Monday, July 28, 2014

CEPAS: EZ-Link and NETS E-Payment Integration - Reflection

 
To: Leong Kwok Weng
IC: C-Level and Audience
From: Nikita Patel
Date: July 28, 2014
Subject: Re: Reflective Analysis – CEPAS 
This memorandum is a follow-up to the meeting held last Tuesday with 'YSW Consultant Group'. I believe their team provided thoughtful insights in the presentation with regard to the presence of competing card issuers, the main stakeholders involved in the platform, CEPAS impact, motivations/ incentives for the stakeholders, innovations & its platform analysis prior to CEPAS and key take away from the CEPAS initiative. This is exactly what we seek to send the requestors who want to know how we merged the two systems and explain the success story of how our country 'Singapore' is moving towards a cashless society.
After careful analysis of the notes we had prior to the consultant meeting along with the presentation & data provided by consultants, we should utilize the power point presentation for circulating to the requestor so as to help them create another success story among other enterprises as it will bring about faster turnaround time in the payment process within an economy which will ultimately increase GDP across the economies. The more innovation brought about to this platform, the more economies will prosper across the world. The consultants discussed most of the benefits of CEPAS standard initiative, especially the point mentioned about having standard methodologies & create an entity independent of stakeholders. If there is an independent entity appointed who reinforce the changes across the society, there will be an evidence for a need to change perceived by the people. With CEPAS it will be convenient to integrate the divergent systems across enterprises.
It is worth circulating this to the users as it will act as a standalone presentation that tells our story in a consolidated manner instead of making different print materials about our success. Once the results of using the CEPAS is visible to  its users there will be a change perceived by the masses, and the nation will be move on to be more consistent and effective in its operations. We can schedule a meeting this week to discuss this matter further.

Monday, July 21, 2014

CEPAS: EZ-Link and NETS E-Payment Integration - Case Preparation


Introduction:
Prior to 2009, Singapore had different e-payments system dominated by two major card issuers with non-interoperable cards. The Land Transport Authority (LTA) with its EZ-link fare card & Network for Electronic Transfers Singapore (NETS) with its contact cash card. Together, they accounted for 95% of the country’s micropayments market.

EZ-link was formed by the Land Transport Authority (LTA) on January 8 2002, to manage Singapore's single largest contactless stored value smart card system mainly used for payments on public buses, taxi fare collection and Mass Rapid Transit (MRT) ticketing. Due to its appeal, the EZ-link card had been expanding its range of services beyond local transit into the food and beverage, retail, and entertainment markets. The next generation of ez-link cards is Contactless e-Purse Application (CEPAS)-compliant which can be used to make payments in Electronic Road Pricing (ERP) and Electronic Parking Systems (EPS) facilities. The card is combined with an ETC transponder in vehicle to enable tolling fee collection.

NETS contact card system pioneered Singapore’s first cashless payment platform through its EFT at Point of Sale (EFTPOS) network, a debit payment servicing using the banks automatic teller machine cards for consumers purchases and bill payment. In the retail sector, NETS faced significant competition from credit and debit cards even though the Cash Card was accepted by 12,500 merchants including self-service kiosks, libraries, public payphones and vending machines. Building on its first-mover advantage in merchant acquisition through the EFTPOS network and the largest terminal base installed island-wide, the Cash Card demonstrated strong growth in retail transaction volumes. NETS could take advantage of its extensive network of top-up points deployed by bank sector. NETS tried to urge Infocomm Development Authority of Singapore (IDA) for a unified national platform.

IDA saw the potential to boost the local micropayments industry and to promote the opening up of services for consumers to use one card seamlessly. The integration needed to make NETS contact card system and LTA’s contactless system work together faced significant barriers including the differing commercial interests of parties involved. LTA’s priority was to have access to a suitable card that was faster, more cost-effective and compatible with existing readers and new IUs. The challenge was to find a common ground and approach to address the commercial, operational and technical aspect of such a large-scale implementation nationwide.

