MaPPAR was a very complete and powerful system, it was very poorly used. Employees ignored or resisted using much of MaPPAR's functionality, preferring to develop their own small systems and databases to manage only the information relevant to their daily tasks, and used the central MaPPAR database only as the source of data to feed their own small systems and databases.

Moreover, the employees of the plant were refusing to input timely data about the tasks they perform. They preferred to defer their inputting until the end of the week or the month, so they would not lose time during the days. Sometimes, one of the employees was freed by his colleagues from his normal duties in order to input his and his colleagues' data. The problem with this practice was that it became virtually impossible to track down the state of the orders in production.

Pedro and Isabel agreed that Isabel would do an on-site study of ENGINECOMP at work, in search of the fundamental reasons, technical, social, or cultural, for the opposition to MaPPAR and for the proliferation of small systems and databases. Isabel would study the work of two departments in ENGINECOMP: the Finance Department and the Logistics Department. They were the most influential departments of the company, since they performed essential activities for the company. The Finance Department did financial management, and the Logistics Department did customer service and production planning. Moreover, the employees of these two departments constituted a majority of MaPPAR's users.

CASE DESCRIPTION

Isabel spent five months at ENGINECOMP, observing and interviewing all the employees of the Finance and Logistics departments. Almost every day, Isabel spent several hours joining or observing employees performing their tasks with or without support from MaPPAR. She interviewed Carlos and Manuel, the directors of the departments. She also interviewed several middle managers responsible for key activities, including Fernando, Carlos's closest collaborator in the Finance Department, and Roberta, Eduardo, and Antonio, the managers of the Customer Service, Production Planning, and Purchasing divisions of the Logistics Department.

Isabel also observed and interviewed Pedro and his collaborators in the IS Department. She talked also a few times with the German leader, Fritz and she was present at events such as meetings and training programs. To learn more about MaPPAR, Isabel consulted the available manuals and technical documentation. She used a demonstration version of MaPPAR to test some of its functionality on her own.

Below is a department-by-department summary of Isabel's observations.

Finance Department

The Finance Department was responsible for all financial and accounting tasks of the company. Carlos, the director of the Finance Department, had sole directorial responsibility for the department. However, he delegated supervision of the accounting tasks to Fernando, a trusted employee with an accounting degree. Fernando had access to key information and knowledge for performing these accounting tasks. Fernando's access and knowledge, charisma, and core skills made him a privileged ally of Carlos, the director.

As mentioned, the coordination and control of the Finance Department activities were responsibilities of Carlos, the director, who kept and centralized all decision making. Carlos was a Brazilian sent to ENGENECOMP by the Brazilian company's administration. Fritz, the new German leader, was not very comfortable with Carlos's complete control of the Finance Department.

In the Finance Department, informal communication about work tasks was discouraged. Carlos's rule was that all communication must be well documented. The work in the department was organized into well-defined tasks connected by clearly defined processes, all of which determined the precise responsibilities of each employee. Employees only occasionally received professional training. The heavy workload left little time for such training. Moreover, Carlos believed that each employee must perform simple and repetitive tasks that can be learned by doing. The tasks were distributed among eight employees, each with limited autonomy. Carlos had his trusted assistant Fernando, with the accounting degree, supervise the daily routine.

Fernando was seen as a bright and ambitious young man. He was expected more to comply with rules and procedures than to make autonomous decisions. Fernando

worked hard to serve Carlos's interests, taking advantage of what he had learned in courses leading to his degree to further those interests. Fernando's actions and information were especially useful to Carlos, who as a Brazilian, was not as familiar with Portuguese accounting regulations as a Finance Department director should be.

It is I who signs the accounts, the financial reports, and the balance sheets. It is I who signs the fiscal statements. I am the officer responsible for the company's accounting. My accounting degree and my understanding of Portuguese law allow me to give invaluable assistance to the director. - Fernando

With the help of Fernando, Carlos asserted the strong leadership that Carlos believed was the guarantor of efficiency and motivation. Compliance with Carlos's leadership was the main criterion by which Carlos recruited employees for the Finance Department.

Interviewed Finance Department employees mentioned some competition for career advancement. Finance Department employees were rewarded for accurate completion of assigned tasks. Failure to comply with rules and procedures was punished. There was a predominant belief among the employees that autonomous and creative employees were dangerous in a finance department. This belief was supported by past events during which fraud was perpetrated. This belief was one of the most important sources of the motivation to use MaPPAR, which was seen as reinforcing established practices:

I am responsible for one area. So, I work in a well-defined set of tasks and my colleagues have clearly defined tasks as well. There is no confusion. The system requires that we are specialists in our tasks... hmm ..., and it assures that our director has access to what we do, so we are not blamed for the mistakes [errors and fraud] of others. - An Employee of the Finance Department

There was little variation in the daily routine of the Finance Department. All needed information was in MaPPAR's database, and that information was provided by the other departments of ENGINECOMP. Moreover, a significant part of the Finance Department's work was the production of regular reports and other more timely, but irregular information for the other departments. The other departments of ENGINECOMP exerted the most influence on the Finance Department and served as a buffer between the Finance Department and the company's clients and suppliers. However, the Finance Department did have some interaction with banks and other similar entities outside the company. Thus, as can be expected, the Finance Department's workload was very stable, with almost no surprises.

The Finance Department employees made heavy use of spreadsheets to produce the reports the department was required to produce for the other departments. The reasons offered for use of spreadsheets instead of MaPPAR included:

The [MaPPAR] system reports are not adequate for our management needs. They present too much data, in a lot of rows, many of which are not useful. It is better to search for the relevant data using query tools and then to export the data to our spreadsheets where we can treat the data in the way that suits our objectives. - Fernando

Despite that the use of spreadsheets was sanctioned for the production of only specific reports, the spreadsheets were being programmed to also perform some functions that the system provided.

There is no need to use the options provided in the menus of the [MaPPAR] system because we have other tools that do the same. - Another Employee of the Finance Department

Some Finance Department employees regretted the lack of training to use MaPPAR. At the time MaPPAR was installed, MaPPAR's implementers did train the Finance Department employees that were hired specifically to operate MaPPAR. However, these employees saw the training as too brief and too compressed; they simply could not absorb all the complex information about MaPPAR's functionality in such a short time. Hence, from the beginning, even the MaPPAR operating employees did not understand MaPPAR's full capabilities.

It was a one-shot training. I would not even call it training; it was more like a conversation with the technicians. - Still Another Employee of the Finance Department

After that initial training, employees that had used MaPPAR for a longer time were responsible for in-house MaPPAR training. Often these trainer employees guided the trainee employees through only the functionality actually being used. The trainers usually advised trainees to avoid other MaPPAR functionality, saying that it would be too complex, inadequate, or better implemented in the programmed spreadsheet.

All that I know about the system is the result of my efforts to use it. But we have too many tasks to perform. There is no time left to explore the system, which has too many complexities. And I say to my colleagues that they should not waste too much time experimenting if they are not sure of the usefulness of a menu's options. - Fernando

The Finance Department employees saw this in-house training as a burden. Moreover, Carlos did not encourage his employees to experiment with MaPPAR themselves.

The Finance Department's history included some catastrophic mistakes, and the department rumor mill still propagated stories about the stupid mistake that Employee A or Employee B had made.

To many Finance Department employees, the spreadsheet appeared much easier and less constraining than did MaPPAR.

All requests for required new or enhanced features for MaPPAR were sent to the IS Department for implementation. However, many times the IS Department's response was to deny a request because of the high costs of the new or enhanced feature. The IS Department did not want to have to make the same changes to every new version of MaPPAR that would come out in the future. When a required feature was refused by Pedro, the director of the IS Department, the requesters were able to easily find implementers among their colleagues, who had accepted the informal responsibility of programming the spreadsheets and databases.

In general, Finance Department employees acknowledged the importance of MaPPAR for their department, since MaPPAR's integrated modules automatically fed all the accounts. The institutional authority of the IS Department to define MaPPAR's IT support was well accepted.

Logistics Department

The work of the Logistics Department was distributed among three divisions: Purchasing, Customer Service, and Production Planning. Antonio, the manager of the Purchasing Division, Roberta, the manager of the Customer Service Division, and Eduardo, the manager of the Production Planning Division, each reported directly to Manuel, the director of the Logistics Department. Each of the three managers coordinated and controlled the tasks for which he was responsible. The three managers and one director participated jointly in defining the Logistics Department's goals and objectives and in decision making.

Professional training was being delivered to Logistics Department employees on a regular basis. However, each of the three managers believed that his skills were not being adequately used and rewarded. In particular, the Customer Service Division manager, Roberto, felt especially frustrated with this situation. Roberta was seen as a very dynamic man who learned his job quickly and tried to exceed what was expected from him. However, Roberto felt that MaPPAR was a significant barrier to his own career advancement. MaPPAR demanded too much specialization in specific tasks and made it difficult for one person to have a broad perspective of the business processes. Roberto believed that this broad perspective was central to providing effective customer service and to making good decisions.

Here [at ENGINECOMP], we are evaluated by our ability to solve problems. To be able to solve problems quickly, we need to know what is going on around here. But, the system is so unnecessarily complex, and it limits our ability to access relevant information. - Roberto

In fact, it was Roberto who took the initiative of programming the spreadsheets and databases that were being used by his colleagues throughout ENGINECOMP. He and two other employees in the Customer Service Division became the informal IS team of ENGINECOMP, always ready to implement new features adapted to the specific needs of their colleagues. Roberto's informal, can-do attitude, his enthusiasm in searching for solutions, and his courage to directly face senior managers provided him with the admiration of his colleagues, inside and outside the Logistics Department. Roberta proudly said,

"At this stage of my career, I am independent of the director of the department, I report directly to the administration [i.e., Fritz],"

There was a widespread belief among all ENGINECOMP's employees that the Logistics Department created the company's positive image among its customers and the general public. This belief was a source of negotiating power for the Logistics Department and especially for its emerging leader, Roberto.

Especially during the last three months, we ... When I joined the department, we contacted one client directly, and the others were contacted through our office in Hamburg. In fact, it was not a real department but an expedition unit. With the recent closing of the office in Hamburg, all the logistics service is provided by Portugal. Of course, this gave us much more importance inside the company. - Roberto

Roberto was the manager of one of the three divisions of the Logistics Department officially directed by Manuel. Manuel and the managers of the three divisions believed that the four of them should cooperate to achieve the department's goals. However, frequent internal conflicts emerged from the fights over the specific interests of the department's divisions. These conflicts emerged from the need to fight for scarce resources such as budget, human resources, and technology. The conflicts also arose from the conflicting influences on work practices exerted by Antonio, the Purchasing Division manager, and Roberto.

We 're working differently now. We have three autonomous divisions. We [managers of the divisions] are responsible for ensuring that our colleagues have what they need to perform their tasks. Hmmm ... Who coordinates our activities? Well, that is a difficult question. The department's director, I guess ... [laughter]. Well, I talk directly with the administration [Fritz]. - Roberto

The Logistics Department office space was designed as an open space into which any ENGINECOMP employee could enter to seek a problem solution or to demand a service. The Purchasing Division and the Production Planning Division managers often complained about deleterious effects and the pressure caused by the constant interruptions that the open space invited:

There is always pressure from the exterior of the department. This is a drawback of the clientsupplier policy that was adopted internally, this pressure to be continuously available in open space. We are constantly being interrupted! It is not possible to focus our attention on a single subject for long and to follow logical and correct reasoning. - António

Adding to this pressure were the variable and often unexpected requests and problems posed by suppliers, clients, and ENGINECOMP's production plant. For example, as mentioned, the quantities ordered by a costumer could be changed within an agreed upon percentage after the order was placed and production had started. Logistics Department employees saw flexibility of work practices and procedures, autonomy of decision, and informal communication channels and work relations as key factors to reduce the negative impacts of these sudden changes. Moreover, they saw MaPPAR as reducing their flexibility of action and making their work less interesting. Furthermore, MaPPAR was forcing them to comply with rules and procedures that reduced their ability to fulfill the needs of ENGINECOMP's plant and customers.

Some of these Logistics Department employees referred to MaPPAR as a "sacred cow'" that could not be questioned and that made them "slaves," requiring most of their time to input data without "receiving anything in return." These employees complained also of the poor quality of the MaPPAR reports. They had become highly suspicious of the data stored in the central database.

Because people won't be wasting their time to explore this and that. Why should they? When I want a report and this [MaPPAR] does not give me what I want ...! If only they [IS Department] made changes to the system! Meanwhile, someone [from the IS Department] decides not to make them. It is frustrating. - Eduardo

As in the Finance Department, the reports needed to support Logistics Department decisions were created in spreadsheets, using data obtained by querying the central MaPPAR database. This practice fostered a disconnection between the inputting of data and the production of reports to support decision making. The Logistics Department employees saw MaPPAR as too complex and too general to effectively support the details of the department's activities. Logistics Department employees agreed with Finance Department employees about the lack of MaPPAR use training and the burden caused by having to train new employees in the use of MaPPAR.

I find the system too confusing. It is a tool, since it is a standard in a lot of business areas. I think it does not really help the specific tasks of a specific company in a small country like ours. - António

Also, the Logistics Department employees decried the IS Department's lack of support and understanding. In response to this complaint, the Logistics Department developed what Roberto believed was a very effective strategy:

I have been doing [developing any needed functionality] by myself. When they [the IS department] do not want to make the [required] changes to the system, I develop the feature using the spreadsheets and databases. Nowadays, I do not even ask; I do by myself and help others with the programming. -Roberto

And he added:

The lack of support from the IS department is creating disinterest in the system. - Roberto

The removal of MaPPAR was seen as an important step to gain more control over the performed work. Employees wanted to be involved in (i) defining the work practices, (ii) decision making, (iii) monitoring the system usage, and (iv) defining what were good and bad usages.

This plant is six years old now. We have learned a lot. We want to be heard! We need a new system, but this time, we want to be involved! - Roberto

The IS Department

As mentioned, Pedro was the director of the IS department. He kept close at hand the responsibility to define the operational and management best practices and to ensure that the information systems were effectively supporting those practices.

Also mentioned, Pedro was very proud of his professional advancement and his contributions to the success of ENGINECOMP. He considered himself responsible for the formulation of creative solutions in both work practices and information systems. He considered that implementing these solutions was a task to be performed in collaboration with the affected departments. Pedro did not consider himself to be an IS technical expert. His closest collaborator was the person that knew the used systems in detail and would do all the programming, parameterization, and users' support. This collaborator, José, was a timid man with strong technical skills; he was very competent, but was hardly considered a leader of opinion and action.

He [José] is very competent. I trust all technical tasks to him - Pedro

José works hard. He always treats us right. The only thing is... Well, he is very silent [smiling]. - Roberto

José was well accepted by employees from the other departments. These other employees understood the difficulty José had in providing immediate support to all MaPPAR users. José's colleagues from the other departments found José easier to approach than Pedro and they preferred to talk with José first when a problem arose or when a change to MaPPAR was needed. However, these employees knew also that Jose's actions were constrained by IS Department policies and his manager Pedro. At one point, the managers of departments other than the IS Department were informally discussing the role of the IS Department. A clear line was emerging between those that supported Pedro's interventional attitude and those that supported Jose's helpful and cooperative attitude. Pedro was aware of this discussion but showed no resentment towards José.

I know that they [the other employees] would like to get rid of me [laughter]. I defend the company interests too much. Of course, some other people around here understand that I have dedicated my life to this company. This happens everywhere and is tough. I do not believe José could handle all this. - Pedro

Pedro saw José as a very good programmer that would never be able to carry out the negotiation and political battles inherent in Pedro's, the IS director's, job. Moreover, Pedro knew that José was oblivious to the discussion. Pedro understood this discussion as an expression of the growing resistance to his own actions. What Pedro really resented was that the German administration and Fritz, in particular, were listening to these dissenting voices more and more.

The Brazilian administration understood. They hired me for my competence, and they saw what I did. The new administrator does not know. - Pedro

CHALLENGES FACING THE ORGANIZATION

By the end of the Isabel's study, the company was undergoing important changes in its middle management structure. Carlos resigned when a new directorial opportunity was offered to him back home in Brazil.

Roberto was becoming a key player in the growing importance of the Logistics Department within ENGINECOMP and in the good image this department projected to the company's stakeholders. Manuel, the Logistics Department director, was losing control over departmental decisions and strategy definition.

The German parent company was using a different ERP system, SAP R/3, and was now weighing the cost-benefits tradeoffs between upgrading ENGINECOMP's MaPPAR to interface with the parent company's system and deploying SAP R/3 at ENGINECOMP. Roberto believed that SAP R/3 should be deployed at ENGINECOMP. Roberto believed also that ENGINECOMP's six-year use of some ERP system, albeit different from SAP R/3, gave ENGINECOMP's middle managers the technological knowledge to actively participate in the parameterization of SAP R/3. The Finance Department did not have any preference, and its director was concerned only with the costs of the new system. Pedro was against the deployment of SAP/R3 because of the high costs of process reengineering and user training.

Some were suspicious of the data stored in the central database. The reluctance to use MaPPAR and the lack of time and will to explore MaPPAR's full functionality resulted in data being entered late or not at all, with the usual deleterious effects. For example, it was not always possible to track a client's order when the client requested information about his or her order. There were also problems identifying what products and raw material were in stock.

The growing trend to use spreadsheet programming to get around the problems caused by MaPPAR or to implement functionality perceived as not available in MaPPAR was also reducing the data's quality. Often, results of outside data processing were not fed back into MaPPAR.

Important MaPPAR functions, such as requirements planning and capacity planning, were never utilized and were instead programmed outside MaPPAR, resulting in unnecessary maintenance costs, lack of control over planning and its results, and a severe risk of unreliable planning. Pedro's efforts to document (1) organizational processes and resources, (2) the decision to deploy MaPPAR, (3) the MaPPAR process, (4) MaPPAR's functionalities and upgrades, and (5) the IT structure of ENGINECOMP supported his conviction that there was no need to incur the high costs of switching to a different system, especially when the European economy, including its automotive sector, was slowing down. Pedro realized that prevailing with this view would require gaining allies within ENGINECOMP and gaining the explicit support of Fritz, a near impossibility. Pedro just did not know what else could be done to get people to see the importance of abandoning the small databases and in-house programming in favour of a fuller understanding and use of MaPPAR.

Subject: Case studies; MIS; Technological planning

Classification: 9110: Company specific; 5240: Software & systems; 2310: Planning

Publication title: Journal of Cases on Information Technology

Volume: 7

Issue: 3

Pages: 1-17

Number of pages: 17

Publication year: 2005

Publication date: Jul-Sep 2005

Year: 2005

Publisher: IGI Global

Place of publication: Hershey

Country of publication: United States

Publication subject: Business And Economics--Computer Applications

ISSN: 15487717

Source type: Reports

Language of publication: English

Document type: Business Case

Document feature: references charts tables

ProQuest document ID: 198720356

Document URL: http://search.proquest.com/docview/198720356?accountid=38610

Copyright: Copyright Idea Group Inc. Jul-Sep 2005

Last updated: 2011-07-21

Database: ABI/INFORM Complete

Document 42 of 100

Power Conflict, Commitment & the Development of Sales & Marketing IS/IT Infrastructures at Digital Devices, Inc.

Author: Butler, Tom

ProQuest document link

Abstract:

This article explores the political relationships, power asymmetries, and conflicts surrounding the development, deployment, and governance of IT-enabled sales and marketing information systems (IS) at Digital Devices, Inc. The study reports on the web of individual, group and institutional commitments and influences on the IS development and implementation processes in an organizational culture that promoted and supported user-led development. In particular, the article highlights the problems the company's IS function encountered in implementing its ad-hoc strategies and governance policies. It will be seen that the majority of these problems occurred because of the high levels of autonomy and budgetary independence of the IT-literate, engineering-oriented business 'communities-of-practice' that constituted Digital Devices. The case therefore provides rare insights into the reality of IS development and IT infrastructure deployment in organizations through its in-depth description of the positive and negative influences on these processes and their outcomes. [PUBLICATION ABSTRACT]

Full text:

ORGANIZATIONAL BACKGROUND

Digital Devices, Inc. was founded in 1965 in Cambridge, Massachusetts, by Ray Stata and Matt Lorber. In 2003, the company was acknowledged as one of the leading designers and manufacturers of high-performance linear, mixed-signal and digital integrated circuits (ICs), which addressed a wide range of signal-processing applications in the electronics and related industries. Digital Devices is headquartered in Norwood, Massachusetts, and has a significant global presence in all major markets in the electronics industry. The company has numerous design, manufacturing and direct sales offices in over 18 countries and employs more than 7,200 people worldwide (Figure 1). The company's stock is traded on the New York Stock Exchange and is included in the Standard & Poor's 500 Index. Many of Digital's largest customers buy directly from the company, placing orders with its sales force worldwide; the remainder obtain their products through distributors or over the Internet. Just fewer than 50% of Digital's revenues come from customers in North America, while the balance came from customers in Western Europe and the Far East.

Ray Stata, Digital's co-founder and longtime CEO, recognized the importance of fostering a culture of openness, where employees were empowered and encouraged to be innovative. This was reflected in the company's structure, which exhibited a high degree of process decentralization, especially in the allocation of capital and operational budgets, and, in particular, the locus of decision making. Figure 2 illustrates the company's structure: the core business functions are the 'product line' Computer Products Division, Communications Division, Standard Linear Products Division, Transportation and Industrial Products Division, and the Micromachined Products Division, which was taken over by Ray Stata when he stepped down as CEO. Shown directly beneath these are corporate business divisions that provided support for product line divisions. It is of significance that Human Resources and Finance Divisions aside, all support divisions were engineering oriented, even the World Wide Sales and Corporate Marketing and Planning Divisions. This engineering-oriented culture was to have profound implications for IS development and governance in several areas of the company's operations, as will be seen.

Since its inception, Digital Devices gained a reputation as an excellent employer, where employees were respected, well remunerated and benefited from lucrative stock options. Individual commitment to the organization was manifested in the low level of staff turnover and the lifelong employment of many senior employees and engineers. The vast majority of employees remained loyal to the company despite the large salaries and attractive bonuses on offer from competitors. Significant too was the low level of turnover in employees from areas like sales and marketing, which was comparatively high in other companies in the sector. In December of 1997, Fortune magazine selected Digital Devices as one of the top 100 companies to work for in America and, later, in 2000, Fortune named the company as one of America's most admired companies.

SETTING THE STAGE

The process of information systems development is akin to Shakespearean drama, with its various acts, scenes, plots, counterplots, characters, tragedies and uncertain outcomes. This section of the article sets the stage for the drama described by introducing the major players: (a) design engineers in the marketing sub-functions of the Standard Linear Product Division; (b) marketing managers/engineers and communication professionals from the Corporate Marketing Division; (c) Central Applications support engineers, and sales and field engineers from the Sales Division; (d) IS professionals from the IS function, which is a sub-unit within the Finance Division; and (e) IT professionals from external consultancy firms. Customer design engineers from Digital's customer base constituted the ultimate end-user/stakeholder group. In order to better understand the issues discussed herein, a short overview of the major actors in the drama of the development of sales and marketing and governance of IT infrastructures at Digital Devices, Inc. is first offered. Following the major sections on theory and research method, the main section of this article then describes the origins of the political tensions surrounding IS development and associated issues of governance. These subsections are followed by three that describe how the various 'actors' and their 'communities-of-practice' participated in the development and implementation of: (1) the sales and marketing component of the company's Intranet and (2) the Corporate Web-presence. The evidence adduced in describing these complex IS development 'dramas' facilitates an understanding of the roles that power, political conflict and commitment play in shaping both the development process and its product - these are discussed in the penultimate section. The case therefore provides a real-world example of the 'reality' of systems development in innovative organizations.

The IS Function

The company's IS function was located at corporate HQ in Norwood. Unlike senior executives in the sales or marketing divisions, the senior IS executive, the CIO, reported to the VP of Finance, the CFO (Figure 2). This is important, as most large organizations in the US had established relatively autonomous IS functions by the mid-1990s. Product line and support divisions at Digital Devices had IS managers and IT professionals dedicated to take care of their particular IS needs and IT infrastructure support. For example, the Sales and Corporate Marketing divisions had one IS team to take care of their Sales and Marketing IS requirements: however, in all cases report relationships of IS staff were to the CIO and thence to the CFO. The following overview of IS operations at Digital indicates the outcome of this structural arrangement.

In the early 1990s, Digital's IS were centralized and based around an IBM mainframe. In this scheme of things, the role of IS was to gather corporate data. Subsequently, Digital's major business systems were based around SAP-packages. The first SAP module was implemented in 1994. In that year, the IS function also decided to standardize the desktop platforms in use across the organization, in order to provide all users with a common suite of applications and lower the total cost of ownership. Although many end-users preferred the Apple Macintosh platform, the decision to go with the PC hinged on the paucity of business applications for the MAC. So, while there was some opposition to this strategy within the organization, Digital opted for Microsoft Windows-based PC platforms worldwide and rolled out Banyan-Vines Network Operating System on the local area network. The one exception to this strategy of standardization was the engineering community in the product line and R&D divisions, who used Sun UNIX workstations. At the end of 1998, there were about 4,000 Windows-based desktop PCs and approximately 2,000 Sun Unix workstations in Digital's IT infrastructure. It was considered by many that Digital had a state-of-art IT infrastructure, although others were of the opinion that the same could not be said of IS support for areas like sales and marketing.

Central Applications: The Nexus of Sales & Marketing Product Knowledge at Digital Devices, Inc.

Digital's Sales and Corporate Marketing Divisions together served a wide range of customers in the US electronics industry and played a pivotal role in servicing customer needs worldwide. It must be noted that while Corporate Marketing was concerned with the formulation of Digital's worldwide marketing strategies, each of the product line divisions had their own marketing sub-functions. The company's IT infrastructure and related IS - that is, its Internet e-commerce and e-Business application, corporate intranet systems, and emerging sales and marketing information systems - played a major role in helping the sales and marketing operations deal with the large number, and wide geographical dispersion, of Digital's products and customers.

Based in Wilmington, a suburb of Boston, the Sales Division's Central Applications function was the corporate nexus for all product-related knowledge at Digital Devices. It was through this function that sales and field engineers, in addition to product distributors, were trained and supported. It also had close functional relationships with the marketing engineers from the various product line divisions. This function also provided technical support via 1-800 toll-free lines direct to Digital's customers. Each day it accepted and processed about 200 technical support questions from customers, and recorded each and every call. Central Applications also advertised new products, mainly at technical seminars, and through this forum it reached about 10,000 design engineers every year. The function also provided a fax-back service to customers - here, customers faxed in a request for data sheets1 and these were automatically dispatched by fax in a matter of hours. Application engineers also used the information contained in the data sheets of over 2,000 new and established products to compile the company's short-form product catalogue and the related CD-ROM. This product data was also published on the company's Internet Web site, and later became the preferred method of access, thus replacing Fax-Back. One of Central Applications' key roles was in providing product support and technical information over the corporate intranet with its own Lotus Notes-based product and technical support application. Because of the need to better manage customer-related call tracking, customer contact, and product application problem-solving, this system evolved from a client/server platform into a web-based solution. Since its inception as a client/server system, this application, which consists of several separate but related databases, has been extended and ported to the corporate intranet via Lotus Notes Domino Server.

Why Engineering-Oriented Business 'Communities-of-Practice' Generally Held the Balance of Power in Shaping IS/IT Infrastructures

The majority of senior, middle and line managers at Digital Devices came from engineering backgrounds; as such, they shared common educational and professional interests. This shaped the various 'communities-of-practice' that existed within and between 'business' divisions and their functional sub-units. This is in contrast to staff from the company's administrative and IS functions, the vast majority of whom were not engineers. This had a significant impact on the formation of Digital's social matrix and the manner in which IT architectures were deployed and in how IS development was conducted. Two comments highlight this point graphically. The first comes from Standard Linear Products Division's (SLPD) Marketing Manager, who was an engineer and who was with the company for 26 years:

Part of it is the corporate culture within Digital, it has always been an engineering-run and an engineering-driven company, seldom in a time of contraction has the research and development budget been cut...all the guys come from the same universities, from the same professors and they all have been taught the same things.

The common background in electrical and electronic engineering provided social actors with a shared language that facilitated communication and learning across functional areas within the organization - however, there were obvious differences in objectives between engineering and non-engineering 'communities-of-practice' that led to a degree of institutional tension around IS development and the deployment and operation of IT infrastructures. Such differences were reflected in the way IT resources were employed. For example, while engineers in the product line divisions used the corporate LAN and WAN infrastructure, they were relatively independent in terms of the computer platforms and applications they used. The IS manager described it thus:

This federated decentralized approach to building Digital's IT infrastructure resulted from the way in which the company operated since its foundation, where the product divisions and the product lines at the various sites maintained their own IT budgets and tended to provide for their own IT needs.

The important point here is that of ownership and control of non-corporate applications rested exclusively with the end-user community, with the IS function acting in support roles only. On one hand, this engendered a local sense of community that helped reinforce each engineering 'community-of-practice.' On the other, this independence of corporate IS extended beyond engineers in the product divisions, as is evidenced in the Sales Division's Central Applications function, which was staffed by applications engineers who developed and operated a key element of the corporate intranet, with the blessing, but not with the support of the corporate IS function.

THEORY & PREVIOUS EMPIRICAL RESEARCH: COMMITMENT, POWER & POLITICS

Three separate but related theoretical perspectives are now briefly explored to help understand the case and associated analysis.

Institutionalized Commitment & Organizational Purpose

The role of 'commitment' in the design, development and implementation of IS has been elaborated on in several studies. In computer science, Winograd and Flores (1986) highlight the role of commitment in shaping the design of computer-based information systems, while Abrahamsson (2001) illustrates the role of commitment in the success of software process improvement initiatives. Sabherwal et al. (2003) highlight the role of commitment in successful information system development; however, theirs was one of several that focused on the dysfunctional escalation of commitment and its consequences. All this is indicative of the vital role of individual and organizational commitments in shaping the trajectory of the development process and its outcomes. This study draws on Selznick (1949, 1957), who illustrates that the process of institutionalism gives rise to, and shapes, the commitments of organizational actors and groupings. Selznick (1957) argues it is through commitment, enforced as it is by a complex web of factors and circumstances, and operating at all levels within an organization, that social actors influence organizational strategies and outcomes. Here, 'commitment' refers to the binding of individuals to particular behavioral acts in the pursuit of organizational objectives. Selznick identified the sources of organizational commitment viz. (a) commitments enforced by uniquely organizational imperatives; (b) commitments enforced by the social character of the personnel; (c) commitments enforced by institutionalization; (d) commitments enforced by the social and cultural environment; (e) commitments enforced by the centers of interest generated in the course of action. However, these commitments do not evolve spontaneously through the process of institutionalization, they are shaped by 'critical decisions' that reflect or constitute management policy: as Selznick illustrates, the visible hand of leadership influences the social and technological character of organizations. Thus, Selznick (1957) maintains that organizational, group, and individual commitments determine whether organizational resources, such as IT, are employed with maximum efficiency and whether organizational capabilities are developed to leverage such resources to attain competitive advantage.

Power & Politics

Power is another concept that has been used to help explain different preferences among stakeholders in IS development; as such, it provides a useful complement to commitment theory. Jasperson, Saunders, Butler, Croes and Zheng (2002) provide a comprehensive review of previous research on the subject which includes perspectives from the user participation literature (itself comprehensively reviewed by Cavaye, 1995). This short review therefore draws on this body of work as a convenient point of access to what is a comprehensive literature. The dominant view in the literature holds that participants in the development of IT infrastructures shape the socio-technical features of an IS through the exercise of power. User participation, for example, in systems development leads to the exercise of power by users to change development outcomes. So does the exercise of power by competing groups of managers. Thus, in line with the pluralist perspective, power may be defined in terms of users' abilities to influence the behavior of others to achieve specific objectives (Jasperson et al., 2002). Keen (1981) therefore argues that the development of an IS is a political process. In light of this, IS managers require organizational mechanisms to provide them with the necessary influence and resources to successfully develop an IS within the context of competition among political actors and groupings in an organization, who will possess divergent aims and commitments. While Markus (1983, p. 442) illustrates that "[w]hen the introduction of a computerized information system specifies a distribution of power which represents a loss to certain participants, these participants are likely to resist the system"; she also showed how the reverse also holds. Echoing Markus (1983), Kling and Iacono (1984) contend that in order to gain control over the development trajectory of an IS, key actors will engage in conflict-related activities such as domination, sabotage or compromise. The concepts of commitment and power therefore inform the readers' interpretations of the case in that they promote an understanding of the purposeful actions of actors in achieving IS development outcomes in terms of shaping process and influencing product.

RESEARCH METHOD

A qualitative, interpretive, case-based research strategy was adopted to conduct this study. This involved a single instrumental case study (Stake, 1995) that was undertaken to obtain an understanding of the circumstances surrounding the design, development and deployment IT-enabled information systems at Digital Devices Inc. Purposeful sampling was employed throughout (Patton, 1990). Research of Digital Devices, Inc. was conduced at three sites located in Limerick (Ireland), Wilmington (Boston, MA) and at the company's corporate headquarters in Norwood (MA) in mid-to-late 1998. Fourteen taped interviews were made with a cross-section of 'key informants' from business and IS 'communities-of-practice' - each interview was up to two hours in length. Additional data sources included documentary evidence and informal participant observation and discussion at the three sites. Elements of Selznick's (1949) theory of commitment and insights from the literature on 'power' were employed as 'seed categories' to interpret the interview transcripts and other documentary sources. Finally, the case report approach was used to write up the research findings.

CASE DESCRIPTION: DEVELOPMENT & GOVERNANCE OF IS & IT INFRASTRUCTURES AT DIGITAL DEVICES, INC.

The following case report is structured into four sections, each of which provides a different, but complementary, perspective on the issues surrounding the development of IS and governance of IT at Digital Devices, Inc. The first provides the context for the other three by describing the origins of the political tension between the IS function and some of the 'communities-of-practice' responsible for sales and marketing operations in the company. The second delineates the problems with IS governance, while the third and fourth sections then describe the factors that influenced the development, implementation and governance of two IS/IT architectures: the company intranet and the corporate Internet system. The events described in the case occurred between 1996 and 1999.

Political Tension Surrounding the Development of IT-Enabled IS

Previous sections have made reference to Digital's unique character and idiosyncratic business practices, which had a significant impact on the manner in which IS had been developed, operated and used in the company. The following comments provide insights into the kernel of the issues described in the case: the first comes from the IS manager for Sales and Marketing.

Traditionally the company has been based on a culture where autonomy has been promoted and creativeness of engineers encouraged in designing new products, getting into spaces where they need to be visionaries, an area that s where the real disconnection is, in the culture that's been built here. And also, if you think about the product line guys, they are all engineers -you know they are not known for their discipline. And most of the sales people are engineers, so you got a lot of these people running around and we have to instill some discipline, put some standards in here, so we say 'We need to slow you down because it s good for everyone.' I'm not sure that that s something that they would agree with it.

He was more specific when it came to describing the activities of one product support unit:

Take [the manager of Central Applications, he] has been very successful at developing systems to support what he needs to do. He and I joke about it all the time because we made a decision a couple of years ago not to use Lotus Notes, it just did not fit into our architecture, we went the Microsoft way, he's been very successful deploying small Lotus Notes applications for his group. I'm not going to come in with a hammer and say "You have got to get rid of that because it's against standards," it fits a niche. Fortunately, with the advent of the Internet, Lotus Notes and its Domino server is just another Internet server, as opposed to the whole infrastructure change, where we would have to deploy servers everywhere-it just plugs into the intranet. So we do have situations now where groups will go and implement their own technology for their own niche requirements as opposed to something for everybody.

Hence, business managers developed information systems out of their own budgets, and without IS input, through in-house development or by importing the required competencies from external consultants to aid in the development endeavor. This independence and autonomy, which enhanced creativity in product development, caused problems elsewhere in the organization, especially for the IS function, and it resulted in a certain degree of friction between IS and the business community. While there was ample evidence of amicable social interpersonal relationships between the respective 'communities-of-practice', that is, between those populated by engineers and IT professionals, professional relationships, on the other hand, appeared to be less than amicable. Take for example a comment made by the manager of the Central Applications function in the Sales Division:

In terms of IS...they introduced a SAP system for accounting and order processing, they maintain the system, but did not develop it; they are essentially system integrators and IT architects. One of the major issues with them is that our technical support needs are not being met. They have elaborate solutions for simple needs, and they impose restrictions on applications support. But because I have my own budget, I have instituted in own solution based around Lotus Notes: this is not a Corporate standard, so I am a mini-IS owner. An uneasy truce exists between myself, my department and the IS people in Norwood; essentially, what I have found is that their grand solutions are impractical.

That said, IS managers did not just ignore end-user development, as a formal protocol existed whereby independent units and sub-units could develop their own applications. If those applications complied with the corporate standards, and were of use to other organizational units, the IS function rolled them out across the organization, and subsequently supported them. This happened with an application developed by engineers in the Santa Clara facility - later, that system was rolled out by the IS function, as it had found favor with engineers in other divisions. The Central Applications Lotus Notes/Domino application, which could be accessed through an Internet browser over the intranet, gained acceptance at IS, as it did not interfere with corporate standards due to its use of a Web browser on the desktop: in any event, IS staff refused to support the underlying Lotus Notes Domino system.

Problems with IS Governance

In terms of IS governance and independence, engineering-oriented business managers across divisions at Digital were universally unhappy with the IS function being under the control of the Finance Division. For example, a senior marketing manager in the Standard Linear Products Division in Wilmington argued that:

There are no good reasons for having the IS function under finance, there are very good reasons for having it as a shared resource: because we are a decentralized company and because we have five different business units, and we can't have an IT function in every single business unit, and we do not want business units making decisions on expenditures that result in overlapping systems that don't talk to each other. It's the kind of [mess] that [the manager of Central Applications] is in right now, he is married to Lotus Notes - and Lotus Notes is a loser, I'm sorry. And is not supported in Digital at all, and any time something breaks and any time something hiccups in Lotus Notes, he has got to pay a contractor to fix it - and Lotus Notes doesn't talk to anything, and you cannot link it to the Internet, so you're screwed.

It is ironic that the marketing manager was in agreement with IS people in relation to Lotus Notes, while sharing the same opinion, more or less, as sales managers with regard to the IS function. IS managers were sensitive to such opinions, and in defense of the status quo one stated:

I know that reporting through to finance has always been an issue out there, but I think our CFO has a very good perspective and good vision on where IT fits in the whole organization, so I would say he's been a most positive force in driving us where we are today to the point where everyone has access to the same capabilities and functionality.

Notwithstanding this positive opinion, no formal IT strategy was ever articulated for the organization. Instead, this manager said:

I think we all walk around generally understanding what needs to be done. [The CFO] overcomes the problem of not having [a strategy] by communicating with a lot of people, he's very much in touch with all of the VPs, he communicates his plans and so forth.

Even so, the IS manager underlined the fact that Microsoft was the corporate desktop standard, although it was not written down anywhere, nor indeed was it codified that SAP was the first choice when it came to developing corporate applications. In addition, the IS managers interviewed considered the CFO to be really unique due to his passion for IT and his understanding of its benefits to the company. They also thought that few senior executives within Digital were as enthusiastic proponents or sponsors of IT as he. Nevertheless, the following statement from the IS Manager for Sales and Marketing is revealing, in that it may indicate where the fundamental cause of the frustration with the IS function existed:

I think there would be good agreement that there are areas, especially in Sales and Marketing, that he just does not understand-the soft stuff, customer relationship management [etc.] ... There is agreement that he is probably too removed from that side of the business, that he might say: "Well, wait a second, why are we spending money on that?" And well sometimes you know at the high level that many of the vice-presidents communicate when these initiatives are being discussed, but I think what he tends to fall back on is that if the vice president responsible is willing to fund it out of his own budget, and put his best people on it, then he would be willing to support [it].

