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To Balance Technological Development Vis-à-vis Growth and Profitability

22 Feb 2017Business Essays

BACKGROUND OF THE CASE

iPremier is one of the top two electronic commerce retailing businesses with a commendable pattern of growth. The overall management structure of the company is sound and impeccable. Its stock position, surviving the NASDAQ 2000 downfall, held comfortably steady hence. The level of satisfaction of its executive, employees and customers are sustainable. The technical and technological structure of iPremier is well provided for. It has an outsourced host and colocation support. iPremier’s relationship with QData has been a long-standing satisfactory affair.

Until that one early morning when iPremier’s 3-month old Chief Information Officer, Bob Turley, was awaken from a business trip in New York City by one of iPremier’s operations crew, Leon Ledbetter, with an alerting problem that iPremier’s website cannot be accessed. Within a few hours that market will commence, their customers might not be able to conduct business with them. A hacking into the systems of iPremier is highly suspected.

THE INCIDENCE

As instantenously looked into and being analyzed by iPremier’s Technical Operations Team Leader, Joanne Ripley initially surmised to Turley that the continuous one-liner e-mails that says “ha” keep appearing in their systems. Ripley and Ledbetter could not diagnose behind their firewall via the T1 line therefore they suspect a connectivity problem in QData, meaning, a possible “problem outside the perimeter of the architecture of iPremier”. But they do not see any connectivity problem into and out of the building of QData

What Ripley initially learned is that the emails are “coming through an anonymizer”. The preliminary thought of Ripley is to unplug the server soon she gets to QData offices. But it will take sometime to put their systems back together after unplugging. Yet, Turley and Ripley are worried about infiltration of customer data and credit cards data.

After the initial and brief exchange of Turley and Ripley, the subsequent briefings he held with iPremier’s CEO, Jack Samuelson; VP Business Development Warren Spangler and Legal Counsel, Peter Stewart – the unanimous decision is to “pull the plug” and avert a public raucous soon as markets awaken and iPremier experience a backlash on their stocks and market standing.

What Turley eventually had to do was to consult iPremier’s Chief Technology Officer, Tim Mandel – that will enable him to come to a final conclusion then achieve a unanimous decision with his peer executives. Mandel hesitates on pulling the plug because logging data might be lost. And such logging data will be crucial to truly analyze the depth of what happened. It will serve as evidence to enable them to evaluate the big picture of the problem with QData, and, yes, with iPremier Chief Executive Officer. It is therefore imminent that the hacking incidence be thoroughly analyzed because if iPremier does not get to know what really happened, it can happen again. And not knowing what happened, iPremier will not be truly capable of what to disclose to the public. Besides, Mandel believes there is however little effect preserved logs because “detailed logging is enabled” because it takes a lot of disk space on the server. To pursue detailed logging will require investment on additional storage arrays and the finance executives of iPremier are cold to the idea. Therefore, the investigation of the incidence might produce mediocre analysis to support further solutions desired or courses of action.

Finally, Ripley having gotten into the server console of QData discovered a flood of synchronized conversation “from multiple sites directed at the router that runs the iPremier’s firewall service”. There are 30 sites that the hack is coming from which spells to “a classic distributed denial of service attack”. Ripley decided to shut down traffic from the addresses of the internet providers. A denial of service attack does not necessarily mean an intrusion. Thus, the customer data and credit card data of iPremier are still safe. Although, Ripley contends that a denial of service attack and an intrusion may not necessarily be exclusive.

Finally, Ripley reported to Turley that amazingly she just saw that the attack stopped just like that and the website of iPremier is back in the fold of servicing their customers – without any trace of the incidence having transpired. Of course Ripley and Turley decided to really sit down and sort out what really happened and come to fore as to what should be done for once and for all to the seeming deterrence of existing technical architecture of iPremier.

ORGANIZATIONAL PROBLEMS AND CAUSES

iPremier seeming relationship with a benign associate as QData hosting is mainly due to the proximity of the two companies. QData however cannot be described as a potential candidate for market leadership. It features “basic floor space, power, connectivity, environmental control, physical security, management services of websites, firewall internet security services. QData is not keen on investing in advanced technology.”