Competition & Impact on Consumers, card issuers and society:

Public transport ticketing in Singapore has evolved over the past 20 years from manual cash collection to an advanced e-payment system using smart cards. This case traces its development from the automatic fare collection system introduced in 1987 for the first metro system in Singapore, to the current contactless smart card system used for travel across the entire public transport network. The introduction of Symphony for e-Paymentan enhanced ticketing system based on open standards allows multiple card managersmarked a milestone in the evolution of e-payments in public transport. The use of a national e-purse standard CEPAS (Common E-Purse Application Specification) further enabled the development of a single transport card which can be used on both public transport and private transport i.e. road pricing and parking.

The CEPAS provides the command sets and data bytes that can be used for contactless e-purse applications, and focuses on the debit and credit areas. The most recent version of the standard is CEPAS 2.0 allows the interoperability of multi-purpose stored value (MPSV) card payment schemes from different card issuers and system operators. The CEPAS standard provides an interoperable platform that all MPSVC issuers will eventually migrate to. Therefore, the launch of CEPAS is a significant step closer towards giving consumers the convenience of having a single card for making transit, motoring and retail payments instead of having multiple cards for different purposes.

Beyond just convenience to consumers, merchants and public service providers will be able to deploy a single reader for their transaction processing, as opposed to having multiple readers. In today's age and lifestyle, there was a need to move towards contactless payment system for micropayments.  CEPAS will also level the playing field allowing more card issuers such as banks and financial institutions to participate in this micro-payment space. Hence, CEPAS results in a win-win situation for consumers, merchants, as well as card issuers.

A single standard had offered CEPAS cardholders access to expanded range of payment application and service offering. As standardization lowered the reader and card costs due to multi-vendor support, there were positive effects into the non-transit sector. More payments options available to users who enjoyed marketing promotions from card issuers competing for higher market share. A study by VISA showed that every 10% increase in the share of e-payments in the economy could stimulate GDP growth by as much as 0.5%.

Diverse Stakeholders Interest:

There were several stakeholders involved in the convergence of the two major card issuers, such as IDA, consumers & companies using e-payment systems, banks, and the Singapore government, all of whom had different interests who saw a potential in the implementation of CEPAS compliant cards. IDA saw the potential to boost the local micropayments industry and to promote the opening up of services for consumers to use one card seamlessly. Government played an important role as it demonstrated that contactless payments could be safe, reliable and convenient experience for commuters. LTA’s priority was to have access to a suitable card that was faster, more cost-effective and compatible with existing readers and new IUs.  However, since integration of systems takes ample time, LTA and NETS card issuers wanted to complete the process soon. Consumers and companies using e-payment systems wanted a single e-payment system so as to make transactions more convenient and easy to use as it would increase their revenue. 

Innovations Needed for CEPAS standard to be useful:
In the past, EZ-link and NETS each competed through continuing innovations; NETS planned to introduce Combi card that could be used for public transport and EZ-Link wanted to grow and manage its non-transit service offerings. After the deployment of CEPAS driven by government who played an important role, there was an increasing level of adoption of new technologies by consumers and businesses which paved way for continuing innovations and adoption of  emerging technologies in the e-payment arena. In early 2012, Mc Donald’s Singapore installed NFP readers at over 100 restaurants although it had earlier stopped using an older payment system which accepted ez-link cards.

The CEPAS platform was being leveraged for the next generation of e-payment innovation such as payments via Near Field Communication (NFC) - enabled mobile phones. Merchants with contactless credit card or CEPAS terminals were already able to accept payment via NFC phones. Industry players could leverage the existing platform instead of having to invest in their own infrastructure. IDA noted that a fully interoperable NFC ecosystem could generate a market eight times that of a non-interoperable environment. The nationwide ‘tap-and-pay’ service using NFC technology was rolled out in August 2012. The new payment mode could be accepted at about 30,000 retail points equipped with contactless reader terminals, which worked with NFC-enabled mobile phones as well as contactless cards, including CEPAS-compliant cards.
 