While the IS function was not held in the highest regard by Sales and Marketing engineers, the reverse was also the case, as both Sales and Marketing (including the marketing sub-units in the product line divisions) tended to go it alone more often than other organizational units when it came to providing their own IT solutions. Nevertheless, IS was always the first port of call whenever new systems were planned in order to determine whether or not the IS function could deliver the desired solution. However, because of human resource limitations and skills shortages, the demand for corporate-wide systems, and attendant need to prioritize the systems to be developed, IS was not always in a position to deliver a particular solution.

The Other Side of the Governance Coin

The IS function ran into problems that were not of its own making in undertaking certain projects for business 'communities-of-practice'. For example, it had been badly burned in the past, with, for example, the original Opportunities, Strategies and Tactics (OST) System for Digital's sales team and, also, the organization's sales forecasting system - both of which were failures. Accordingly, the IS function tended to tread carefully so as not to get embroiled in change management problems and resultant system failures. Hence, they adopted a policy that required business areas to appoint a project leader who was highly competent in his field, and who would have top management support, as they did with the successful SAP Logistics and Order Fulfillment System. In this project, a senior manager from manufacturing acted as user project manager, and an IS project manager handled development. The problems that arose in the implementation of this system revolved around the significant change in the logistics process that would effectively eliminate all product distribution warehouses worldwide, save for those at the manufacturing site of origin. The new system allowed for a form of just-in-time manufacturing whereby products were to be shipped directly from the manufacturing site of origin direct to a customer once ordered. As the IS manager responsible outlined:

An IT guy could not make that type of business decision, and an IT guy could not get through political issues in Europe: like saying that we are going to close down that warehouse and make 30 people redundant. The business manager who did that had the support of the vice president of worldwide sales. And that is the struggle I alluded to before, but now we're in the space of systems where someone comes up with [a] great idea and says well I think we should do this, and I say fine, but who are you going to put into this to run it? And the response might be: "Well I don't really have any one that I am willing to give up at present." That is signal to me that the system is not that important.

Whereas change management problems were resolved when the SAP system was implemented, the new sales forecasting system was more problematic however, as problems of a cross-functional nature between the manufacturing and marketing functions, and a lack of buy-in on the marketing side, caused the system's implementation to fail. One of the major problems here was that Manufacturing and Corporate Marketing had separate sales forecasting needs. Furthermore, their existing approaches to forecasting, although separate, were pretty much dependent on each other. In any event, managers from manufacturing locations and the marketing groups participating in the development redesigned the forecasting processes and developed the system around the new processes. However, the system was never used to its full potential because business managers not involved in the design and development were reluctant to change fundamental forecasting processes. Thus, while the new system was implemented, the basic business processes involved in forecasting were never changed. The IS manager responsible for this development project stated that it became "a pass the buck issue" with both marketing and manufacturing. As a result of these implementation problems, responsibility for forecasting was removed from the marketing function, and the relevant planning activities were transferred and integrated into manufacturing processes and then ported back into marketing. Hence, the new planners effectively spanned both functions. The IS manager for Sales and Marketing summed up the situation thus:

It seems to me that everyone is always fascinated with new systems, and they believe that a particular solution is going to solve all their problems; and [whether the systems work or not] it all comes down to whether or not the organization is lined up - that the right people, with the right incentives, are in place, and that business managers have thought through what this is going to mean, and so on.

In response to the problems they were experiencing with the Sales and Marketing divisions, IS managers wanted to see a single vice president of Sales and Marketing so that there would be coherence, vision and leadership in the planning, development and implementation of Sales and Marketing Systems. The other side of this coin, however, was that such a move had the potential to reduce political infighting and, perhaps, act as a mechanism to impose corporate standards on highly innovative operations like Central Applications.

Building the Intranet the Digital Way

In 1996, the IS function put in place a strategy for the corporate intranet. Prior to this, islands of Web-based sites had appeared across the wide area network (WAN), and business and IS managers wished to tap into the potential for intra-organizational communication and learning that such systems offered. Essentially, business users were employing Web-based technologies to share their knowledge of products and customers with each other. In order to develop a strategy that would bring order to the chaos that then existed, the IS function benchmarked its proposed strategy with companies such as DEC, Hewlett Packard, Sun Microsystems and Silicon Graphics. The IS team observed two dominant approaches to implementing intranet technologies in these companies. First, they noted that Sun Microsystems and Silicon Graphics had adopted a laissez faire strategy and basically let staff do their own thing, whereby every workstation had the potential to become an intranet Web site. DEC and Hewlett Packard took a much more disciplined and rigorous approach by instituting a formal strategy that included the adoption of exacting standards, in conjunction with a corporate template that mandated a certain look and feel for each site. The IS function at Digital adopted a strategy that lay somewhere between the two reported.

In implementing this strategy, an umbrella intranet site was first established and the representatives of all the other sites were informed of the new policy. Essentially, this involved the observance of some basic guidelines that end-user developers had to follow - these guidelines merely set certain standards for the Web sites. No effort was made to tell users as to what they could or could not place on their sites, but nevertheless, certain policies had to be observed. The IS project manager responsible commented on this endeavor and maintained that it had "worked out pretty well, but there was some duplication of effort. For example, if I need a phone list of people, there are probably 10 of them out there now, and each one, apart from the corporate one, is maintained for people in a particular Web group." Nonetheless, in response to such issues, and to introduce more functionality and cross-site accessibility, a cross-functional intranet development steering group was established. This group was charged with two tasks-to develop standards and to develop generic tools like a search engine. The group had responsibility also for the formulation of a strategy to guide the direction of the Intranet and to determine what, if any, additional standards needed to be put in place. However, in keeping with the organizational culture, rigid structures were not put in place, nor were Web authors questioned in regards to what they were doing with their sites. Even so, some control was levied over the use of resources to prevent particular groups from monopolizing them and thereby preventing other voices from being heard.

Central Applications Leads the Way in Providing Intranet Support for Sales & Marketing

As indicated previously, Lotus Notes was not supported by the IS function, and because the Digital's CIO did not want Lotus Notes client software on corporate desktops, it seemed unlikely that the applications developed using Lotus Notes would be of general use to the people that needed them - the sales and field engineers. However, with the advent of the corporate intranet, and with the capability of Notes' Domino Web-server, the Central Applications product support system came into its own, and such was its success that the product divisions and the product lines looked to Central Applications to host new product information. The IT consultant at Central Applications described it thus:

When Internet technology and Web servers first became available and popular, a lot of people went out and set up their own intranet servers, and it was fun and games for a while. But they soon realized how much work it was to maintain their own sites and keep their information fresh...So what we have done is make it easy for people [by hosting their intranet sites], and the [Central Applications manager] feels that if we keep it easy for people, they will come.

In addition to hosting new product data for the product divisions, something that was pivotal in helping sales and field engineers to promote Digital's diverse product range, Central Applications also hosted intranet Web sites for the product lines, as many of them had neither the time nor the inclination to maintain their own sites. Application engineers supported and input most of the data into the Lotus Notes databases; for example, the sales bulletins, the product problem data, and so on. With the general accessibility of the Marketing Information Central Web site, it was hoped that much of the work of inputting new product status data would be taken over by the entities responsible for the original data such as the product lines and so on.

Creative Tension & Development of Digital's Corporate Web Presence

The success of user-led development of Digital's intranet systems had unintended consequences for the development of the company's Internet IS. Digital wished to implement a corporate Web site in order to execute its e-Business strategy, such as it was. External users consisted primarily of design engineers who were now provided with enhanced product search and select features in order to better meet their needs. The system would also provide a mechanism by which design engineers could order products or have samples sent to them. Internal users provided product descriptions and technical data for publication, on one hand, while customer preferences and future product needs (in terms of design and manufacture) could be obtained from customer interaction and used by sales and corporate/product line marketing functions. The IS function, which provided technical support for the initiative, did not see itself as leading the project, that responsibility rested firmly with the VP of Corporate Marketing. The appointment of a Webmaster was a pivotal factor in the success of the Web project. The Webmaster acted as a user project manager whose role was to provide leadership and guidance for the ongoing development, operation and use of Digital's Internet presence. Previously she was involved with the Computer Products Division (CPD) application support center at Norwood.

Enthusiastic as many of the management team were by the exciting new possibilities for customer contact and marketing new and existing products using the Internet, others were less enthused as they perceived that tried and tested methods of communicating with customers were to be discarded and replaced by indirect, impersonal technological mechanisms. Predictably, this led to friction between the various groups involved, particularly the sales and marketing functions. Take, for example, this admission by the Webmaster: "I know that the Web site will continue to be an emotional thing and not everyone will be happy." Nevertheless, elsewhere she admitted that the Web site was jointly developed with cross-functional teams from these constituencies, indicating that the difficulties mentioned were overcome - at least on a formality.

One of the major difficulties that arose in relation to the implementation of this Web-based IS centred on the manner in which product details were prepared for publication on the Web. In a move that paralleled the intranet policy at Central Applications, the Webmaster shifted the emphasis from authorship and ownership of all new product data to the product lines. The early successes in deploying what was a new technology led some senior managers to believe: (a) that traditional mechanisms of customer contact were now obsolete; (b) that existing business processes were under threat; (c) and that catalogs, CD-ROMs, and sales engineers were now of little value.

The perspectives of IS function managers on the issue of IT support for promoting product data to customers are summed up by a comment from the IS manager for the Internet project:

The [Central Applications Manager] does this on the intranet internally, [the Webmaster] is on the Internet site: I think maybe that there is some competition there, I don't think that is organizationally clear who is responsible for this-it just hasn 't been defined. I don't think Digital works like that, [Central Applications] have done this for a long time and now [the Webmaster] needs to do this externally. The choices are "I can use his stuff or I can do my own thing"; [The Central Applications Manager], I think, gets and maintains it himself, while [the Webmaster] has the product line people do it for her. [Central Applications are] facing field service engineers while [the Webmaster] is facing the customer.

Thus, the absence of an overarching policy on the management of the customer interface at Digital (one direct, the other via sales and field service engineers) led to competition and tension between two important organizational functions. However, this proved beneficial and led to optimal outcomes for customers and field service and sales engineers, as the Web team and Central Applications unit both wished to be perceived as the nexus of corporate knowledge. It must be said, however, that unequivocal top management support helped mitigate many of the problems mentioned and others that arose elsewhere in the organization regarding the new Internet IS, and thereby led to a successful development outcome.

CURRENT CHALLENGES/PROBLEMS FACING THE ORGANIZATION

This section describes the problems and challenges facing the organization in relation to IS development and governance of IT infrastructures, and, in particular, the issues confronting its IS function and engineering-oriented business 'communities-of-practice' in the Sales, Corporate Marketing, and Standard Linear Products divisions. The following challenges/problems are discussed with reference to the preceding case report.

Business users in engineering 'communities-of-practice' were committed to leveraging IT to transform core business processes and to be innovative in delivering products and services using IS. It is evident that they will continue to do this with or without the help of the IS function. Hence, in order achieve their objectives, they will exercise as much control over the development of IS and the governance of IT infrastructures as is possible. On the other hand, the IS function is committed to bringing order and professionalism to the mayhem caused by the organic and uncoordinated approach to IS development and IT infrastructure deployment by engineers from the business divisions. Factional interests will continue to exist as engineers in business 'communities-of-practice' form alliances with others to achieve their ends. However, if the IS function continues to operate from a relatively weaker power base, it will need to form potent alliances to obtain its goals. The challenges for the organization's leadership would be to maintain what is good in Digital Devices' culture, structure and processes, while transforming how the company deploys and governs IT infrastructures and develops and implements IS. These challenges are now detailed.

At the time this study ended, the company faced several major options in addressing what were its main problems: the marginalization of the company's IS function and the power asymmetries this created with the business community in terms of IS development and governance issues. The first option concerns the challenge of changing the company's structure for the purpose of establishing a new division based on the IS function. From IS managers' perspectives, the key challenge is to have the IS function emerge from beneath the wing of the Finance Division and become an autonomous organizational unit with a CIO of equal standing to the VPs of business divisions, as is the case with almost all large multinational organizations. The challenge for the IT-literate, engineering-oriented, business 'communities-of-practice' would be to gracefully cede control over the design, development, implementation and operation of IT infrastructures so that a uniform and aligned approach could be adopted in the provision and deployment of IS. This would involve a change in power relationships and commitments. Hence, the challenge for business and IS managers here would be to address the fallout in terms of the perceived loss of control by business managers over the design, development and evolution of the IS they depend on to conduct business.

An alternative to this option would be the challenge of creating a business-specific IS function within each division with direct reporting relationships to a senior business executive: for example, the IS Manger for the Standard Linear Product Division would report to, and receive budgetary resources from, a senior executive or the VP of that division. Overall strategy could then be formulated by a corporate IS function. Thus IS personnel could participate with business users as members of the same 'community-of-practice' and the culture of user-led development in the organization would not need radical change. The problem here is that if corporate IS remained under the umbrella of the Finance Division, then the CIO could not be said to be unbiased in terms of strategy formulation, the allocation of IS budgets and the prioritization of IS projects. Hence, the corporate IS, whatever its size, would need to be focused exclusively on strategy, but with a CIO that had VP status reporting directly to the CEO. This would enable the CIO and his IS executives to address, for the first time, the challenge of formulating an IS strategy that was aligned with business strategies and needs across the organization, thus IT-enabled support for business processes could be delivered more effectively and efficiently. Indeed, the absence of a coherent IS strategy throughout the 1990s was a significant problem for the company and its IS function.

Another problem highlighted by IS managers, and evident from the case, was the limitations on IS performance in its inability to deliver timely solutions to business due to a shortage of IS staff, especially those with competencies in particular areas such as Internet and intranet technologies. If recruiting new staff was going to be problematic, due to the high demand of IT professionals at the time, the challenge for IS managers would be to choose between outsourcing, consultancy or customizable-off-the-shelf software approaches, or implement hybrid solutions involving a mixture of all three. These could be integrated with the above options. However, there will remain the significant challenge in convincing an IT-literate business 'community-of-practice' that IS is best placed to do this, as many business managers, such as the Manager of Central Applications, are already contracting consultants, and so on. Whatever strategy is selected, there remains the challenge of confidence building in the business community in regard to the IS function, as IT-literate business managers already had a long-standing role in providing for their own IS needs.

If management at Digital Devices address the aforementioned challenges and solve related problems, there remain several issues to be addressed in the short term. As an IS manager pointed out, having a single IS unit serve the IS needs of both the Sales and Corporate Marketing divisions was causing problems. The challenge of senior management would be to merge the two divisions, as the existing structure lay at the root of many of the IS development-related problems being experienced by the IS function in providing joint solutions. Sales and marketing strategies could be then be aligned more effectively so that agreement could be reached on integrated IS applications. This was important given that a number of sales and marketing engineers were fearful of the company's radical change of strategy in planning to use Internet-based systems to replace established means of meeting customer needs. The challenge was to use the Internet as an additional sales and marketing tool, while not abandoning tried and tested business processes - only then could the 'doubters' be won over. Then there was the problem of business managers in the Sales and Marketing divisions thinking that they knew better than IS managers as to which IT platform was the best IT-based solution for their IS needs, as indicated in the case. Even if agreement was reached on a particular IS solution, change management problems tended to arise that could only be solved by business managers. For IS managers, the solution to these and other problems was to draft Project Charters that delineated the roles and responsibilities of all stakeholders and which would provide agreement to implement the agreed project outcomes. The challenge for the IS function is to have this introduced on a corporate-wide basis.

Several of the major issues facing Digital Devices related to matters of IT governance and adherence to standards. One such problem facing the organization will be resolving issues relating to the IS function's support for the Microsoft Windows platform and the engineering 'communities-of-practice' allegiance to UNIX-based systems. Take, for example, that Linux, the free Open Source Software operating system, now comes with a client suite of personal productivity tools (Open Office) and enterprise-wide system software utilities that rival Microsoft's offerings (Apache, MySQL, etc.). Then, there is the competition between Microsoft's .Net and Sun's Java 2 Enterprise Edition (J2EE) in the application development space. Interestingly, engineers in product line divisions were early adaptors of Java technologies and are committed to their use, as J2EE applications run on Windows, Mac and all UNIX variants, while .Net applications run on Windows only. Also, it will be interesting to see whether the company will continue with its insistence on Windows client and server operating systems in the face of the lower total cost of ownership (TCO) of Linux-based Open Office and server side utilities, especially given the range of UNIX-based competencies in the organizations.

Finally, while Digital's intranet strategy was an undoubted success, it had two obvious weaknesses. First, the heterogeneous nature of the Web and data servers meant that it would be more difficult for the IS function to quickly roll-out anti-virus and worm upgrades across different platforms (e.g., Microsoft's Internet Information Server (IIS), Lotus Domino, Apache, etc.). Thus, weak links could exist that would compromise the company's local and wide area networks (LANs and WANs) and cause data loss. The challenge here for the IS function would be to implement a strategy that migrated nonstandard servers to the corporate standard(s), and introduce automated anti-virus upgrades and other means to protect valuable corporate data repositories. Second, the case description of Digital Devices' intranet and Internet infrastructures indicates that the company's knowledge resources were not well integrated, in that there existed islands of knowledge stored in diverse data repositories - something that is in contravention of knowledge management practice. Problems of duplication of effort and data inconsistency aside, a major challenge for Digital's IS function is to protect this learning organization's most valuable resource, knowledge of its core business processes and products.

Subject: Case studies; Marketing information systems; Power; Software engineering

Classification: 9110: Company specific; 5240: Software & systems; 7000: Marketing

Publication title: Journal of Cases on Information Technology

Volume: 7

Issue: 3

Pages: 18-36

Number of pages: 19

Publication year: 2005

Publication date: Jul-Sep 2005

Year: 2005

Publisher: IGI Global

Place of publication: Hershey

Country of publication: United States

Publication subject: Business And Economics--Computer Applications

ISSN: 15487717

Source type: Reports

Language of publication: English

Document type: Business Case

Document feature: maps charts references

ProQuest document ID: 198720534

Document URL: http://search.proquest.com/docview/198720534?accountid=38610

Copyright: Copyright Idea Group Inc. Jul-Sep 2005

Last updated: 2011-07-21

Database: ABI/INFORM Complete

Document 43 of 100

From Principles to Practice: Analyzing a Student Learning Outcomes Assessment System

Author: Drinka, Dennis; Voge, Kathleen; Minnie Yi-Miin Yen

ProQuest document link

Abstract:

The College of Business Administration (CBA) is part of a mid-sized urban university with a primary focus on teaching. It had recently decided to develop a process for defining student learning objectives and outcomes, measuring success in achieving these, and using the results of those measures for continuously improving the quality of student learning. Its aim was to design and develop a system which could automate data collection and streamline the processes of course effectiveness evaluation and course/curriculum enhancement. Even though many challenges still existed for the college, it nevertheless launched into a logical design of the Student Learning Outcome Assessment System (SLOAS). Alexis, the college's IT Manager, was assigned the responsibility for managing this project. She determined this system would be used for data collection and reporting in order to provide evidence that student learning outcomes were being achieved at the course, college, and potentially university levels. Amid the lack of internal development resources, insufficient IT support, constantly changing standards and policies, budget issues, and so forth. Alexis knew that she was faced with a challenging project. [PUBLICATION ABSTRACT]

Full text:

BACKGROUND

The College of Business Administration (CBA) was housed within a public, mid-sized, urban university located in its state's largest city. The mission of the university was to promote scholarship, and excellence in teaching, research, creativity, and service. Working towards this mission, the college's faculty, administration, alumni, and community partners were dedicated to advancing the quality of learning and academic distinction of the university, while being actively engaged in using their talents and knowledge in service to their local and statewide communities. In recognition of their dedication and commitment to quality by AACSB International (Association to Advance Collegiate Schools of Business), the CBA was awarded its accreditation in 1995.

The CBA was composed of six academic departments: accounting, business administration, computer information systems (CIS), economics, logistics, and public administration. It offered associate and bachelor's degrees in each department, a certificate in logistics, a master's degree in business administration (MBA), a master's degree in public administration (MPA), and a Master's of Science (MS) in logistics and global supply chain management. The college was also the home of several research, outreach, and economic development centers. These centers focused on social and economic research, international business, small business administration, regional economic policy and development, and international business education. The CBA served the local, state, and global communities by training and educating the workforce, by promoting and inspiring excellence in public, private, and non-profit management and related business disciplines, by providing professional assistance and advice to these organizations, and by conducting basic, applied, and pedagogical research.

The CBA had more than 1,300 students of which approximately 15% were pursuing one of the two-year associate degrees or a certificate, 75% were pursuing four-year baccalaureate degrees, and 10% were in one of the three graduate degree programs. Nearly 50% of the student body was considered non-traditional, either working towards their degrees on a part-time basis, or attending classes solely for personal or professional development. Part-time students typically required six to seven years to complete a baccalaureate degree program.

In 1987, the university was included in a state government-mandated consolidation that resulted in the merger of the regional community colleges with the university. One result of this merger was the partitioning of faculty into two distinct categories: faculty members from the community colleges were categorized as bi-partite faculty whose job responsibilities would include teaching and service, while faculty members from the original university were classified as tri-partite faculty whose responsibilities, in addition to teaching and service, would also include research. Faculty members have since unionized, with bi-partite and tri-partite faculty members represented by separate unions. The CBA had 46 full-time faculty members of which 12 were bi-partite and 34 were tri-partite.

SETTING THE STAGE

The stated objectives of the college for its CBA baccalaureate program were as follows:

* to provide a broad-based business education;

* to prepare students for professional and managerial careers in regional, national and international job markets; and

* to foster lifelong learning.

The objectives of the CBA master's degree programs were similar, but also include a primary emphasis on preparing students for leadership roles in organizations.

The college would be undergoing review for reaffirmation of accreditation by the AASCB in January 2005. Beginning in September 2002, the college initiated its required self-study process phase for that review. It was recognized by the administration and faculty within the CBA that regular, continuous assessment of the quality of the education that it provided, and the quality of the learning of the students, was imperative to achieving the college's objectives and to it maintaining its accreditation status. Three distinct and independent review processes were being used to evaluate and manage educational quality and assurance of learning. The focuses of these separate processes were on teaching effectiveness, course effectiveness, and course and curriculum design.

Teaching effectiveness was evaluated through standardized student evaluation surveys that were designed by the University and administered at the University level. These surveys were used to determine students' perceptions of instructors, textbooks, and overall course value. The surveys were conducted in two parts. In one part, students rated predetermined factors concerning the course using a standard scale. For example, "I would recommend this instructor to other students" would be rated on a five-point scale from strongly disagree to strongly agree. In the second part of the survey, students were asked to supply written, open-ended responses to predetermined questions such as, "What did you like best about this course?" The two parts of the survey and a summary of the results were reviewed by the CBA Dean. His comments and suggestions, if any, were appended to the surveys and summary results for each course. The appended surveys were then forwarded to the appropriate department chair for review and more comments. Finally, all comments, summary results, and surveys were given to the individual faculty member. These surveys were significant - although not exclusive - documentation used for assessment of faculty teaching for purposes of annual reviews, promotion, and tenure. These surveys, while an indicator of teaching effectiveness, did not in any way attempt to address course objectives or student outcomes.

Course effectiveness, as measured by achievement of course objectives and student outcomes, was evaluated through a separate survey. Each course is required to have a Course Content Guide (CCG) that served as a general resource guiding the development of course syllabi. One of the requirements of each CCG was a statement of course objectives and student outcomes. The objectives were statements that reflected what the instructor of the course needed to accomplish if the course was to be considered successful. The outcomes defined, in a general sense, the knowledge, skills, and abilities the students should attain through participation in the course (Gardiner, Anderson & Cambridge, 1997). These objectives and outcomes became part of the course syllabi. At the end of each semester, the course effectiveness surveys were completed by students to evaluate how well the course objectives were achieved and how well students felt they achieved the defined student outcomes. This form of assessment was relatively new to the CBA, and its format varied from instructor to instructor and course to course, so its design and its usefulness as feedback were still evolving. A summary of results was prepared at the college and department levels. The results of these surveys were not used for purposes of faculty evaluation in annual review, promotion, or tenure decisions, and there was no formal process in place by which this information was being used to guide changes in course design.

Course and curriculum design review was conducted through the review of the Course Content Guides. Every course in the university was required to have a CCG, all were publicly available on the University's Web site and were often used for advising, for course shopping by students, for content evaluation by community organizations, or for evaluation of transfer credits by other universities. In addition to the objectives and outcomes included in the CCG documents, instructors also incorporated an outline of topics to be covered in the course and a bibliography of relevant books. These additional items were included to ensure that guidance for the development of course syllabi was provided. They were used to maintain consistency across multiple sections of a course, to control the quality of items that might be used to publicly represent the curriculum of the university, to ensure that adequate library and instructor resources were available for supporting the course, to minimize duplication and maximize consistency throughout the university system, and to ensure that curriculum changes were consistent with the University's overall objectives.

All curriculum change requests had to be initiated by a faculty member. The process began with the development of a CCG document using word-processing software. The document, in paper form, would then be approved in sequence by the appropriate department chair, a college-wide curriculum committee, the Dean, the University Curriculum Committee, the Faculty Senate, the Provost, and, in the case of program additions, the Board of Regents. All proposed changes to a CCG were distributed through a university-wide e-mail listserv in order to allow all university faculty an opportunity to comment on any proposed curriculum changes. Changes could be suggested at any stage during the review process, however the tracking of changes was not a formal process, and monitoring of the progress of a given curriculum action through the process was difficult.

The University Curriculum Committee (UCC) historically presented the most rigorous level of review. This committee provided guidelines on what content should be included in the document, and they provided examples of "good" formats, but there were no standard formats or templates. Included in the reviews by this committee were an examination of the consistency between - and completeness of - course objectives, student outcomes, and course topics, and the consistency between stated course expectations and the course level. One exception to the review process by the UCC were experimental courses which only required approval at the Dean's level, but which could only be taught for four semesters. Another exception were special topic courses that needed to be reviewed by the UCC in a generic format, but could be changed by an instructor as desired to accommodate a unique topic without undergoing additional UCC review.

There was no review of curriculum at the college or department level that was comparable to the level of review at the UCC. In addition, at no level was there a systematic review of learning objectives, peer observation, expert observation, or formal periodic assessment of the impact of instruction on student performance. Moreover, at no level of review was there an evaluation of courses with the purpose of evaluating and guiding instructional improvement, to reward the development of new courses, or to reward innovation in teaching and learning, nor was there any formal review of the consistency between the thoroughly reviewed CCGs' objectives and outcomes, and those included in the course syllabi.

CASE DESCRIPTION

Project Background & Initial System Analysis

Alexis was recently hired as an IT Manager for the CBA. She had been assigned the project of developing the Student Learning Outcomes Assessment System in May 2003. This was to be a highly visible project and, if developed and implemented successfully, it could help the college and possibly the university in a variety of ways including standardizing formats and providing version control of CCGs. The primary goals of the new system included:

1. Assure consistency between the college mission, the college-level program outcomes, and the individual course CCG learning objectives.

2. Allow comparison of actual student outcomes to desired student outcomes.

3. Provide continuous improvement in student learning through curriculum revision by providing reports on the outcomes assessment results.

4. Increase operating efficiency and maintenance of AACSB accreditation by assisting in the documenting and tracking of curriculum changes throughout the curriculum review process.

The stakeholders of the Student Learning Outcomes Assessment System (SLOAS) included many college and university-level personnel, CBA faculty, and any current or future students enrolled in CBA courses.

A new college-level Curriculum and Assessment Committee was established by the Dean in September of 2003. Members of this committee would be appointed annually, with representation from each of the CBA academic departments. This committee was responsible for oversight of the system and would be the primary and most direct system stakeholder. Alexis was designated as the Project Manager for the project, and she was responsible for ensuring that resources were identified and made available once the analysis and design phases were completed and development was ready to begin. Since the Curriculum and Assessment Committee membership could change from year to year, it was important to have someone like Alexis involved to ensure continuity on the project.

During the previous academic year (2002-2003), student course effectiveness surveys had been administered in most classes for the first time to begin capturing assessment data and as a test of potential survey designs and survey methods. At that time, no agreement had been reached concerning a college-level design, so departments and even individual instructors were allowed to design their own surveys.

In April 2003, two faculty members from the CIS department, Mike and Kevin, were invited to consult on the design of the assessment process by Ferdinand, the Associate Dean of Academic Affairs. Mike and Kevin accepted the responsibility of being the system analysts as well as the project designers for this process, and had already begun analysis work before the Curriculum and Assessment Committee (CAC) was formed. They had been asked to begin an analysis of the needed system and to build a prototype that would help in the capture, analysis, and reporting of the Course Effectiveness data that had, by then, already been gathered. As a result of his experience with the analysis and prototype, Kevin was eventually appointed as one of the CIS department representatives to the CAC when it was formed.

When Alexis was given responsibility for the project development the next month, her first step was to evaluate her resources. She learned that the University had an Information Technology Department that was responsible for communications, the information technology infrastructure, university-wide software licensing, security, and public use labs. However, the Information Technology staff within the CBA, Alexis learned, was relatively small, consisting of four full-time employees (Appendix 1) and many part-time student lab aides. It was responsible for all the needs of CBA students, faculty, and staff. The IT Department within the CBA operated independently of the University's IT staff, and there was minimal interaction between them. The college had its own network, over 275 workstations, three student computer labs, and six lab classrooms in addition to four network and database servers. The college IT staff was responsible for managing all aspects of IT in the college, from purchasing new equipment to maintaining records on software licenses. The part-time lab aides were available only to assist students in the labs and computer classrooms. There was no one on the staff that performed any development function with the exception of the Webmaster, who was responsible for maintaining the CBA Web site. Alexis realized that she would not be able to use any existing CBA staff for her project because of their lack of development expertise and because they were already overextended in their operational support. She also learned that the University IT staff, and potentially the system-wide IT staff, had the development capabilities she would require. However, the project could not be completed in time for the January 2005 AACSB review if she had to rely on these resources.

By the time Alexis got involved, Mike and Kevin had already drafted the original process of the Student Learning Outcomes Assessment System, with input and confirmation provided from the Curriculum and Assessment Committee and from the Associate Dean. The need to analyze the process had originally been identified early in the 2002-2003 academic year, just shortly after some Course Effectiveness Surveys had been administered by faculty and results were collected. At the time, Ferdinand already decided that student-reported self-efficacy data would be the most appropriate for these Course Effectiveness surveys, so Mike and Kevin developed a Microsoft® Access database to assist in the tracking of course-level learning objectives, faculty information, and the student self-efficacy Course Effectiveness survey responses. The data for the Spring 2003 semester surveys was captured and entered into the new database, and reports were generated for faculty and administration by the time they returned in August 2003.

Upon completion of this database, Mike and Kevin both realized it had the potential for tracking all of the college's information needed for teaching effectiveness, course effectiveness, and course and curriculum design. It could store course-level curriculum information, the student learning objectives, and the assessment results. They decided to modify the original database design and complete the logical design of the larger system which could ultimately include a Web-based user interface. It was at this point that they decided Alexis would need to be brought in to oversee the project.

Project Risks

Shortly after Alexis became involved, she received notice that the AACSB had announced and published new standards (AACSB International). These standards resulted in many significant reporting changes for the college, one of which had a direct impact on the measures of course effectiveness that Mike and Kevin had been working with. Upon their return at the beginning of the 2003-2004 academic year, there was still considerable uncertainty among the CBA faculty, and faculty throughout the country, about how to interpret the new standards and exactly what assessment data should now be collected. This uncertainty led directly to the formation of the Curriculum and Assessment Committee.

The CAC eventually reached the consensus that the new standards indicated that while student self-efficacy data was nice to have, that type of data was not a direct measure of the amount of learning that actually occurred in a course and so should not be the primary measure of course effectiveness. Therefore, the focus for Mike and Kevin and the CAC shifted to the collection of direct measurement of student outcomes that did measure effectiveness. Their challenge was now to determine the best methods for collecting the new student outcomes data. Given the new AACSB standards, almost everyone in the college agreed that it would be important to have faculty ownership over both the curriculum process and the development of any assessment tools that would be used in their courses.

While Kevin and Mike were reworking their analysis and their prototype, Alexis was identifying potential risks and issues that needed to be addressed. One of Alexis' concerns with the design and development of the system was integration of the data with the larger, university-wide system already in existence. Kevin and Mike had a good start on the design of a college-based system, but had not fully considered the broader uses of the data. Alexis also wondered how the system administration and on-going maintenance of the new system would be supported once the system was built, but felt that addressing that issue could be postponed because of larger overriding issues.

At that time, her primary concern was with the use - or more specifically the non-use - of the system once it was developed. The faculty members were already starting to show their discontent resulting from the original effort required for administering the original Course Effectiveness surveys that had now been discarded. She knew she needed to ensure that any new system processes that would be developed must be streamlined and have little workload impact on faculty. However, the faculty members' desires of wanting to own the process themselves, rather than allowing the administration to own it, was a barrier to being able to quickly finalize a design for a system that would be optimized for ease of use. She knew that design changes might never stop being requested if their decision making was done by a faculty committee and no one individual had the authority to freeze and approve the design.

To address these problems, Alexis decided she needed to review the basic principles of system development using a conventional System Development Life Cycle (SDLC) versus those of several other alternatives, such as Rapid Application Development (RAD), Joint Application Design (JAD), Object-Oriented Development (OOD), and so forth. She pulled out her collection of System Analysis and Design books and articles for help in determining the advantages and drawbacks of each approach and to review different project lifecycle approaches, such as waterfall, iterative, spiral, prototype, and design-to-tools (Berardi and Stucki, 2003; Cleland and Ireland, 2002; Hoffer, George, and Valacich, 2001; Kendall and Kendall, 2004; Kloppenborg and Petrick, 1999; McConnell, 1996; Valacich, George, and Hoffer, 2003; Whitten, Bentley and Dittman, 2004). She did not want to restrict the project to one specific approach without having a thorough knowledge of all the available resources she might have access to once the analysis and design phases were complete. Theoretically, Alexis knew that she could use a combination of the above proven methodologies depending on the needs and the available resources and skills faced by the CBA (Johnson, 2000; Mylopoulos, 1999; Wang, 1996).

After reviewing her texts, Alexis realized she had other problems. She decided to arrange a meeting with Kevin and Mike so they could brainstorm design ideas and risks. She started by expressing her concern to them that since no dedicated IT development function currently existed within the college, no standard development tools could be identified. The prototype that Mike and Kevin had developed utilized Microsoft® Access, but they all agreed that the new system should be designed using a client/server model for the database with a Web-enabled user interface. Kevin and Mike agreed with Alexis' assumption that the database design would have to be scalable to allow for both database growth and the expected continuous design changes - including possible university-wide data requirements.

Since it appeared that the learning outcomes assessments and curriculum reviews would continue to be in an iterative and on-going process of revision, the actual assessments used and the data collected would need to be able to take on a variety of forms over the years. For some stakeholders, the system would primarily be used as a data warehouse for both curriculum information and assessment results. However, Kevin pointed out that other members on the CAC had indicated that it would be desirable to keep historical data in the system so that at some point in the future, past students' learning assessment results could be compared with current results using data mining techniques. Mike and Alexis agreed that historical data would most likely need to be preserved.

Kevin then pointed out that one primary responsibility of the CAC was to provide oversight for a five-year curriculum review cycle. That is, each course would need to be reviewed, updated, and revised, if necessary, at least once every five years. The purpose for this review went beyond accreditation and assessment needs; these reviews would be conducted to ensure that the curriculum being delivered in the classroom was meeting current needs of both students and industry, and to ensure that all CCG document items, especially outcomes, objectives, and bibliographies, were up to date. While discussing this issue, Mike realized that even if the college implemented its own new curriculum review requirements, it would still need to satisfy the comprehensive review requirement of the UCC in order to obtain approval for changes. Therefore, it would be critical for the new system to aid in the university-level approval process, not hinder it.

Balancing Stakeholder Expectations

As Alexis began to understand all of the related curriculum process needs, she knew this project would be difficult, though not impossible, to manage. She continued to identify, document, and prioritize the risks. One primary element that was out of her control was getting the faculty to agree on the interpretation of the new accreditation standards and what assessment techniques would best provide evidence of student learning. She knew her experience was in IT, not curriculum development, so maintaining clear and open communication with her primary faculty stakeholders would be critical to the project's success. She determined that she would have to rely on the CAC to handle the interpretation of the new accreditation standards and resolve any faculty disagreements on assessment techniques, but would also have to press them to commit to some technique as soon as possible. In the meantime, she would focus her efforts on identifying resources to actually build and maintain the system.

Alexis recognized that different stakeholder perspectives, views, and values would also be considered a main challenge in this project. Given that this was an academic environment where freedom of ideas was cultivated and encouraged, differing perspectives were to be expected. She would need to balance individual perspectives with department and college goals, along with any imposed university-wide requirements. But she alone did not have the authority to approve the final design, nor was there anyone who did have that authority. This "freedom of ideas" dilemma was further complicated by the fact that she knew that if the system was to truly integrate with other campus-wide systems, she would need to be in communication with the University's IT group, perhaps the system-wide IT group, the UCC, and maybe even the Provost, the Faculty Senate, and the faculty unions.

As Alexis began to plan how to effectively manage the project, she documented the implementation issues she would eventually need to address. In a worst-case scenario, she would manage the development of a system that no one would end up using. This would be viewed as a huge waste of effort and resources; therefore, she knew that faculty would need to quickly see the benefits of the system in order to accept and utilize it. Additionally, with workloads already a potential point of contention for many faculty, any process developed and any assessment tools designed, would have to be simple to use, with an automated data collection process to minimize impact on faculty time. Finally, results would need to be made available in a timely and accessible manner.

Alexis knew that there were many individuals who had differing views concerning the potential appearance and operation of the resulting system; nevertheless, she felt confident that no one would disagree with the eventual benefits of the system. The ultimate business purposes of the system would have to be: (1) to effectively and efficiently track and maintain all course-level learning objectives for the college in a centralized data store to support the needed five-year curriculum review process, (2) to track either individual assessment data or summarized assessment data results, and (3) to provide a base of data that would assist in meeting the majority of on-going curriculum and/or assessment reporting needs.

While everyone would likely agree on the primary benefit of the system, the "how" to accomplish these, and the "what" to actually capture and store, would be more difficult to obtain agreement on. The usefulness of data, the validity of data, the question of whether private information (like student IDs) would be stored in the database, and so forth, were all issues that would eventually need to be addressed. She knew that she would be relying heavily on Mike and Kevin to complete a very thorough and comprehensive analysis of the information requirements, and she anxiously awaited their report.

Project Documentation

By the end of the fall semester of 2003, Mike and Kevin had made progress in their new analysis of the system and expanded it based on Alexis' concerns. They had documented the main processes and developed a preliminary design of the database that would collect and maintain the necessary data. They also had developed a Context-Level DFD (Data Flow Diagram) in order to help define the project scope, to manage faculty expectations, and to communicate requirements to both Alexis and the CAC (Appendix 2). The Context-Level DFD dramatically illustrated the large number of entities that would either provide input to or receive data from the system. The complexity of the system was apparent even at this beginning level. Even Alexis was surprised to see just how large the environment of the system was.