Of course iPremier has recognized these realities and the imminence of a shift to another facility. What makes the resolve pending final enactment is due to iPremier’s being enamoured with and just concentrates on its growth track that has been consistent. They have been busy with their progress. Then there is the consideration of expense that will be incurred in the shift: at three times more than their current cost with QData. iPremier is likewise extensively dwelling on the effect of eventual disruption of service to customers during the transition. Finally, one of the founders of iPremier has a sense of indebtedness to QData who has stood by iPremier during the difficult times of iPremier during the early days of its operations. QData was more than willing to sustain their contracts.

HOW IPREMIER AND ITS EXISTING OPERATIONAL STRATEGIES STAND

Strength - iPremier is presently and considerably a lead player in the “new economy” of internet marketing. At 50% annual growth rate, it was able to hold its water during the 2000 NASDAQ crash. Its high-end customers are varied and transactions are smoothly settled via credit card online and on the spot. In return, the goodwill of iPremier to its customers is illustrated via its flexible policies on purchase satisfaction before finally deciding on keeping their purchases.

Weakness – The technical and technological support of the seemingly efficient marketing and management realities of iPremier need to be thoroughly re-evaluated. What has arisen with the hacking incidence may be a blessing in disguise enabling further evaluation as to what could possibly brew further.

Opportunities – The customer satisfaction level of iPremier is secure. Therefore, customer satisfaction will translate to improved turnover of business. There is the word of mouth effect that is truly profound. There are repeat orders that can be harnessed.

Threats – A weak technical support that will eventually no longer cope to the potential of market growth - will have a very drastic effect. “New Economy” businesses are highly sensitive because the only thing that customers bank on is the efficiency of online transactions. Customers who will face a minutest difficulty on online transactions will simply “click away” to find alternative providers.

ALTERNATIVE SOLUTIONS

As verily pointed out by the operations staff of iPremier, it is reckoned that “with appropriate modernization of computing infrastructure, growth could be accomplished by adding installations in other facilities, rather than by expanding floor space in existing facility.” iPremier has not gotten on the drawing board to truly work this concept out.
The perspective of the operations department is to augment their existing business volume that will ensure that their efficiency to present customer service is sustained and that no hitches can immediately transpire.

RECOMMENDED SOLUTION

Bob Turley as the protagonist must reckon that his is the mandate to attack iPremier’s suspected “deficit in operating procedures” – as what the CEO advised him during his appointment time. Therefore, there is the overall picture that needs in-depth analysis beyond the technical and technological aspects.

The need for paradigm shift might come to fore: as it is the battlecry of change. As an exemplification, the U.S. Department of Housing and Urban Development developed their processes and procedures in their website management. And an overview says:

“When HUD’s website debuted in 1995, we made a discover: citizens expect to get information and services directly from HUD. Some managers objected: “Citizens aren’t our customers. We work through intermediaries. We’re wholesalers – not retailers.” The web changed this paradigm. It caused HUD to create a new product: citizen-centered information and services. We began by examining our audiences: what do they want to know? What do we want to tell them? Within months, we refocused our website on “homes and communities” – not HUD. We drew content from inside and outside of HUD, adding value by organizing it in ways that make sense to citizens. When we encountered voids in content that citizens wanted, we became entrepreneurial. In 2000, we began teaching free Web Clinics, encouraging HUD’s grantees and partners to create content to which we link. We developed free software - HUD’s Web Clinic Wizard - to make it easy for them to build websites.” (HUD, 2005) [underline supplied]

Turley must diagnose the true flow of operational procedures. Whatever logistical support that each process and procedure requires must be prescribed with solutions in two phases: interim short term to progress to long term stable solution.

Turley and Ripley must for once and for all make a comprehensive analysis of what happened in the incidence. They will have to take off from there to solidly support a firm course of action. If an overhaul may come to pass in its technical support, then it should be so. Turley must awaken his CEO that with a sustained 50% annual growth, a reasonable investment can be worked out to upgrade technical facilities.

Venturing to change requires the firm commitment to succeed. With that vision in mind, playing the “devil’s advocate” may come to fore. Making a decision towards either a calculable or incalculable repercussion entails the same thing: risk. However, there are already a thousand and one other cases and situations that embarking on a vision is half the battle won. For example, Merck & Co. Inc. encountered a situation while it was working on its Invermectin veterinary drug.