Success from CEPAS initiative:
CEPAS was designed to meet the security and integrity requirements of an open e-purse system.  Some of the features are as follows:
  • Atomicity – updates completed in total to ensure information was in whole
  • Signed Certificates– After each debit, credit and ReadPurse, the card would return cryptographically signed certificates
  • Autoload – automatic add value services when transaction amount exceeded balance, provided the card was linked to bank account
  • Partial Refund – Limited to most recent amount debited which was useful for retail and bus fare transaction that required ‘at start, deduct maximum, upon end, and refund unused amount’
  • Cumulative debit (or Slicing) – to minimize transaction processing overheads, debit operations for one card were accumulated into a final amount
Singapore had planned to spend up to $30 million in 2012 on building NFC infrastructure allowing citizens to use NFC for a wide range of NFC services such as payments, transport, loyalty etc. The government through Infcomm Development Authority (IDA) hired a consortium of 7 members to help with the development and roll-out of this NFC infrastructure across Singapore.
Research conducted by an independent IT consulting firm mentions that a fully interoperable NFC environment creates a market size that is eight times larger than that of a non-interoperable environment. Based on this research, one can safely conclude that based on the approach followed by IDA, the country will see a strong growth in the roll-out of NFC services as compared to other countries (today no other country besides Singapore has a government led NFC infrastructure roll-out program in place). The open access infrastructure has several advantages such as:
 
  • Ability to offer secured services to all mobile subscribers through a single TTP connection
  • Faster time-to-market, shorter development and deployment cycle with standardised interfaces and processes
  • Standard mobile payment services can be deployed within 6 months upon agreement
  • Cost efficient – reduce duplicated infrastructure and capital investment.
Some of the initial services that have been rolled out in Singapore are mobile wallets being offered by all 3 mobile operators in collaboration with payment service providers. Currently, e-wallet applications based on 3 different type of cards are being offered to consumers in Singapore: CEPAS card (national e-purse application), MasterCard (Paypass) credit and pre-paid cards.
 
Key Risks:  
Some of the key risks of the integration revolve around the differing commercial interest of the parties involved. This was addressed by government driven mass market deployment of CEPAS as it demonstrated that contactless payments could be safe, reliant and convenient experience which helped overcome the initial resistance by the stakeholders. Another barrier to retail adoption was not having a common terminal network across all card managers in the retail arena. To encourage the merchants to support CEPAS smart cards, IDA offered S$ 16 million in a CFC to jointly fund the cost of local merchants who switched their POS terminal to contactless CEPAS-compliant readers.

Monday, July 14, 2014

Reflection Report - AtekPC Project Management Office


Memorandum
To: John Strider
IC: C-Level and Audience
From: Nikita Patel
Date: July 14, 2014
Subject: Re: Reflective Analysis – AtekPC PMO
 

This memorandum is a follow-up to the meeting held last Tuesday with 'GHR Consultancy'. I believe their team provided thoughtful insights with regard to shifting from PMO light to PMO heavy approach in a phased manner. The suggested course of action can be utilized in arriving at our final decision after considering the sensitivity towards the cultural issues and governance at our organization.

After careful analysis of the preparatory notes we had prior to the consultant meeting along with the presentation & data provided by consultants, we should definitely move towards having a PMO heavy in the future at an enterprise level. The consultants discussed most of the benefits when PMO is used in the organization, especially the point mentioned about having standardization methodologies that will allow us to have consistency and the project managers recognized as change leaders. If we have the change leaders in place who reinforce the changes across the organization, there will be an evidence for a need to change perceived by all the employees.

The consultants mentioned a very practical point of proving to the staff and company that PMO system works and is effective. This is definitely something to consider as unless we have a PMO running the projects and proving its worth, the staff members will not be able to quantify the results of having an office in the company. Once we start seeing the results in PMO light by concentrating the projects for few functions, we can then take steps and make it visible to the organization by aggressive communication across the firm. In today’s age, where there is competition across the industry & users want quick & precise information in a consistent manner, I believe we should take steps to implement the PMO light approach and later move to PMO heavy approach.