The large number of interactions and approval stages required by the CCG approval and maintenance process was finally documented (with the exception of the Faculty Senate, Provost, and/or Regents approvals) (Appendix 3). This further confirmed Alexis' understanding of the complexity of the system. While she was overwhelmed by the large number of approvals required, she understood that these were justified by the importance of maintaining and continuously reviewing the curriculum.

But even this documentation of the process was insufficient in identifying all of the inherent issues. First, after a CCG had been approved by the UCC, its status was never well-tracked. If a CCG moved to the UCC, then was returned to the CBA for editing, it was not easy to determine where in the process the CCG was, and whether suggested changes had actually been made. In some cases where there had been several editing cycles between the UCC and CBA, there had been instances where the final version of the document was not what was eventually published in the University Catalog. Tracking versions had always been a totally manual process, which invited errors. Mike and Kevin hoped that, eventually, a CCG version tracking module could be designed and implemented as a part of the new system. However, until the UCC established a standard format for all CCGs and moved toward an automated, rather than paper-based, submission process, such a tracking module seemed to be an unlikely enhancement in the near future. At a minimum, Mike and Kevin felt it might be postponed until a second version of the system.

Finally, with a preliminary design of the database completed (Appendix 4), the project designers had to establish new business processes for the entry and maintenance of system data. While they could identify processes, they were unsure as to whether the individual faculty members would actually complete them. How would faculty feel about having another job responsibility? While Mike and Kevin knew there were some who would readily accept and utilize the system as it was intended, if even one course was not kept up to date or assessment results not entered, the data validity and reliability would be at risk. Mike and Kevin considered suggesting to Alexis that once the system was developed, some individual in the College should be assigned the responsibility of all data entry and maintenance, so that faculty would not have to be involved in the initial user acceptance testing and so that the system could be implemented more quickly. Then, once the system was stable, data entry and maintenance functions could be decentralized on a department-by-department basis, gaining support and momentum along the way. To help Alexis understand the type of entry that might be required in the new system, they provided a sample of data that the primary database tables might contain (Appendix 5).

When the beginning of the Spring 2004 semester approached, Mike and Kevin provided Alexis with a status report. They told her that they felt confident they would have all of the remaining system designs completed and documented, including all input screens and the base set of reports, before the end of January. They would also make recommendations, based on input from the CAC and the Associate Dean, about the implementation approach that should be pursued. In addition, they would complete a brief analysis of what different development tools might be utilized. They both believed that the final database would be developed in Oracle®, but this might require housing the data on a university server rather than relying on a college server; the advantages and disadvantages of this option would have to be evaluated. In any case, at the end of January, the system had to be ready to move into the development phase.

CURRENT CHALLENGES/PROBLEMS FACING THE ORGANIZATION

Alexis reviewed the status report Mike and Kevin had prepared and realized she had only two months remaining to identify the development resources that would be necessary. She had a number of options to consider. However, at the moment, she wasn't sure which would be the most cost effective, efficient, or attainable. She knew she would need to carefully consider all practical design and development strategies currently available given the unique issues and current business environment of the CBA. As she began to carefully identify and categorize the most significant challenges currently facing the project, she identified two main groups of issues; organizational/environmental issues and IT management issues.

Organizational/Environmental Issues

The CBA, like other higher education institutions, was experiencing a paradigm shift from a teacher-centered "instruction paradigm" to a student-centered "learning paradigm" (Barr and Tagg, 1995). This new paradigm created opportunities that could contribute to continuous improvement in educational quality, and could help students develop learning skills and facilitate them in becoming "self-growers" (i.e., people who take ownership of and responsibility for their own educational growth) (Apple and Duncan-Hewitt, 1995). It would also entail the need for changes in the management and control of the curriculum and course design for the CBA.

This shift was the reason for increased interest in the assessment of learning outcomes as part of the Assurance of Learning process. Alexis and the CAC realized that this process was a dynamic process that would need continuous refinement and enhancement in both the curriculum and the assessment portions of the process. One of the challenges in adapting to the shift was the need to have faculty develop a consensus on the learning goals for each CBA degree. Faculty members in each of the different disciplines would then have to develop a consensus on learning goals for their programs, consistent with their degree goals. These revisions would have to be done before the course-level outcomes and the assessment measures could be developed. Designing and implementing the SLOAS would also be a dynamic process that would need continuous refinement and enhancement. However, if this system was well designed, it was likely to help formalize and simplify the entire process.

IT Management Issues

Because she was still relatively new in the CBA, Alexis was very nervous about the IT management challenges she was facing. As she was reviewing her notes, she noticed three main groupings of issues: Project Management, IT Resources, and IT Implementation.

Project Management

The Context-Level DFD clearly emphasized the large number of entities that would either provide input to or receive data from the system. Alexis quickly recognized how large the environment of the system was and how complicated the system would be. There were several management problems she had to face. Being able to plan and manage the progress of the project would be the key to its success. If the project was completed late, the college might not obtain reaccreditation. However, given the faculty members' desires of owning this process themselves, and with no one individual having the authority to freeze the design or approve the move into the development phase, any project schedule Alexis developed would be meaningless. She realized that the project would have to either be divided into several subprojects, or different versions would have to be developed in phases, with major functionality required for reaccreditation being in the first release.

Another concern Alexis faced was that since no dedicated IT development function currently existed in the college, there were no standard development tools that could be identified. Based on the requirements of the analysis, the SLOAS needed to have a client/server model for the database which would be scalable to allow for the growth and continuous design changes; have a user-friendly, Web-enabled user interface; and have the capability of being able to keep the historical data for future long-term evaluation and comparison. Regardless of whether the development would be carried on inhouse or use outside resources, the CBA had to be able to identify its preferred standard for development tools.

Additionally, she knew a thorough investigation of available packaged software would need to be initiated as soon as the requirements from Mike and Kevin's prototype had been documented. Though the CBA might incur higher initial costs if an off-the-shelf software package was identified, the longer-term savings and perhaps a reduction of development time were potential benefits that could not be overlooked.

IT Resources

Resources at both the state and university level were tightly constrained, and budgets were being cut. Like IT project managers in many other non-profit organizations, Alexis faced the difficulty of finding the financial and human resources needed for developing, implementing, and maintaining this system.

Alexis also began to realize that she would not be able to use any existing IT staff for her project because of their lack of development expertise and because they were already overextended in their operational support. She also learned that the university IT staff, and potentially the system-wide IT staff, had the capabilities she would require; however, the project could not be completed in time for the AACSB review if she relied on these resources, since system development for academic units was not a priority in their jobs.

CIS faculty, primarily Mike and Kevin, could be involved in the development and maintenance of the system, but their use would not be cost free. Their inclusion might require obtaining course releases for them since their job descriptions focus on teaching, research, and service. They were each on nine-month contracts; therefore extending their contracts over the summer would require additional funding. Their only commitment would be as a service activity through committee assignments. As a result, their participation on this project would be sporadic, especially throughout the summer months, so maintaining momentum on the project would be difficult.

However, Alexis did not want to forget about the prototype that Mike and Kevin had already developed. The prototype was being used to collect and summarize survey data. Though the original intentions had been for the prototype to be a "throwaway," she was beginning to wonder if could become more of an "evolutionary" prototype.

IT Implementation

One of Alexis' major concerns with the design and development of this system was the integration of the data with the larger, university-wide curriculum and enrollment systems already in existence. It was possible for SLOAS to source or download course and enrollment data from the campus-wide system; therefore, the data collected from and processed by the SLOAS would also need to be integrated into the campus-wide system for university-level learning outcome assessment purposes. However, integration raised other issues such as the inconsistencies between definitions of objectives and outcomes at the different levels. Alexis discovered that the university was accredited by one board while the college was accredited by another, and the data needed by each did not easily map from one onto the other. No student outcome system similar to SLOAS existed elsewhere in the university.

Another integration issue was that UCC had no standard CCG document format. This and other similar issues needed to be coordinated between the CBA, Alexis and outside parties such as other colleges, the system-wide IT group, and the UCC. An articulated policy that established the required standards for both business processes and data formats was essential for development of this system. Being the leaders in the development of this system would provide the CBA and Alexis the opportunity to play the leading role in implementing a larger, highly visible, university-wide system, though it would also provide them with many other significant challenges.

As Alexis reviewed and contemplated these issues, she wondered what the best development strategy would be. She knew she would need to be creative and resourceful if this project was to be a success.

Subject: Educational evaluation; Case studies; Data collection; Colleges & universities

Classification: 8306: Schools and educational services; 9110: Company specific; 5240: Software & systems

Publication title: Journal of Cases on Information Technology

Volume: 7

Issue: 3

Pages: 37-56

Number of pages: 20

Publication year: 2005

Publication date: Jul-Sep 2005

Year: 2005

Publisher: IGI Global

Place of publication: Hershey

Country of publication: United States

Publication subject: Business And Economics--Computer Applications

ISSN: 15487717

Source type: Reports

Language of publication: English

Document type: Business Case

Document feature: references charts tables

ProQuest document ID: 198671218

Document URL: http://search.proquest.com/docview/198671218?accountid=38610

Copyright: Copyright Idea Group Inc. Jul-Sep 2005

Last updated: 2011-07-21

Database: ABI/INFORM Complete

Document 44 of 100

The Columbia Disaster: Culture, Communication & Change

Author: Guthrie, Ruth; Shayo, Conrad

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Abstract:

The National Aeronautics and Space Administration (NASA) is a government organization, founded to explore space to better understand our own planet and the universe around us. Over NASA's history, there have been unprecedented successes: Apollo missions that put people into space and walking on the moon, the remarkable findings of the Hubble space telescope and the Space Shuttle Program, allowing astronauts to perform scientific experiments in orbit from a reusable space vehicle. NASA continues to be a source of national wonder and pride for the United States and the world. However, NASA has failures too. In February of 2002, the Space Shuttle Columbia disintegrated as it returned to Earth. This event occurred 16 years after the Space Shuttle Challenger exploded during take-off. As information was collected, investigators found that many of the problems uncovered during the Challenger investigation were also factors for Columbia. Underlying both disasters was the problem of relaying complex engineering information to management, in an environment driven by schedule and budget pressure. Once again, NASA is looking at ways to better manage space programs in an environment of limited resources. [PUBLICATION ABSTRACT]

Full text:

ORGANIZATIONAL BACKGROUND

NASA was founded in 1958 to explore space. A year earlier, the Soviet Union beat the United States into space by launching Sputnik, the first satellite. In the United States, this was seen as an embarrassment, and the need for a space program was pressing. Only a few short months after the formation of NASA, the first American space missions were launched. In 1969, NASA's Apollo 11 mission put the first humans on the moon surface. NASA's space program has changed the way mankind views the Earth and helped bring about many important scientific findings that have resulted in numerous "spin-offs" in science, technology and commerce. After many other successful manned space flights, the Space Shuttle Program was initiated. The goal was to develop a reusable vehicle for frequent access to and from space. After nine years, the first shuttle, Columbia, was launched from Kennedy Space Center in 1981. Columbia was a remarkable success, though the promise of frequent access to space has never been realized. (Columbia flew 24 missions, the most of any shuttle in the fleet.) Today, NASA is renown for its discoveries and explorations in space - both manned and unmanned. NASA is truly a unique governmental agency with the lofty mission shown in Figure 1.

In 1986, the world was shocked and saddened as the Challenger exploded during takeoff. Seven astronauts were dead along with the first civilian to ride the shuttle, Christy McAuliffe, an elementary school teacher. The Rogers Commission, formed by an executive order from President Reagan, found that design flaws contributed to the Challenger's explosion. During the investigation, it was revealed that NASA engineers and management knew about the problems with the O-rings and failed to act on the information that was available. The report was also critical of safety procedures and Space Shuttle Program management.

Sixteen years later, on February 1, 2003, the space shuttle Columbia disappeared. In the control room, contact was lost with the Columbia at 9:00 a.m. Minutes later, the Houston mission control room was locked down, as the team of ground support realized a disaster was occurring. By 2:05, President Bush addressed the public, "Columbia's lost; there are no survivors."

The Columbia had disintegrated when it reentered the Earth's atmosphere. Seven astronauts were dead, including the first Israeli astronaut and an Indian astronaut, who immigrated to the United States. The sadness of the national disaster deepened as pieces of the Columbia shuttle began to turn up in Texas and Louisiana.

A NASA internal investigation was conducted. In the wake of 9/11, theories of a terrorist attack surfaced and were quickly dispelled. The theory that a piece of foam may have damaged the wing was proposed. It was quickly dismissed too, as not being possible for the foam to cause such a catastrophic failure. As the pieces of Columbia were collected and the shuttle was reassembled, it was determined that a large piece of insulation foam broke off during launch, and hit Columbia's left wing at a velocity of 500 mph. On reentry, the heat was too great for the damaged shuttle, causing it to disintegrate. Disturbingly, the foam was discussed at NASA internal mission meetings, but only in passing.

An external review board of 10 people, led by Retired Admiral Hal Gehman, was appointed to investigate what happened at NASA that could have prevented the Columbia tragedy. In August of 2003, after conducting over 230 interviews with NASA personnel, from mechanics to astronauts, a 243-page report summarized the findings. Excerpts from the Columbia Accident Investigation Board (CAIB) report are highly critical of NASA management and the culture of the agency:

"Based on NASA's history of ignoring external recommendations, or making improvements that atrophy with time, the Board has no confidence that the space shuttle can be safely operated for more than a few years based solely on renewed post-accident vigilance. "

"Unless NASA takes strong action to change its management culture to enhance safety margins in shuttle operations, we have no confidence that other 'corrective actions' will improve the safety of shuttle operations. The changes we recommend will be difficult to accomplish - and they will be internally resisted. " (CAIB Report, Vol. 1, p. 13)

Changes that NASA has made include the removal of more than 12 people from upper management into different positions. At the onset of the disaster, several critics of NASA wanted to hold someone accountable for the management mistakes that led up to the disaster, including Sean O'Keefe, NASA's president. NASA now has the task of reviewing and deciding what to do with the external investigation report.

SETTING THE STAGE

The engineering for the Space Shuttle Program began development in the 1970s. The purpose was to develop a cheaper way to access space. Previously, any launch vehicle was destroyed when it entered the Earth's atmosphere. American astronauts would parachute into the ocean in a heat-protected capsule. The military would seek and meet the capsule in the ocean and recover the astronauts. (The Russian astronauts parachuted onto ground, a harder landing.) Rockets, life support, communication and other subsystems were lost when the mission concluded. Having a launch vehicle that flew from space to Earth had the potential to save money because these subsystems were reusable.

The space shuttle has three main components: the orbiter, the external fuel tanks and the rocket boosters. The orbiter is the main reusable component, carrying the astronauts and any payload and all the necessary support subsystems. The fuel tanks supply power to the orbiter's thrusters. The rocket boosters give the shuttle enough power to escape the earth's gravitational pull. Once the shuttle is near orbit, the rockets are discarded and fall to earth. The rockets are recovered for use in future shuttle missions. The external fuel tanks are also detached from the orbiter in space, but are not recovered. Over its history, the shuttle program has had several milestones (see Appendix A-1) including the first woman in space (Sally Ride who also participated in both Challenger and Columbia investigations), docking with the Russian Mir Space Station and the return to space of astronaut, now Senator John Glenn.

In 1986, after the Challenger exploded, an investigation of the disaster by the Rogers Commission identified technical deficiencies that led to the explosion - the O-rings between portions of the right solid rocket motor failed. Surprisingly, engineers were aware of the potential problem O-rings, though the decision to launch was still made.

There were systems used to track anomalies. However, as stated in the Roger's Report:

"NASA's system for tracking anomalies for Flight Readiness Reviews failed in that, despite a history of persistent O-ring erosion and blow-by, flight was still permitted. It failed again in the strange sequence of six consecutive launch constraint waivers prior to 51-L, permitting it to fly without any record of a waiver, or even of an explicit constraint. Tracking and continuing only anomalies that are Outside the data base' of prior flight allowed major problems to be removed from and lost by the reporting system. " (Roger's Commission, p. 148)

The Rogers Commission also found several organizational problems that led to the decision to launch Challenger under dangerous conditions.

A tremendous amount of planning takes place prior to a shuttle launch. In addition to planning the payload and planning for the scientific mission, several other activities take place. A delay in launching a shuttle disrupts the schedule for all the missions that follow. There are many stakeholders, including astronauts, NASA engineers and administrators, as well as engineers and managers form subcontracting organizations. During the Rogers Commission investigation, the structure of the organization was reported to be complex and non-inclusive of engineering and subcontractor viewpoints. An example of this is that Rockwell Inc. and Thiokol expressed reservations at the flight readiness meeting before the decision to launch. The report indicates in several instances that Marshall Space Center management pressured and influenced subcontractors to approve the launch decision, even though their support for launch was ambiguous at best.

The major findings of the Rogers Commission, with excerpts from their final report, were:

Recommendations made by the Rogers Commission were both technical and managerial. The technical recommendations included: (a) redesigning the rocket boosters, (b) upgrading the shuttle tires and breaks, and (c) retrofitting the shuttles to include escape systems.

Some of the managerial recommendations were:

* Create a strict risk-reduction program.

* Reorganize (decentralize) so that information is made available to all levels of management. Astronauts should be placed in NASA management positions so that their viewpoints are represented.

* All waivers to flight safety should be revoked and forbidden. All contractors need to agree to launch.

* Technical issues should be reviewed by independent government agencies, which report their analysis to NASA.

* The NASA Associate Administrator for Space Flight and the NASA Associate Administrator for Safety sponsor open reviews, encouraging NASA and contractor management, engineering and safety personnel to discuss concerns.

* Allowance be made for anonymous reporting of shuttle safety concerns.

In response, NASA implemented the recommendations of the Rogers Commission and adopted a more realistic launch schedule. However, over time, it is difficult to assess what changes were fully adopted.

Culture in Government Agencies

Throughout the discussions of NASA management, the topic of organizational culture is prevalent. "Every organization has a culture, that is, a persistent, patterned way of thinking about the central tasks of human relationships within an organization. Culture is to an organization what personality is to an individual. Like human culture generally, it is passed on from one generation to the next. It changes slowly if at all" (Wilson, 1989). Adoption of information systems or changes to processes created by introduction of information systems are frequently doomed because the organization's culture is unwilling to accept change.

NASA was formed to re-establish US dominance in space and science. Drawing from existing organizations and top research scientists, NASA became a high-performance organization (McCurd, 1993). In an amazingly short period of time, NASA was able to achieve the Apollo missions and become a source of national pride and prestige. The culture at the time, described by Vaughan (1996), was that of engineering. The very word 'engineer' implies that something is being created and tested in order that it be engineered again and improved. NASA's early culture of scientists and engineers relied on testing, research and rigorous methodology to find out what worked in achieving manned space flight. The culture believe strongly that an in-house technical ability was necessary, that people hired by NASA were the best and brightest in the world, and that risk and failure were part of doing business. Failure was tolerated because the view was that you cannot achieve success without innovation and experimentation. McCurd points out that high-performance cultures tend to be unstable and short lived.

As the organization grew, and the amount of work increased, the culture underwent a significant change, becoming more bureaucratic. Instead of keeping all work 'in-house', NASA began to use outside contractors to do research and development. The culture became more averse towards failure and innovation. Employees began to feel that their failures would not be tolerated. This was reflected in a NASA culture survey in 1988 (McCurdy, 1993) that showed employees were dissatisfied with the work going to outside contractors and were finding it difficult to get things done in a large bureaucracy. They felt that a loss of technical knowledge was occurring and that failure was no longer tolerated.

Information Systems Development for Government Agencies

In 1986, information systems used in organizational decision making were very different from the Web based, graphical systems we have today. Systems ran on a mainframe computer and were accessible to users through command-driven or primitive, menu-driven interfaces. Information systems were slow, not user-friendly and required training to learn how to operate. Commercial, mass-produced software (Commercial Off The Shelf (COTS)) was very minimal. If an agency like NASA wanted programs developed for them, it was customized software that was expensive and time consuming to create.

Today, software development methodologies offer prototyping and iterative design so that users can identify problems in the system before they are developed. In 1986, government agencies followed a strict software methodology (DoD-STD-2167A, 1995; see Appendix A-2) that defined all the software requirements at the beginning of the life cycle and then delivered a system, often years later, based upon written requirements, difficult for the user to visualize. Governmental systems development contracts were notorious for being overrun, late and not meeting the needs of the users. Further, systems developed for agencies like NASA might be high risk and require high reliability. To achieve high reliability and fault tolerance is very expensive. Today's methodologies using rapid application development, prototyping and iterative design make it cheaper to produce these systems. However, they are still expensive because of the effort involved in ensuring reliability.

CASE DESCRIPTION

Columbia's Final Mission

Columbia's final mission, STS-107, was to perform experiments related to physical, life and space sciences. The seven astronauts conducted more than 80 experiments while in orbit. This mission was an extended orbit, lasting 16 days. The crew was noted in the media because it had the first Israeli astronaut, Payload Specialist Ilan Ramon, quickly hailed as a national hero of Israel. See Appendix A-3 for a listing of Columbia's crew and the STS-107 Mission. The mission goals are available in Appendix A-4.

When Columbia launched on January 16, 2003, cameras caught images of insulation foam breaking loose from the fuel tank. Columbia entered its orbit over Earth without incident and conducted its 16-day mission. On February 1, 2003, while returning to Earth, Columbia lost communication with Johnson Space Center. After realizing that a disaster has occurred, Flight Director Leroy Cain order the communication center locked down and the contingency plan order is implemented.

As the news reports begin, people from Texas to California report seeing the shuttle break up as it entered the atmosphere. Minimal talk of rescue fades as President Bush addresses the nation, "The Columbia's lost. There are no survivors." People begin finding debris from the shuttle in Texas and Louisiana. NASA issues a warning that the debris might be hazardous and that people should report any finding to NASA, and not touch the debris. NASA's top administrator, Sean O'Keefe, vows to investigate what went wrong. The Columbia Accident Review Board (CAIB) is formed, chaired by retired Navy Admiral Harold Gehman, Jr. Members of the review board are listed in Appendix A-5.

The possibility of a terrorist strike is offered and quickly rejected by NASA. As more is discovered about the Columbia disaster, the foam debris that broke loose on take-off is mentioned. However, Shuttle Program Manager Ron Dittemore says this is highly unlikely. A few days later, he retracts these statements.

As the CAIB investigates, some surprising information about the NASA and the shuttle program comes to light.

* NASA had known about the foam debris-shedding problem for some time. However, since it had never caused a problem before, it became routinely ignored.

* NASA had the opportunity to obtain images of Columbia in orbit on the day of the disaster, but declined, feeling that this was unnecessary.

* Budget restrictions led to demoralizing attitudes on the shuttle safety program. For example, NASA inspectors were required by management to supply their own tools and were restricted from making spot checks.

* Lower level shuttle personnel felt that they could not raise issues of quality and safety without risk of being fired.

With this in mind, the CAIB conducted more than 230 interviews of shuttle personnel at every level. In their final report, they begin their analysis of organizational culture by revisiting the history of NASA and the Challenger disaster 16 years earlier. The shuttle program organizational chart is listed in the Appendix A-6.

The CAIB final report identifies three problem areas: physical flaws in design that led to the disaster, weaknesses in NASA's organization and other significant observations. The report indicates that technical explanations were not enough to explain the Columbia disaster and is critical of NASA management:

"In our view, the NASA organizational culture had as much to do with this accident as the foam. Organizational culture refers to the basic values, norms, beliefs, and practices that characterize the functioning of an institution. At the most basic level, organizational culture defines the assumptions that employees make as they carry out their work. It is a powerful force that can persist through reorganizations and the change of key personnel. It can be a positive or a negative force." (CAIB Final Report, Part II, p. 1)

A Matter of National Pride

When Sputnik, the first satellite in space, was launched by the Soviet Union in 1957, Americans were stunned. Their Soviet rivals had beaten them into space. NASA was formed a year later and in 1961 rallied the American people to be the first to the moon. This was an unimaginable, engineering feat, and in 1969 NASA succeeded when Neil Armstrong became the first person to walk on the moon. NASA's culture was defined through the spirit of exploration and achievement of the impossible. Those who witnessed the 1969 space walk clearly remember where they were and the awe inspired by the greatness of science and engineering achievement. Today, the shuttle program has made space flight seem common. Children do not remember a time when this was only a dream. Over time, the emphasis for space exploration has gone from achievement of the impossible to cost savings and streamlined operations. Figure 2 shows the NASA budget as a percentage of federal funding. A dramatic decline is evident in the early '70s. Figure 3 shows the relatively flat spending over recent years on the shuttle and international space station programs. The CAIB contends that the NASA culture clashes with the shuttle philosophy of cheaper, frequent access to space. The Board goes further to state that the Rogers Commission recommendations made after the Challenger disaster were never fully realized.

DELICATE BALANCE OF RISK, BUDGET & SCHEDULE IN SPACE EXPLORATION

Only three years after the Challenger disaster, NASA was viewed as being overly cautious and expensive in adhering to the Rogers Commission. NASA cut the budget on the shuttle program by 21% over a three year period (1991-1994). Interestingly, the White House formed a blue-ribbon committee in 1990 to investigate NASA spending. The recommendations of the Augustine Committee were that NASA was overwhelmingly under-funded and needed a budget increase of 10%, per year.

During this time, The White House appointed Daniel S. Goldin, a former aerospace industry executive, as director of NASA. Viewed as a change agent, his goal was "faster, better, cheaper," with the hopes that streamlining efforts in NASA would result in an eventual manned mission to Mars. Goldin made dramatic changes to NASA, following a Deming-like management philosophy, seeking a less bureaucratic, more empowered worker approach to NASA.

Goldin's greatest contribution to NASA was possibly the creation of the International Space Station. Sean O'Keefe replaced Goldin in 2001. At this time, the current debate was over privatization of NASA. The rationale was that privatizing portions of the shuttle program could save money and might facilitate more commercial uses of the shuttle. Parallel to this push was the effort to complete Node 2 of the International Space Station. The scheduled date, viewed widely as unrealistic, for deploying Node 2 of the International Space Station in February 2004 was programmed into a screen saver countdown and sent to all shuttle program managers.

The CAIB made several recommendations, including a redesign of the thermal tank protection subsystem to eliminate debris shedding and several other technical enhancements. They also expressed the need for obtaining better images of the shuttle, on-board and from external sources. The need to perform emergency repairs of the shuttle from space was identified, along with the need to return to the industry standard for foreign object debris, which had been waived for the shuttle.

The managerial recommendations were:

* Ease scheduling pressure to be consistent with resources.

* Expand Mission Management Team crew and vehicle safety contingencies.

* Establish independent Technical Engineering Authority that oversees technical standards, risk, waivers, and verifies launch readiness.

* Reorganize the Space Shuttle Integration Office so integration of all elements of the program is possible.

Chapter 7 of the CAIB is dedicated to the organizational causes of the Columbia disaster. Normal Accident theory was used to describe the culture of NAS A. Namely, in a complex, noisy organization, management actions can increase noise levels to a point where communication is ineffective. High Reliability Theory contends that organizations are closed systems where management is characterized by an emphasis on safety, redundant systems are seen as necessary, not costly and the organizational culture is reliability driven. The problems highlighted in the report were:

* A lack of commitment to a culture of safety: "... reactive, complacent and dominated by unjustified optimism."

* Lack of adequate communication: Specifically, managers in charge were resistant to new information indicating what they did not want to hear. Additionally, the databases in place to support decision and data dissemination processes were difficult to use.

* Oversimplification: Foam strikes had occurred over 22 years and were viewed as a maintenance issue, not a safety problem.

Similarities between the organizational culture of the Challenger and Columbia disasters are striking.

PROBLEMS WITH INFORMATION TECHNOLOGY

As with the Challenger disaster, Columbia also had communication problems related to information technology. During the Challenger disaster, it became apparent that several memos were written indicating the O-ring problem was seen by Thiokol and NASA engineers as being dangerous. The technical detail in the memos was considered difficult to understand and focused on technical detail over risk. Safety systems in place during the Challenger disaster were lax, allowing for waivers, and failing to track waivers and anomalies across flights. Several analyses of the Columbia disaster point to communication through PowerPoint and difficult-to-use databases as contributors to the problems with the shuttle safety program.

PowerPoint

Given the technical nature of the Columbia disaster and all the complexity, technical and cultural, related to the launch decisions, reports from the CAIB related to PowerPoint presentations were quite remarkable:

"As information gets passed up an organizational hierarchy, from people who do analysis to mid-level managers to high-level leadership, key explanations and supporting information is filtered out. In this context, it is easy to understand how a senior manager might read this PowerPoint slide and not realize that it addresses a life-threatening situation. "

"At many points during its investigation, the board was surprised to receive similar presentation slides from NASA officials in place of technical reports. The Board views the endemic use of PowerPoint briefing slides instead of technical papers as an illustration of the problematic methods of technical communication at NASA." (CAIB report, Vol. 1, p. 191)

It seems that overuse of PowerPoint briefings, in place of detailed analysis, made it difficult for meeting attendees to identify what the launch risks were for Columbia.

Edward Tufte, a highly prominent Yale professor and an expert in the visual display of data, gave a sample slide in the New York Times (Schwartz, 2003), showing how misleading and vague it was in conveying the risk of the foam strike. In his short book, The Cognitive Style of Power Point (Tufte, 2003) criticizing Power Point and its use in organizations, Tufte gives examples of the communication failures of NASA's presentation. For example, a slide title states, "Review of Test Data Indicates Conservatism for the tile Penetration." This could be construed to indicate no risk for foam tiles. However, the title applied to conservatism about the choice of models used for prediction. Only at the bottom of the slide, in a lower level bullet, is the important information related to the audience. Namely, "Flight condition is significantly outside the test database." Tufte goes further to say that the low resolution of the slide (presumably to condense information) and the use of condensed, non-specific phrasing adds to the ambiguity of the communication.

Note: In Visual Explanations (1997), Tufte did an analysis of the Challenger disaster, showing 13 view graphs prepared for management and faxed to NASA. The critique stated the charts were unconvincing and non-explicit in stating the impact of temperature on O-rings.

Information Systems Used to Support Safety

The CAIB findings indicated critical problems with the information systems used to support shuttle safety:

"The information systems supporting the shuttle - intended to be tools for decision making are extremely cumbersome and difficult to use at any level. While tools were in place to support safety decision making, the design and use was difficult, causing them to fall into disuse."

In 1981, the PC was invented. The operating system, Disk Operating System (DOS), was command line driven and difficult to use. Windows 1.0 was released in 1985, but was viewed as slow and still difficult to use. In 1990, Windows 3.0 was released and graphical user interfaces (GUIs) gained massive popularity. GUIs were easy to use because the user did not have to remember any command names or sequences to operate the computer. The desktop analogy interface was intuitive to experiences users already had. Home use of PCs was rapidly rising. Consequently, customized, expensive systems developed for governmental agencies seemed archaic. A GUI design for safety that was easier to use and interpret, and that did not allow users to bypass safety features, may have led to a more informed decision.

* Another system existed that was easier to use, but not required. "The Lessons Learned Information System database is a much simpler system to use, and it can assist with hazard identification and risk assessment. However, personnel familiar with the Lessons Learned Information System indicate that design engineers and mission assurance personnel use it only on an ad hoc basis, thereby limiting its utility."

Given a simple system was available, it was surprising that it was not organizational policy to use it. User training may be an issue here as well.

* The simulation tool called Crater (mentioned in the slide in the above section) was inadequate to analyze foam impact data.

* The CAIB also indicated that the decentralized manner with which the shuttle program operated could hide unsafe conditions, whereas a centralized way to handle safety issues would foster better communication and insight.

CURRENT CHALLENGES/PROBLEMS FACING THE ORGANIZATION

Can NASA Change?

Soon after the CAIB report was submitted, Brigadier General (and CAIB member) Duane Deal submitted a supplement to the CAIB report. Duane felt strongly that enough hadn't been said about preventing "The Next Accident." The language of the CAIB report was not strong enough in specific areas in its criticism of NASA management for letting schedules and budgets take precedence over safety. Brigadier Deal expressed strong reservations about NASA's ability to change:

"History shows that NASA often ignores strong recommendations; without a culture change, it is overly optimistic to believe NASA will tackle something relegated to an 'observation' when it has a record of ignoring recommendations."

Can NASA's Culture Be Transformed?

In the wake of the Columbia disaster, 12 top-level shuttle administrators and program managers were reassigned to different positions within NASA. In May of 2003, Former-Marine William Parsons replaced Dittemore. Previously, Parsons was the director of the Stennis Space Center and is viewed as a NASA insider with strong leadership skills. Over a transition period, Parsons continues to learn more about the shuttle program from the retiring Ron Dittemore.

Now he has the daunting task of changing NASA's culture. His first major assignment is to ensure that personnel at all levels feel comfortable voicing concerns about shuttle safety. In a recent quote to the Associated Press, Parsons claims, "None of this is too touchy-feely for me." He even went so far as to hire a colleague whose assignment among others is to critique his interactions with subordinates to ensure he is not intimidating.

Even so, NASA veterans are reluctant to adopt a more humanistic style of management. Will changes at the top level by Parsons be enough to successfully change NASA's culture?

Information Technology

In this case, what is missing, is quite informative. Information technology offers advantages of being distributed or centralized, accessible, user friendly and can track anomalies, extending human abilities to see trends that they might otherwise miss. Failing to use a tool that can help you is akin to burying one's head in the sand. Yet, we see it every day when users press the NEXT button or the OK button without reading the alert message on their personal computers. Designers have set up clever ways for technology to help us, but it seems like human nature to ignore that help. Ironically, many military systems are designed specifically with a 'man-in-the-loop' to avoid catastrophic errors. After the Challenger disaster, the structure of the shuttle program was changed so that astronauts were managers and present at decision-making meetings. A proper safety system that did not allow people, in-the-loop, to bypass anomalies would have served the Columbia shuttle better.

PowerPoint is part of business culture. At NASA, as with many organizations, PowerPoint presentations are interwoven with the structure and communication processes that support decision making. It is often said that "the devil is in the details." PowerPoint is not a tool that is made to support a great deal of detail. Detailed information on a slide becomes an eye-chart, impossible to read. Lengthy reports with a lot of detail can unintentionally hide information by failing to display it in a way that catches the readers attention and overloading them with massive amounts of detail. Is reliance on Power Point to communicate ideas making NASA incapable of distinguishing key factors for decision making?

NASA's Changing Goals

In January 2004, US President George Bush addressed the public, outlining the new plan for Space Exploration. In his speech, he gave three goals:

1. Complete the International Space Station. This will be the primary mission of the Space Shuttle. The Space Shuttle will be retired in 2010.

2. Develop and test a new spacecraft by 2008. This will be the replacement for the shuttle and it will operate to transfer astronauts to and from the space station. The spacecraft will also carry astronauts beyond the earth's orbit to 'other worlds.'

3. Return to the moon by 2020. Explore the moon robotically by no later than 2008.

President Bush also spoke about NASA's current $86 billion budget, vowing to reallocate $11 billion within the budget and to increase NASA's budget by $1 billion over the next five years.

Bush also expressed his support and confidence that Sean O'Keefe could usher NASA into a new age of space exploration. In light of the small increases in funding, one NASA watcher, Douglas Osheroff, a member of the CAIB and a Stanford University physics professor in an interview with the Seattle Times was skeptical about Bush's support for the future of the space program:

"If you give them a goal and you don't give them resources, I think the situation will get worse."

The question remains: How will O'Keefe find the resources to meet Bush's goals and assure NASA is an organization with a culture of safety?

Mars Rovers

In early 2004, NASA's Jet Propulsion Lab (JPL) in Pasadena, California, successfully landed two ruggedized rovers on Mars. The rovers, Spirit and Opportunity, are sending remarkable images of the Martian surface to Earth.

A poignant memorial, a plaque with the names of the seven, lost Columbia astronauts has been placed at Spirit's landing site. The site has been named the Columbia Memorial Station. Opportunity's landing site will be named for Challenger's final crew.

Subject: Aircraft accidents & safety; Space shuttle; Case studies; Failure analysis

Location: United States, US

Company / organization: Name: National Aeronautics & Space Administration; NAICS: 927110; DUNS: 00-325-9074; Name: NASA; NAICS: 927110; DUNS: 00-325-9074

Classification: 8350: Transportation & travel industry; 5340: Safety management; 9190: United States; 9110: Company specific

Publication title: Journal of Cases on Information Technology

Volume: 7

Issue: 3

Pages: 57-76

Number of pages: 20

Publication year: 2005

Publication date: Jul-Sep 2005

Year: 2005

Publisher: IGI Global

Place of publication: Hershey

Country of publication: United States

Publication subject: Business And Economics--Computer Applications

ISSN: 15487717

Source type: Reports

Language of publication: English

Document type: Business Case

Document feature: tables graphs references charts

ProQuest document ID: 198671407

Document URL: http://search.proquest.com/docview/198671407?accountid=38610

Copyright: Copyright Idea Group Inc. Jul-Sep 2005

Last updated: 2011-07-21

Database: ABI/INFORM Complete

Document 45 of 100

LIBNET: A Case Study in Information Ownership & Tariff Incentives in a Collaborative Library Database

Author: Hooper, A S C

ProQuest document link

Abstract:

In any cooperative database the participants contribute their data for their own as well as the benefit of the other members, usually with incentives from the database administrators. A South African library network company (LIBNET) provided a networked service to participating libraries. Member benefits included conversion of their catalogues into machine-readable form, significantly reduced costs through cooperative cataloguing and more efficient interlibrary loans through a union catalogue of the holdings of the participant libraries. This case study explores some of the issues influencing tar iff determination in a cooperative database. Questions of data ownership and the provision of incentives for the uploading of data also raise legal and ethical issues. The case study provides a basis for exploring business strategy in collaborative database management. [PUBLICATION ABSTRACT]

Full text:

ORGANIZATIONAL BACKGROUND

The Public Good Character of Information

Information is usually considered to be a public good (Braunstein, 1981; Spence, 1974). Certainly, that which falls outside the already established category of intellectual property is a public good, a shared resource that is enriched rather than diminished by policies that increase rather than decrease everyone's access to it (Ebbinghouse, 2004).

A pure public good is one that has two major characteristics - nonrivalous consumption and nonexcludability (West, 2000). Nonrivalous consumption means that the good or service is not diminished or depleted when consumed. If information is shared between two people, it is not diminished thereby, and both can have full use and benefit of it. Nonexcludability means that consumption of the good or service cannot be denied to people who have not paid for it. It is an important factor in controlling the spread of information by vendors wishing to market it, especially in an online environment where it can easily be downloaded and further distributed, processed or reused.

Information may have different value to different people with whom it is shared. Some consumers may be prepared to pay significantly more for a specific piece of information than others. And, of course, the time it is delivered can be an important factor in determining the value of information for a particular consumer. The manner in which information is provided plays a significant role in determining its characteristics as a public good. Printed information in book or journal form has physical characteristics that enable it to be priced and marketed as an artifact irrespective of the informational value of the contents to different consumers.

The implications of this are that, because it is difficult for a vendor of information to be reimbursed for the development and provision of the goods or services, or to control subsequent distribution, there is a reduced incentive for investing in the creation of the good. So, while there may be a demand for the information, no seller will offer it. Sometimes, public good providers create modified or less-efficient markets to generate the revenue that pays for the public good. Advertising revenue can be used to pay for public TV, Internet portals, search engines and other information products (West, 2000).