“In 1978, Dr. P. Roy Vagelos, then head of the Merck research laboratories, received a provocative memorandum from a senior researcher in parasitology, Dr. William c. Campbell. Dr. Campbell had made an intriguing observation while working with Ivermectin, a new antiparasitic compound under investigation for use in animals. Campbell thought that Ivermectin might be the answer to a disease called river blindness that plagued millions in the Third World. But to find out if Campbell’s hypohesis had merit, Merck would have to spend millions of dollars to develop the right formulation for human use and to conduct the field trials in the most remoted parts of the world. Evn if these efforts produced an effective and safe drug, vitually none of those afflicted with river blindness could afford to buy it. Dr. Vagelos….had to decide whether to invest in research for a drug that, even if successful, might never pay for itself……[Yet] Despite these risks, Dr. Vagelos wondered what the impact might be of turning down Dr. Campbell’s proposal. Merck had built a research team dedicated to alleviating human suffering……..Ultimately, Dr. Vagelos who had to make the decision whether or not to fund research toward a treatment for river blindness.” (Weiss, Bollier, 1994) [underline supplied]

Furthermore, Turley can work out with Business Development and Marketing how they could increase on product line offerings. Congruent to an efficient operating procedure is the capability to expand product lines and market base. As Turley can warrant that re-investment in the total operating process will be returned by an invigorated market activity, there can be no stopping on the potential of iPremier – both in service efficiency and turnover.
A re-invigorated market activity depends on loyal customers and they must indeed be built upon. They are the bastions that will warrant the “risks” to achieve success and a vision and deciding on new investments.
“Curious things are happening. More and more companies, it seems are trying to turn us into loyal customers. We read about it ….. We hear about it…..Companies in every industry are saying they want us around for the long term. They say THEIR FUTURE SUCCESS ACTUALLY DEPENDS ON KEEPING US IN THE FOLD. Executives proclaim that THE ONLY PROFITABLE CUSTOMER IS A LOYAL ONE and that the only way to grow a good business is by building a good relationships.” (Heil, Parker, Stephens, 1997) [upper case provided]

PERSPECTIVE AND PROSPECT:

Paramount to real business growth is a balancing act of “recycling”. Meaning, a portion of sustainable growth must be re-invested. This balancing act is an armor towards calculable changes that market environments and business environments pose within the realm of customer responses. Customer needs and satisfaction can become variable overnight. A satisfactory level of service, even if sustained and consistently attained, is not a laurel to simply rest with

Recognizing changes and adopting and adapting to them is a more prudent and dynamic business resolve than merely “sitting” on growth and continue “playing profits” with “intangible” fixed income investments or money market or stocks. Capital expenditures are “honest” expressions of a company’s true recognition of the goodwill of customers and the intention towards improving customer relationships.

What Turley and iPremier will risk is of course a sizeable reduction in the company’s cash flow. With a solid blueprint on maximizing customer satisfaction towards increasing product line and customer base, the “hesitation” will be alleviated. The confidence of any transitional and bold dynamics in a business must be a unanimous consensus amongst its executives. It is only in unified faith and confidence that a business expansion and operational upliftment can be realized.

There may be setbacks in infusing new ideas into a company. Creating a vision and the ability to share a vision and gather everyone to unite behind the process of success is a challenging hurdle and yet a rewarding exercise and a demonstration of skill.
“Generating a vision for an organization is held to b important, because from that platform the enterprise is helped to model strategic plans and provide a kind of touchstone for goal setting [Allen, 1995]. An effective vision is considered ot be one which defines ways INTO THE FUTURE………[but] do not expect that everyone will buy into your ideas. There will always be those who will not want to come to board [Moorhouse in Shell’s video, 1996]. He argues that there will be always be people who cannot be motivated to join in, and that these persons will need to be moved aside into less critical positions…….” (Kakabadse and Kakabadse, 1998) [upper case provided]

At the end of the day, no guts, not glory.

References:

  • “HUD’s Web Management Operating Procedures”. June 1, 2005
  • Weiss, S. and Bollier, D., 1994. “Merck & Company, Inc: Having the Vision to Succeed”, A Case Study. International business Case Studies. Edited by Robert T. Moran, David O. Braaten and John E. Walsh, Jr. p. 309, 314
  • Kakabadse, N.K. and Kakabadse, A. P. 1998. “Vison,Visionary Leadership and the Visioning Process: An Overview.” Success in Sight. Edited by Andrew Kakabadse, Frederic Nortier and Nello-Bernard Abramovici. p. 1, 26
  • Heil, G., Parker, T., Stephens D.C. 1997. “Building Relationships One Customer at a Time”. One Size Fits Ones. P. 17

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