Due to the above facts in making our business process flow more efficient, it is worth investing in the implementation of PMO as it seems to be an ideal alternative that addresses the problem and the symptoms we face currently. Once the results of having a PMO are visible to the employees there will be a change perceived by all the employees, and the entire project management process will be more consistent and effective. We can schedule a meeting this week to discuss this matter further.

Monday, July 7, 2014

Reflection Report - Zara: IT for fast Fashion


Memorandum
To: Xan Salgado Badas, Bruno Sanchez Ocampo
From: Nikita Patel
Date: July 7, 2014
Subject: Re: Reflective Analysis – Zara: IT for fast Fashion 

This memorandum is with regard to the meeting held last Tuesday with ‘BCH Consulting Group’. I believe the consulting team provided a considerate approach with regard to shifting from DOS to a new OS at our POS terminals in all of the 531 Zara locations. The suggested course of action can be utilized in arriving at our final decision to the ongoing issue of our technology becoming outdated & answers the continuous debate that the management has whether we should keep DOS since it works fine for our company.
After careful analysis of the preparatory notes we had prior to the consultant meeting along with the presentation & data provided by consultants, I believe that since Microsoft no longer supports DOS and we fear that our vendor might upgrade/ change the software in future thereby leaving us in a situation where we would have to make some quick decisions regarding whether to go to another DOS vendor that could be used on the POS terminal, or rather we should plan to change the operating system for our business. I see that the consultants discussed most of the benefits of shifting from DOS to Windows OS which leads me to consider my initial judgment of moving forward to implement one of the latest OS into our system.
The consultants provided some evidence that we are performing inefficiently by not having an OS that allows the store managers to have 100% accurate inventory and what the inventory is at our local locations. Though we are looking for 93%-95% accuracy in the inventory level, if we can get 100% accuracy with the new OS, we should take it into consideration from a future perspective. For example - If a customer in one of our stores asks for a new item but it is not in stock at the store, then the store manager has to make several phone calls to other stores while the customer is waiting for a response. In today’s age, where users want quick information, and where the technology changes rapidly we should go ahead with the consultant’s suggested solution to the problem & invest for our POS terminals operating with a new OS.
 
The consulting team provided some financial evidence that an investment in utilizing a new OS would be right for us. We would spend an estimated €233,000 in initial costs to get the tech project running but we have not considered the lifelong costs associated with the two options; invest in new technology or keep DOS. By keeping DOS, we would not need to spend any additional euros to keep business running, but there will come a time when we have to make a switch to new technology and we would spend the money by all means, maybe a little more than we have to pay now. Investing in new technology will in theory make us more money in the long run because we would be using less man-hours due to us cutting out some business inefficiencies as stated in the example in above paragragh. Also as mentioned by the consultants, reports would be run more often to create optimal plans to begin production, stores would be able to check up SKUs from other stores, as well as have a faster system with more functionality.
I suggest that we attempt to use the new technology in 10 stores so we have the flow process to conduct a metric comparison. After a certain period of say 1 year, if we find that inefficiencies are lower and revenue grown as per the target we should make the € 259,320 investment for the enhanced system. I believe that since Inditex’s net income has grown over 28% from 2001 to 2002, and the investment would be affordable and lucrative in future. I also want us to consider that even though we do expect revenue growth from the project, we will also incur higher costs due to tech maintenance, training to meet our needs. Also by conducting a test run, we can understand the security concerns that we currently have. However I believe the anti-virus software's available in the market will solve our concern.
Due to the above facts in making our business process flow more efficient, I believe it is worth taking the risk to invest in the implementation of Windows OS for the POS terminals as it seems to be an ideal alternative that addresses the problem and the symptoms we face currently. Once the store managers are well versed with the new OS system, the entire process will be more efficient and effective. If you have any further questions, please do not hesitate to contact me this week at the earliest.