Alliance Forming for Information Provision

Because of the nature of information as a public good, very often it has fallen to governments to provide the good or service, either independently or in association with other providers. This concept is central to that of the knowledge economy in which the public good characteristic of information is used by governments to grow the competitiveness of the national economy through the development of knowledge and social capital. "E-Government is the use of information technology to deliver public services in a much more convenient, customer oriented, cost-effective, and altogether different and better way" (Holmes, 2001, p. 2). Increasingly, the way that governments make their services available is through online service provision, and, as such, they have become major players in the online database industry. "Digitising government can create a particularly lucrative new market" (Fountain, 2001, p. 5). By 1998, the electronic information services industry in the United States had become a $33.5 billion per annum market with an annual growth rate of 7.5% (Communications Industry Forecast, 2000). With so much at stake, it is hardly surprising that governments seek to benefit from their investment, or to control the process of data-ownership and the way that information is distributed or shared (Ebbinghouse, 2004).

By forming strategic alliances, individual organizations can increase their individual power with government and gain credibility, legitimacy and visibility. Many experts have regarded strategic alliances as the foundation for inter-organizational collaboration in the public and private sector, to reach new markets and technologies, to share risks and to gain complementary competencies. "When the knowledge base that supports an industry is hard to comprehend, still emerging and distributed across several organizations, then collaboration among firms, universities and national laboratories will reflect a strong and fundamental interest in access to knowledge rather than simply strategic calculation, resource sharing or transaction cost reduction" (Fountain, 2001, p. 75). In 1977, governments or not-for-profit agencies produced 78% of all databases, but by 1997 this percentage had dropped to 20% (West, 2000, p. 64).

The use of computers for the development of databases and catalogues was appreciated early in the evolution of business computing. ease of sorting, ease of searching and the fast generation of reports found applications in many organizations dealing with large product lines or customer bases. The use of structured formats for electronic data interchange (EDI) facilitated the deconstruction of the original data and its use in different forms and for different purposes. Along with bankers, supermarkets, motor and aircraft manufacturers, librarians were quick to recognize the value of using computers to provide greater operational efficiencies. In tight financial times, the cost of harnessing the large networked computers needed for library systems was beyond the budget and technical expertise of most academic libraries. Academic administrators and politicians turned to collaboration as a means of accomplishing their goals (Patrick, 1972; Kemp, 1996; Kopp, 1998).

Especially in the 1980s and 1990s, a rapid increase in the number and cost of books and journals, combined with severe constraints placed on library budgets - especially in academic libraries - became a worldwide phenomenon, further exacerbated in those countries with volatile currency units (Hooper, 1990). The consequences of these problems were obsolete equipment, untrained personnel, out-of-date collections (Martey, 2002) and the resultant imperative to downsize/right-size, together with political pressure to collaborate (Kopp, 1998). It became imperative to find ways of making the most efficient use of the resources available by reducing duplication of book and journal purchases, especially on a regional basis, and optimizing interlibrary loan traffic to ensure the most efficient and effective use of those materials already available within the country.

"Libraries are forming alliances for the purpose of identifying and addressing common needs arising from development in information technology, especially the growing importance of the Internet and the World Wide Web. " (Potter, 1997, p. 417)

This instinct to cooperate is part of the ethos of the library profession. The major driver of cooperative alliances among libraries has not been technology, except in so far as technology is an enabler of greater efficiency. Rather, the main drivers are economic considerations. These include sharing of resources, cooperative acquisitions, cooperative automation, shared cataloguing, and preservation and access (Gorman & Cullen, 2000; Hayes, 2003; Hooper, 1989).

The purchase of a book or journal requires the generation of data that is used not only for the order process, but forms the basis for subsequent entries. That data is structured according to author, title, publisher and other components, all of which might be required as the sort key in the generation of a report or for database search purposes. Collaborative data entry into a centralized networked database enables libraries to speed their order processes, make their catalogue entries more accurate and make more informed decisions about purchases, depending on the holdings of other libraries in the region. The same networked database could also form the central resource for cooperative catalogue development and the establishment of a regional or national union catalogue of library holdings, facilitating interlibrary loans and promoting networked communications among participant libraries.

The development of a centralized, networked database of the catalogue holdings of the major libraries in a region or in a country would provide operational efficiencies for participant organizations in the same way that banks, insurance companies and motor manufacturers promoted efficiencies through collaborative database development. Many of the problems associated with collaborative database development were the same - especially those relating to systems integration, data and content ownership, catalogue content management and the determination of tariffs for database use combined with incentives for participants to contribute their data. (Rayport & Jaworski, 2002, pp. 366-372). The reason for this is that, in collaborative databases, several information producers combine to generate the data for the online server/vendor to supply to the information consumer. These three players - producers, vendors and consumers - in the online information services market can have conflicting interests, especially when the information consumers are also the information providers and they establish the server/vendor for that purpose.

Inter-Organizational Systems & Library Consortia

Information technology has been used for many years to promote collaborative working opportunities, to share data and to control dispersed operations. The characteristics of inter-organizational systems (IOSs) that link numerous business partners have only recently been investigated because they form the basis for many electronic commerce business models. The reasons why organizations and businesses adopt IOS (or EDI as a prominent type of IOS) (Ahmad & Schroeder, 2001) show a marked similarity with those of libraries embarking on collaborative ventures. These include perceived benefits, external pressure including competitive pressure, and readiness in terms of financial resources and IT sophistication (lacovou et al., 1995; Chwelos et al., 2001) Competitive pressure has also been highlighted by Premkumar and Ramamurthy (1995), Crook and Kumar (1998), Bensaou and Venkatraman (1996), Morrell and Ezingard (2001) and Maingot and Quon (2001), while industry pressure was noted by Bensaou and Venkatraman (1996), lacovou et al. (1995), Chwelos et al. (2001). Efficiency and effectiveness also feature as key drivers (Morrell & Ezingard, 2001 ; Ahmad & Schroeder, 2001).

Like library consortia, IOSs also raise the incongruity between the need for collaboration while still needing to compete (Johnston & Gregor, 2000). Creating congruence among the partners can be a key uncertainty and risk reducing strategy (Angeles & Nath, 2001). To do this, a participative rather than an authoritarian management and decision-making style is desirable among partners (Angeles & Nath, 2001). Nevertheless, the competitive aspects of IOSs also need consideration. IOSs affect competition in three ways: they change the structure of the industry and alter the rules of competition, they create competitive advantages, and can create whole new businesses (Siau, 2003). Furthermore, academic administrators and politicians have turned to this form of collaboration as a means of accomplishing their goals (Siau, 2003), which are very often competitive.

The origins of many of today's e-commerce business models can be found in those business innovations that recognized the value of networked computers for obtaining greater efficiencies and promoting collaborative contributions. Many of the problems and issues that were found to have been intractable then remain problems in contemporary businesses. Solutions found to these problems in earlier models can often lead to insights and solutions in today's businesses.

The Foundation & Promise of LIBNET

The South African library system is the most comprehensive and sophisticated network of information resources on the continent of Africa. Although very flawed, it gave birth to an impressive collaborative venture that has survived through dramatic political, economic and technological developments. In 1979, a committee examining the possibility of establishing a national computerized catalogue in South Africa concluded, "The cost and resources needed to establish a national catalogue from scratch would be prohibitive" (Laing, 1997, p. 53). The committee, largely made up of senior librarians and academics, was aware that the rate of growth of publication titles would double every 25 years. While very dependant on the importation of scientific and technical information, a small country like South Africa, with so many other more pressing demands on its national resources, needed to make the most efficient use of funds spent on its national bibliographic development and control. It made sense, therefore, to develop a national online catalogue of the bibliographic holdings of the major research and public libraries.

No individual library could afford to fund the development of such a facility, not even the State Library. As a statutory organization falling under the Department of National Education, the State Library considered that its responsibilities, defined before the days of computerized catalogues and online databases, would have included the functions of a national online catalogue. Indeed, over the years it had been responsible for the compilation of the South African National Bibliography, the SANB. This serial publication provided the bibliographic details of all South African publications deposited by publishers in the various Legal Deposit Libraries. The State Library also maintained the South African Joint Catalogue of Monographs that recorded many of the acquisitions and holdings of the major libraries in the country in order to support interlibrary loan requests. The Joint Catalogue was terminated in 1976 and published on microfiche. From 1979 onwards it was decided to publish the bibliographic records of the Joint Catalogue on computer tape (Musiker, 1986, p. 152). Accordingly, the State Library had an important role to play in the development of LIBNET because several of the functions that had hitherto been the statutory responsibility of the State Library would be taken over by LIBNET and developed in electronic form.

After months of investigation and consultation, LIBNET was established as a section 21 (not-for-profit) utility company. The key enabler was a "pump-priming" grant from government and the 10-year subscription commitment made by the original members in the Memorandum of Agreement. There was some tentative enthusiasm about the direction in which library cooperation was going with the establishment of the fledgling company. Besides the State Library, the original members included universities, national and regional government departments, and municipalities that owned and ran the libraries intended to benefit from the collaborative venture. The subscribing libraries hoped that their expenditure on subscriptions and purchases would be offset by reduced numbers of acquisition and cataloguing staff, more efficient interlibrary loans transactions (with associated staff efficiencies) and more efficient information retrieval by consultant or reference staff. In addition it was hoped that the pressure on libraries to automate their management processes would be offset or delayed by participation in the LIBNET initiative. If nothing else, participation by members was a learning process that would facilitate subsequent decision making about library computerization - a way of putting their toes into the water without the pain of sudden and total immersion. And, of course, there were incentives to load their cataloguing data that would offset the cost of establishing their own computerized catalogues.

The original subscription commitment for 10 years made the member libraries shareholders in the company with the right to elect the Board of Directors at an Annual General Meeting of LIBNET. This was usually held, for convenience sake, at the annual conference of the South African Institute for Librarianship and Information Science. However, not all the directors were subject to election at the Annual General Meeting. Because of that library's important statutory responsibilities, the Director of the State Library was a permanent member of the Board of Directors. In addition, the interests of the government were represented on the Board of Directors by a person nominated by the Minister of National Education. The Managing Director of LIBNET was ex officio a member of the Board, while the members at the Annual General Meeting elected the rest of the directors. Largely they were drawn from the academic library sector, although an important component was the presence of senior businessmen who could bring their business and entrepreneurial acumen and expertise to bear on decisions before the Board.

SETTING THE STAGE

Internally, the staff of LIBNET consisted of two main groupings - those responsible for developing the technological base of LIBNET's operations and providing the networked services, and those responsible for marketing the products and services as well as growing the clientele and membership numbers. This latter activity had a very positive side effect in that it made the LIBNET staff very much part of the professional library community in South Africa, and in fact, helped to create a sense of unity and camaraderie among the members. This sense of participative ownership was essential to promote a constant flow of new cataloguing data of the highest possible quality being added to the database by all the subscribing libraries. It also provided LIBNET with the means to refine the services required by the members.

LIBNET's Technical Infrastructure

Initially LIBNET operated on the Washington Library Network software. Access protocols for LIBNET included an X.28 dial-up facility for IBM PCs; an X.25 packet switching as well as SNA and TCP/IP for dedicated data lines and point-to-point asynchronous communication with DEC VT-100 or compatible terminals. Any other data communications requirements were investigated to ensure as wide a range of access options for subscribers as possible (Laing, 1997, p. 54).

From the beginning the intention was to develop its own system using South African Machine Readable Cataloguing (SAMARC) records. The SAMARC format was based on the original MARC format developed by Henrietta Avram and her team in the Library of Congress in the 1960s and 1970s. It included some modifications made in the British UKMARC format as well as some idiosyncratic requirements to suit the multilingual South African situation. A great deal of time and effort went into developing the specifications and writing the software for LIBNET's new, home grown system until it was realized that it would not be as cost effective as originally intended. "Build or buy" decisions were very controversial at that stage, especially as the Open Systems Movement gained ground within the computer systems industry worldwide. Finally, in 1992, LIBNET rolled out their new system amidst some controversy. It was a turn-key system based on a library software package popular with university libraries in South Africa at the time. Running on a UNIX operating system, and therefore in line with current open-systems thinking, the system was accessible via X.28 dial-up facilities, via Telkom's dedicated data lines with X.25 packet switching, or with TCP/IP communications protocol on GOVNET, UNINET and other networks available in South Africa.

Databases available were originally based on the Washington Library Network database, supplemented by the Joint Catalogue of Monographs developed by the State Library from records sent to them by the major libraries in the country, particularly the main university, and public libraries and the legal deposit libraries. With the implementation of its new system in 1992, LIBNET made available to its members a new "bouquet" of databases. These included the South African Cooperative Library Database (SACD), the Index to South African Periodicals (ISAP), the Library of Congress Database (otherwise known as the National Union Catalog (NUC)), the British National Bibliography (BNB) and Whitakers Books In Print. The Union Catalogue of Theses and Dissertations developed by Potchefstroom University and the South African National Bibliography were also available on the LIBNET database.

Jan's Problem

Jan's problem was not trivial. Two months earlier he and his friend Sid had both been at a meeting of the Board of Directors of the national bibliographic service provider LIBNET. Jan represented the LIBNET Users Committee on the Board, while Sid had been elected by the members at an AGM and had served since then for a series of three-year terms. They had served together on the Board for several years and flew to Pretoria for Board meetings every two or three months. They were tall men, same age, same size, and archetypical representatives of the Boer and Brit elements of South African society. Yet the hostilities of the South African War were entirely absent in their dealings with one another. They were both university librarians of old and established research libraries. The good professional relationship they enjoyed started when Sid had been invited to serve as a professional advisor on the selection committee that recommended Jan's appointment. Since then they had consulted one another on matters of common concern, and served on professional committees and task forces. The trust and mutual confidence in each other's perspective and professional ability led to constructive decision making in various cooperative initiatives. They presumed that it was that trust and confidence that persuaded the LIBNET Board to task them to find a solution to the data-ownership and tariff problem.

The fact that LIBNET had been established as a cooperative venture with government seed-money meant that the customers were also the information providers. Instead of providing all the funding, the government wanted to play an enabling role such that LIBNET would in due course become self-sustaining as a non-profit organization. As the database administrator, LIBNET sold its networking and database services to its members, using the information they had provided as the database content. To ensure high standards of data entry, LIBNET ran nationwide training programs and established quality control mechanisms to monitor input. It was in the interests of all members to ensure accurate data capture, and so incentives needed to be built into the tariff structure to reward those members that participated in the process.

The calculation on which the annual tariffs were determined had been a matter of concern to the LIBNET Board for several years. The larger libraries that were founding members of LIBNET paid an annual subscription and a usage charge based on EEs (Enquiry Equivalents) used. The EE was based on the number of searches conducted on the database. Associate members, who were usually the smaller libraries and other bodies, did not pay an annual subscription, but paid a monthly terminal connection fee and a tariff per EE used which was almost twice the EE charge of the larger subscribing library members.

However, these tariff arrangements did not take account of intellectual property rights and data ownership. A great deal of original intellectual work went into the process of data capture of bibliographic records. The library catalogue of any large research library represents a major investment for the institution concerned. It is the intellectual property of the institution and as such could be sold or negotiated in the same way that other intellectual property could be negotiated. Many academic libraries continued to spend additional funds on catalogue conversion projects in order to capture their cataloguing data retrospectively. This expenditure enabled them more quickly to establish their own machine-readable catalogue for the needs of their domestic library systems. To upload that data to a national bibliographic service utility such as LIBNET did not draw them any royalty payments. They got no benefit from the initial expense of data capture other than greater bibliographic control of their own domestic collection. However, the enriched online catalogue was an important marketing consideration that could be used by LIBNET to attract new members. Like many other members, Jan and Sid considered that their extra expenditure gave them a greater stake in LIBNET, and they felt that their extra contribution to LIBNET's development and welfare was not being recognized or appreciated. And, of course, the higher percentage of their libraries' bibliographic records that were on the database, the more likelihood that other libraries would want to borrow books from them on interlibrary loan.

Meanwhile, almost as an encouragement for this viewpoint, the State Library continued to develop and market its Joint Catalogue of Monographs and South African National Bibliography. Was there not a way in which other libraries, in tough budgetary times, might not recoup some of their expenditure in similar ways? LIBNET paid royalties to those information providers like the British Library for the British National Bibliography, the Library of Congress for its National Union Catalog and the Washington Library Network for its database. If LIBNET was deriving a benefit from the contribution of libraries such as those directed by Jan and Sid, surely there could be some reconsideration of the tariff determination by LIBNET?

The two-hour flight back to Cape Town after that Board meeting in Pretoria had done little to ease the minds of Jan and Sid. Who were the information providers? Who owned the database? Who was paying for what services and should their institutions not be getting some form of royalty or compensation for the added contribution they were making? In addition, how could a tariff policy be set that allowed libraries to reduce budgetary uncertainty ahead of time when the tariff policy was based on an annual subscription as well as connect-time pricing and/or per-record charges? How could all this be done without damaging LIBNET and its financial viability, or were there other strategic options available to them?

The Boeing 737 wove its way through tall towers of cumulus, like huge, airborne cities. Through the late afternoon sky, the sun's rays struck the white bulbous towers from the west, creating deep shadows and slowly redecorating the thick, puffy clouds in gold and pink as the land below melted into shadow. Not much chance of the data ownership and tariff problems melting in the same way. Although it was a privilege to be able to see the world from a perspective that few creatures in all of Earth's history had ever seen, one way or another, that privilege would have to be paid for.

CASE DESCRIPTION

Jan leaned back in his chair and looked across his desk and out the window. On the wall to his right hung a painting of a typical farming scene in red and brown and ochre - one of the university's art treasures with which he had been burdened as curator. Below it, but closer to him was his computer, its monitor and keyboard, and his telephone - his links to the outside world. Evidence, if it was needed, of the increasing reliance of libraries on the growth of information and communications technologies to streamline and enhance business services in all areas of endeavor.

It was now two months since he and Sid had flown home from Pretoria, and the problem that the LIBNET Board had referred to them had in no way been resolved in the intervening weeks. Within a few minutes, Sid would be arriving for a meeting to explore and, if possible, resolve the issues involved in tariff determination and data ownership. As usual for his meetings with Sid, Jan had scheduled a lunch break for about 12.45 p.m. in the university's staff dining room. The caterer had agreed to prepare freshly caught grilled yellowtail and roast seasonal vegetables as the main course with a light sorbet and fresh fruit compote to finish off. And two bottles of Pinotage were ready to provide some consolation for the mental effort they expected to expend. He was looking forward to the rest of the day, and hoped that the business end would be completed before lunch started.

"Good to see you, my friend!" smiled Jan, as he and Sid shook hands. After a brief word with Anne, Jan's personal assistant, the two men went into the committee room with every intention of being undisturbed until they had resolved the problem. To set the scene Jan reviewed the background that had given rise to the situation. For 10 years, academic library directors had been laboring hard to ensure the purchasing levels of materials for their libraries. A combination of publishing price rises that had impacted on university and other libraries throughout the world, and the falling value of the South African currency unit on international currency markets had increased their journals budget by a factor of three, while the book budget remained unchanged. The total acquisitions budget had almost doubled over a period of five years. Despite this, the actual buying power of the money was reduced by 20% in terms of the numbers of both book purchases and journals subscriptions. The academics were in an uproar and the university administrators were demanding closer cooperation on a regional basis between the two university libraries. "More bang for the buck" and "You must work smarter, not harder" were the clichés that rang around the meetings of the library committees of both institutions.

"I tell you, Sid, the combination of publishing price rises and the falling value of the South African Rand on international currency markets has increased our journals budget by a factor of three, while our book budget remains unchanged. And we have fought to maintain that situation!" Jan complained. "Clearly, closer cooperation in purchasing policies and more ready access to the holdings of each other's libraries would assist in easing the problem. But to do that we will need to ensure full bibliographic control of the book and journal holdings of both our libraries. That is not a trivial matter-and it will be expensive," observed Jan.

"Our options are to do it either through LIBNET, or through some form of cooperative regional bibliographic database as we have been discussing with our colleagues," suggested Sid. Arising from their earlier meetings over many years, both Sid and Jan were under pressure to promote regional cooperation - and that pressure came in the form of financial incentives from outside benefactors willing to help fund the emergence of a new social structure now that the years of apartheid and social isolation were ended.

"But LIBNET has made an important contribution over the eight years of its existence. We signed on for 10 years. We are committed to it for another two years at least. It makes sense to support and use it. But regional cooperation is also important. We can incorporate the benefits that flow from our LIBNET membership for regional advantage," suggested Jan.

"That's true. But I have to conserve resources and watch carefully the percentage of my library's budget that goes to LIBNET. The larger libraries that make up the foundation members of LIBNET pay not only our annual subscriptions, but also for the use we make of the system beyond the calculated maximum. If we cut back on use in order to save money, we're cutting back on the benefits to be gained from our subscription," reasoned Sid. "The tariff structure locks us in. Part of the problem is trying to budget ahead of time for our needs. I can't anticipate the EE usage, the connect time, or even the annual subscription sufficiently far in advance to reflect them accurately when the budget goes to the University Council."

"Yeah! But both your library and mine still have a lot of retrospective cataloguing to do before we reap the real benefits of LIBNET. In fact there are holdings gaps for libraries throughout the country. We have started a project to convert our card-based catalogues to machine-readable form starting with heavily used materials. What are you doing?" asked Jan.

"We've contracted with a commercial company operating out of Australia," said Sid. "They sub-contract to staff in the Philippines, and send copies of our catalogue cards for data capture. It's not entirely satisfactory because it involves a lot of checking for completeness, but I must say, mostly the quality of the data-capture is good."

He looked out of the window trying to imagine a team of Philippino data-capturers making sense of the catalogue cards they were working with. "Look, you can't expect them to use their initiative to fix obvious errors. That's not what they are paid for - and anyway they may not even understand what they are keying in. But it still reflects the initial investment in creative cataloguing made by the university over the years. It would be great if we could recoup that expenditure by selling off our records to some other library. You're not interested, are you? I'll give you a special price?" smiled Sid. "After all, there must be a high percentage of overlap between your holdings and ours."

"No way, my friend. We are doing our retrospective conversion in-house, simply to save money. Can you imagine what my bosses would say if I bought catalogue records from you?" He grinned back. The traditional rivalry extended to professional matters as well. For both, retrospective conversion projects were an important cost factor and not without their detractors among the academic Luddites.

"The urgent need is to establish a credible computer-readable catalogue for the needs of our domestic systems faster and cheaper than would otherwise be possible. That will give us a basis for any regional cooperation as well. With both our bibliographic databases loaded, we would have an immensely valuable regional resource," mused Sid. "But when we upload it all to LIBNET, what are we going to get for our troubles? More interlibrary loan requests and a whole lot of extra work! Why can't we get some additional form of recognition and compensation? After all, LIBNET is here to help us, but the spin-off of our membership means additional expense and work for us."

"How come? What are you trying to say?" asked Jan.

"Look. Although there are incentives built into the LIBNET fee structure, to upload all our new data to the national database still costs us more. Is that extra contribution being recognized or appreciated? If the State Library and Potchefstroom University can own their data, and even sell it to others, why can't we? After all, our additional data contributes to LIBNET's enriched online catalogue. That's partly what makes LIBNET attractive to new members. Other libraries join and then start using the records we provide to reduce their own cataloguing costs. Some benefit from the data we have uploaded. Others use the same data to save themselves the cost of buying books. They demand those books on interlibrary loan. It doesn't seem right that our extra expenditure on retrospective catalogue conversion places us in a position of being additionally exploited by increased numbers of interlibrary loan requests! It's nonsense! There should be some sort of royalty built into the LIBNET tariff structure to compensate us for our contribution - not just to LIBNET, but to the country as a whole."

"Ja! I see what you mean. Actually, this thing has been brewing a long time," replied Jan, getting into the thrust of Sid's argument. "Let's look at it from another perspective. The State Library is statutorily charged with responsibility for the development of the South African National Bibliography, and the Director is therefore ex-officio a member of the LIBNET Board. He considers the records contributed by the State Library rightly belonged to the State Library. That includes the South African National Bibliography and the Index to South African Periodicals. Although they are all available through LIBNET, they belong to the State Library. On the other hand, the Executive Director of LIBNET would naturally want to protect his interests and would take the view that each subscribing library has a responsibility to load its bibliographic data onto LIBNET in terms of their Memorandum of Agreement - and the national interest. But the directors of the major research libraries, who like ourselves are also members of the Board, will consider that they should be getting some return on their investment, some compensation for the initiative they had taken to ensure that the national online catalogue will be completed faster to everyone's benefit. What is in it for us and them?"

"That's it. OK. Let's look at the major issues." Sid pulled out a document with his scribbled notes. That morning he had jotted several points down before driving over to Jan's library. These were the principles that he thought should drive any decisions about equity in this situation. "Let's take them one at a time as defendable issues or issues that may be of political or strategic importance to individual members of the Board." He read them out.

1. Each library owns the records that it has generated through its own creative efforts.

2. Each library also owns the records it has generated through paying for the data conversion process.

3. The State Library owns all records that it has contributed to the LIBNET database, even though many of those records were contributed by participating libraries sending in copies of their catalogue cards, or by legal deposit libraries contributing their acquisitions lists to the State Library.

4. Similarly, the Library of Congress owns the National Union Catalog that is accessible through LIBNET, and the British Library owns the British National Bibliography, also accessible through LIBNET.

5. LIBNET owns all databases that it has developed from the contributions made to it by subscribing libraries, or for which it has paid in agreement with the owners of other bibliographies.

6. Individual libraries have the right to decide whether or not to upload bibliographic data to LIBNET. Once uploaded, the records belong to LIBNET in terms of the subscription agreement, but they also belong to the originating library and may not be sold by LIBNET without permission or recompense.

7. Having paid for their subscriptions and the downloading of their own bibliographic records from LIBNET, individual libraries are entitled to establish their own domestic bibliographic database, but may not sell records downloaded from LIBNET.

8. Any library is free to sell, or otherwise make available, its own bibliographic records to any other individual or library, as it sees fit.

"Hey. That's good!" complimented Jan. "Let's go through each one and see if we can pick holes in them!"

From this set of basic principles, Sid and Jan debated their implications.

"What if the larger libraries withhold the uploading to LIBNET of their retrospective conversion records and recover their costs by selling them to other libraries? OK. In a way this would be going into competition with LIBNET and would be in breach of the original agreement we signed when we joined LIBNET."

"But by meeting that obligation, we are creating a stick for our own backs," grumbled Sid. "Increased interlibrary loans are a significant counter-incentive increasing staff pressure in a sensitive area. Not only must I deal with pressure on my materials budget, must keep my staffing budget under control. The budget cuts affect both materials as well as staffing budgets."

"So what about a regional initiative?" asked Jan. "There is the financial incentive that flows from the possibility of overseas funding by benefactors. That could make a big difference to our situation. It will make good political sense too. We will be seen to be driving academic regional cooperation where many other initiatives have failed. Also, a smaller cooperative network would be easier to handle, would give more direct administrative control and would build on what we have already done through our earlier discussions and through LIBNET." He looked questioningly at Sid.

"Well, if LIBNET is unable to come up with some new and revised tariff structure that recognizes the contribution we are making, it could make sense for us to slowly withdraw our dependence on LIBNET and build a closer dependence on a regional cooperative structure. After all, we only have a year or so to go before our legal obligations to LIBNET end. As far as I am concerned, the financial constraints being placed on us by our respective administrations are such that all our options need to be considered. I am under a lot of pressure to reduce staff, improve services, increase book stock and take a lead in collaboration and regional rationalization." Sid looked pensive. It sounded like treason. After all the years of working on the promotion of LIBNET and of national and regional library cooperation, to suddenly turn to a narrow and self-serving strategic direction went against the grain. But he had to consider all the options that were open.

Jan looked at his watch. "Hey! It's lunchtime," he announced with a smile. "I have something good for you!" he said, thinking of the grilled yellowtail and the pinotage.

They gathered up their papers and with a sense of relief found their way out of the library and across the square to the university's staff dining room. Based on the discussion over lunch, Jan undertook to prepare a series of proposals for the next meeting of the LIBNET Board. He asked Sid to write up a memorandum on the basis of the day's discussions and forward it to him as soon as possible. He would then consult with his deputies before submitting his final proposals to the LIBNET Board.

The range and implications of their morning discussions ensured an ongoing debate over lunch and dominated their thoughts for the rest of that afternoon. On his way home, and while the issues were still fresh in his mind, Sid dictated a memorandum for typing the next day, so that it could be sent to Jan as a file attachment with the least possible delay. Both Jan and Sid felt they had had a very productive meeting - yet one that could have enormous repercussions for both the future of LIBNET, and also for academic library cooperation. It would probably have some important implications for the principles on which database development is funded and the way that the contribution of members is rewarded.

CURRENT CHALLENGES & PROBLEMS FACING THE ORGANIZATION

The question of database ownership and the provision of incentives and rewards to the information providers were reflective of the changing needs of LIBNET members. Originally, they had required a networked union catalogue of the holdings of the nation's major research libraries. The cost of such a facility was beyond the budget of any one of the libraries, so they were happy to participate in and contribute to the development of this national utility.

After 10 years, however, three things had happened to change the perspective of the members:

1. LIBNET had successfully established the basis of that national catalogue. It had a modern networked system, a staff that nurtured high standards of contribution to the database, and simultaneously promoted the company's services nationwide.

2. The technology had changed, making online, real-time network access to a regional library system both affordable and desirable.

3. The political and economic climate of the country had changed. South Africa was no longer under siege. The academic boycotts, political and economic sanctions, and civil unrest that spread to the campuses of the major LIBNET members were over. Nelson Mandela was out of gaol. The first democratic elections had been held, and around the world, aid agencies and benefactors were keen to contribute to and participate in the remarkable emergence of what Archbishop Desmond Tutu had referred to as "the Rainbow Nation." What better contribution could be made than to democratize the nation's information resources by networking the major libraries on a regional basis so that their collections were accessible to all the citizens, whether or not they were students or staff?

With this option before them, it was understandable that Jan and Sid and their colleagues on the LIBNET Board of Directors started giving attention to who owned the LIBNET database. Their cash-strapped universities saw many benefits flowing from the injection of funds by overseas benefactors. Not only were there savings to be made from cooperative library acquisitions policies and cataloguing activities, but a unified circulation system and a reduction in duplicate journal subscriptions would be facilitated by a regional cooperative system. LIBNET was therefore under pressure to deliver at the same time as its initial "pump-priming" government funding, and the 10-year membership commitments of its founder institutions were coming to an end.

The resolution of the tariff and incentives structure became the catalyst that led on to the restructuring of the entire LIBNET business. On January 1, 1997, LIBNET sold its operations to a private company to enable it to expand into the commercial online market. Today, the new privatized LIBNET thrives as the most successful online information network in Africa. But it is very different in structure from its original conception - largely as a result of the factors driving the decisions outlined above.

The main reasons for "privatizing" LIBNET operations in the mid-'90s were:

* to bring in strategic partners through a shareholding structure,

* to create a vehicle for generating development capital, and

* to attract and keep the right type of staff members.

These intentions are now reflected in the current shareholding structure. The perspective has become one of an equal partnership between clients and staff. So the new LIBNET is evolving into a situation where staff and client shareholder groups will both have a 50% shareholding. The co-ownership concept, together with a creative shareincentive scheme, is making a huge contribution to its success. The business orientation of staff has increased beyond belief. Clients are benefiting through the ongoing improvement of products and services, while costs are controlled in the same process, because it is in the interest of the staff to run a profitable and competitive shop. Although there had been discussions at times with potential strategic partners to buy a stake in the company, that idea was abandoned several years ago without selling off any shares to outside investors. The traditional character of the company was therefore maintained without diluting the value of the shares.

The big challenge in doing business in the new South Africa is the Black Economic Empowerment and Affirmative Action law. The general line of thinking is that all businesses should have a 25% black ownership by 2010. Government itself is more concerned about real empowerment, such as people development, skills transfer, enterprise development, corporate social upliftment, and so forth. The record shows that there are, unfortunately, a small number of black businessmen in the country who are pushing the shareholding idea without contributing anything to the growth of the economy. As a result, LIBNET is still not listed on the Johannesburg Stock Exchange (JSE) and has no immediate plans to do so. The corporate scandals of the last couple of years have made the JSE less attractive (from a cost viewpoint) to apply for a listing. LIBNET doesn't need capital at present and shareholders are not prepared to sell their shares, so a listing does not make any sense. Accordingly, the new LIBNET intends to grow its black shareholding through the current structures of staff and client shareholders. Initially, shares were sold to staff at R0,20 per share at the time of privatization. Those shares were subdivided in the ratio of 10:1 five years later. The latest official valuation of the shares is about R0,50 to R0,60 per share. That is equal to 5 to 6 Rand per share before the subdivision.

Functionally, LIBNET has developed into a company with a primary focus on the maintenance and development of its traditional services (cataloguing support, interlending and reference services). These are still growing slowly, but the real performers are the newer products, such as electronic journals and the legal products (government and provincial gazettes, parliamentary monitoring and statutes). This has helped to spread the risks far better than before. Structurally, LIBNET has divided into two separate business units (Academic/Library, Corporate) to reflect the separate focuses, and these are functioning well with totally different marketing and support approaches. The core strengths remain the same - excellent relationship with clients backed by high-quality client support, and an excellent team of people doing the job.

The challenges facing the new LIBNET reflect the current economic development climate in contemporary South Africa. Apart from Black Economic Empowerment and Affirmative Action employment laws, these include doing international business with an unstable local currency, growing the markets and competing with larger international competitors.

Subject: Case studies; Electronic commerce; Intellectual property; Property rights; Alliances; Libraries; Data base management

Classification: 9110: Company specific; 5250: Telecommunications systems & Internet communications

Publication title: Journal of Cases on Information Technology

Volume: 7

Issue: 3

Pages: 77-97

Number of pages: 21

Publication year: 2005

Publication date: Jul-Sep 2005

Year: 2005

Publisher: IGI Global

Place of publication: Hershey

Country of publication: United States

Publication subject: Business And Economics--Computer Applications

ISSN: 15487717

Source type: Reports

Language of publication: English

Document type: Business Case

Document feature: references

ProQuest document ID: 198658100

Document URL: http://search.proquest.com/docview/198658100?accountid=38610

Copyright: Copyright Idea Group Inc. Jul-Sep 2005

Last updated: 2011-07-21

Database: ABI/INFORM Complete

Document 46 of 100

ERP Implementation for Production Planning at EA Cakes Ltd.

Author: Portougal, Victor

ProQuest document link

Abstract:

This case details the implementation of the Systems Applications & Products (SAP) Production Planning module at EA Cakes Ltd. The market forced the company to change its sales and production strategy from make-to-order to make-to-stock. The decision to change the strategy involved not only the company's decision to invest much more money in accumulation and keeping stocks of finished goods, it required a complete redesign of its production planning system, which was an integral part of an ERP system that used SAP software. A team of IT specialists and production planning personnel was formed for designing computer support for the new production planning system business processes. There was no consensus in the design group. IT specialists were sure that existing SAP software could provide adequate computer support. The production planning staff had doubts that SAP modules are relevant to their business processes. To resolve the problem, the management invited a consulting company. The consultants suggested quickly designing a rough prototype system. Apart from giving adequate computer support to the new production planning system, the SAP implementation had to solve several implementation problems identified by consultants.

Full text:

ORGANIZATIONAL BACKGROUND

EA Cakes Ltd., New Zealand, is a successful food manufacturing company with a major share of the market in New Zealand and the Asia-Pacific region. It produces more than 400 different kinds of fresh and frozen food products.

From a shelf-life point of view, the company manufactures three types of products:

1. Shelf-stable and frozen food with practically infinite shelf life (up to one year)

2. Chilled products with a medium shelf life (from three to six months)

3. Short shelf life products (from one week to six weeks)

The demand for many products is uneven. Christmas cakes and puddings, for example, are mainly sold during November and December. Generally, the demand for cakes is lower during summer than during winter. Sales are also volatile because they are conducted through numerous channels, including major supermarket chains, route outlets (such as groceries stores), and food service for hospitals, hotels, and restaurants. Sales to Australia, the major export market, add uncertainty to demand.

For years EA Cakes Ltd. built a reputable brand name and had enjoyed a stable market. As a result, the dominant production strategy of the company was make-to-order, MTO (see for example, Vollmann, Berry, and Whybark, 1997). Permanent customers, such as supermarkets, shops, and restaurants, placed orders either for the next week, or for longer intervals with a regular delivery, and the company provided good customer service both in terms of quality and of on-time delivery.

In the late 1990s EA Cakes Ltd. began to observe a decline of its market share in many of the traditional markets. Marketing analysis showed that the main reason for the drop in sales was price increase due to the company's high production costs, and as a result competitors offered lower prices on similar products. The famous brand name did not attract customers enough to support the higher prices. An attempt was made to compete on low retail prices, with the results of slightly increased sales volumes, but significantly decreased profit.

Soon the company was forced to reconsider its sales and production strategy. Two major faults were identified:

1. To support its MTO strategy, the company was forced to have a significant capacity cushion both in labor and equipment. It was necessary for providing stable customer service while the demand was uneven, sometimes with huge lumps. During Christmas, for example, the company usually tripled their average sales volumes. EA Cakes Ltd. was accustomed to seasonal variations and Christmas sales lumps, and coped with them by accumulating stock. Daily and weekly variations, however, led to losses in production time in low periods and to excessive use of overtime during peak periods. High labor cost variances (as compared to the standards) and low machine capacity utilization were prevalent.

2. The MTO strategy implied that the company always quoted lead times to customers; for example, an order placed this week would be promised to deliver next week, or the week after, if there were too many orders. Old traditional customers agreed with this system, and the company was mostly successful in keeping its promises. The market, however, had become much more dynamic. Increased competition from NZ and overseas and a heavy promotional activity required improved "speed to market." Many customers wanted the product on demand, not next week. The company was unable to exploit such opportunities and lost this significant part of the market.

As a result EA Cakes Ltd. had decided to change its production and sales strategy (as recommended by operations management literature; see for example, Vollmann, Berry, and Whybark, 1997) for long and medium shelf-life products from "make-to-order" (MTO) to "make-to-stock" (MTS). The MTS strategy costs more in inventory than MTO, but it has two benefits:

1. Increased "speed to market" allows expanding the market share by attracting new customers and by catching unexpected opportunities.

2. Capacity may be utilized more efficiently using the inventory "cushions" instead of capacity cushions (see McNair and Vangermeersch, 1998).

MTS companies hold stocks of all advertised products. The stocks usually are managed by a "min-max" rule: stocks below or close to minimum trigger production until they reach or approach the maximum level. The difference between minimum and maximum is defined by the demand forecast during a planning period. The production process is driven by the current levels of stocks rather than by customers' orders.

The decision to change the strategy from MTO to MTS involves not only the company's decision to invest much more money in accumulation and keeping stocks of finished goods, it requires a complete redesign of its production planning system. There are several major reasons for making significant changes in production planning:

* MTO is driven by customers' orders, MTS is triggered by forecasts; a forecasting system had to be designed and implemented.

* There are no significant stocks of finished goods under MTO, so there is no need for stock management; for MTS, an inventory management system for finished goods had to be developed.

* Under MTO there are no significant information links between the company planning and shop floor production planning; under MTS it is vital that the planning system preserves continuity. It has to be continuity in planning. That means the plans produced by each level are detailed plans of the top level. Also there must be feedback continuity: feedback of the top levels is an aggregation of bottom level feedback - for more detail see McNair and Vangermeersch (1998).

The production planning system was an integral part of an ERP system that used SAP software. Its redesign was a part of a major project of the ERP system development, carried out by Ernest Edams Ltd. for two years.

SETTING THE STAGE

The new production planning system consists of three levels (Figure 1).

Aggregate Capacity Planning (ACP)

The first (top-level) procedure is part of the general budgeting procedure, which starts from sales budget development. Sales budget is not a simple forecast of the amount of products that could be sold in the future. The budget not only predicts, but also directs the sales and marketing efforts of the company. Thus it is more a sales plan than a forecast. This defines the dual nature of the budget: on the one hand it should be realistic and should define what could be sold; on the other hand it should meet the business and financial goals of the company.

The sales budget is a management tool for control of company performance by the Board of Directors. The Board provides the inputs to this budget in the form of key performance indicators. The marketing department provides other inputs (launch of new products and other marketing initiatives). The sales budget is developed for the fiscal year, and it is redeveloped every quarter with a one-year time horizon (a rollover procedure). All the budgets and rollovers are stored in the information system for reference and subsequent statistical processing. At any time two versions are available for analysis and use in the sales and production planning: a full budget for the current fiscal year, approved by the Board of Directors, and a current rollover budget.

ACP has all the features of a capacity planning procedure. Starting from the sales budget, it produces an aggregate production plan for the following planning periods up to the planning horizon. The plan is balanced against the agreed target capacity, and at the same time meets the production and sales goals of the company. The demand forecast, the financial goals of the company, the target stock levels and actual stock levels are kept in the budget database.

The planning starts from defining an optimum production strategy. The production strategy that follows the demand pattern month by month ("chase" strategy) is not sustainable here because of high seasonality of some products. Figure 2 shows that the "level" strategy with even production levels is not sustainable as well, because there is not enough time for stock accumulation from the beginning of the year until the start of the peak season. If production starts earlier, then the level of stocks becomes excessive.

The optimum "mixed" strategy that combines stock accumulation with overtime use is shown in Figure 3. It plans some overtime at the peak season, and decreased resources utilization at the beginning of the year to compensate for the effect of increased production.

The optimum mixed strategy, expressed in sales dollars, then is converted to an aggregate production plan. The planner uses:

* conversion tables, containing unit prices;

* capacity tables, which show the lines' capacity (units/hours); and

* labor content tables (labor hours/machine hours) - these are necessary because different lines have crews of different sizes.

Here the planner shifts shelf-stable seasonal products to an earlier month, targeting the optimum stock levels and loading the lines up to their capacity. The development of an aggregate plan based on the optimum strategy is necessary because:

* The strategy gives total sales dollars and cannot be used for production planning while the plan is expressed in units of each products.

* There is no direct relationship between the selling price and production hours, therefore the strategy is not balanced against capacity.

Thus, the strategy serves as a goal for ACP. The aggregate capacity plan is developed initially for the fiscal year, and it is redeveloped every quarter with a one-year time horizon (a rollover procedure).

Master Production Scheduling

The master production scheduling system is the most important managerial tool for the operations manager of an MTS company. Master Production Schedule (MPS) gives the ability to ensure that available capacity is allocated with a customer service focus. The main MPS inputs are:

* aggregate capacity plan for the following two months,

* actual stock levels, and

* short-term demand forecast.

The sales team prepares a short-term demand forecast by-product for the next five weeks, each week (a rollover forecast). The sales managers of particular products modify the monthly sales forecasts from the current budget, taking into account changes in demand, planned promotions, and so on.

Starting from the demand forecast for the following planning period, the Master Scheduler produces a weekly production plan for the next five weeks, which is balanced against capacity, and at the same time meets production and sales goals of the company.

The MPS is calculated using several planning runs and is being balanced with the capacity. This can highlight where the capacity is insufficient for meeting the schedule or where the capacity utilization is insufficient within the schedule.

The procedure is performed initially at the beginning of the planned month (the main run) in order to work out the MPS for the month. Only the first week of the plan is valid (and frozen). The rest of the plan is necessary for keeping the continuity of planning during the month. At the end of each week, when feedback on actual production and updated demand forecast become available, the procedure is run for the rest of the planning period (a control run). During this run the updated MPS for the following weeks will be produced. Also, instant changes in demand can initiate a control run in order to react quickly to the market demand.

The primary function of the MPS is to produce feasible assignments for all product lines, which ensure their performance according to ACP with minimum cost.

The other functions of this level are:

1. To keep desirable stock levels.

2. To implement a "speed-to-market" principle: react quickly to significant changes in market demand.

Shop Floor Scheduling

This level performs actual scheduling for the next week (with a daily subdivision), specified by production lines and products.

The scheduling constraints (for both men and machines scheduling) have been worked out as fixed recommended schedules for different proportions of the output. Set-up times, planned downtime and average capacity losses due to unplanned downtime are known and used for realistic scheduling. This required a downtime reporting procedure and a schedule for major planned maintenance. The scheduling is performed initially at the beginning of the planned week (the main run) in order to work out an optimal weekly schedule. At the end of each day, when feedback on actual production becomes available, the procedure is run for the rest of the planning period (a control run). During this run the updated plan for the following days, subject to the same planning constraints, is produced.

It was assumed that this level would be supported by a whole set of shop floor control procedures recognized in literature (Sherer, 1998).

Similar to most organizations, EA Cakes Ltd. operates on a hierarchical basis.

All activities and documents are organized through the Production Planning hierarchy. The hierarchy is organized so that the aggregate capacity planning (ACP) process is at the highest level of aggregation, while the shop floor scheduling process is at the lowest level. These levels can be presented using different parameters. Thus it includes a product hierarchy, time hierarchy, and organizational hierarchy. Each level varies in purpose, time span, and amount of detail (Figure 5).

CASE DESCRIPTION

The implementation of the Systems Applications & Products (SAP) Production Planning module at EA Cakes Ltd. in order to provide computer support to the MTS production planning system started from the detailed analysis of the problems.

The production planning system described above carries specific features of production planning of EA Cakes. Standard software (and SAP by definition is standard software), on the other hand, comprises programs developed for an anonymous market. The question is: can a standard software system like SAP give adequate computer support to an individually designed business management system?

This class of problems is widely discussed in literature (e.g., Robey, Ross, and Boudreau, 2002; Jacobs and Bendoly, 2003), with rather uncertain results, always pointing at the specific features of the enterprise. Because of this, a team from IT specialists and production planning personnel was formed for designing computer support for the new production planning system business processes.

The concept of a business process is central to many areas of business systems design, specifically to business systems based on modern information technology (see Scholz-Reiter and Stickel, 1996). In the new era of computer-based business management, the design of business process has substituted the previous functional design. There are many definitions of a business process (see Davenport, 1993; Sharp and McDermott, 2001; Rosemann, 2001). According to Sharp and McDermott (2001), a business process is a collection of interrelated tasks initiated in response to an event that achieves a specific result for the customer of the process. Thinking in terms of business processes helps managers to look at their organization from the customer's perspective. Usually a business process involves several functional areas and functions within those areas. Thus, a business process is cross-functional.

Definitely, this is the case of the production planning at EA Cakes.

The aggregate capacity planning uses sales budget, stock feedback, and available capacity (manpower and machinery). The master scheduling involves forecasting, feedback on stocks. The shop-floor scheduling and control absorbs a huge variety of activities from other functional areas such as material control, human resource management, inventory management, and so on.

Quite to the contrary, standard software was initially developed only for certain functions that could easily be standardized. Modern standard software such as SAP is said to be object oriented or process oriented (see Kirchmer, 2002). However, it is still mostly functional, and the necessary orientation can only be achieved by adjusting the appropriate parameters. Even after the adjustments, the functionality of SAP may not be completely relevant to the business processes of a particular company. Then the implementation team will have only two options (Sawy, 2001 ):

1. To substitute the business processes of the company for the business processes implemented in SAP.

2. To create additional special software for providing computer support to production planning.

There was no consensus in the design group.

When the production planning staff got acquainted with the business processes suggested for production planning by SAP, they had doubts that these modules are relevant to their business processes. They argued that SAP, like most ERP systems, still focuses on the function such as inventory, production, accounting, finance, and so forth. The functional view poorly represents the interaction with other functional views. Many companies have to modify their current business activity in order to use the ERP system. The members of production planning staff were the authors of the new production planning system, and they had a rather firm position that their planning processes were the most efficient for EA Cakes. No changes would be accepted.

On the other hand, IT specialists were sure that existing SAP software could provide adequate computer support. They argued that SAP software mostly represents the "best-of-breed" solutions, thus producing a system that better fits each process in the company. While the best-of-breed solution would not fit precisely, it may be an investment that provides greater long-term flexibility and better solutions to the company's problems.

So, the management of EA Cakes was presented with the following dilemma:

1. Believing the IT specialists and continuing to implement the existing SAP modules on comparatively low cost, but facing all the risks of losses due to planning inefficiency.

2. Believing the planning staff and ordering high cost computer support in addition to existing SAP system.

The management invited a consulting company. The consultants suggested quickly designing a rough prototype system (Hoffer, George, and Valasich, 1998), using ARIS (Sheer, 1999). Analysing this system would help the working group to reach a consensus.

Apart from giving adequate computer support to the new production planning system, the SAP implementation was intended to solve several implementation problems (Hong and Kim, 2002) identified by consultants.

Problem 1

The manufacturing process requires an updated short-term forecast each week. Sales managers must produce the forecast, and then it is automatically processed within the Master Production Scheduling. Sales figures for individual products have to be provided on a weekly basis for the current month and the next month. Actual sales made each week are captured and available for reporting on the following morning (after actual sales completion). Sales staff compare actual sales with long-term forecasts and using judgement make necessary adjustments. Currently, forecasts are prepared manually and then put into the database. It needs computer support to relieve sales personnel and to eliminate data entry.

Problem 2

The Master Scheduler has to check the capacity requirements and to change the production volumes according to available capacity. Then he must present the changes to the Sales Department and the Production Department for acceptance.

Problem 3

Presently at EA Cakes Ltd., scheduling is only done on finished items. It is desirable to schedule some components production as well.

Problem 4

It is necessary to provide a reliable method for checking inventory availability.

The question is: Can the SAP implementation solve all these problems?

CURRENT CHALLENGES

One of the biggest problems for EA Cakes Ltd. is low capacity utilization. The company has sufficient regular work force. Nevertheless, the Master Scheduler sometimes has to schedule overtime production, paying for overtime labor, which results in higher production costs for products. This can also cause shortages or stock-out of some materials for production, further increasing the cost of production. Managers are especially frustrated when an instant need for overtime follows a period of low demand, when inventory could have been built up; for example, in anticipation of an increase in sales following production promotions by marketing.

Another problem was identified in inventory management. Stock control of raw material and finished items needs double-checking. Initially, the line manager records the data about actual production and actual use of raw materials. However, due to possible conflict of interests, this data is not absolutely reliable. The actual amounts of goods produced should be verified regularly. Any variances must be investigated; hence the necessary data must be kept for a longer time. More thought is required on the handling of rejects/seconds, as some are almost planned by-products. This will also have ramifications with stock control and sales analysis.

There are hopes that these problems could be fixed after the ERP implementation by existing SAP tools. Of course, the company must modify its current business activity in order to fully use the functionality of SAP. If the planning staff will accept modest trade-offs, then the IT specialists are still sure that existing SAP software could provide adequate computer support.

Subject: Case studies; Enterprise resource planning; Production planning

Classification: 9110: Company specific; 5240: Software & systems; 5310: Production planning & control

Publication title: Journal of Cases on Information Technology

Volume: 7

Issue: 3

Pages: 98-109

Number of pages: 12

Publication year: 2005

Publication date: Jul-Sep 2005

Year: 2005

Publisher: IGI Global

Place of publication: Hershey

Country of publication: United States

Publication subject: Business And Economics--Computer Applications

ISSN: 15487717

Source type: Reports

Language of publication: English

Document type: Business Case

Document feature: charts graphs tables diagrams references

ProQuest document ID: 198655150

Document URL: http://search.proquest.com/docview/198655150?accountid=38610

Copyright: Copyright Idea Group Inc. Jul-Sep 2005

Last updated: 2011-07-21

Database: ABI/INFORM Complete

Document 47 of 100

Experiences from Using the CORAS Methodology to Analyze a Web Application

Author: den Braber, Folker; Mildal, Arne Bjørn; Nes, Jone; Stølen, Ketil; Vraalsen, Fredrik

ProQuest document link

Abstract:

During a field trial performed at the Norwegian telecom company NetCom from May 2003 to July 2003, a methodology for model-based risk analysis was assessed. The chosen methodology was the CORAS methodology (CORAS, 2000), which has been developed in a European research project carried out by 11 European companies and research institutes partly funded by the European Union. The risk analysis and assessment were carried out by the Norwegian research institute SINTEF in cooperation with NetCom. NetCom (www.netcom.no) is one of the main mobile phone network provider s in Norway. Their 'MinSide' application offers their customers access to their personal account information via the Internet, enabling them to view and change the properties of their mobile phone subscription. 'MinSide' deals with a lot of sensitive customer information that needs to be secure, while at the same time being easily available to the customer in order for the service to remain usable and competitive. The goal of the analysis was to identify risks in relation to the use of the 'MinSide' application and, where possible, suggest treatments for these risks. This was achieved through two model-driven brainstorming sessions based on system documentation in the form of UML sequence diagrams and data flow diagrams. [PUBLICATION ABSTRACT]

Full text:

ORGANIZATIONAL BACKGROUND

NetCom

NetCom is the second largest mobile phone network provider in Norway, providing solutions for mobile communication. NetCom is an innovative company that uses new technology and knowledge to meet its customers' demands and aims to be a leading company in Norway within the market of mobile communication. A main goal for NetCom is that their products shall be competitive on price and quality, while at the same time remaining easy to use and understand for all its customers. With offices in Trondheim, Bergen, Stavanger, Kristiansand and Tønsberg, and its main office located in Oslo, NetCom has 740 employees in Norway.

NetCom is owned by the Swedish-Finnish company TeliaSonera, the leading telecom company in the Nordic and the Baltic regions. Based on the number of customers, the company is the largest mobile provider in Sweden and Finland, the second largest in Norway (NetCom) and the fourth largest in Denmark. TeliaSonera is also the largest fixed voice and data provider in the region, with leading positions in Sweden and Finland. Furthermore, TeliaSonera is the largest operator in the Baltic region, with consolidated mobile and fixed line operations in Lithuania and consolidated mobile operations in Latvia. The TeliaSonera share is traded in Stockholm, Helsinki and on the NASDAQ Stock Market in the United States.

SINTEF

SINTEF is a Norwegian research institute with 1,700 employees. SINTEF performs research for the industry and the public sector in a number of different fields, ranging from oil and process industry to IT and medical research.

The group involved in this case study is the group for Quality and Security Technology (QST), which consists of seven people. This group was also strongly involved in the CORAS project during which the used methodology was developed. QST is part of SINTEF Information and Communication Technology (ICT) with about 300 employees.

SETTING THE STAGE

Communication is a key aspect for NetCom's products; naturally, the quality of the communication with its customers is an important part of the services offered by NetCom.

NetCom offers its customers roughly three possibilities for interaction:

* a 24-hour telephone-based helpdesk and customer service center;

* e-mail and regular mail can be used to get answers about various topics; and

* a Web application which lets customers log on to their own mobile phone account Web site to view billing information, usage history information, and more.

Focus during the risk analysis was on the last of these three alternatives, the Web application called 'MinSide' (Norwegian for 'MyPage'). MinSide makes it possible for each customer to get a complete overview of his or her mobile phone account, at any time of the day and from any place. The helpdesk/customer service was also slightly addressed but only where it was influenced by the MinSide application.

Giving customers the ability to interact with NetCom's databases and view their personal and sensitive information through the Internet requires a high level of security. With the help of the MinSide application, users are able to get information about their calling history and their calling cost status. MinSide also opens up for more interactive functionality, allowing the customer to send SMS and change their personal information and preferences.

In addition to security, this kind of service leads to requirements on availability. Serving more than a million users, the system needs to be able to handle all customers at any time, satisfying their wants and needs with respect to the use of their personal Web site.

A helpdesk where telephone operators are answering requests from customers related to their mobile phone account on a 24-hour basis is very costly. As a sub-goal, the MinSide application is meant to save money by relieving the helpdesk. Even though extra traffic will be generated from people with questions or problems related to MinSide, it is still believed that the MinSide application contributes to a reduction of the total helpdesk traffic.

Security

Having personal Web sites and login functionality is nothing new. However, the fact that all users are mobile phone owners opens for some extra possibilities, both for users such as people having a NetCom mobile phone account, and misusers such as people illegally exploiting MinSide. NetCom uses a combination of a password and a PIN code for the login process. The password needs to be remembered by the customer while the PIN code is sent to the customer's mobile phone in a text message (SMS).

NetCom's situation related to serving its customers with a Web application giving them direct access to their mobile phone account means that there is a need to identify both the security status and the security requirements related to the MinSide application. This case study describes the process used to analyze risks related to the MinSide application and to identify possible treatments to eliminate or reduce these risks.

CASE DESCRIPTION

The main goal of the analysis was to identify possibilities for misusing the MinSide application by violating one of the four security requirements: confidentiality, integrity, availability or non-repudiation, as defined in a number of standards related to IT security (ISO/IEC TR 13335,2001 ; ISO/IEC 17799,2000). This was achieved by carrying out a risk analysis based on the CORAS methodology. CORAS is specifically designed to address risk analysis of security-critical IT systems and offers a tool supported methodology for model-based risk analysis (MBRA). During a model-based risk analysis, models, in particular UML models, are used for specification and documentation of both the system (target of evaluation) and the risks. Also these models are the main medium for communication among the participants.

We will not explain the complete methodology here, but provide a short outline of the process in order to illustrate the main steps of a risk analysis based on the CORAS methodology.

Activities of the Risk Management Process

The CORAS risk management process is based on the Australian/New Zealand Standard 4360 (1999) and provides a sequencing of the risk management process into the five sub-processes illustrated in Table 2.

Each of these five sub-processes comprises a number of activities, and the CORAS methodology for model-based risk analysis proposes different methods and models for use in the different sub-processes and activities.

The CORAS methodology is developed to address systems of all kinds and sizes. For this field trial, one of the goals was to perform a lightweight risk analysis; therefore, several activities in the standard full CORAS methodology were skipped or modified. A description of the techniques and activities used is given below where the different subprocesses are described in more detail. Another goal was to test the CORAS tool that supports the risk analysis methodology.

Hypotheses for the NetCom MinSide Risk Analysis Field Trial

Prior to the field trial, a list of hypotheses concerning the use of the CORAS methodology and tool was produced. One of the goals of the field trial was to test whether these hypotheses were valid. The hypotheses were:

* A lightweight model-based risk analysis (CORAS light) produces results whose value corresponds to the investment.

* The CORAS light methodology leads to risk analysis results at the "correct" level of abstraction.

* The CORAS Web-based risk analysis tool supports the risk analysis process and makes it more efficient.

* The CORAS Web-based risk analysis tool provides the functionality that is required to perform a (lightweight) risk analysis.

Model-Based Risk Analysis

The CORAS methodology defines its own UML stereotypes and methods for describing UML models related to security analysis. These specific security-related UML aspects are caught in the CORAS UML profile (OMG, 2003b). This UML profile for security modeling defines an abstract language for supporting model-based security analysis. The asset, threat and treatment diagrams in Figure 2, Figure 5, Figure 7 and Figure 8 are examples of how this profile is used, and shows where the term "model-based" comes from.

Organization of the Trial

The field trial described in this case study was carried out over a period of three months, lasting from May 2003 to July 2003. It consisted of two brainstorming sessions that took place on the 21st and 27th of May, in which people from both NetCom and SINTEF participated. The preparations and analysis work before and after these sessions were mainly carried out by the risk analysis experts at SINTER Table 3 shows how many people from the two organizations were involved in the analysis and what roles they had.

Three Phases

The field trial was split into three main phases.

* The first phase consisted of context identification and high-level risk analysis. This was performed by the risk analysis experts (SINTEF) with input from NetCom.

* The second phase was the risk identification and analysis. This consisted of two half-day meetings at NetCom, as well as preparatory work performed prior to each meeting by the risk analysis experts.

* The third phase consisted of continued analysis, treatment identification and structuring of the results gathered during the brainstorming sessions.

Context Identification

The goal of the first sub-process is to identify the context of the analysis, in other words: what are we going to analyze? This includes describing the system, its environment and the target of evaluation, and identifying usage scenarios, the assets of the system and its security requirements. The process steps that were followed for the context identification are illustrated in Figure 1.

With assets we mean those parts of the system that contain a value that can possibly be lost. This can be anything from information to hardware. The identified assets are documented in an asset diagram, which is a UML class diagram. The asset diagram for this case is shown in Figure 2.

Every context identification process ends with an approval meeting where all stakeholders involved in the coming risk analysis agree on the chosen target of evaluation and the describing documentation.

It was decided that NetCom's MinSide application was a suitable target of evaluation for the field trial. Prior to the context identification activity, NetCom provided system documentation in the form of UML (OMG, 2003a) use case (Cockburn, 1997) and class diagrams, use case descriptions and other textual descriptions.

The risk analysis experts produced UML sequence diagrams based on the use case descriptions provided by NetCom, which were sent to NetCom for review and approval. Following is a selection of risk analysis documentation in the form of tables and diagrams that specify the target of evaluation and provide the main input to the risk identification sub-process.

Table 5 contains a use case description made by NetCom. This is shown to illustrate how such a description looks and to show the source for the sequence diagram in Figure 3. The description contains some terms that are specific to NetCom; they are irrelevant for the understanding of the case and will therefore not be further explained.

Based on this use case, a sequence diagram was created, as shown in Figure 3. The sequence diagram shall specify the same behavior as the use case description. However, we believe that the sequence diagram is much easier to read and therefore more suitable as a starting point for a risk analysis. This sequence diagram was one of the diagrams used during the first risk analysis session.

The data flow diagram shown in Figure 4 was one of five diagrams provided by NetCom as system documentation to be used during the second risk analysis session.

Risk Identification

The risk identification process was performed during two meetings at NetCom on May 21 and May 27. These two risk identification sessions were the key activities in the analysis. They not only served to generate risk analysis results, but also gave valuable feedback on the CORAS process. Following is a description of these meetings.

21st May - First HazOp Analysis

The meeting started with an approval session where the risk analysis leader performed a walkthrough of the context identification results and sequence diagrams that would be used as a basis for the risk identification. This was done as part of the first risk analysis meeting instead of conducting a separate approval meeting.

Based on the results of this approval meeting, some information was added to the asset and risk evaluation criteria tables, but no other significant changes were made. Later it became clear that the importance of this approval was underestimated by both the system experts and the risk analysis team, as described.

HazOp Analysis

After the approval session, the risk analysis leader gave a brief introduction to HazOp (Hazard and Operability) analysis (Redmill, 1999), a risk analysis method to be used during the risk identification session. A HazOp analysis can be described as a 'structured brainstorming'. The idea is to focus on certain items in the system documentation that are part of the target of evaluation, and try to identify risks connected to failure or incompleteness of these items. In this case, the use cases and especially their corresponding sequence diagrams were used. In order to find threats to the scenarios described in the use cases, one can ask the following questions for every message in a sequence diagram.

What happens if this message...

* ...is not sent?

* ...is not received?

* ...is delayed?

* ...is changed?

During a HazOp session, the knowledge, expertise and intellect of all the members in the group is exploited, in order to find as many relevant risks as possible. The session is led by the risk analysis leader while the risk analysis secretary is responsible for writing down the results of the analysis itself. The results are stored in a HazOp table. Table 6 shows a part of the HazOp table produced during this risk analysis session. The CORAS tool was used to store the results from the HazOp analysis.

The threats identified during the HazOp analysis are drawn in a threat diagram. An example of such a diagram from this analysis is given in Figure 5. The threat diagram shows the security scenarios that initiate the unwanted incidents that affect the assets.

This case showed the importance of displaying the system documentation, which is the source for the analysis. The system documentation diagrams are the main input to HazOp, and it is therefore important for the people involved in the analysis to be able to look at them during the whole session.

While analyzing the different steps of the sequence diagrams, it became clear that the diagrams did not describe the system correctly, for example, they were not complete or showed wrong behavior. In an ideal situation this would have been recognized and corrected during a separate approval phase. The fact that this was not the case here indicates that the approval session deserves more attention.

An important organizational detail for this type of analysis is the physical separation of analysis objects and recording results. Only one laptop was used for showing the diagrams to be analyzed and for recording the analysis results, which led to confusing situations. A better solution would have been to use one laptop for showing the diagrams to be analyzed and one laptop for gathering the analysis results. The second analysis session proved this was indeed a right conclusion.

A comment from the system experts was that the information in the sequence diagrams was at too low a level of abstraction and that they were not very suitable to identifying threats. A bigger picture was suggested that could include more of the surrounding environment (users, mobile phones, customer service, social hacking, etc.). As mentioned above, this also motivates using a reasonable amount of time on approval of system documentation, not only to ensure that the documentation is correct, but also that it is addressing the right level of abstraction.

It was decided to update the target of evaluation and to use data flow diagrams supplied by NetCom as the basis for the analysis during the second meeting. This meant that focus was shifted to a subcomponent of the MinSide application responsible for the login and authentication process. The system specification used during the second session consisted of data flow diagrams. One of these diagrams is shown in Figure 4.

27th May - Second HazOp Analysis

This time, the data flow diagrams were used as an input to the risk analysis process. The risk analysis leader led the brainstorming session, using one laptop to show the diagrams that were being analyzed to all the participants. Another laptop was used by the risk analysis secretary to record the results on the fly. This activity was hidden from the other participants, allowing them to focus completely on the brainstorming session and coming up with new threats and risks. The risk identification process is illustrated in Figure 6.

A selection of the results of this second HazOp analysis session is given in Table 7.

Again the results of the HazOp analysis were translated into threat diagrams. Figure 7 shows one of them.

After the risk analysis leader had gone through all the data flow diagrams, the HazOp table was shown to everyone, and the remaining time (about one hour) was spent cleaning up the table and filling in the missing information such as frequencies and consequences.

Risk Analysis

As described above, during the risk analysis sub-process, the consequences and frequencies for the identified unwanted incidents are determined. Unwanted incidents become risks as soon as they are assigned a consequence and frequency value. Doing this requires a thorough knowledge of the analyzed system and is therefore also performed in cooperation with the system experts. When this is done the risk matrix can be drawn. Table 8 shows such a risk matrix.

The qualitative values for both consequence and frequency scales where already indicated in the context identification phase, and are given in Table 9 and Table 10.

During a complete risk analysis, a technique called Fault Tree Analysis (FTA) (IEC 1025, 1990) is used in order to calculate consequences of complicated unwanted incidents.

Because of resource restrictions during this analysis, it was decided to combine the risk analysis sub-process with the risk identification process that was carried out at the two NetCom meetings. Instead of using FTA, consequence and frequency values were estimated with the help of the system experts, and these values were recorded together with the other risk information in the HazOp table.

Risk Evaluation & Risk Treatment

The NetCom meetings were the only two sessions where the system experts and risk analysis experts physically met. The results of these sessions were structured and summarized by the risk analysis experts. As a result of this, sub-process 4 - risk evaluation and sub process 5 - risk treatment were combined, and these were performed mainly by the risk analysis experts at SINTER The risk treatment sub-process was however to a certain degree also combined with the risk identification process, by recording treatments that were suggested during the HazOp session.

Using the information of Table 8, Table 9 and Table 10 for the identified risks mentioned in the HazOp Table 7, we can range the risks after their risk value. This is done in Table 11.

Following is a selection of the indicated treatments for the risks with risk ID G2.1, G2.2, G2.3 and G2.4, here identified by G2.*. The treatment for these risks is specified in a treatment diagram and a treatment activity diagram.

CURRENT CHALLENGES/PROBLEMS FACING THE ORGANIZATION

The field trial produced valuable results in the form of identified threats and risks as well as possible treatments. One challenge for NetCom is to adjust these results of the analysis to its own organizational structure. Even though the analysis was restricted to address the MinSide application, the results of this analysis will affect other parts outside the scope of MinSide but inside NetCom's organization.

In fact, since the termination of the field trial, it has already been shown that the effect of this trial on new projects at NetCom has been considerable. The methods used during this field trial have been adopted in several new projects in order to indicate risks and possible treatments at an early stage in the development or maintenance process.

An individual project or case study with restrictions on both time and resources, carried out in a relatively large organization, will naturally have a corresponding limit on the ability to affect the organization. However, the choice of addressing only a small part of the organization implies a limit in itself. The expectations of such a project should reflect the amount of time and effort that is put into the case.

The scope of the risk analysis described in this case was restricted to the MinSide application. Even though the results of such a risk analysis cannot be expected to have a major impact on how NetCom handles its customers, it certainly gives a good overview on the functionality of this specific service.

The main problem connected to the use of the MinSide application that NetCom faces on a 24-hour basis is offering the customers the service they pay for, while protecting them at the same time. Through carrying out this risk analysis, this ability has increased. Since systems are continually updated, these analyses will also need to be updated. NetCom will always strive to be one step ahead of the people looking for the security holes in order to protect its customers. Hence a major challenge for NetCom is to obtain a correct picture of relevant risks and their risk values, and maintain the validity of this picture as the application, its context and NetCom's business objectives evolve.

Another issue related to this field trial is the relation between a system and its risk analysis over time. Is it enough to carry out a single risk analysis for a system like MinSide? Should a risk analysis of MinSide be carried out every other year? Every year? Are there systems that can safely be put into production without a preceding risk analysis?

These are topics that span far wider than the scope of this teaching case. We refer to the list of additional sources of reading to find references to books and articles about risk analysis in general and model-based risk analysis in particular.

Subject: Access control; Case studies; Benefit cost analysis; Data integrity; Risk assessment; Computer viruses

Classification: 5140: Security management; 9110: Company specific; 5240: Software & systems

Publication title: Journal of Cases on Information Technology

Volume: 7

Issue: 3

Pages: 110-130

Number of pages: 21

Publication year: 2005

Publication date: Jul-Sep 2005

Year: 2005

Publisher: IGI Global

Place of publication: Hershey

Country of publication: United States

Publication subject: Business And Economics--Computer Applications

ISSN: 15487717

Source type: Reports

Language of publication: English

Document type: Business Case

Document feature: tables diagrams references

ProQuest document ID: 198719789

Document URL: http://search.proquest.com/docview/198719789?accountid=38610

Copyright: Copyright Idea Group Inc. Jul-Sep 2005

Last updated: 2011-07-21

Database: ABI/INFORM Complete

Document 48 of 100

The Algos Center: Information Systems in a Small Non-Profit Organization

Author: Chinn, Susan J; Pryor, Charlotte A; Voyer, John J

ProQuest document link

Abstract:

Two systems faculty from a university was contracted to perform an analysis of information systems at the Algos Center, a small non-profit charitable organization which provides support for children and their families facing losses. The Center specifically requested help in integrating its fundraising and accounting software packages or exploring alternative software solutions. It also needed to generate reports required by the Board of Directors and United Way. Finally, the Center requested help in designing a family database to capture and track statistics about the families receiving services. As the team analyzed the Center, they discovered many underlying issues that would form part of their recommendations to the staff. This case makes two contributions. First, it reveals many problems facing small non-profit organizations, which primarily expend their resources on mission-critical activities, and allows readers to supply possible courses of action. Second, it provides an opportunity to evaluate how a consulting experience was handled and to make recommendations to ensure successful project implementation. [PUBLICATION ABSTRACT]

Full text:

ORGANIZATIONAL BACKGROUND

The Algos Center is a non-profit organization based on the East Coast. (Because we are using a pseudonym to describe the organization, the web site address cannot be revealed.) It was founded in the 1990s by an individual who helped a young relative deal with her aunt's death; he saw a need for a Center that would help and support grieving children. The Center's mission is just that: to aid grieving children, teens, and their families through outreach, education, and peer support. The model for this organization is the Dougy Center, which was the first center in the United States to provide peer-based bereavement support groups for grieving children (Chappell, 2001; http:// www.dougy.org/about.html).

In support of the mission, the Center sponsors many program activities, but bereavement peer support is the primary service provided (Rubin & Witztum, 2000; Stroebe, Strobebe, & Hansson, 2002). Approximately 170 children, teens, and adults attend these support groups every week. Trained volunteers conduct the groups. The volunteers seek to provide a safe environment for participants to express their feelings; they do not attempt to be counselors or therapists. A professional consultant or staff member also attends these meetings. All participants are welcome, even if they cannot afford the suggested monthly pledge donation. Groups are divided into age categories: three to five, six to eight, seven to 12, teens, and young adults (up to age 30). Adult family members participate in support groups as well.

A related program, the Life Care Program (LCP), offers support groups for children and teens dealing with family members facing terminal or life-threatening illnesses. This program was started in the mid-1990s in collaboration with several hospices, hospitals, and nursing and cancer associations. While the bereavement peer support program is ongoing, LCP is offered in six-week sessions.

Two other major programs are offered. The Diversity Peer Support Program provides peer support in association with Kennedy Elementary School, which has a very diverse student body. Many of the students come from war-torn backgrounds and have lost family members. The second program, Community Extensions, is aimed at helping schoolchildren who are faced with a loss, and at assisting adult organizations and businesses dealing with grief issues. Other Center services include presentations to organizations by trained volunteers, and sponsorship of an annual bereavement conference. In addition, the Center offers referrals to mental health professionals, gives telephone support, and sends brochures and other written materials to callers.

The Center is governed by a 25-member volunteer board of directors. The executive director, appointed by the board, manages three full-time staff, six part-time staff members, and five unpaid interns who are university students. More than 100 volunteers assist with the events and support groups. Because there are so few full- and part-time staff, the organizational structure is very flat and informal; most of the staff has direct access to the executive director (see Appendix A for the organization chart). The Center is a public, non-profit charity (a 501 (c) (3) organization) that relies on contributions from individuals, grants from foundations, and United Way allocations, as well as corporate sponsorships and special fundraising events, to support its operating budget. The Center sponsors many activities throughout the year including a Pet Walk, Fun Run, golf tournament, and a gala event featuring dinner and an auction. Appendix B shows its Statement of Income, Expenses and Changes in Net Assets for its most recent fiscal year.

Non-profit organizations such as this Center rely to a large extent on individual donations; successful fundraising necessitates tracking the funds that are received from each donor (Klein, 2004). Information is also needed to evaluate the effectiveness of each fundraising event. Non-profits often use specialized fundraising software for this purpose (Davis, 2002). In addition, the organization's accounting software must be set up so that donated funds or grants that are restricted in purpose can be carefully monitored to ensure that the funds are used only for their designated intentions (Gross, Larkin, & McCarthy, 2003). The Board of Directors typically wants expense information organized in the same way as the budget is prepared, generally by expense category such as salaries and rent, to ensure that the organization's expenses do not exceed the board's authorizations (Trussel, Greenlee, Brady, Colson, Goldband, & Morris, 2002). In addition, funding organizations such as United Way and government agencies, such as the IRS, require that expenses be reported by program type. Many non-profits thus have greater record-keeping requirements than do for-profit enterprises of comparable size (Cutt, Bragg, Balfour, Murray, & Tassey, 1996).

SETTING THE STAGE

Janet Tucker and Caryn Powell, two professors at a local university, both had a strong interest in non-profit organizations. Dr. Tucker was a professor of MIS with an emphasis in systems analysis, while Dr. Powell was an accounting professor with an emphasis in accounting information systems. They put out a general offer to conduct an information system needs assessment for any local non-profit organization in support of the university's mission of community involvement. The assessment could include problem or opportunity identification, project selection, a feasibility study, identification of project risks, and development of recommended courses of action (Block, 2000; Coates, 1997).

The Algos Center responded quickly to the solicitation, and, after a brief phone call with the executive director, a preliminary meeting was scheduled with the key organization members: Elizabeth Medford, Executive Director; Vicki Hume, Development Director; and Dawn Lopez, Operations Manager. Tucker and Powell put together an outline for their first meeting. They wanted to get a sense of what information systems issues the Center was facing, and to set the goals and boundaries for what they were offering to do. They wanted to clarify that they were not proposing to design and implement any new information systems, but rather to evaluate how information was being collected, stored, and reported, and to develop recommendations to improve the systems (Burt & Taylor, 2000). They wanted to set up a schedule to collect data and they also wanted to make sure that the board of directors would approve of their involvement (Cornforth, 2003).

At the initial meeting, Elizabeth Medford, Vicki Hume, and Dawn Lopez explained some of the major issues they had been having with their information systems. The first issue concerned the software they were using for fundraising, Paradigm (http:// www.mip.com/software/fundraising/paradigm.htm), and their accounting software, QuickBooks (http://quickbooks.intuit.com/). Vicki said she was having a hard time getting the reports she needed out of Paradigm. Both Vicki and Elizabeth acknowledged that there were inconsistencies in how data (notably expense codes) were being entered in each program. Dawn believed that they were not taking full advantage of Paradigm's features. They liked QuickBooks, but they wanted to see if there were features in it that they could be using better, or if there was a way for the two packages to work together. This is a concern that many non-profits have when they attempt to use off-the-shelf software (Jones, 2000). Dawn noted that they were currently entering duplicate data in both systems.

The second issue concerned reports that the Center was obligated to produce for the board of directors and United Way. As is true of many non-profits, the Center received revenue not only from hundreds of individual and corporate donations, but also from various funding sources, such as United Way. These fund providers need detailed information about how the money is spent (Bradley, Jansen, & Silverman, 2003). Non-profits also require accurate financial and program data in order to plan for future growth - an especially critical need for organizations like the Center with limited technological expertise (Smith, 2002).

The third issue involved a database project that Dawn was starting. She wanted to design a family database that would allow the Center to track bereavement meetings and to generate statistics. The database would be useful to the Center, and it would also facilitate reporting to United Way. For example, United Way required demographic data that the Center staff had had trouble compiling other than manually (Cutt et al., 1996).

Elizabeth indicated that the Center was growing, and there was a need to prepare for the growth they were expecting. Tucker and Powell were offering their services pro bono, but they did ask Elizabeth if they should be mindful of any financial constraints when developing recommendations for purchasing software or equipment. Elizabeth said not to worry about it. Elizabeth also asked for confidentiality when viewing any information about their clients. However, she and the rest of the staff agreed to be very open about sharing documents and other agency information with the university team.

After their meeting, Tucker and Powell immediately drafted a letter to Elizabeth, which in essence was the consulting contract (Block, 2000). The agreement was to review their software, reports, and database design, and to evaluate alternative approaches to the integration and growth issues that had been discussed. The letter stated that the Center's current environment would be assessed through interviews, document collection and review, and an analysis of their computer systems. The project, starting in July, was to terminate in the fall with a formal report of recommendations.

CASE DESCRIPTION

Gathering Fundraising & Accounting Software Requirements

Tucker and Powell decided to meet first with Dawn Lopez, Operations Manager, to get an overview of how Paradigm (the fundraising software) and QuickBooks (the accounting software) were being used. Dawn was glad to show the team what she did. The team immediately got the impression that Dawn, as an information technology manager, worked hard to keep the Center's operations running, even though she worked part-time while pursuing a degree at a two-year technical school. Administrative Assistant Alicia Austin recorded donations in Paradigm, and then, Dawn recorded the donated amounts in QuickBooks. Dawn stated that she believed Paradigm could be used to record information about the volunteers that the Center wanted but was not currently collecting. She also showed the team how she produced reports in QuickBooks.