AtekPC Project Management Office - Case Preparation

Problem/Issue Statement
 
The PC industry was changing, and AtekPC was dealing with remarkable pressure from larger competitors. To compete in a changing industry where consolidation was getting widespread, AtekPC had implemented a corporate planning office to decide on selecting an ideal PMO model for its company. Recognizing the role that IT would play in enabling AtekPC to respond to the industry pressures, the senior executive had supported the creation of a PMO within IT. The AtekPC management is now faced with challenges in the development and deployment of a Project Management Office in the company.
The main challenges and obstacles in implementing a PMO at AtekPC was that a formal documentation and plans for PMO did not exist. There was a shortage of PMO expert resources, where staff consisted of a PMO director and three contract project managers. Therefore leading AtekPC to a problem statement of selecting between PMO-Heavy model and PMO-light model.
 
Situation Assessment
 
The changes in AtekPC’s business environment caused the company to introduce a PMO. In mature organizations, the PMO is the focal point for improvement and enhancement in project management through the implementation of the enterprise-oriented functions. Enterprise-oriented functions are intended to strengthen the overall capability of the organization for long-range benefits. The enterprise functions provide the long-term stability and backbone for the project management success. This mission is met by establishing, and maintaining, a project historical database, by developing and disseminating project management best practices, by providing training in all project management knowledge areas, and by providing visibility for the value of project management to the organization.
 
The decision criteria would be cost reduction and to get better on projects which would mean getting more creative, adaptive, and agile in launching new products.
 