Dawn provided the team with a document describing deposit and data entry procedures. The team noticed that the names used for the same donation types entered in Paradigm and in QuickBooks were not consistent. For example, QuickBooks used "publications" and Paradigm used "booklets" to describe the same thing. The team observed Dawn as she demonstrated how deposits were entered into QuickBooks. At month's end, she manually compared the deposit report generated in QuickBooks with the list of donations entered in a Paradigm report. They usually did not match, and Dawn had to discover where the discrepancies were. In the case of one particular discrepancy, it was not easy for her to show the team how she had resolved it; she had simply attached a sticky note to a printed report saying that the discrepancy had been resolved. It seemed to the team that there was much less duplication of data in the fundraising and accounting programs than had originally appeared to be the case. The total dollar amount of a group of donations deposited at one time was entered as a single transaction in QuickBooks; the individual donations and data relating to each donor were recorded only in Paradigm. In another instance, the team observed Dawn entering a contribution that was designated to cover expenses as a negative expense, instead of as contribution revenue that would offset the relevant expense. Dawn admitted that although she was responsible for entering data into QuickBooks, she had no formal training in accounting. This is a common problem for non-profits with limited staff; they may not have been trained to enter data properly (Barrett & Greene, 2001). The team and Dawn also discovered that Paradigm only supported exporting data to a limited number of programs such as dBase, old versions of Excel, and a comma delimited ASCII format. There were no export options to QuickBooks. Dawn had not been successful trying to export data.

After meeting with Dawn, Tucker and Powell believed that meetings with both Vicki Hume and Elizabeth Medford were needed. They wanted to know how Vicki was using Paradigm, what reports she was producing, and what information she needed that she was not able to produce. From Elizabeth, they wanted to learn more about United Way reporting needs.

The team met with Vicki Hume and inquired about the donation category and expense code discrepancies between QuickBooks and Paradigm. Vicki replied that the staff had simply not gotten together to standardize the codes, and furthermore, that some codes were "deliberately" entered differently in the two software packages. She said she would prefer a solution where the Center could use QuickBooks for all their work, but she realized that fundraising software would be needed to handle event tracking, a feature usually absent from a general purpose software application.

As development director, Vicki was a heavy user of Paradigm. She generated two important reports: one segmented donors into categories to use in generating mailing lists; the other was an analysis of contributions, which she used to track the progress of fundraising campaigns and to analyze donation trends (see Appendix C for a sample report). In order to produce reports, it was necessary to generate queries; some reports also required subqueries. For many reports, Vicki kept getting an error message that the subquery could not return more than one row. The team asked Vicki to keep track of specific querying problems over the next few weeks. Vicki agreed with Dawn that there were many functions in Paradigm that were not being used, and that it was hard to figure out which fields would print out. She also had to resort to calculating many aggregate functions (e.g., counts, averages) manually. When the team asked if she consulted the user's manual to help solve some of these problems, she remarked that the user's manual was missing. Concerning vendor support, Vicki said she believed they paid a flat rate for a specific number of calls per year, and to ask Dawn for details.

During a subsequent meeting with Dawn, Vicki presented the team with a Paradigm query she had tried to run without success. Vicki also said that she wanted an audit trail of who made each update to the data in Paradigm to see who might be to "blame" for poor data entry. Later, back at the university, the team re-ran the query using test data on their office computer and found that it worked perfectly. During their next visit, they examined some of Paradigm's features with Dawn and found an error log tool. The error log displayed error codes and SQL statements that appeared to fail because of data entry problems (e.g., attempts to put two values into a single-valued field). Dawn learned that she could contact the vendor to acquire SQL scripts that could be run to "kick out" problem data. Dawn had never previously looked at the error log.

Tucker and Powell asked Dawn for more information about Paradigm documentation and user training. First, the team inquired about the missing Paradigm manual; Dawn said it was available, and that Vicki would often say that something was missing when, in fact, it was not. Dawn loaned the manual to the team and the CD-ROM updates. The CD had updated pages that were supposed to be printed out and inserted into the manual, but although the pages had been printed out, Dawn lacked the time to insert the pages. It was later discovered that the CD actually had the complete manual on it, but that several computers (including Vicki's) lacked CD-ROM drives. The team then asked about the Paradigm training Dawn had received. Training is often a major component in successful technology adoption, but can often be a shortchanged component in a resource-constrained non-profit organization (Barrett & Greene, 2001; Hecht & Ramsey, 2002; Light, 2002). Staff personnel need to be cross-trained in the event that one staff member should leave. The staff also needs ongoing training to take advantage of up-grades in software, hardware, networking, etc. (Smith, Bucklin & Associates, Inc., 2000). Both Dawn and Alicia had taken a training course. The training emphasized building queries that served as the basis for generating reports. Dawn told the team that she could call the vendor for unlimited support and that all of the updates came bundled with the support contract.

Center Reporting Requirements

Elizabeth discussed reports requested by the board of directors with the team. To produce one of the reports required by the board, the treasurer had to export information from two QuickBooks reports into an Excel spreadsheet; from there, he had to manually prepare the report in the desired format. Elizabeth hoped it would be possible to produce this report more easily, saving the treasurer much effort. Elizabeth also explained that the board needed to have monthly reports that listed expenses by functional classification (e.g., for salaries, rent, depreciation, and utilities) in the same format in which the budget was prepared (see Appendix D for a sample report). This format would improve the directors' ability to compare expenses with budget authorizations. United Way required not only expenses by functional classification, but also wanted management expenses to be distinguished from program expenses (see Appendix E for a sample United Way report). The Center wanted to set up the accounts in QuickBooks so that the data could be retrieved more easily by both functional classification and program. In addition, Elizabeth explained that increasing reliance on grants meant that in the near future, the Center would need to start tracking the use of restricted purpose funds across fiscal years. There was no one on the staff who knew how to do this in QuickBooks.

The Family Database Project

Elizabeth explained that the Center needed a database because United Way required a lot of demographic information about the Center's clients, such as age, ethnicity, etc. She provided the team with the Center's intake form that clients fill out and a copy of the United Way's information requirements. Elizabeth said there were two important reports that would be "nice to have." First, she wanted a report that provided the reasons why families sought out the Center; this report would enable the staff to analyze who did or did not use the Center and why. The second was a report that would show the growth in demand for services over the years. Dawn provided the team with a description of the types of information they wanted from the database. Some of the desired information would require data the Center did not currently collect. She also provided a copy of her plan to set up the database in Microsoft Access (http:// www.microsoft.com) including a list of tables and attributes (see Appendix F for her data model).

Tucker and Powell analyzed the forms and compared them to both Elizabeth's reporting requests and to the requirements Dawn had provided for future report generation. The Center's intake form lacked some of the fields (e.g., ethnicity) for information that Elizabeth needed for United Way reporting. In addition, some of the information, such as income that United Way requested was included on the intake form, but was not being filled in.

The team spent additional time seeking clarification from Dawn about the data the Center wanted to track, as well as assessing her database design skills and her preliminary data model. Dawn said she had taken an online course in Microsoft Access and had gotten an A in it; however, the concept of foreign keys was new to her. As the team worked with Dawn on redesigning the data model, they discovered that the Center also wanted to use the family database to track attendance at various group sessions; however, facilitators were not taking attendance at group meetings. The Center also wanted to track phone calls using the family database; thus, Dawn had included phone calls in her original data model. The Center wanted every cold call as well as calls from participating (current) clients to be included in the database. There was no policy about how long the Center planned to keep the data. Pamela Russell, Family Coordinator, kept a manual phone log, so the team decided that talking with her would be in order (see Tribunella, Warner, & Smith, 2002, for a rigorous discussion of database design).

The team then paid a visit to Pamela to look at the phone log. They discovered that Pamela kept a manual log of all calls, but that she was instructed to check off only one action (outcome) per call (see Appendix G for the phone log form). For example, if she mailed program information to a caller and provided an outside referral, she could only select one of those outcomes. At the end of every month, she manually tallied up the different actions and then summed those totals for the reporting year (Tribunella et al., 2002, discuss more systematic data gathering approaches).

CURRENT CHALLENGES/PROBLEMS FACING THE ORGANIZATION

Given the number of technology issues they found, Tucker and Powell were impressed with the way the Center's staff managed to keep their operations running as smoothly as they did. They were further impressed when they saw the hardware the Center was using. The file server was a donated PC that was rapidly running out of disk space. During the team's visits, Dawn was able to acquire another PC that she hooked up to the first one as a cluster. Most of the computer equipment in the Center had been donated; in fact, one of the team members wound up donating her five-year-old computer, and it was gratefully accepted. They were particularly impressed with the staff, especially Dawn. Not only was Dawn going to school and working at the Center part-time, she was also heavily involved (as were the rest of the staff) in fundraising activities. She even served as a bereavement support facilitator.

As Tucker and Powell studied the Center, they kept thinking about what they would put into their final report of recommendations, and what kinds of reactions they would receive. The Center, as an organization with a small staff and limited resources, was acting as an "adopter" of technology; that is, the type of organization that is simply operating in a survival mode and "making do" with existing technology (Fried, 1995). A major challenge facing many consultants working with non-profits is that they encounter a culture where non-profits shortchange themselves on technological resources, so that they can devote most of their resources to the primary mission (McCarthy, 2003). Tucker and Powell also knew that some of the Center's staff was aware that technology might be better harnessed to support their mission activities, but the staff did not have a plan in place for realizing this goal. Some of those technology goals would mean that the Center would experience radical changes in its business processes (Amis, Slack, & Hinings, 2004). Was the Center ready for change? The team also reflected on how they might evaluate their own efforts as consultants and as change agents (Bergholz, 1999). They had tried to function in the role of facilitator, which involved empowering clients to "own" changes in technology use and to mobilize and support client initiatives (Winston, 1999); however, they wondered if instead their role had been more of a traditional one or as an advocator. In the traditional role, consultants functioning as change agents focus on the implementation of technology, while advocators create a business vision and proactively function as champions for change (Winston, 1999). Was their position as facilitator a good match for a client in the adoptive mode? Had they been effective consultants to the Algos Center to date? How could they be useful to the Center in the future?

Subject: Accounting systems; Case studies; Technological planning; Nonprofit organizations

Location: United States, US

Classification: 5240: Software & systems; 4120: Accounting policies & procedures; 9110: Company specific; 9540: Non-profit institutions; 9190: United States

Publication title: Journal of Cases on Information Technology

Volume: 7

Issue: 2

Pages: 1-15

Number of pages: 15

Publication year: 2005

Publication date: Apr-Jun 2005

Year: 2005

Publisher: IGI Global

Place of publication: Hershey

Country of publication: United States

Publication subject: Business And Economics--Computer Applications

ISSN: 15487717

Source type: Reports

Language of publication: English

Document type: Business Case

Document feature: charts references tables

ProQuest document ID: 198658568

Document URL: http://search.proquest.com/docview/198658568?accountid=38610

Copyright: Copyright Idea Group Inc. Apr-Jun 2005

Last updated: 2011-07-21

Database: ABI/INFORM Complete

Document 49 of 100

Automotive Industry Information Systems: From Mass Production to Build-to-Order

Author: Howard, Mickey; Powell, Philip; Vidgen, Richard

ProQuest document link

Abstract:

Building cars to customer order has been the goal of volume vehicle manufacturers since the birth of mass production. Eliminating the vast stocks of unsold vehicles held in distribution parks around the world represents potential savings worth billions, yet the current supply chain resembles islands of control, driven by production push. Despite recent advances in information technology offering total visibility and real-time information flow, transforming an "old world" industry to adopt customer responsiveness and build-to-order represents a significant step change. This requires overcoming barriers both within and between supply partners and at all levels of the supply chain. Yet, what are these barriers really like and how can the industry overcome them? [PUBLICATION ABSTRACT]

Full text:

ORGANISATIONAL BACKGROUND

Automotive manufacturing is a global industry producing 56 million new cars per year, and represents a significant proportion of gross domestic product in developed countries, for instance, 5% in the United Kingdom (Crain, 2002). Yet despite steady sales, the industry in Europe is facing a period of significant change, driven by poor profitability, excess finished stock and over-capacity. Current vehicle manufacturing and distribution represents an old-world industry struggling to come to terms with a digital economy, driven by increasingly price conscious, demanding customers who require vehicles built to individual specifications and delivered in short lead-times. Vehicle manufacturers can no longer rely on selling cars from existing stocks and are shifting their business models away from mass production toward mass customisation and build-to-order (BTO).

The 'double prize' for manufacturers in achieving BTO is eliminating the vast car parks of unsold inventory, and reducing vehicle discounting by dealerships that can demand a premium price for vehicles tailored and delivered according to customer choice. However, this increases the importance of existing systems for efficient order execution and integrated information flow, where manufacturers' IT infrastructure still reflects the hierarchical, function-orientated nature of communication in many corporations.

The rise of BTO reflects the increasing dissatisfaction in the marketplace with the traditional vehicle production philosophy that typically builds the vehicle first before finding a customer. In Europe, manufacturers expect dealers to hold between 60 to 100 days of inventory that amounts to billions of dollars (ATKearney, 2003). Even in the USA where vehicles are usually sold from dealer stock, 74% of customers would rather wait and order the vehicle instead of buying one from the dealer lot that is incorrectly equipped (Business Wire, 2001). Customers are beginning to realise that they are paying for the waste in the automotive distribution system. Hence, many manufacturers are now exploring the possibilities of reducing order-to-delivery lead-time to the customer through their own initiatives: that is, BMW - 'Customer Orientated Sales and Production Process'; Ford - 'Order Fulfilment'; Renault - 'Project Nouvelle Distribution'; and Volvo - 'Distribution 90'.

SETTING THE STAGE

The ability to communicate effectively both locally and globally increases the reliance on information systems (IS) and information technology (IT). The auto industry operates complex IS, where current systems act as a major inhibitor both to time compression in the order fulfilment process and to organisational change. These inhibitors or information barriers, are the subject of a research programme called '3DayCar'. A key finding from this research shows an average delivery lead-time of a new car in the UK is around 40 days. Moreover, only 5% of the delay is taken up by manufacturing, and 85% of the process is related to customer order, supplier schedule, and vehicle sequence information systems (Figure 1).

A transformation is required in order to satisfy customers and remove the functional chimneys, silo mentality and waste, towards the integration of IS across the whole supply chain. 3DayCar (3DC) is a complex project that aims to understand the current practice, relationships and technology. It involves universities and independent research institutions to examine the role of BTO and the barriers to change across the automotive supply chain in the UK. The programme is unique as it encourages the participation of sponsors from all parts of the supply chain and some beyond, including vehicle manufacturers (VMs), dealers, component suppliers, logistics, consumer groups, trade associations, and financial corporations. The key objective of 3DC is to develop a framework in which a vehicle can be built and delivered to customer specification in minimal lead-times, with a three-day order-to-delivery as the ultimate goal.

The generic map of the current order fulfilment process presents the extent of the problem to order, build and deliver a new vehicle within a short lead-time (Figure 2). It uses process mapping to record information and physical flows during the order to delivery process. In response to the productivity gap between Japan and the West - highlighted by the best-seller, The Machine that Changed the World (Womack, Jones, & Rods, 1990) - the past two decades have seen vehicle manufacturers optimising their own production operations while transferring more responsibility to upstream and downstream partners. Figure 2 highlights the challenge for the industry today, where competitiveness no longer depends solely on assembly plant performance and 'metal bashing', but on the collaboration of all stakeholders across the entire vehicle delivery process - from extraction of raw material to final inspection at the dealership.

Identification of the barriers to change is essential if they are to be incorporated into planning for the redesign of the industry (Figure 3). This will promote a successful transition from the current mindset of 'production push' and the erosion of profits through discounted sales, towards responsive production and 'customer pull'. The following accounts explore the experiences of key industry stakeholders, and highlight the major difficulties both in identification and amelioration of information barriers.

CASE DESCRIPTION

Customer & Dealer

"We don't confirm the delivery date to the customer until the vehicle actually arrives at the showroom, so much can go wrong. " (Sales Director)

The lack of integration between Dealer Management Systems (DMS) and Dealer Communication Systems (DCS) is causing high levels of hand-keying and information duplication. Dealers operate two distinctly separate systems: DCS is linked with the VM and provides information on vehicle availability, price, incentive and orders. DMS provides the dealer with their own independent database of customer details, costs, and sales. When an order for a new vehicle is placed, significant levels of duplication occurs, where identical data such as vehicle description and owner details are hand-keyed into both systems. Ideally, dealers can do without the complexity and delay caused by maintaining two systems.

Other stand-alone PCs are also used to support activities such as finance schedules. Hence, in terms of changing the entire vehicle delivery process from a manual to an electronic system, much development is required, as there are still up to 20 'hard copy' documents per vehicle. For example, this research found the process to require an Order Form, Cash Back Claim Form, Vehicle Invoice, Supplementary Invoice, Vehicle Registration Certificate, Vehicle Swap Sheet, Vehicle Delivery Note, Purchase Invoice, Product Delivery Inspection Note, and Requisition Note.

Dealerships in the UK still operate within a territory, and their customer data is considered confidential both from the VM and other dealers. It is suggested that integration is possible if DMS system architects can be persuaded to use a common middleware implementation with DCS capable of masking specific data streams. This means that each system must retain the facility for hiding certain information fields from other organisations. Extensible mark-up language (XML) will be a key enabling technology in this situation. XML is a universal standard for representing any kind of structured data. 'Markup' means the insertion of information into a document to convey information about its contents. The power of the language is that users can access documents in an intelligent manner based on the grammar they use. Thus, specific files can only be accessed according to a standard, predetermined syntax.

System Support

The system support provided for dealers is often inadequate and not aligned with the needs of the business. Hardware choices promoted by the VM may be inappropriate. For example, current DCS satellite bandwidth is often too narrow to transmit all necessary information to the VM. Consequently, some dealers are reverting to traditional terrestrial systems. Due to the complexity of the process and the duplicative systems, training system administrators for the role can take between one and two years.

Despite Sunday being a busy day for order enquiries (confirmed by 3DayCar market research), no IT system back-up is provided by VMs because the weekend is traditionally reserved for system maintenance.

Liaison over systems designed for the dealer network does not appear to adequately involve 'Dealer Councils'. The manager of one dealership stated that he had heard of 13 new DCS software 'improvements' currently being prepared by the VM, but had not been consulted about any of them during their development process. There is a distinct feeling of 'IT Specialists' at the VM creating new software without working with the end user first. This extends to the use of the Internet by dealers for new car sales: the lack of their involvement in the VM's going online is making dealers uncertain of the future and provides the gap for new entrants, particularly Internet brokers, to enter the market.

Order Visibility & Customer Information Needs

Order visibility beyond stocks held in VM compounds and distribution is highly variable, but all dealers can see UK market stock for their franchises. If the vehicle required by the customer is visible in the stock locator, such as held in a compound or at another dealer, then response is either instantaneous or reasonably quick.

Once a factory order has been placed, some versions of DCS can provide data further upstream in production, but feedback can be slow. If the vehicle is in the VM pipeline, then it can take 24 to 48 hours for this information to be given to the dealer.

Some dealer franchises can see into production, others cannot. Some dealers can see all orders in the pipeline; some can only see their own orders. Some VMs raise all stock orders; some systems operate totally from dealer orders, requiring the dealer to phone another dealer who has an unsold model and 'agree to a swap' before they can acquire it and specify it for their customer. All systems allow different levels of order specification amendments.

Many DCS either do not give a delivery date, or have significant time delays in confirming them, which is a particular problem for customer-built orders. When dealers are given delivery dates on the system, these can and often do change and are not guaranteed. Dealers will add on days for quotation to the customer to compensate.

Dealers and customers need a search facility for stock and pipeline that supplies the information they need when they want it. If they request a certain specification, product mix, and delivery date, they want to know whether these service needs can be met, and what near matches are also available.

Uncertainty Over the Internet for New Car Sales

Dealers are in an uncertain position on how to embrace the Internet for new car sales. The introduction of vehicle selling over the Internet is seen as a threat by some dealers, concerned that they will lose significant market share of price driven, online purchasers either buying direct from the manufacturer or from importers such as Jamjar or Virgin Cars.com. Others feel that brokers such as Autobytel are building an Internet presence for dealers and customers in the gap left open by VMs. These brokers are able to advertise over any geographical area and allow customers to search for value offers by contacting many dealers quickly and efficiently. Some dealers feel that the customer prefers a face-to-face purchasing experience, built on the more traditional concept of 'service and trust' and that the Internet cannot replace these elements of new car buying.

'Clicks and mortar' summarises the use of the Internet in the USA where it is generally perceived as an extension to existing customer services and where vehicle enquiries are directed to the nearest available showroom. In the UK, leads to customers are being generated for dealers via manufacturer sites and brokers, but very little through their own sites. However, it must also be remembered that the UK is behind the US in most respects in e-commerce, although it is catching up fast. The 3DayCar National Franchised Dealer Association (NFDA) survey highlighted that dealers feel slightly threatened by the Internet, but would have faith in a 'clicks and mortar' approach if the manufacturers gave them more of a lead in implementing an integrated online new car sales presence.

Dealers & Change

Dealer IT Systems currently suffer from excessive hand-keying, duplication of processes and poor integration. They have largely failed to capitalise from the technological advances of the last decade, shown by their reliance on manual controls and hard copy documentation. However, to what extent have barriers emerged through a lack of technological integration as opposed to process re-engineering?

Significant conflict exists in vehicle retailing at present between the traditional 'territorial sales' approach encouraged by the VMs, and the 'empowered customer' approach currently being adopted by new entrant IT specialist companies. New entrants who offer customers the facility to trawl for a quote from any number of dealers, are undermining the current system based on local sales territories. Despite the imminent threat of losing market share to importers, the traditional boundaries between VM/ dealer and dealer/dealer remain, where system ownership and resistance to sharing is obscuring the potential benefits of a collaborative solutions. One dealer is quoted as saying:

"Technology is the easy bit, 90% of our problems are process related".

Vehicle Manufacturer

"The Internet is the 21st century equivalent of the moving assembly line." (Jac Nasser, Ford Motor Company CEO, 1999-2001)

'Batch Processing' represents a major IT systems barrier to 3DayCar where large numbers of customer orders are processed prior to production at a set time every 24 hours. The current configuration of VMs' systems typically results in individual mainframe systems updating overnight, processing batches or 'buckets' of orders in time intensive cycles that adds four to five days to the order lead time (Figure 4). Due to the fact that the information flow through the batch processing systems is largely un-sequenced, it is possible for the output of one process to miss the start of the next window, adding further time into the process.

IT managers confirmed that there was an increasing emphasis on developing the capability for building-to-order. Proposals had been made to 'speed up' the system by shortening batch processing periods to around 10 minutes (currently around four hours, overnight). This represents a logical progression for VMs that can avoid scrapping existing databases, and only needing to replace IT software in order for it to handle such a change.

IT System Legacy

Legacy systems were originally built for a 'different world' of IT capability, specific tasks, and where technology was associated with 'control'. Systems today are still driven by in-bound logistics and pushed by production, rather than by order demand.

It was found during the research that the total lead-time required to develop, pilot and 'roll-out' systems across several continents could be as much as 10 years. Once committed to an operational IT strategy, VMs have little choice but to complete them almost regardless of any changes to the external business environment that may occur during the period.

Changes to the IT infrastructure have been achieved in the past by simply 'bolting on' additional systems alongside existing mainframe architecture. For example, in the 1990s, PC-based, client-server architecture offered a powerful industry standard on which to base new systems. However, very few of the old systems were ever fully engineered out of the business and switched off, resulting in a mess of complex, overlapping networks. Today a typical production plant runs over 200 separate IT systems; hence, many VMs are faced with an expensive and ongoing burden of replacement and repair of an aging 'spaghetti' infrastructure.

Often, the fault lies not with the legacy databases themselves (the 'IBM AS 400' remains one of the most popular and reliable models from the 1980s), but the network of cabling, applications/software and user terminals, that require replacing without disrupting the order flow.

The introduction of 'middleware' technology such as Tuxedo (BEA Systems) has significantly increased the flexibility of writing IT applications as business services and linking this information with local area network and Internet-based environments. However, the success of this approach depends on the reliability of the legacy system. Some VMs have begun to recognise the weakness of simply building onto existing infrastructure and are now systematically replacing sections with 'modular solutions' that offer a universal platform and the flexibility to accommodate future change. There are products available now that allow core systems to be retained without having to renew the entire network.

Stovepipe/Chimney

IT systems tend to be designed to meet the specific objectives of the different players in the supply chain within an organisation. They are not, therefore, driven by true customer order fulfilment philosophy and inhibit smooth order flow. 'Stovepipe/chimney' refers to the mentality that focuses on the requirements of specific parts of the process without considering what effects may result in other areas. This multiplies the series of batch systems operating, such that once an order has entered the system, it is often invisible to the rest of the organisation and other supply chain partners until it reaches the order sequencing or operational scheduling stage.

The stovepipe/chimney mentality also extends inside the functions. Manufacturing is a particular example where, once an order enters the order bank, it often cannot be amended, before emerging from production in, at best, eight days time. The extent of IT legacy means that the ability of VMs to move toward a BTO environment is severely limited. VMs are largely governed by a centralised 'package' mentality, built around an in-bound logistics optimisation view rather than out-bound customer delivery. There is some evidence of a growing emphasis being placed on removing internal stovepipes and increasing system visibility. However, where this is the case, change is quoted by automakers on a timescale of five to 10 years.

Central Management Systems

Central management systems are popular amongst VMs because of the ease of maintenance and the purchasing advantage gained through economies of scale. However, the time lag introduced at regional plant level, where central batch processing cannot allow for local time differences, can result in higher levels of inventory.

The research also found examples of managers flying around Europe looking for the original IT system architect. In some cases, it took weeks to locate and resolve the system query because the problem originated from central VM headquarters, located on the opposite side of Europe.

Driven by material optimisation, IT systems are designed for the purchasing and in-bound logistics (pull to production) aspects of supply rather than for the flexibility to respond to individual markets (pull to customer demand). Is there a case for examining the balance between central versus regional systems?

Supplier

"Once you get past Tier one, there aren't any system standards." (IT Manager)

EDI Standards

Electronic Data Interchange (EDI) emerged in the early 1980s as a bespoke, dedicated communication link between two organisations for logistical and technical messaging. Suppliers perceive the major IT system barrier as a lack of adherence to EDI standards by VM's in terms of protocol and data format (label layout). Protocol means the language used during transmission: for example, OFTP (Odette File Transport Protocol) and TCPIP (Transport Control Protocol - Internet Protocol). Data format refers to the visual interface containing predetermined fields or subsets into which information is entered: for example, supplier name, address, date, material, and quantity.

Odette was set up as the original EDI system with the support of Ford Europe in the early 1980s, but they felt the system was not developing fast enough and went on to develop VDA and Fordnet. While many European Suppliers still use a version of Odette, France has developed its own system called Galia. No VM uses EDI in exactly the same way. The differences usually manifest themselves in the layout and content of the data. In an attempt to make systems more compatible, all VMs have pledged to adopt a new standard called Edifact where everyone will use universal 'fields' (i.e., NAD-Name and address, QTY - Quantity, DTM - Date and time) with free-text fields left for specific comments.

Currently, EDI format changes are made by VMs up to three times a year. Suppliers are already receiving messages in about a dozen different formats, all of which must be converted to a common standard before they can be processed internally. This all causes delay and disruption to the system, particularly in the event of a system malfunction. During the research it was calculated that each format change costs a supplier around two 'IT manager weeks' of labour. Considerable time is also spent with IT software consultants, where suppliers are understandably reluctant to build and maintain a customised system with diverse inputs from around a dozen demanding customers who seem to change their minds on a whim. Suppliers are currently concerned about the significant costs of IT system administration caused by the undisciplined approach by VMs and the implications of adopting new technology on an unregulated, firm-to-firm basis.

With traditional EDI, there is usually no acknowledgment, where messages are sent at a pre-agreed time to ensure the equipment is switched on and operating correctly. Internet communication offers many business-to-business benefits, particularly in areas such as automatic electronic invoicing that may soon become widespread across the industry. However, like many aspects of electronic communication discussed so far, homogenous procedures need to be established by all players.

Internet Security

There is some concern by suppliers who have adopted Web-enabled systems that do not offer sufficient reliability or security to conduct transactions between businesses. A total system failure, whether caused by the Internet or otherwise, cannot be buffered by the low stock levels typically held at most assembly plants. However, Internet security is being improved with the use of a virtual 'firewalls' which are inserted between the host organisation's core communication platform and the external electronic environment. Supply partners wishing to share information must first verify their identity via a password.

Some suppliers question whether the Internet is ready to support mission-critical operations, despite its success in other areas of commerce (e.g., Internet banking) where delay in delivering a message could ultimately mean the stopping of a vehicle assembly line. Accountability would ultimately rest with the supplier. The delays and occasional inconsistencies currently experienced in e-mail delivery, not to mention the new dimensions of Internet crime such as hackers and viruses, are regenerating some support for traditional, dedicated 'machine-to-machine' links such as bespoke EDI.

Visibility

Internet technology potentially offers total connectivity and visibility to the auto industry. At present, the component supplier does not know the true demand for his product. The end customer is seen as the VM, not the new car buyer. Current IT systems reflect this: There is no customer delivery date attached to any parts ordering. A component may be used within days of its despatch or may remain in inventory for a considerable period.

In the transition from traditional EDI to Web-enabled systems, the full potential of total visibility across the entire supply chain must be exploited: The system must not simply emulate the original functional, stovepipe/chimney mentality. A recent development is 'WebEDI' which emerged in the late 1990s using XML code and standard computers to offer a flexible, low-cost solution for suppliers seeking a connection to other business partners via the Web. It is increasingly used by tier 1 suppliers to overcome the high costs of installing bespoke EDI to connect smaller upstream partners, where improvements in efficiency and responsiveness can reduce the need for safety and buffer stock.

Questions remain about how suppliers will fit into the consortium automaker portals like the 'Covisint' Internet trade exchange founded in 2000 by Ford, General Motors, and DaimlerChrysler (also known as a portal or 'e-hub'). Some industry observers think a single automotive e-hub will evolve linking everything from the lowest-tier suppliers to dealers. Others believe a variety of exchanges will emerge, not a single online marketplace that dominates the industry. To date, the fortunes of the e-hub in the auto industry have been mixed, with Covisint suffering from a Federal antitrust case, delays in the introduction of new technology, and departures of a succession of CEOs. Current total investment in the hub stands at $500 million with still no sign of the business reducing its losses (ANE, 2004). Yet 'SupplyOn' is a successful third party managed hub originally founded by Bosch, which currently serves 2,700 suppliers. It receives a monthly subscription from each firm in return for the provision of electronic training, a connection service, and online collaborative product engineering software.

Logistics

"E-commerce and IT will wring out cost from our massive supply chain management systems." (Ford press release on their alliance with UPS Logistics, USA, 2000)

System Integration & Data Quality

In-bound logistics IT systems for materials and components to be delivered to the assembly line are more developed than out-bound vehicle distribution, but this contradicts the value of the goods carried. Despite having their own systems, the lack of contractual commitment given to logistics providers by VMs on out-bound delivery promotes a short-termism that hinders long-term investment and the development of new IT.

Vehicle manufacturer annual capacity is based upon a production plan and sales forecast, which will differ over the year. Capacity judgments by the logistics provider are based more on risk management than firm data. More information is required by logistics providers prior to vehicle release from production. The key issue is poor data on projected volumes and resource planning, as part of the general quality of advance information from VM's central control.

Labelling

In supplier-to-supplier logistics, or in-bound logistics, to the VM assembly plant, there are no universal standards in terms of Odette label formats. Upon receiving an EDI transmission, labels are individually printed off, attached to a crate or 'stillage', and the bar-code portion scanned before departure and upon arrival. However, subtle label format differences require significant levels of VM-specific knowledge by all individuals who come into contact with the system, creating confusion and inevitably resulting in time lost during the process.

Converting electronic data to 'hard-copy' documentation is becoming a very lengthy process for suppliers faced with delivering vehicle parts to depots in transit to other destinations. Typically seven duplicate copies of documentation per part are required, specifying carrier, warehouse, depots, and final destination. Some areas of in-bound delivery work well, assuming constant demand, such as sequenced in-line supply. However, it will be some time before logistics providers, suppliers and VMs achieve a truly 'paperless revolution' where electronic tagged containers automatically trigger a goodsreceived message as a truck completes its delivery, which in turn sets off a sequence of electronic billing.

Connectivity: Wide Area Networks & Extranets

Lack of connectivity is the main technical obstacle, particularly in current outbound logistics. Wide Area Networks (WANs) will replace Local Networks (LANs) and these WANs can be combined with company intranets to provide a shared space, an extranet, portal, or electronic hub. The combined power of e-hubs can be harnessed to provide a high portability of information, ease of transfer and access, eliminate re-keying of data and time lost on updates.

The replacement of traditional LAN-based access within companies by e-hubs will allow increased portability of information, reports and real-time data exchange between departments increasing their 'single world view'. This should improve the chance of non-contradictory messages from VMs being exchanged with supply chain partners, a common issue for logistics providers for out-bound transport. A common platform is needed to facilitate sharing spare capacity, particularly on return runs (called 'back loading') between rival haulage firms, although this requires significantly higher levels of trust between VM/logistics and logistics/logistics partners.

Planning & Routing

Load consolidation and planning is executed as vehicles come in from the manufacturer. There is no direct consideration of load consolidation and planning by the manufacturer in passing advance information to the out-bound logistics company. In a 3DayCar scenario, this would be unacceptable. Currently, around three days is given to move product, including time taken for consolidation.

Transport providers use off-the-shelf routing and load-planning software, but the development of more sophisticated network planning systems is under development and can learn from route planning. This software uses "genetic algorithms" that claim to cut journeys through experience and recalculation: A route is reworked over result generations to improve overall journey minimisation.

Proactive decision making systems are required, such as suppliers taking control of replenishment, based upon a signal to build for delivery date from order placement at the factory. Mid-journey re-routing could also be harnessed by logistics companies using global positioning system (GPS) and Internet technology in order to provide a '24/7' operating environment, which is totally responsive to changing requirements and takes into account fleet capacity. However, this represents a significant speculative investment for logistic providers.

CURRENT CHALLENGES FACING THE ORGANISATIONS

Organisations wishing to begin the transition from mass production to build-toorder face a number of significant challenges. This is because the problem lies less with 'technology', and more within the people who use it. A mindset change is needed away from vertical, hierarchical reporting and the optimisation of only part of the system (i.e., production) and toward embracing the concepts of information transparency and responsiveness from the perspective of the end customer. Four core challenges for the automotive industry as a whole are raised here:

1. There is considerable work to do in Europe (and the US) in building an electronic infrastructure that overcomes the proliferation of standards and protocols that creates so much additional work for supply partners. A situation where information systems expand through poor regulation, such as the case with bespoke EDI, must not be repeated with Web-enabled e-commerce.

2. Better measures are needed to encourage supply chain collaboration and the adoption of inter-organisational systems over the nature of the realised benefits from building-to-order, and a clearer vision over who - other than VMs - are likely to share in them.

3. A coordinated adoption of information systems across multiple stakeholders is needed, driven by 'electronic leadership' skills that are currently lacking at boardroom level. The premature departure of Jac Nasser as CEO of Ford shows that even top executives are not immune from the outcome of business decisions involving the Internet.

4. In order to meet the requirements of 3DayCar and build-to-order, there must be a reduction in the number of processes that an order goes through prior to production. Eventually, customer orders should be treated as 'batch sizes of one' capable of being handled in real time. Hence, a major challenge facing the automotive industry today is how to adopt an Internet-enabled inter-organisational system that supports total supply chain transparency and connects all stakeholders with the customer (Figure 5).

Subject: Automobile industry; Case studies; Order processing; Information systems

Classification: 8680: Transportation equipment industry; 9110: Company specific; 5240: Software & systems

Publication title: Journal of Cases on Information Technology

Volume: 7

Issue: 2

Pages: 16-30

Number of pages: 15

Publication year: 2005

Publication date: Apr-Jun 2005

Year: 2005

Publisher: IGI Global

Place of publication: Hershey

Country of publication: United States

Publication subject: Business And Economics--Computer Applications

ISSN: 15487717

Source type: Reports

Language of publication: English

Document type: Business Case

Document feature: charts diagrams references

ProQuest document ID: 198655375

Document URL: http://search.proquest.com/docview/198655375?accountid=38610

Copyright: Copyright Idea Group Inc. Apr-Jun 2005

Last updated: 2011-07-21

Database: ABI/INFORM Complete

Document 50 of 100

Up In Smoke: Rebuilding After an IT Disaster

Author: Ross, Steven C; Tyran, Craig K; Auer, David J; Junell, Jon M; Williams, Terrell G

ProQuest document link

Abstract:

On July 3, 2002, fire destroyed a facility that served as both office and computer server room for a College of Business located in the United States. The fire also caused significant smoke damage to the office building where the computer facility was located. The monetary costs of the disaster were over $4 million. This case, written from the point of view of the chairperson of the College Technology Committee, discusses the issues faced by the college as they resumed operations and planned for rebuilding their information technology operations. The almos-ttotal destruction of the college's server assets offered a unique opportunity to rethink the IT architecture for the college. The reader is challenged to learn from the experiences discussed in the case to develop an IT architecture for the college that will meet operational requirements and take into account the potential threats to the system. [PUBLICATION ABSTRACT]

Full text:

ORGANIZATIONAL BACKGROUND

Western University1

Western University (WU) is a public, liberal arts university located on the west coast of the United States. The university's student enrollment is approximately 12,000. WU focuses on undergraduate and master's level programs and is comprised of seven colleges, plus a graduate school. WU receives much of its funding from the state government. The university has earned a strong reputation for educational quality, particularly among public universities. In its 2003 ranking of "America's Best Colleges," US News & World Report ranked Western University among the top 10 public master'sgranting universities in the United States. The university community takes pride in WU's status. According to Dr. Mary Haskell, President of WU, "Continued ranking as one of the nation's best public comprehensive universities is a tribute to our excellent faculty and staff. We are committed to maintaining and enhancing the academic excellence, personal attention to students and positive environment for teaching and learning that has repeatedly garnered Western this kind of recognition."

College of Business Administration

The College of Business Administration (CBA) is one of the colleges at WU. CBA's programs focus on junior and senior level classes leading to degrees in either Business Administration or Accounting. In addition, CBA has an MBA program. About 10% of the students at WU (1,200 FTE) are registered as majors in the CBA. Each year, CBA graduates roughly 600 persons with bachelor's degrees and about 50 with MBA degrees.

CBA has four academic departments - accounting, decision sciences, finance and marketing, and management - each of which has about 20 full-time or adjunct faculty members and an administrative assistant. Other academic and administrative units for the college are the college office, three research centers, and the CBA Office of Information Systems (OIS) - about 20 persons total.

Organizational Structure of Information Systems at Western University & CBA

The organizational structure of information technology (IT) support services at WU includes both centralized and decentralized units. Figure 1 shows a partial organizational chart for WU that depicts the different groups and personnel relevant to the case.

WU Information Systems

WU's Office of Information and Technology Services (OITS) group is a large centralized organization that provides university-level services to the WU administration, the seven colleges, and students. OITS is headed by the Vice-President for Information Systems Services Ken Burrows and is organized into three areas: User Support (US), Administrative Services (AS), and Information Technology Services (ITS). OITS has offices in Thompson Hall, which houses the WU administration offices, and the Administrative Center located approximately one mile off campus on 23rd Street (and more often called "23rd Street" than by its proper name of "Administrative Center"). The 23rd Street facility contains a secure, fire-protected, emergency power equipped server room. The OITS main offices and US are located in Thompson Hall, while ITS and AS are located at 23rd Street. The key server computers that are operated by OITS are summarized in Table 1.

CBA Information Systems

While some of WU's colleges rely almost completely on the OITS group for all of their IT service needs (e.g., management of data servers, end user support, etc.), other colleges - including CBA - have created their own decentralized IT unit to address specific information service needs. CBA's Office of Information Systems (OIS) was created in 1985 to provide systems support to CBA's microcomputer lab and faculty workstations, which were the first on campus. Although OITS now provides support for these types of systems, CBA has elected to continue its OIS function. CBA's OIS staff provides most of the information systems and technology services used by CBA, including its 55-workstation computer lab.

CBA's OIS group is located in Mitchell Hall, which is CBA's office building. Mitchell Hall is an older building that lacks a number of features that are common in newer buildings. For example, at the time of this case, Mitchell Hall had fire alarms that could be triggered manually, but it did not have automatic fire alarms that would detect a fire and then contact the fire department and shut off the ventilation system (shutting down the ventilation system is critical to reduce smoke damage). Office and work space in Mitchell Hall was at a premium. The OIS group's computers and operations were limited to a cramped office that was about 30 feet long and 15 feet wide. This space was home to 13 computer servers, a variety of technical equipment, numerous file cabinets and bookshelves, and the OIS staff.

Table 1 lists CBA servers that existed at the time of the fire. CBA servers were named after states. While some of the servers were new and powerful machines, others were upgraded workstations that were used for low demand special purpose applications. The age of the CBA servers ranged from one year old to six years old.

Due to a tight operating budget, the staffing resources for CBA's OIS group were very limited. The OIS group had two full-time employees who were supplemented by numerous part-time student employees. The Director of Information Systems for OIS was Bill Worthington, who had been in the position for over five years. Worthington had extensive operating experience with a number of technologies and operating system environments.

In early 2001 CBA hired Don Clark to serve as the OIS group's second full-time employee. Clark's title was manager of Information Technology, and his job was to manage operations for the OIS group. Clark knew the people and information systems of CBA very well, since he had worked under Worthington the previous two years before he graduated from CBA with an MIS degree.

CBA's Technology Committee

CBA has a Technology Committee that provides advice to the dean and OIS concerning a variety of matters involving the planning, management, and application of technology in CBA. At the time of the case, the committee was chaired by an MIS professor named Sam Moss. Other members of the committee included other MIS faculty and representatives from each of the CBA departments - usually the most technology-literate persons in those departments.

SETTING THE STAGE

On the evening of July 3,2002, a fire destroyed many components of the information systems infrastructure for CBA, including virtually all of the server machines for CBA's computer network. To help provide a context for understanding the issues associated with IT disasters, this section provides an overview of the topic of disaster recovery, followed by a description of the fire disaster incident at CBA and a summary of the key people and places involved with the disaster and subsequent recovery process.

Information Technology Disasters & Disaster Recovery

An information technology (IT) disaster can be considered any type of event that may significantly disrupt IT operations (Lewis, Watson, & Pickren, 2003). Examples of disasters range from events that are more ordinary (e.g., an IT move or upgrade) to those that are more dramatic (e.g., a hurricane). A recent study analyzed all disaster recovery events (a total of 429) handled by a large international provider of disaster recovery services during the period from 1981 to 2000 (Lewis et al., 2003). This study identified the most common types of disaster events, as well as the degree of disruption caused by the events. Seven types of disasters were found to be most common, with the disaster categories of "natural event" and "IT failure" being the most frequent types of disasters encountered. While disasters associated with fires and IT moves/upgrades were not as common, the study found that the potential for extended periods of disruption for these types of disasters were particularly high (Table 2).

While IT disaster recovery has long been an important issue for organizations (e.g., Rhode & Haskett, 1990), the issue of IT disaster recovery gained a higher profile and sense of urgency following the terrorist attacks on September 11, 2001 (e.g., Eklund, 2001). Although many organizations may not feel threatened by terrorism, most organizations are vulnerable to some form of disruption to their IT operations. For example, the electrical blackout that hit the northeastern section of the United States in August 2003 exposed many businesses to vulnerabilities in their ability to handle a disaster (Mearian, 2003). Given the importance of IT operations to contemporary organizations, it is critical for organizations to be prepared. Unfortunately, industry surveys indicate that many organizations are not as prepared as they should be (Hoffman, 2003). In particular, small and medium-sized organizations tend to be less prepared, often due to limited IT budgets (Verton, 2003).

Disaster planning can require significant time and effort since it involves a number of steps. As described by Erbschloe (2003), key steps in disaster planning include the following: organizing a disaster recovery planning team; assessing the key threats to the organization; developing disaster-related policies and procedures; providing education and training to employees; and ongoing planning management.

The Night of July 3, 2002

The fire disaster event at CBA occurred on the night of Wednesday, July 3, 2002. During this evening, the WU campus was quiet and deserted. The following day was Independence Day, which is a national holiday in the United States. The July 4th holiday is traditionally a time when many people go on vacation, so a large number of WU faculty and staff who did not have teaching commitments had already left town. The library and computer labs on campus were closed at 5 p.m. in anticipation of the holiday, and custodial staff took the evening off.

The quiet mood at the WU campus on the evening of July 3rd changed considerably at 10:15 p.m. when a campus security officer spotted large amounts of smoke emerging from Mitchell Hall. The officer immediately reported the incident to the fire department. Within minutes, Mitchell Hall was surrounded by fire trucks. The fire crew discovered that a fire had started on the third floor of Mitchell Hall. Fortunately, the fire fighters were able to contain the fire to an area surrounding its place of origin. Considering that Mitchell Hall did not have an automated smoke alarm system, the structural damage to the building could have been much worse. As noted by Conrad Minsky, a spokesman for the local fire department, "If it hadn't been for [the security officer's report of the smoke], the whole building probably would have burned down." Unfortunately, the room where the fire started was Mitchell Hall 310 (MH 310), the central technical office and server room for CBA - where virtually all server hardware, software, and data for CBA were located.

The dean of CBA, Peter James, and the Director of CBA's OIS, Bill Worthington, were called to the scene of the fire late on the night of July 3rd. Their hearts sank when they learned that the fire had started in MH 310 and that it had completely devastated the contents of that room. Due to the fire department's protocols involving forensic procedures at a disaster site, neither James nor Worthington was initially allowed into the area near MH 310. However, based on what they could see - numerous fire fighters in full gear coming in and out of the Mitchell Hall building - they could imagine a grim situation inside the building.

There wasn't much that James or Worthington could do that evening, other than wonder if anything could be saved from the room and what it would take to recover. James found a computer on campus from which he could send an e-mail message to the CBA staff and faculty, most of whom were blissfully unaware of the disruption that was about to happen in their lives. The e-mail sent by Dean James is shown in Figure 2.

After the Smoke Had Cleared

After the fire fighters managed to put out the fire and clear the area of smoke, the fire department's forensic team closely examined the burn site. The extent of the damage to MH 310 and its contents was complete. According to the fire department spokesman Conrad Minsky, "It was cooked beyond belief. It was so hot in there that a lot of the [forensic] evidence burned ... All we saw was just huge clumps of melted computers." The extent of the damage is illustrated in Figure 3, which shows a picture of a MH 310 server rack shortly after the fire was extinguished. Based on the evidence available at the scene, the forensic team concluded that an electrical fire in one of CBA's oldest server computers had started the blaze. Once the fire started in the server, it slowly spread to other servers in a slow chain reaction. Since the servers were not in contained fire-proof server racks, there was nothing to stop the initial server fire from spreading. Ultimately, the entire server room and all of its contents (including technical equipment, furniture, back-up tapes, and papers) were destroyed.

CASE DESCRIPTION

This section discusses the key activities and issues that confronted the members of the CBA IT staff and administration following the fire. As is the case with many disaster events, it took some time for the people involved to get a complete understanding of the extent of the disaster and its implications. Once the situation was assessed, a number of issues needed to be addressed to deal with the disaster. These issues included data recovery, the search for temporary office space and computing resources, rebuilding Mitchell Hall, and disaster funding.

The Morning After

Sam Moss, MIS Professor and Chair of the CBA Technology Committee, awoke on the morning of July 4th looking forward to a day of relaxation - a bit of work around the house capped off by a burger and a brew while he and his friends watched the civic fireworks show that evening. Little did he realize that the real fireworks had happened the evening before.

Moss always checks his e-mail, even on a holiday. He was, of course, rather disturbed to see the message from Dean James about the fire in Mitchell Hall. Moss's first reaction was to try to visit a web site that he maintained on his experimental server, Iowa, which was located in his office. Much to his relief, the web site responded and appeared to be working as usual.

Moss also tried to access the CBA web site, which he had developed with another colleague (Chanute Olsen), as well as files maintained on the CBA faculty data server. Neither of these last two attempts was successful.

Upon first reading, the Dean's message did not convey the full impact of the loss

of systems to Moss, who hoped that the servers might be recoverable. Moss knew that the CBA office maintained tape backups of the directories containing the web site, faculty, and student data. While he expected a few weeks of disruption, he anticipated that CBA's IT operations would be in pretty good shape shortly.

Moss was very familiar with the techniques for remote access to Iowa and other college and university systems (see Microsoft Corporation, 2004a, and Novell Corporation, 2004, for examples of remote access software). Concerned that access to his office, where Iowa was located, might be limited for a few days, Moss immediately copied the backup files of his database projects and those of his students to his home machine. He also copied .ASP (active server page) files and any other documents that would be difficult to replace.

Moss contacted Dean James later in the day via e-mail. Moss made his remarks brief: "Iowa appears to be OK, we can use it as needed as a temporary server." ... and ... "Would you like me to convene the College Technology Committee to provide advice for the rebuilding of our technology support?" James's response was that he appreciated the offer of Iowa, and yes, he wanted advice on "How should we rebuild?" The following sections summarize what was learned and what was done by key players during the month after the fire. These items are not in chronological order; they are a summary of what Moss learned as he prepared to address the issue of rebuilding the college's IT architecture.

Determining the Extent of Data Loss

The first question, of course, concerned the state of the data back-up tapes of the CBA servers. Unfortunately, the situation regarding the back-ups was discouraging. While nightly data back-ups had been made, the tapes were stored in MH 310. Copies were taken off-site every two weeks. At the off-site location, the most recent copies of data and documents from Wisconsin and Missouri were dated June 16 - the last day of Spring Quarter. All of the more recent backup tapes were located on a shelf near the server machines and had been destroyed in the fire. On Maryland, the static pages and scripts to create dynamic pages (e.g., a list of faculty drawn from the database) of the CBA web site had been backed up, but the SQL Server database (which included data as well as stored procedures and functions) on that machine had not been backed-up. According to Worthington, the college was waiting for special software needed to backup SQL Server databases.

In addition to the back-up tapes, there were several other sources of backed-up data; however, these sources were rather fragmented. For example, many professors worked on the files for their university web sites from home and used FTP (file transfer protocol) to copy the updated files to the web server. Their home copies were, in effect, back-ups. Moss had made some changes to the CBA web site pages the evening of July 2nd and had copies of those pages on his home system. The Iowa server in Moss's office had been used as the test bed for the database portion of the web site; therefore it contained the structure of the database, but neither the most recent data nor the stored procedures and functions.

Although no desktop machines, other than those in MH 310, were burned in the fire, they were not readily available immediately after the event. Smoke and soot permeated the building. There was a concern that starting these machines, which were turned off at the time of the fire, might lead to electrical short circuits and potentially toxic odors and fumes. The decision was made to clean these machines before restarting them.

Recovery & Repair of Smoke-Damaged Systems

Within 48 hours of the fire, the university contracted with BELFOR International to help with clean-up. BELFOR specializes in disaster recovery and restoration. Examples of high profile disasters that BELFOR responded to in 2003 included the major wildfires in California and hurricane Isabel in the eastern United States (BELFOR, 2004). With extensive experience with disaster recovery and regional offices in Seattle, Portland, and Spokane, BELFOR was well-positioned to respond to the Mitchell Hall fire incident. BELFOR's areas of expertise included restoration of building structures, office equipment, and paper documents.

Based upon BELFOR's initial analysis, none of the computer systems, nor any of their components, from MH 310 was deemed recoverable. On the other hand, all other computers in the building escaped heat and water damage and could be "cleaned" and continued in service. These machines contained valuable data and were set up with individual users' preferences. Recovering them would be a major benefit.

The cleaning procedure for computers was a labor intensive process that involved immersion in a special water solution followed by drying and dehumidification. Systems units, monitors, and most printers could be cleaned. Keyboards, mice, and speakers were cheaper to replace than to clean. Most of these systems were cleaned in the 30 days following the fire and then stored until the reopening of the building in mid September. The college identified a few critical systems, based on the data they contained, for expedited cleaning and return to service.

Sources of Funding for Disaster Recovery

The cost of cleaning Mitchell Hall and rebuilding the computer system was significant. Estimates rose dramatically during the period that followed the fire. The initial estimate was $750,000. However, ongoing investigation of the damages and building contamination indicated that the total cost would be much higher. By the end of July, the university issued a press release indicating that the costs required to replace equipment and make Mitchell Hall ready for classes would be approximately $4 million. In fact, the final cost was about $4.25 million.

The repair costs were high because of smoke and water damage. The ventilation system in Mitchell Hall had used fiberboard ducts instead of metal ducts, and these had absorbed smoke and particles during the fire. The ducts could not be cleaned and had to be completely replaced on the top three floors. This required new ceiling tile installations to accommodate the new locations of the ventilation ducts. Carpets on these three floors also had to be replaced. MH 310 was completely gutted and rebuilt starting with the metal studding in the walls. The remainder of the third floor had the drywall walls torn out and replaced. In addition, the electrical and network infrastructure was rebuilt, which required completely rerunning the associated wires back to an electrical closet on the third floor. BELFOR handled the cleaning for all computers and other electronic equipment that was of sufficient economic value to justify the work. These cleaning costs totaled more than $100,000. The replacement costs for computer equipment and software that had been lost in the fire was approximately $ 150,000 - an amount that did not include the labor required to install and test the hardware and software.

The cost of the recovery was paid from two sources. WU had a specialized Electronic Data Processing (EDP) insurance policy to cover hardware losses. This policy provided up to $250,000 (on a "replacement cost" basis) less a $25,000 deductible. The other source of funds was a self-funded reserve set up by the state. The amount of money provided from this fund was determined by the State Legislature. President Haskell invited several legislators to campus and conducted first-hand tours of Mitchell Hall so that they could view the damage. Based on their review of the situation, the State Legislature provided a sufficient amount of funding to WU to rebuild Mitchell Hall and to replace all the hardware and software that had been destroyed. In a press release, President Haskell stated "We are very pleased with the timely and supportive action from legislative leaders and the Governor's office."

Temporary Quarters

Office space on the WU campus is at a premium. Fortunately, there was a small area in WU's administration building, Thompson Hall, which had been recently vacated. This office, with perimeter cubicles surrounding a large open area, became the temporary location of CBA's department offices. Each department chair and each department secretary had a workspace with a desk, phone, and limited storage for files and books. The offices had connectivity to the campus network. An open area was converted to a "bull pen" for faculty use and small group meetings.

Because the incident happened in the summer, it was relatively easy to relocate the classes. During the school year, university classrooms are at 100% utilization during mid-day class hours but in the Summer Quarter, less than 50% utilization is common. The only class sessions lost were for the few classes scheduled to meet on Friday, July 5th. Classes resumed as usual on July 8th, although in different rooms. Those that had been assigned to meet in the Mitchell Hall computer lab were relocated to another lab on campus.

Computer Hardware Resources Available for Immediate Use

For the immediate term, CBA was able to make use of 15 computers that had been received but not yet deployed in Mitchell Hall. These machines had been ear-marked as replacements for older systems and for recently hired faculty due to arrive in the fall. Fortunately, these systems were being held in the 23rd Street facility. They were quickly configured and delivered to the offices in Thompson Hall.

The MIS program at Western had a set of 20 notebook computers that were used for classroom instruction as part of a "mobile computer lab." At the time of the fire, they were stored in a locked cabinet in a second floor room in Mitchell Hall. These computers were examined by the health inspectors and deemed safe to use (i.e., cleaning was not needed). These machines contained wireless network cards and were configured with the Microsoft Office suite. No MIS classes were scheduled to use this lab during the summer, so these computers were signed out to faculty who did not have sufficient capacity in their home systems. The combination of new systems, the notebook computers, and individuals' home systems was sufficient to equip all staff and faculty with adequate workstations.

The loss of servers was much more problematic. The college lost every server it had with the exception of Iowa - the research and development server running Windows 2000 Server and MS SQL Server 2000. Iowa was located in Moss's office on the third floor. Although this location was less than 100 feet from the scene of the fire, Iowa had been relatively protected in Moss's office. Because Iowa had been operational continuously since the start of the fire and had not shown evidence of any problems, Moss and Worthington decided to keep it in operation (not clean it). Iowa was relocated to a well-ventilated area in the Thompson Hall offices.2

The university maintains many servers: a series of Novell systems used for student and faculty data, a server running Windows NT devoted to academic use, and a UNIX server used for most university, faculty, and student web pages. Worthington was able to negotiate for space on one of the Novell servers to hold the data that had been stored on Wisconsin and Missouri.

Recovering Files from Novell OS Servers

Immediately following the fire, Worthington obtained temporary workspace in the 23rd Street building and set out to recover the data from the June 16th tapes. He quickly ran into a severe stumbling block. CBA used digital tape equipment that was newer than the drives attached to Kermit, WU's Novell server. Fortunately, a tape drive in the correct format was attached to Grover, WU's UNIX server. To recover data from Wisconsin and Missouri, it was necessary to copy the tape contents to a disk on Grover; then write the data to tapes in the format of the drives attached to Kermit, and finally restore from those tapes. Most of the data was available within a week, thanks to Worthington's diligent efforts.

Back on the Web

The Windows servers that were used to support CBA's WWW sites and database applications were also lost. As it turned out, the process of recovering and recreating this data took much longer than the Novell files and was not completed until July 31st. Worthington was able to recover portions of the CBA web site which had been backed up on June 16th. The recovered data consisted of those folders that professors and department chairs had prepared for their web sites. As the files were recovered, they were copied onto the Iowa server. Unfortunately, the database data for the CBA WWW site, including the views and stored procedures used to execute queries, had not been backed-up to tape and were lost.

Sam Moss and Chanute Olsen set about to reestablish the site as quickly as possible. Once Iowa was operating in its new location in Thompson Hall, they arranged for the DNS entry for the web site to point to Iowa's IP address. They quickly rebuilt portions of the database and copied as much data as they could from other sources. On his home computer, Moss had current copies of many of the Active Server Page (ASP) files that were used to extract data and format the data for the page displays on CBA's WWW site. Moss immediately loaded these files onto Iowa. Unfortunately, Moss did not have copies of ASP files on the Windows server that had been maintained by others. These files ultimately had to be recreated from scratch.

Much of the information displayed on the college web site was drawn from a database. Maintenance of the database data was done by the department chairs and secretaries. Once Iowa was fully operational, these persons had to re-enter data about their departments.

Moss and Olsen contacted the professors who had sites on the college web site. For those who had home back-ups of their data, it was easy to recreate their sites on Iowa. Those who did not have a back-up were forced to wait until files were copied from the back-up tapes. By the first of August, all web sites had been restored and most of the database entries had been recreated.

CURRENT CHALLENGES/PROBLEMS FACING THE ORGANIZATION

During the period following the fire, Moss thought about the challenges that the college would face once the immediate tasks of restoring data and temporary operations were accomplished. He knew that a major task would be rebuilding the College's IT operations. Moss would need to work with his College Technology Committee through the months of July and August to come up with recommendations. As Moss pondered the situation, he realized that there were many unanswered questions, which he organized into two categories:

* Planning for IT architecture : What system applications and services were needed at CBA? What were the hardware/operating system requirements for these applications? How should the applications and services for CBA be allocated across servers? How many servers should CBA acquire? Where should the servers be physically located, and under whose control?

* Assessment of threats: What were the disaster-related threats to the CBA information systems? Would it be possible to design a CBA IT architecture that would minimize the impact of disaster and facilitate disaster recovery?

Planning for the Information Technology Architecture

Issues concerning IT architecture were at the top of Moss's list. As discussed by Seger and Stoddard (1993), "IT architecture" describes an organization's IT infrastructure and includes administrative policies and guidelines for hardware, software, communications, and data. While one option for CBA would be to replicate the architecture that had been destroyed, Moss did not believe that this would be the best way to go. The array of servers and systems before the fire had grown on an "as needed" basis over time, rather than guided by any master plan. While the previous system had worked, Moss wondered if there might be a different, more effective IT architecture for CBA. Since CBA would need to rebuild much of its IT operations from the ground up in any event, Moss thought that it would be worthwhile to take this opportunity to re-examine the IT service requirements and the way that the requirements would be implemented. By doing so, it was possible that the college might adopt a new IT architecture.

Moss was aware that an important first step in IT architecture planning is to determine the applications and services that will needed (Applegate, 1995). To kick off the IT architecture planning process, Moss sent an e-mail message to all faculty and staff on the morning of July 8th. The purpose of the message was to solicit input from the CBA user community regarding IT service requirements. The e-mail message is shown in Figure 4.

By learning more about the desired IT applications and services, Moss and his committee would be able to determine the types of application software that could be used to provide the specified services. This information would be useful, as it would have implications for the types of operating systems that would be needed. Due to operational considerations, Moss anticipated that no more than one type of operating system would reside on any given server. After the services were identified and the operating systems requirements were determined, the next step would be to decide on the number and type of server machines. Based on input from Worthington and others, Moss knew that an "N-tier" type of IT architecture would offer useful advantages for CBA. An N-tier design (also called multi-tiered or multi-layered) would involve separating data storage, data retrieval, business logic, presentation (e.g., formatting), and client display functions. One benefit of an N-tier design is that the development staff can focus on discrete portions of the application (Sun Microsystems, 2000). Also, it makes it easy to scale (increase the number of persons served) the application and facilitates future change because the layers communicate via carefully specified interfaces (Petersen, 2004). Although multiple tiers may reside on the same server, it is often more efficient to design each server to host specific parts of the application. For example, database servers perform better with multiple physical disks (see McCown, 2004). The use of more than one server can also complement security offered by network operating systems. For example, CBA provided file storage services for both faculty and students. Although these services could be hosted on a single machine, allocating the services on separate machines, and not allowing any student access to the "faculty" machine, would provide additional security for faculty files (e.g., student records, exams, faculty research).

As Moss received responses to his e-mail message, he organized the responses in a table to help him and his committee analyze the requirements. As indicated in Table 3, Moss had organized his list of application and service requirements for CBA into different categories based on the type of server that might be used to host the services. A variety of different types of servers may be used in an N-tier architecture. Examples of some of the different types of servers and their functions include the following (TechEncyclopedia, 2004):

* Application server. The computer in a client/server environment that performs the business logic (the data processing). For WWW-based systems, the application server may be used to program database queries (e.g., Active Server Pages, Java Server Pages).

* Database server. A computer that stores data and the associated database management system (DBMS). This type of server is not a repository for other types of files or programs.

* Directory services: A directory of names, profile information and machine addresses of every user and resource on the network. It is used to manage user accounts and permissions.

* File server: A computer that serves as a remote storage drive for files of data and/ or application programs. Unlike an application server, a file server does not execute the programs.

* Print server: A computer that controls one or more printers. May be used to store print output from network machines before the outputs are sent to a printer for printing.

* Research and development server. A local name used at CBA to describe a computer that is used for developing and testing software and programs. A single R&D server often hosts multiple tiers because demand (i.e., number of clients served) is light.

* Tape back-up server. A computer that contains one or more tape drives. This computer reads data from the other servers and writes it onto the tapes for purposes of backup and archive.

* Teaching server. Another local name used at CBA to describe a computer that is used for educational purposes to support classroom instruction in information systems courses (e.g., WWW development, database management, network administration).

* Web server. A computer that delivers Web pages to browsers and other files to applications via the HTTP protocol. It includes the hardware, operating system, Web server software, TCP/IP protocols, and site content (e.g., Web pages and other files).

Assessment of Threats

It was clear to Moss that the College had not been well positioned to handle an IT disaster. Although many books on IT management include references to disaster planning (e.g., Frenzel & Frenzel, 2004), the college had been too busy handling day-to-day IT operations to devote resources to disaster planning. Moss resolved to ensure that the next disaster, if there was one, would not be as traumatic. As part of this process, Moss wanted to identify the threats to CBA's IT system (Microsoft Corporation, 2004b). As suggested by Table 2, Moss knew that IT disaster threats can come from the physical environment (e.g., WU's location makes it susceptible to both earthquake and volcanic activity), from machine failure, and from human causes. With the help of the technology committee, Moss set out to identify the primary threats.

Once Moss and his committee had generated the list of threats to CBA's IT operations, he hoped to design the IT architecture in a way to minimize the impact of any future disasters and facilitate future disaster recovery. Toigo (2000) has pointed out that decentralized IT architectures, such as a N-tier design, involve special considerations for disaster planning. To help minimize the impact of disaster, Tiogo recommends that a decentralized system include high-availability hardware components, partitioned design, and technology resource replication. For example, having similar machines in multiple locations may provide an immediate source of back-up computing resources (as illustrated by the use of Iowa and Kermit after the CBA fire). Moss planned to arrange meetings with both OIS and OITS personnel to determine how CBA and WU could shape its IT architecture plan to minimize the impact of any future disaster.

Subject: Disaster recovery; Fires; Case studies; Information technology; Colleges & universities; Safety management

Location: United States, US

Classification: 9190: United States; 5340: Safety management; 5220: Information technology management; 8306: Schools and educational services

Publication title: Journal of Cases on Information Technology

Volume: 7

Issue: 2

Pages: 31-49

Number of pages: 19

Publication year: 2005

Publication date: Apr-Jun 2005

Year: 2005

Publisher: IGI Global

Place of publication: Hershey

Country of publication: United States

Publication subject: Business And Economics--Computer Applications

ISSN: 15487717

Source type: Reports

Language of publication: English

Document type: Business Case

Document feature: tables charts photographs references

ProQuest document ID: 198671770

Document URL: http://search.proquest.com/docview/198671770?accountid=38610

Copyright: Copyright Idea Group Inc. Apr-Jun 2005

Last updated: 2011-07-21

Database: ABI/INFORM Complete

Document 51 of 100

A Case of Information Systems Pre-Implementation Failure: Pitfalls of Overlooking the Key Stakeholders' Interests

Author: Schneider, Christoph; Sarker, Suprateek

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Abstract:

This case study examines an often overlooked context of information system failures, that of preimplementation failure. It focuses on an Information Systems Development (ISD) project at a large public university that failed even before implementation could get under way. Specifically, it describes the vendor selection process of a proposed computerized maintenance management system. While the managers in charge of the project took great care to avoid commonly discussed types of information systems failures by emphasizing user involvement and trying to select the best possible system they could afford, non-functional requirements, procedures as outlined in the RFP, and the roles of relevant but relatively "hidden" decision makers during the pre-implementation stage of the project were overlooked. This led to the termination of the project after an appeal was lodged by a software vendor whose product had not been selected for implementation. [PUBLICATION ABSTRACT]

Full text:

ORGANIZATIONAL BACKGROUND

UMaint is the maintenance department of a large public university (BigU1) in the northwest of the United States. Currently, about 18,000 students are enrolled at BigU, a large proportion of whom reside on-campus. This makes BigU's main campus one of the largest residential campuses in the Pacific Northwest. In addition to the student body, about 7,000 faculty and staff work on campus.

UMaint's employees are responsible for the maintenance of BigU, the campus area of which encompasses more than 400 buildings and over 1,930 acres of land. In a typical year, UMaint handles approximately 60,000 service calls, and schedules and completes 70,000 preventive maintenance projects for 69,000 pieces of equipment.

The primary departments of UMaint are Architectural, Engineering, and Construction Services, Utility Services, Custodial Services, and Maintenance Services. These departments are supported by UMaint's Administrative Services. Architectural, Engineering, and Construction Services are involved in all new construction projects as well as all modifications to existing facilities. The Utility Services department operates the university's power plant and is responsible for providing utilities such as steam, electricity, and water. Custodial Services, UMaint's largest department, handles the custodial work for all buildings and public areas on campus. Maintenance Services is divided into environmental operations, life safety and electronics, plant maintenance and repair, and operations, and is responsible for the upkeep of the university's buildings and facilities.

The Administrative Services department encompasses units such as operational accounting, personnel and payroll, storeroom, plant services (including motor pool, heavy equipment, trucking and waste, and incinerator operations), and management information systems. This department handles all supporting activities needed to coordinate and facilitate UMaint's primary activities. Overall, more than 450 employees work for UMaint in order to support the university's operations. Please refer to Appendix A for the organizational chart of UMaint.

SETTING THE STAGE

The major challenges faced by UMaint arose from the state's tight budget situation and increased competition from outside service suppliers. In order to deal with these challenges, UMaint had to constantly strive to reduce costs and streamline operations. One major obstacle to providing services efficiently and effectively, as is the case in many universities and even business organizations, was UMaint's outdated information systems infrastructure.

This infrastructure consisted primarily of an outdated mainframe, in which the applications were written in Natural and the databases were hosted in ADABAS. Administrative functions were conducted using form-based systems that had been developed in-house. Over the years, the systems had grown with the needs of UMaint. In the absence of an information systems (IS) department that was internal (or dedicated) to the needs of UMaint, the growth of the systems in this area has been rather uncontrolled, leading to a variety of different applications, the majority of which were incompatible with one another. In order to perform accounting, inventory management, maintenance, and project development functions, the employees had to work with over 100 different databases. This situation led to a huge paper trail, the need for multiple paper copies of documents and considerable redundancy of work, which in turn resulted in the lack of data integrity, a major hindrance to efficient operations. As one manager explained "... [UMaint has] someone three cubicles down from another person replicating the same work, unnecessarily."2

In the mid-1990's, UMaint's director and departmental managers (hereafter referred to as top management) decided to implement a computerized maintenance management system (CMMS) in order to consolidate the legacy applications into one integrative system. With this, UMaint hoped to be able to provide more efficient and higher quality service, obtain more timely and accurate information for top management, and reduce costs for the customers by eliminating the need for multiple data entry and simultaneously reducing the potential for errors associated with the maintenance business processes. Additional goals were to increase the accountability of the organization as well as to better maintain the university's facilities. Appendix B displays typical features of a CMMS.

In order to achieve these goals, UMaint formed an implementation team consisting of employees representing different levels of the organization. These were charged with initiating the CMMS project. In the first stage, the primary task was to gather information about different CMMS vendors. As the members of the implementation team conducted all project-related activities in addition to their regular tasks, many of them spent additional hours in the evenings to work on the CMMS project, often leading to dissatisfaction among the project team-members. Unfortunately, the personal sacrifices of the team-members proved to be in vain, since shortly thereafter, work on the project was halted due to lack of adequate funds. A timeline of the events is shown in Appendix C. The idea of introducing a CMMS however was never completely abandoned. In the year 2000 (after the Y2K crisis never materialized), top management again decided to make a renewed commitment to implementing a CMMS. After a new president had been hired to take on leadership of BigU, a new strategic plan was set up for the entire university; one of the goals was to "create a shared commitment to quality in all ... activities", which included to "develop strategies that foster a university culture dedicated to adopting and extending best practices that promote an ongoing commitment to continuous improvement". As this goal was closely linked to the services of UMaint, Jack, the director of UMaint, was invited to be a member of the implementation team for this goal. Since Jack had been with BigU for a long time, he therefore enjoys high credibility and good relationships with higher management, but as in most large institutions, he is constrained by his budget and the strategic goals of BigU. With the introduction of a CMMS, UMaint would clearly help BigU in achieving this goal, thus, funding seemed much more likely, and consequently, an internal IS department responsible for providing information services and technical support for UMaint's information systems was created. The IS department was also charged with the project of implementing the computerized maintenance management system. Currently, the information systems department consists of an Information Systems Manager ("Frank") and two Computer Systems Administrators, in addition to several computer-savvy college students serving as Support Staff.

Top management was very excited about the project and had a good grasp on the project's potential implications for the organization, a factor that would help in the selection process (West & Shields, 1998). Specifically, Jack (the director of UMaint) strongly believed that "the selection of a CMMS will affect the way [UMaint does] business for the next 10 years."

In addition to serving UMaint, the CMMS was supposed to serve BigU's housing department and Central Stores. University Housing would use the system to support all maintenance related aspects of their operations, as well as to manage its warehouse, and Central Stores would use the system for all procurement-related activities. Several other departments played a role in the process as well; for example, the university's Budget Office allocated the funds for the project and was hence involved in the purchasing process. As the total amount budgeted for the purchase of the CMMS exceeded $2,500, the acquisition had to be made through the university's Purchasing Department in the form of a bidding process; furthermore, due to the administrative, rather than academic or research related nature of the project and the fact that BigU is a state university, unsuccessful bidders had the option of filing a protest with the state's Department of Information Services (DIS) after the announcement of the final decision. The DIS had the authority to review and override any decisions made by UMaint. Furthermore, acting as an outside consultant (Piturro, 1999), the university's IS department provided guidance to UMaint's IS department during the selection process. Please refer to Appendix D for a diagram displaying how UMaint fits into the university's structure; Appendix E shows the major stakeholders of the proposed system.

Given that upper administration was well aware of the large impact the system would have, everyone agreed to implement and routinize the "best possible alternative" for the proposed system. Due to the limited resources, developing an integrated system in-house was not seen to be feasible. Therefore, it was decided to purchase a system from an outside vendor. Even though highly customized solutions can be problematic in the long run (Ragowsky & Stern, 1995), both off-the-shelf packages and solutions specifically designed for UMaint by interested vendors were considered.

CASE DESCRIPTION

In the practitioner literature, there has been a limited number of articles on software vendor selection processes; most of these articles have offered somewhat simplistic implementation guidelines such as having sufficient human resources, securing commitment by top management, conducting site visits, or being aware of possible problems associated with customized software (e.g., Ciotti, 1988; Piturro, 1999; Ragowsky & Stern, 1995; West & Shields, 1998). In addition, few academic IS researchers have directed attention to critically examining the process of software vendor selection; consequently, normative rational processes (Howcroft & Light, 2002) are seen to guide systems acquisition initiatives (Please refer to Appendix F for a model of the software vendor selection process). Even fewer have empirically studied the vendor selection process (e.g., Gustin, Daugherty, & Ellinger, 1997; Howcroft & Light, 2002; Lucas, Jr. & Spitler, 2000; Weber, Current, & Benton, 1991). A recent meta-analysis found that in information systems development process, user participation can influence IS success (e.g., Hwang & Thorn, 1999). Consistent with these findings, noted researchers such as Land (1982) have explained that in the software vendor selection process, user input is seen as an important step in determining business needs, which is fundamental to implementing a successful system. According to Land (1982), user participation can be consultative, democratic, or responsible, where responsible participation implies the greatest influence on the part of the users. At UMaint, one of the first steps in the vendor selection process was to inquire about experiences with a CMMS implementation at similar institutions. Frank briefly described the experiences other universities had:

I talked to a lot of schools [that had] been through [this process], read a lot of implementations, and saw where the weaknesses were; the weaknesses were people not getting involved, I spent some time over at [WesternU], looking at them and their implementation, and one of the biggest regrets and problems was they didn't get people involved.

Just a few years ago, WesternU, another large university in the Northwest region of the US went through a similar process and faced severe implementation problems, partly due to lack of stakeholder involvement with the project from the very beginning. On talking to WesternU, Frank found out that:

... they went through this a couple of years ago, and have a vendor and have implemented it and are still in partial implementation, and they said the biggest problem that they had is when they went to train people and so many people down at the very lowest level claiming not to know what is going on, or not to be happy with the system.

Knowing about the beneficial effects of user involvement (Hwang & Thorn, 1999; Land, 1982; Schwab & Kallman, 1991), top management tried to involve their employees from the initiation stages of the project. Joan (the Assistant Director for Administrative Services) recognized the fact that it would be impossible to involve all employees directly; therefore, she strived to inform as many people as possible, rather than ensure direct participation from every employee:

We obviously selected a core group to work on it because every one of 400 people can't be involved...I'm not sure if they have the need to say vendor A is better than C or D or E, it's more the idea that, okay, it's going to change what I do, am I comfortable with that idea and then as far as which vendor we choose, they're going to have to learn something new, no matter what. So it's more trying to get them the information... them knowing about it, knowing that it's coming, and giving input where they can. But it's...it's very specific what they're going to be doing, and I think it's really important for them to know that it's happening and feel comfortable with the idea.

Therefore, committees were formed in order to involve people from all departments. The Executive Committee was responsible for making the formal decisions while the CMMS Evaluation Team was heavily involved in ranking and scoring the different vendors. In addition to these committees, process teams were created; these were charged with analyzing the workflows in different areas such as accounting, human resources, scheduling, preventive maintenance, or engineering and design. The Executive Committee consisted of UMaint's Director, his two assistants, and the IS manager. Members of Central Stores and University Housing were only represented in the Evaluation Team. In fact, the CMMS Evaluation Team included members of every department of UMaint, with members being nominated by their respective department heads. Of the 51 members, 16 were managers/directors, 18 were supervisors/leads, and 17 were line employees. The process teams consisted of line employees as well as managers. To ensure adequate say of individuals who actually get the work done, several teams were led by line employees. A requirement from the beginning was that "every supervisor, every manager has to be involved." The committee members were expected to "involve all of their people in some way." In this way, the project leadership hoped to have as many people as possible participating in the selection process.

The implementation of the CMMS was planned in three stages. The first stage involved the request for proposal (RFP) process; the second stage consisted of the decision-making process, and the third stage, the actual implementation.

During the RFP process, the different process teams had to analyze the various business functions. This phase was not completed as smoothly as expected, since some of the groups did not put in the necessary effort. This was seen as a big concern during the RFP process when:

...every area that was going to be involved was requested to go out and say what's important to them. And that's where they didn't participate as fully as maybe another group. Some groups did an excellent job of saying I need this, this, this, this, this. And this is the ranking, this is what we need, this is what we've got to have, this is what would be nice. And we may have had...I think it is mainly one area that just kind of didn't do that very well. And I guess how that will be affected as if they, after we've chosen, come and say, oh, I've got to have this...well, you didn't have it in the RFP, we, I, can't know what's important for you. So that would probably... and laziness maybe is a bad word, but I think that's...they're just not choosing their priorities. Some people realize just how important the process was and some don't realize it... and may be impacted.

As the IS group was concerned with choosing the best possible system for the organization, its members decided to start analyzing the business functions themselves. This helped the groups to get started in the RFP process. Frank described his experience with the process as follows:

[We] charged all the groups to come up with [the business functions] ; that didn't work out too well, the groups really didn't do a good job putting it together, so what happened was, we put them together. Our group did all of them and then what we did, we took 'em back to the groups and said okay, here's the storeroom piece, here is what we think is your function, but we're the wireheads, we're not the workers, we don't know their business, but from working with them, and doing what we have been doing up to this point, we felt we could at least get the ball rolling.

Having started the process, the IS group saw some improvement in participation, and most of the groups seemed more actively engaged in the RFP process:

...so we gave them basically something to react to. And that helped a lot. Then people started coming up with a lot of ideas, a lot of changes, and we started getting more participation that way.... These folks really struggled with coming up with something on their own.

Participation was not seen as mandatory by top management, therefore, the CMMS Decision Team tried to motivate the employees to participate as much as possible. However, they also had the option to exercise power in order to get things done. Since UMaint's executive director was a big supporter of the CMMS project, Frank (the IS manager) mentioned that:

I also have an ace in the hole with the director, who's willing to come at any point and lay the hammer down if somebody don't do what we need them to. We don't do that unless we have to, but if we get into that situation where there's a work group or a person who's simply just not going to pull their share. We're trying to work with them and we're trying to motivate them, and get 'em excited and get their involvement, but otherwise, we just have to take it to another level if it is too critical. It's a big project.

Finally, the mandatory and desirable requirements were put together and the RFP was deemed acceptable by the state's Department of Information Services after a few minor revisions. According to the RFP (please refer to Appendix G for the required structure of the proposals), three vendors were supposed to be invited to conduct on-site product demonstrations. In regards to the requirements, the RFP stated that the proposed CMMS system had to be able to integrate the large number of databases currently used to manage accounting, maintenance, inventory, and project development needs. Furthermore, Microsoft Project Server 2002, Sharepoint Portal and Team Services, as well as several Access Data Projects needed to be integrated into the proposed system. As UMaint already had an existing information systems infrastructure consisting of more than 130 workstations running a combination of Windows NT 4.0, Windows 2000 professional and Windows XP operating systems, no substantial changes in client hardware were desired; however, if additional hardware such as servers would be needed for the implementation, this would have to be covered by the budget initially allocated to the project. Furthermore, it was expected that the vendors' systems would be compatible with the operating systems of the existing workstations. Finally, it was not anticipated to allocate human resources in addition to the IS department's current staff to the support of the CMMS system.

While certain non-functional requirements,3 such as security of the transactions or scalability of the database, were considered to be important factors, a proven track record of successful implementations was considered more important than a system using the newest technologies.

Using the mandatory functional requirements, such as the ability to track the status of each shop assignment, request materials for a work order from a "Materials Management" module, trigger notices to responsible persons for potential problems with contract processes, or track equipment maintenance labor history, the executive committee was able to screen out a large number of vendors that initially had responded to the RFP, bringing down the number of potential vendors to six. Following recommendations provided in the practitioner literature (e.g., Raouf, Ali, & Duffuaa, 1993; Weber et al., 1991), these vendors were scored by the CMMS Evaluation Team according to the CMMS requirements, technical requirements and capabilities, and vendor qualifications. Initially, only one bidder provided the required cost proposal (which did not comply with the RFP), hence it was decided to eliminate this criterion in this stage of the process and to reassign the weights of the remaining criteria. Based on a comparison of the summary scores, four vendors were invited to present their products to the CMMS Evaluation Team according to a scripted scenario. The attendees at the demonstrations had the opportunity to score each vendor's product using a standardized scoring package. The scores given were to be used during the final decision-making; at this point, the vendors that were invited to present their products were asked to re-submit their cost proposals.

In addition to helping with the selection, giving the attendants of the vendor demonstrations the opportunity to score the products was seen as a good way to involve people and to get their "buy in". Most members of the executive committee believed that many employees "just want to be involved, just want to be important," no matter "if things go their way or not." According to Joan, the scoring could be compared to voting, where everyone's vote counts. However, in contrast to management's beliefs, many members of the process teams felt that their input did not count at all, which led to dissatisfaction with the process.

Furthermore, some areas felt "shortchanged" during the vendor demonstrations, having felt that their area has not been considered enough during the demonstrations. Another factor adding to the dissatisfaction with the decision process was a lack of feedback from top management. One administrative employee complained:

...they had us do all kinds of stuff. You know, questions we needed to ask, how everything flows, how it needs to be done.... I'm just a little nervous because ... we put a lot of input in, but we didn't get much information back, or how it would affect us.

Even though the process team members were intended to funnel down the information, the information flow did not take place as expected; indeed, many employees did not receive much information about the proposed system. This problem was of great concern to upper management, as information sharing was seen as critical to the success of the process. Frank stated:

And one of the biggest challenges this place has is the information distribution. The information does not go from the top to the bottom. The manager hears it at a Tuesday manager meeting; it may be six months until the employee hears it. It's really embarrassing, but it happens a lot around here. With a project of this magnitude and complexity, you can't do that. The information has to reach everybody at every time. So one of the tasks for us was, how do we get information out. So we developed the project information site....

The project web site was developed to provide access to announcements about the status of the vendor selection, vendor scores and rankings, background information about the vendors, and the like. Even though the web site was seen as pretty effective by the IS group, it did not help to effectively spread the information throughout the entire organization, as the web site was only accessible to CMMS Evaluation Team members and Executive Committee members.

Since the IS team was in charge of the CMMS project, meetings with line employees were set up in order to provide them with information and solicit feedback. Nevertheless, many employees were unaware of the proposed system's impact on their work. Generally, they saw "other" departments as being impacted to a greater extent, and did not anticipate their own day-to-day responsibilities to change much. Many employees regarded the CMMS as a tool for the higher echelons of administration. This led to a lack of interest in participating in the decision process, which thereafter translated to the perception that their departments had been left out of the process. For example, an employee mentioned:

...I don't know how it will really affect me, unless they would get a couple of modules that would really help out back here. It's my understanding that they're just doing administration modules.... I do know that administration, at the other end of this building, had a lot of input.... I don't know that it will probably help us at this point, (emphasis added)

Antagonism between departments added to such perceptions. As the criteria established for the vendor selection process were viewed as relatively inflexible and determined a priori, many employees saw their area as "covered," and did not see the point of providing additional input into the decision process, many hoping that the IS department, consisting of acknowledged experts, would select the right system for them. One employee, for example, stated that "our info tech group... they do have the knowledge to make something run right and I don't."

The information systems department was well aware of its power arising from the myths of their expertise and magic representing systems professionals as "high priests" (Hirschheim & Klein, 1989; Hirschheim & Newman, 1991) to influence decisions of non-IT employees in UMaint. However, it consciously tried to limit the extent of influence IS professionals would have on the decision process:

...we didn't want to influence anyone's decision. ... this isn't supposed to be about us ... this is about their achievement, this is their product in the end, we're just charged with implementing it. They're the ones who gonna have to use it every day and live with it. We wanted it to be about them, and that's why we've been so big about having their involvement....

Nevertheless, being in such an influential position, the IS manager noticed the benefits of being able to influence people's decision, as he was trying to choose the most adequate system for the organization:

...in many ways, we put our hands on the wheel. Because we basically had to come to a decision that works. Everybody, they're just gonna do whatever we say. So we better make sure that what we're saying is really what is the greatest good for everyone ... and that's one thing that has been very confident for us that we have always been striving for the absolute biggest bang for the buck.... Whatever we could get. The most we could do.

Finally, a decision was made by the Executive Committee based on a number of criteria, which included the weighted scores, reference calls conducted by evaluation team members, and finally, consideration of the budget. Before the final decision was made, an informal vote (that would not influence the final decision) was held. Interestingly, the selection made was not consistent with the results of the vote. The vendor that ranked first in the informal vote was not considered for selection, since its product did not meet the budget criteria. The vendor that ranked second had the newest technology and offered a highly customizable product; however, it was regarded as being too risky, as universities were considered an entirely new market for the vendor and was thus dropped from the selection. The vendor that was finally selected ranked third in the last informal vote.

Even though the vendor selected scored very high in terms of meeting the requirements, functions, and features, the decision found only partial support by many organizational members, including the IS department members. The IS group was not at all convinced that the product had necessary technological and functional capabilities. In a vendor review demonstration, an IS department member mentioned that the vendor's "technology is severely outdated and does not offer any customization for the user." Other departments also were not satisfied with the selection, with a member of the accounting team stating, "...just the one that got chosen... we wished that it hadn't." The storeroom, a very powerful unit of UMaint's administrative services department, shared the same thoughts: "we were looking at [Vendor A] and [Vendor B]. These were what we thought were the two best, but other factors came into play in the decision making...."

CURRENT CHALLENGES FACING THE ORGANIZATION

When the final decision was announced to the vendors, it was also not received too well by the vendors whose products had not been selected for implementation. One of the unsuccessful bidders decided to lodge an appeal with the state's department of information services. The members of the department of information services, who had not been at all involved during the selection process, took only a very short time to review the decision and mandate the termination of the project based on procedural errors. As contended by the unsuccessful bidder, the change in scoring criteria for the first stage could not be considered a harmless error, as vendors might have otherwise submitted different proposals. Furthermore, asking the vendors to re-submit cost proposals could be considered a "best-and-final offer" procedure, which was explicitly ruled out in the initial RFP. On the other hand, not asking the vendors for a renewed cost proposal would have led to the elimination of all vendors but one during the first evaluation stage, rendering the RFP process "just a paper chase" (Ciotti, 1988, p. 48). Making a new selection, as recommended by the State's IS department, would not only mean reviewing the original decision, but also reverting to the beginning stages of the project. In order to select a different vendor, the entire selection process would have to be started anew, including sending out a request for proposals, inviting candidates for product demonstrations, scoring the different products, and making reference calls. As this process would most likely continue well into the following year, funding for the project was not automatically valid any more. UMaint would have to reapply for funding, and in light of the state's tight budget situation, getting funds for such a project a second time seemed highly unlikely.

As of 2003, no computerized maintenance management system was implemented at UMaint. Frank (the IS manager), reflecting on the sequence of events in the project, still remains perplexed about why the initiative turned out to be a disaster, despite all his and his colleagues' efforts to consciously manage stakeholder input and thus avoid failure, so he approached an IS academic to find out the reasons for the failure of the current project, how UMaint's current project could be "salvaged", and how similar problems could be avoided in future projects.

Subject: Case studies; Information systems; Failure analysis; Colleges & universities; Maintenance management; Technological planning

Classification: 9110: Company specific; 8306: Schools and educational services; 5240: Software & systems; 2310: Planning

Publication title: Journal of Cases on Information Technology

Volume: 7

Issue: 2

Pages: 50-66

Number of pages: 17

Publication year: 2005

Publication date: Apr-Jun 2005

Year: 2005

Publisher: IGI Global

Place of publication: Hershey

Country of publication: United States

Publication subject: Business And Economics--Computer Applications

ISSN: 15487717

Source type: Reports

Language of publication: English

Document type: Business Case

Document feature: charts references illustrations

ProQuest document ID: 198658367

Document URL: http://search.proquest.com/docview/198658367?accountid=38610

Copyright: Copyright Idea Group Inc. Apr-Jun 2005

Last updated: 2011-07-21

Database: ABI/INFORM Complete

Document 52 of 100

End-User System Development: Lessons from a Case Study of IT Usage in an Engineering Organization

Author: Jennex, Murray E

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Abstract:

How much end-user computing is too much? Should end users develop systems? This case looks at a study of end user computing within the engineering organizations of an electric utility undergoing deregulation. The case was initiated when management perceived that too much engineering time was spent doing IS functions. The case found that there was significant effort being expended on system development, support, and ad hoc use. Reviews of a few key systems illustrate quality problems found with the end-user developed systems. Several issues were identified affecting system development including use of programming standards, documentation, infrastructure integration, and system support. Additionally, the issues of obsolescence, security, and procurement are discussed. [PUBLICATION ABSTRACT]

Full text:

ORGANIZATIONAL BACKGROUND

This case looks at end user computing (EUC) in an engineering organization. End users are non-IS professionals who use computers and EUC are those computer activities end users perform (Edberg & Bowman, 1996). Alavi and Weiss (1986) describe EUC as a rapidly growing and irreversible trend. But how much EUC should organizations allow, what kinds of activities should end users do, and how should organizations manage EUC?

The subject engineering organization is part of a large, United States based, investor owned utility. The utility is over 100 years old, has a service area of over 50,000 square miles, provides electricity to over 11 million people via 4.3 million residential and business accounts, and had operating revenues of approximately $8.7 billion in 2002. Utility net revenue has fluctuated wildly the last few years with a $2.1 billion loss in 2000, $2.4 billion in earnings in 2001 (primarily due to one-time benefits from restructuring and other initiatives), and decreasing to $1.2 billion in earnings in 2002. To service its customers, the utility operates a transmission and distribution system and several large electrical generation plants and is organized into three main line divisions: Transmission and Distribution; Power Generation; and Customer Service. Divisions such as Human Resources, Security, and Information Technology (IT) support the line divisions. The utility has approximately 12,500 employees.

The power generation division is organized into operating units dedicated to supporting specific power generation sites. Each operating unit has line organizations such as Operations, Maintenance, Engineering, and Chemistry/Health Physics. Power generation operating units are supported by dedicated units from the corporate support divisions (security, human resources, IT). The engineering organization used for this case study is part of the nuclear operating unit of the power generation division and is located at the largest electrical generation site operated by the utility. IT support is provided to this operating unit by Nuclear Information Systems (NIS) which administratively is part of the corporate IT division and which operationally reports to both corporate IT and the nuclear unit of the power generation division. NIS supported engineering through its Engineering Support Systems group. This group consisted of a supervisor, two project manager/analysts, and two developers. This group was tasked with the maintenance of the 11 systems under NIS control. New systems or enhancements to existing systems were done at the instigation of engineering. Engineering through a charge-back process paid costs associated with these projects and developers were hired as needed to support the work.

At the time of the study the engineering organization consisted of approximately 460 engineers disbursed among several different engineering groups reporting to the Station Technical, Nuclear Design Organization, Nuclear Oversight, and Procurement management structures. Industry restructuring was causing large drops in revenues that was driving the nuclear unit to reorganize engineering into a single organization consisting of 330 engineers under the management of the Nuclear Design Organization.

SETTING THE STAGE

Between May 2000 and June 2001, the cost of unregulated wholesale power rose above revenues collected via rates that were frozen in 1998, and the utility was not allowed by the regulators to pass these excess costs through to its customers. As a result, the utility incurred $4.7 billion (pre-tax) in write-offs related to under-collected costs and generation-related regulatory assets through August 31, 2001. The net impact of these under-collected costs was a net loss of $2.1 billion by the utility in 2000. This put the utility into a crisis situation with the result that all divisions were asked to freeze hiring and restructure to reduce costs.

The power generation division had its groups assess their work to determine what had to be done and what could be dropped or deferred. The nuclear division decided the existing engineering organizations were inefficient and could be consolidated under one management structure. This review determined that staffing should be lowered by approximately 25%. An engineering change management team was formed for identifying where and how work effort could be reduced. During this process, it was noticed that the engineering organizations were spending significant amounts of time and effort on information technology (IT) related tasks. Computer use in all groups/sub-groups included use of the site work process systems and the basic software such as e-mail, WordPerfect, and QuatroPro (all considered standard end user computing per Benjamin (1982)); plus, whatever other software/hardware was deemed necessary to accomplish their mission. This other software included special engineering software packages for a variety of tasks, such as valve, pump, and pipe diagnosis, analysis, and design, various activity tracking systems, and several programs custom built to meet special needs. However, it was also noticed that engineers were building and maintaining/supporting systems.

The nuclear organization's computer support was split between two groups. NIS was responsible for the design, acquisition, implementation, and maintenance of business systems. This included work process systems, the site network, and desktop systems. The computer engineering group, a subgroup of engineering, was responsible for the design, acquisition, implementation, and maintenance of the plant process and control systems. This included systems used to perform plant processes, such as chemical and water treatment systems, reactor control systems, the plant monitoring system, and control room systems. While this seems to be a clear demarcation of responsibilities, conflicts arose with the use of personal computers. Personal computers were originally brought on-site to support reporting and work functions and were clearly understood to be within the NIS domain. However, as personal computers became prevalent, engineering found innovative systems in support of plant activities, such as testing, data collection, and data analysis. During this period of personal computer adoption, NIS was focused on supporting the mainframe-based work process systems and then converting these systems to a client-server infrastructure, and did not have the resources or expertise to support innovative systems of personal computers. It was also perceived by the nuclear organization that NIS had little respect or concern for personal computers and their adoption in supporting plant or work processes. Engineering stepped into this void and provided expertise and support to plant personnel. This continued until the late 1990s when NIS attempted to reassert its control over personal computers used with the business systems. Engineering resisted this and while they had to acknowledge NIS control over the acquisition of personal computers for business systems, they found novel ways of getting around NIS controls. Calling personal computers test equipment and purchasing them along with support services and software with their own budget usually accomplished this. Additionally, engineering had begun to develop their own systems during the 1980s due to a lack of resources and plant knowledge within NIS. This practice continued even after NIS took over control of personal computer systems. It was for these reasons that engineering management perceived that a significant amount of work activities could be shifted to NIS. Finally, there was a perception by engineering that there was a lack of support by NIS for engineer IT needs due to this history.

To assess engineering IT usage and determine work that could be shifted to NIS, a team was formed consisting of engineering and NIS representatives and led by the author, a former member of the engineering organization and at the time of the study, a member of NIS. The team leader was chosen specifically because he had been one of the engineers who had bypassed NIS and had developed systems of his own. It was expected that the team leader would have the trust of the engineering organization and would know where to look for IT activities. Engineering team members consisted of engineers serving as computer representatives/liaisons and were considered to be subject matter experts (SMEs). NIS team members were personnel serving in the engineering support systems group. The goal of the team was to generate an inventory of IT products and resources used by engineering organizations but not supplied, supported, or controlled by NIS, and to assess how IT usage could be better managed by engineering and NIS.

The team started with the inventory generated by NIS's Year 2000 (Y2K) program. This effort documented 151 systems not supported by IS that were used and supported by engineering where the support consisted of personnel and/or annual renewal/licensing costs. It also documented another 11 systems used by engineering but supported by NIS. Next, the team collected data using various informal surveys and interviews while the project manager conducted 40 structured interviews. The process was to first generate an inventory of IT systems used by the engineering organizations but not maintained by the IS group. The scope of the inventory was any specialized software/hardware for data collection, testing, and analysis, specialized databases, any software used for system development, any generic software that was being customized through the generation of macros, scripts, or programs, and any other software/ hardware assessed to be important to engineering and worthy of inclusion.

The second step was to generate a list of IT resources existing within each engineering organization. IT resources were considered to be engineers with IT skills in demand by their coworkers such that they spent significant amounts of time assisting management or their group with IT support. The initial list of resources was developed by the SMEs. The project manager finalized the list after conducting 40 interviews of selected individuals. A set script was used for determining what amount of IT support was being provided by engineers to engineers, any additional inventory items, general levels of automation and needed IT, and what issues were involved in using IT in engineering. Interview subjects were selected based on input from the SME's and known expertise and/or participation in IT development.

The final step was to take the gathered data, analyze it with respect to dollars and time invested as well as issues identified, and generate a set of recommendations for improving management of the IT effort in the engineering organizations. This was documented in a final report by Jennex et al. (2000) that was presented to IS and engineering management and is used as the data source for this paper.

CASE DESCRIPTION

The Assessment

The assessment found a significant but poorly managed investment in IT in terms of money, time, and expertise. With respect to the management of IT, it was observed that NIS is tasked with managing the infrastructure, networks, and enterprise level systems. This provides an overall organizational perspective and strategy for managing these assets. Engineering IT is managed at the division level and was found to lack an overall engineering strategy for the use, adaptation, and implementation of IT. Additionally, IT was unevenly applied throughout the engineering organizations. Some groups were fully automated; others had process steps automated but not the overall process; and still others were not automated at all. The net effect was that IT assets were not performing as effectively as they could and many engineers were expending more time and resources than they should to obtain the information and data they needed. Specifics on these findings are provided in the following paragraphs.

Investment

The inventory recorded 267 systems and other hardware. This number excludes enterprise work process systems, basic personal productivity systems (MSOffice, WordPerfect, Access, etc.), and plant control systems. Included are the analysis tools, graphics packages, scheduling tools, equipment databases, image and web editing and authoring tools, and data collection tools used by engineers. The team was confident this number reflected at least 90% of what was in use. The investment in terms of dollars and effort was not totally determined, not all numbers were known and not all groups were willing or able to report all costs. However, with about 30% of the inventoried systems reporting this data it was found that approximately $ 1,650,000 had been spent to purchase these systems with an additional five-person years (during the last two years) expended on development. Additionally, $290,000.00 was spent annually on license or maintenance fees and 10 full time equivalent engineers (FTEs) were expended maintaining these systems. Finally, an additional approximate 10 FTEs were expended assisting other engineers in the use of these tools. For political reasons, there were significant exclusions from these figures including 45 FTEs and $335,000 in annual licensing cost supporting plant control IT. The team was confident that purchase and support costs and efforts would at least double if all the information was available. For perspective, these numbers were not expected and were considered by management to be extremely excessive although Panko (1988) found in the 1980s that 25-40% of IT expenditures were in EUC and Benjamin (1982) expected EUC to account for 75% of the IT budget by 1990 where EUC is the adoption and use of IT by personnel outside of the IS organization to develop systems to support organizational tasks.

Engineer Involvement in IT

It was observed that engineers supported IT in three ways: supporting other engineers' use/acquisition of IT, learning to use the IT, and maintaining systems; building queries, macros, and reports for special/ad hoc information requests; and developing IT solutions for supporting engineering processes. It was reported previously that at least 20 FTEs were expended supporting other engineers, learning to use IT, and maintaining IT and approximately five person/years were expended (over the last two years) supporting system development. Doubling these values (per the team's estimate) gives 45 FTEs/year for items one and three. The second item was found to take approximately 5% of each engineer's time. Taken as a whole, this is a fairly extensive activity, approximately 21 FTEs yearly. Combining these efforts and excluding assets dedicated to plant IT support (50 FTEs), approximately 66 FTEs/year (16%) are spent on end user IT functions, see Table 1 for a summary of these resources (Note that the 16% figure does not include time spent using enterprise work process systems or standard office personal productivity systems used for doing routine work activities.) This was considered excessive, and if eliminated, could almost provide the necessary manpower reduction.

Rockart and Flannery (1983) found that 85% of EUC was focused on report generation, inquiry, and analysis. The assessment did not find that level of reporting, instead finding a little over 50%, however, even at this level, the ability to do ad hoc reporting was considered a tremendous strength and the team did not see the need for ad hoc reporting decreasing. However, there were several issues that caused the time needed for this activity to be greater than it needed to be. Chief among these are a lack of standard query/reporting tools, advanced training in the use of the available tools, a central repository for queries with the result that many queries were written over and over, and integration of the site databases resulting in more complex and time consuming query/report generation. Interviews recorded numerous complaints of end users not knowing where data was located. Engineers that spent significant time assisting in ad hoc reports and queries stated that their time was taken in assisting with SQL and finding out where data was kept. Additionally, there is no process for tracking end user reports to determine if they are used in sufficient quantity to warrant inclusion in the enterprise system. The team did not consider this very important but from the interviews it appeared that there were several organizations doing the same or similar reports. Discussions with NIS and end user managers found no awareness of what reports and queries were being run although both groups expressed interest in making repeatedly run reports and queries part of the formal system. This leads to the key issue of NIS focusing on the enterprise level and allowing end users to go their own way. This case is an example of more effort than necessary being expended on ad hoc reporting because the enterprise database structure was not available to the end users and no effort is being made to monitor end user usage for common reports and queries. Dodson (1995) found this to be a common problem when IS focuses solely on the organizational systems. What makes this issue more significant is the ability to generalize the average of 5% time spent on ad hoc reports to other organizations. This was considered excessive by the engineering organization's management and would probably be considered excessive in many organizations once it was quantified. Perhaps the most interesting observation during the study was the generally held opinion that the ability to do ad hoc reports was a great strength. While this is an indication of system flexibility and end user ability, it did not occur to anyone that large amounts of ad hoc reports and queries could also be a negative indicator. To address this, the organization is considering publishing a data road map.

Grindley (1995) predicted that, by 1998, 80% of all system development would be done by end users or their consultants and while this case did not find that high of a percentage of system development being done by engineering, it did find that the ability of engineers to develop new systems for addressing specific engineering problems was considered a strength and a need by the engineering organizations. The team agreed that this function would continue to require engineering involvement. However, this is the function least understood by engineering with respect to cost and process. Engineers followed minimal processes and considered the Capability Maturity Model (CMM) processes followed by IS to be a waste of time and money (NIS is a CMM Level 2 shop).

The engineers justified the need for engineering to provide its own IT support through several reasons that could be combined into primarily three issues. The first is that engineering systems are generally not supported by IS so expertise to assist engineers with these systems only exists in engineering. The second is that due to lack of standardization there are multiple products supporting the same function, this makes having central support prohibitively expensive. Experts would be needed for over 200 systems and devices that in many cases are only used by a few people. The third was an overall poor relationship between engineers and IS.

END-USER SYSTEM DEVELOPMENT

The assessment observed that with NIS focusing on enterprise systems, engineering was left free to support its IS needs as it saw fit, and without management oversight, this IS self support caused the organization to shift significant resources away from its central focus and function of supporting power plant operation. Even though this significant use of resources by EUC is common in many organizations (Jenne, 1996), the resources attributed to end-user system development were thought to be excessive and not effectively used. Of particular concern was end user or end user-led system development. Several systems were looked at that were developed by engineering and several issues affecting the quality of these systems identified. These include not following IS development standards, inadequate documentation, obsolescence/replacement of systems, and security. Lack of development standards, maintainability, and documentation are identified as EUC development risks by Amoroso (1988), Davis (1982), O'Donnell and March (1987), Palvia (1991), Sumner and Klepper (1987), and McGill (2002). Wetherbe, Vitalari, and Milner (1994) and Beheshti and Bures (2000) identified obsolescence of systems as a regular IS issue and Sumner and Klepper (1987) identified security as EUC development issues.

The assessment found several systems that were developed directly by engineering or developed by outside developers under the control and direction of engineering; Dodd and Carr (1994) classify this as Systems Development Led by End-Users (SDLU). Many of these systems were found to be developed without following NIS development or programming standards, tended to not meet requirements, were hard to modify, and/ or were designed such that they could not interface with the organizational infrastructure. These systems result in much higher maintenance costs than expected. To illustrate these problems, two systems were found of which the team was told "unofficially" cost approximately $500,000 each with neither able to perform the function it was purchased for due in total or in part to incompatibility with the infrastructure and failure to fully identify requirements.

Engineering developed the accelerated flow corrosion test tracking system after NIS rated it a low priority. Engineering developed the system using outside developers to code the system and engineers as subject matter experts. The purpose of the system is to track outage activities of three groups - engineers, maintenance, and quality control - in the inspection and repair of high-energy steam lines. Engineering worked with the vendor to develop the system to engineering's perceptions of the requirements. Potential process improvements were not considered and IS, quality control, and maintenance were not included on the project team. The system was implemented for use during the 1999 outage; however, it failed to meet the needs of quality control and maintenance and was abandoned after only a few days of use. In 2000, engineering requested IS take a look at the system and attempted to make it work. IS formed a small project team to rework the system. System requirements were gathered through a series of meetings that included all stakeholders and were used to correct the system. The reworked system was verified to meet the requirements of all users through a simulated outage test and was used successfully throughout the next outage. Management was satisfied with the activity as the system facilitated management reporting and assisted in reducing the activity time by 33%. A post outage review was held with all activity participants with enhancements being identified and approved by all four organizations. A one-month window was identified for the work to be completed prior to the next outage scheduled for the other unit at the beginning of 2001. The activity was performed with even more success during the second outage. A post outage review was also held after the 2001 outage and a maintenance plan prepared for maintaining and enhancing the system. Management was extremely pleased with the final system after there had been a great deal of management dissatisfaction when the initial system failed. Re-work of the system was done at a cost of $40,000 with IS estimating that the system could have been built by IS for approximately $200,000.

Engineering also developed the maintenance rule system after NIS rated it a low priority. Engineering developed the system using outside developers to code the system and engineers as subject matter experts. The purpose of the system is to track maintenance activities on critical equipment to determine if there is a maintenance rule violation and required the operations group to input data whenever a work authorization was issued. Engineering worked with the vendor to develop the system to engineering's perceptions of the requirements. Operations and IS personnel were not included in this process with the result that the system failed to work when installation was attempted. After the system installation failure, a meeting was arranged with IS to discuss how to modify the system so that it could be installed in the site infrastructure. IS spent approximately one-person week working with the vendor to see if the system could be made to work with the IS infrastructure and when it was determined that it could not, the system was abandoned. Concurrent with this IS effort, meetings with other stakeholders involved in the process found that the system added data entry burdens that those groups did not have the resources to support. Additionally, other engineers determined that the initial engineering requirements were incorrect. Management was very dissatisfied with this system as the system had to be scrapped and no value was ever obtained from the investment. Finally, when IS reviewed the correct requirements, it was determined that the system could have been built by IS at a maximum cost of $250,000 or half the amount paid to the vendors by engineering.

Both of these systems were built without consideration of IS standards for the operating environment and consulting the appropriate stakeholders for identifying requirements with the result that both failed. Additionally, neither utilized IS standard interfaces or programming guidelines causing low quality and making both difficult to understand and work with from the IS developer viewpoint. While these two examples are the extreme, they were not isolated cases. Numerous examples were found where engineering groups bought or developed hardware and/or software without regard for IS development standards with the result that additional effort was required to get the hardware and/or software to initially work or to maintain it over its useful life.

A review of the literature finds that the low quality found in the end-user developed systems is not uncommon. Edberg and Bowman (1996) compared the quality of enduser developed systems to those developed by IS professionals and found that the enduser developed systems had significantly lower quality. McGill (2002) found that this problem is worsened by less experienced end-user system developers as they tend to overestimate the quality of the systems they produce. Dodson (1995) believes that the trend towards end user system development is an "Achilles Heel" for the enterprise as attempts to integrate end user databases and systems into the enterprise infrastructure encounter problems that raise the cost for or prevent full integration. Edberg and Bowman (1996) support Dodson (1995) as they found that end-user developed systems tend to have major data integrity problems. Amoroso (1988), O'Donnell and March (1987), Palvia (1991), and Sumner and Klepper (1987) found that risks associated with end user developed systems included incorrect design, inadequate testing, and poor maintenance while Dodson (1995) lists issues such as lack of documentation, no planning for maintenance, improper system of design methodologies, and poor communication and understanding of requirements as the main problems associated with end user developed systems. To prevent or mitigate these issues, Dodson (1995) suggests organizations focus on five areas of standardization: business analysis and system design methodologies, communications structures, software architecture/libraries, documentation, and training. Dodson (1995) does not suggest that IS force end users to follow IS system analysis and design methodologies, but rather create hybrid methodologies that end users understand, can implement, and can use to identify, capture, and model user requirements. Communication structures reflect that end users should use the same project communications used in non-IS projects for IS projects, and Dodson (1995) suggests the widespread adoption of Joint Application Design (JAD) and Joint Implementation Process (JIP) as formal communication structures would improve stakeholder understanding and participation. Dodson (1995) recommends that organizations standardize products available to end users. This includes IS making their object, component, and module libraries available for use by end users in system development and IS creating standard design environments. Dodson (1995) suggests that IS specify standard documents that must be produced for all system development projects. The generation and promulgation of standard document templates that can be tailored to the size and complexity of the project facilitate this. Finally, end users need to be trained to use these tools and processes to produce systems.

The two examples were of large systems, but it should be noted that these issues also apply to smaller, personal productivity systems. Miric (1999) warned that the lack of programming standards and planning leads to large numbers of errors in end user created spreadsheets. KPMG Management Consulting studied end user created spreadsheets in their client organizations and found that 95% of the spreadsheets utilized models with significant errors and 59% of the spreadsheets had poor model design (Miric, 1999). To prevent these errors Miric (1999) suggests that spreadsheet development should be treated no differently than system development and that users need to be trained to use organizational programming standards, determine and document system requirements, perform testing, and use automated tools when available.

The literature also suggests that end user groups such as engineering will be more problematic with respect to end-user developed systems. Munkvold (2002) found that high computer skill self-efficacy within end users coupled with a low regard for IS leads to end-user system/system development. Wagner (2000) investigated the use of end users as expert system developers and found that end users have significant domain knowledge. However, it was also found that end users had difficulty knowing and expressing what they know, making their contribution limited in content, quality, size, and scalability. Taylor, Moynihan, and Wood-Harper (1998) agreed that end users do not produce good systems and identified duplication of effort, low quality, and lack of training in system development methodology as issues. Note that low quality is reflected as a lack of documentation, standard development practices, and/or programming standards. Additionally, McBride (2002) found that imposing system development methodology on end users might be regarded as an attempt to impose IT culture and thus be rejected by the end users. Finally, Adelakun and Jennex (2002) found that end user development issues with respect to failing to meet requirements or failure to gather the appropriate requirements could be caused by end users not identifying appropriate stakeholders for project involvement and assessing success of the developed systems.

Lack of Documentation

Previous discussion of the literature found many sources that identified a documentation vulnerability for end-user developed systems. Virtually all of the systems developed or purchased by engineering were found to have minimal to no design documentation. This is potentially a large problem as there is a great deal of memory/knowledge captured in these systems that is not available to system maintenance personnel. Also, there is a great deal of knowledge as to why things are done a certain way built into macros, programs, reports, databases, and models that is not captured in a retrievable manner. As engineering undergoes change, it is likely that a great deal of this knowledge will be lost since engineering's current knowledge management practices assume a static work force and does little to capture knowledge that exists in the heads of its members.

An example was a system developed to model the fire protection system. The system is used to evaluate potential work activities to determine impact on the fire protection system and to determine what compensatory measures need to be taken to ensure the fire protection system will still function when portions of it are taken out of service. The system was designed, built, maintained, and supported by the fire protection engineer. No documentation was generated. The concern is what happens if this engineer leaves, as a replacement has nothing to learn from. The organization has grown to rely on this system, and its loss would severely impact the organization. Another example was a local leak rate system that was found abandoned. This system had been developed to automatically calculate penetration leakages and to determine the plant's overall local leak rate in accordance with federal regulations. When the engineer who built the system left, the incoming engineer had no documentation to teach him how to use or maintain the system so he abandoned it and performed the needed functions using hand calculations where the potential for error is quite high.

These were not isolated cases. Numerous examples were found of special reports, databases, spreadsheets, and systems that were built to satisfy specific needs but are not documented. All rely on the engineer using them to maintain and enhance them and would be lost should the engineer leave and the report, database, spreadsheet, or system have a failure or need to be modified.

What makes these issues significant to this and all organizations is that it has the potential to lead to inaccurate data and incorrect decision-making. As processes change, the systems supporting the processes must be modified. Without documentation or system models to guide developers as to why the system is the way it is, it is easy for the developer to make wrong assumptions that can result in the incorrect modification of key calculations or algorithms. This can result in the system providing inaccurate data and results. This is of particular concern for this case as the subject organization operated a nuclear site and was subject to a great deal of regulatory required reports and data whose inaccurate generation could result in the site being shutdown.

Obsolescence/Procurement Standards

Obsolescence and procurement standards have been recognized as issues for IS planning. However, quite unexpectedly, the team found many plant and engineering digital systems that were approaching their end of life and needed to be replaced or updated. The team found systems running on Windows 3.1 and DOS as well as using 8'' and 5 1/4'' floppy drive technology. Expertise and hardware for maintaining these systems is disappearing. Problems arise as replacements are investigated for these systems and as new equipment/software is purchased for resolving new problems. The NIS infrastructure was standardized on proven technology and was not leading edge. Products bought on the open market tend to be leading or even bleeding edge. This results in some new products not being able to function within the NIS environment and requiring engineers to purchase equipment of an older standard. However, it is not good practice to develop replacement systems for this older infrastructure; instead, developers need to anticipate where the infrastructure is going and design for that. The issue is that NIS needs to create a process for assessing the incorporation of leading edge solutions needed by engineering into the NIS infrastructure while maintaining the reliability and coherence of the infrastructure. Additionally, procurement standards and processes need to be created for engineering to use and follow in the procurement of replacement systems and components. Another side of this issue is lack of documentation for these systems makes selecting and purchasing, or developing, replacement systems difficult as requirements are not documented and available for use in specifying the needs for the replacement systems.

Another example where a lack of procurement standards affects the infrastructure is the rapidly growing use of digital cameras and digital images. Their use has had a very positive impact on productivity. However, due to a lack of procurement standards many varieties of equipment, software, and formats were obtained and implemented. Extra resources were needed to support these multiple versions of equipment and software reducing much of the productivity gains. Additionally, clogged networks (caused by widespread e-mailing of images), dealing with different formats, and incorporating images into processes not designed to handle them has reduced these gains even further.

A final example is the use of web design and management tools. No procurement standards governing the purchase of web tools exist, and organizations have purchased whatever they have wanted making it difficult for NIS to support the use of the tools or to maintain sites created by non-IS endorsed tools. Additionally, use of intranet-based systems has failed to radically improve productivity as a lack of standard design practices and interfaces have resulted in many sites and systems being created with marginal usability and/or purpose.

Security

The team observed that the demarcation between the business systems maintained by NIS and plant systems maintained by engineering was blurring. Plant information flows across the business network on a routine basis. Plant processes have been developed that rely on e-mail and the business network to transmit data. Plant support productivity has improved by using the business networks to access and maintain plant systems. The key issue is to recognize that the boundary for protecting plant information now extends to the intranet firewalls. NIS and site management need to work together to create a security plan that recognizes this reality and allows for the creation of standards and processes for ensuring that systems developed by end users support the security plan. An example of this issue was the use by an engineering group of the business network to access plant equipment from remote locations such as their homes. This greatly increased productivity and reduced overtime costs but failed to take into account security needs. When interviewed and asked about security processes for ensuring proper access and user authorization, the group's manager stated that business network login procedures were all that was necessary as he trusted his people to properly access and use the remote access process to modify plant equipment when needed. Another example was found in end-user system development. While troubleshooting the previously discussed flow tracking system, the author was able to connect to a plant database that had been given to the vendor for testing purposes. The database had been placed on a publicly accessible server that the author was able to access using America Online, raising the issue of possible inadvertent disclosure of restricted data by end users and/or their vendors doing system development.

CURRENT CHALLENGES/PROBLEMS FACING THE ORGANIZATION

The greatest challenge faced by the organization is in learning to managing EUC within its management of traditional IS. McLean and Kappelman (1992) found that EUC has become an extension of corporate computing and suggest EUC be managed as a shared partnership of responsibility and authority. This organization has a schism between NIS and engineering that has resulted in engineering avoiding NIS control and viewing any attempt by NIS to form a partnership with suspicion. Munkvold (2002) found that this is most likely to occur with a group that has computer expertise and a low regard for IS, as the assessment found to be the case with engineering. McBride (2002) predicts this schism will be a hard issue to resolve as any attempt by NIS to enforce conformance with NIS standards will be perceived by the engineers as an attempt to impose IS culture and process on engineering. However, research suggests this must be done and provides suggestions such as Rittenberg and Senn (1993) who recognize that many users do not appreciate the risk involved in end user development and that this knowledge resides in IS. They suggest policies be implemented to govern EUC that include standards for procurement, documentation, and testing. Rittenberg and Senn (1993) also state that while user groups are suggested as a means of partnering IS and end users, they have found them to be ineffective unless there is strong leadership, a willingness to partner, and allocated resources to support the user groups within the IS and end user organizations. Jenne (1996) also supports creating a policy for managing end user development and suggests that it would be more effective if end user developed systems were grouped into various risk categories with IS development standards applied based on the risk category. Amoroso (1988) supports the use of end user policies to manage end users but suggests control must remain with the end user organization and not IS. Cheney, Mann, and Amoroso (1986) found that corporate policies controlling EUC were necessary to increase the likelihood of EUC success.

Subject: Case studies; Engineering firms; Information technology; End users

Classification: 9110: Company specific; 8370: Construction & engineering industry; 5220: Information technology management

Publication title: Journal of Cases on Information Technology

Volume: 7

Issue: 2

Pages: 67-81

Number of pages: 15

Publication year: 2005

Publication date: Apr-Jun 2005

Year: 2005

Publisher: IGI Global

Place of publication: Hershey

Country of publication: United States

Publication subject: Business And Economics--Computer Applications

ISSN: 15487717

Source type: Reports

Language of publication: English

Document type: Business Case

Document feature: tables references

ProQuest document ID: 198739244

Document URL: http://search.proquest.com/docview/198739244?accountid=38610

Copyright: Copyright Idea Group Inc. Apr-Jun 2005

Last updated: 2011-07-21

Database: ABI/INFORM Complete