Evaluation of Alternatives
 
A PMO that is based throughout an organization in comparison to a PMO base in one department is more likely to get the support from the senior executive. Project management should not be a departmental strategy; it should rather be an organizational strategy. The PMO must exist within Information Technology organization and provide project support for all Enterprise IT projects and its clients across the company. The specific duties of a PMO are typically divided into two categories: project-focused and enterprise-oriented. Project focused responsibilities such as consulting, mentoring, and training were services that enabled the success of individual projects. On the other hand, enterprise responsibilities addressed services that might improve all projects such as portfolio management, PM standards, methods, and tools, and project performance documents. The Enterprise PMO will oversee the management of all strategically aligned projects. This leads us to further understand the selection between the two models available to an organization. An ideal way is to note the characteristics and limitation of the PMO heavy and PMO light models.
For PMO heavy model:
Characteristics:
·         Organization will have full staff of project managers who have an implicit responsibility for managing all IT projects.
·         Hire project management experts, either from internal or external sources, and use these resources to manage projects under the direction of the PMO.
·         In extreme case for PMO-heavy model, none of the project would operate outside the management and direct control of the PMO.
Limitation:
·         There aren’t enough people to move fast. Company wants to move fast to be competitive however there is resistance among employees due to the culture and governance issues.
For PMO light model:
Characteristics:
·         There is minimum number of staff who are experts in working through internal project managers to perform the responsibilities of the PMO.
·         This model focuses on the development of skills of internal project managers who were not formally connected with the PMO.
·         In the extreme scenario for PMO-light, all projects operate outside of the PMO under existing organizational controls, and the ownership of projects resided within the functional area and IT group charged with execution of the project.
Limitations:
·         No one in the management wants to move to PMO as people in the department and functions challenge the values of PMO. This depends on the culture of the organizations.
·         The delays from the light approach might compromise the ability to provide PMO services and to demonstrate its worth to the functional areas of the business. It gets hard to acquire resources and to find funding for PMO resources.
·         The functional areas don’t literally understand what the PMO is & perceive it as a sort of a road block and an obstacle to progress.
·         The fact that it creates a choice for the management whether to add projects under PMO or elsewhere. If they add all of them in PMO, it create a situation of being too aggressive which in turn may violate the culture so much that you cause a big red flag.
·         Having the business resources available is already becoming a problem for AtekPC. With a PMO-light they are lined up better with the business side in terms of the number of resources, and it’s a better balance.
Recommendation
PMO-heavy seems to be the best model for AtekPC, but the management should recognize that they would not be able to gain acceptance immediately from this approach. The demand for resources was more throughout AtekPC, and the PMO would need to prove itself in order to earn the resources they wanted. Therefore there is a need to build support for the PMO-heavy model through project successes. As the PMO gains acceptance, AtekPC can implement a PMO-heavy approach, furnishing project managers to the various groups.
Purpose and mission of a PMO:
The objective of implementing PMO is to deliver successful IT projects, build project management maturity at the organizational level, keep management and project audiences informed, and serve as the organization’s authority on IT project management practices. The purpose and mission of PMO is to have consistent project practices. The specific duties of a PMO were typically divided into two categories: project-focused and enterprise-oriented. Project focused responsibilities such as consulting, mentoring, and training were services that enabled the success of individual projects. On the other hand, enterprise responsibilities addressed services that might improve all projects such as portfolio management, PM standards, methods, and tools, and project performance archives. PMO’s are more effective and can better impact the bottom line, when they are operating at the corporate enterprise-wide strategic level, rather than at the departmental level. Departmentally based Project Management offices are successful in their own silos but not accepted outside their span of influence, and therefore, are unable to influence the organization as a whole. This is because many project management offices started off from a grass roots approach.
Structural and governance mechanisms critical for effective PMO implementation:
In the current governance, there seem to be no roadmaps or timelines for maturation of the PMO, people did not know who PMO was accountable to, and there was weak support from the senior executives. There was resistance among employees which was not making the PMO a success. Keeping in mind it is not possible to measure the performance of PMO and proving its value was by having one which seems to be the only way that will work for AtekPC.
How much PM is enough PM? How much PMO support is enough PMO support?
If the PMO is to be successful, there are several key issues that must be assumed. The success of projects, in general, all rely on the factors being implemented; i.e. the integration of client, implementer, and software vendor goals and plans, constant management of the project’s scope, and finally a method for gaining visibility into project health at all levels throughout the life of the project. There is no definitive answer to the above question, because it purely varies from project to project. To decide on what is needed is to analyse each situation, evaluate whether the benefits are worth the cost and risk.  When PM is applied skillfully, in an appropriate way, it generally improves the probability of project success and pays for itself. When we let fear and adherence to inappropriate rigid standards that drive decision making then everyone loses. However the key point to understand is that every project needs planning, controlling, monitoring and again going back to planning when there are issues seen in the controlling and monitoring phases. And it would be a quality and logical recommendation, if all the projects are handled through PMO.
Presentation
If I were to present this case I would include metrics that measure the stakeholder’s expectation from PMO performance and relate it to the AtekPC’s vision and mission statements.
I would make initial assessments based on assumption which will show the improvements in project successes over time and further measure it through decreases in schedule and budget overruns, and client responses. The Project Management approach can be measured by quality and timeliness of project planning documents, accuracy of time and cost estimates and effectiveness at mentoring and coaching project teams..
I would show an analysis of moving from a single project perspective to a more holistic perspective with the help of the following factors critical to the success of the PMO; I.e. Executive Support, agreement to requirements and scope, user involvement & collaboration, resource alignment reflective of current need, management of expectations, strong project management infrastructure and ability to measure and report.
Other delivery considerations to keep in mind for the PMO at AtekPC are the cost and budget function which requires an allocation method for funding. However the long term benefits of implementing the PMO should be factored in to estimate the future value added to the organization.

Monday, June 30, 2014

Reflection Report: 1-888-JUNK-VAN

Memorandum
To: Marcus Kingo
From: Nikita Patel
Date: June 30,2014
Subject: Re: Reflective Analysis – 1-888-JUNK-VAN 

Hello Mr Kingo,

As a follow up to the business meeting held last Tuesday with ‘RKR Consulting group' with regards to upgrading our IT system, I believe they provided some thoughtful insights for implementing PaaS as a suggested course of action, which can be utilized in arriving at a final decision to improve the operational efficiency in the current system and make the customers satisfied which will ultimately facilitate the expansion and lead us to a sustainable growth in the future.

As per the preparation we had done before the meeting, we thought of that as one of the solution in spite of considering the cost factor involved in the implementation process. However after the presentation, the key take away from the discussion became quite evident that most of the alternatives were possible solutions to our IT infrastructure problem. However keeping in mind our decision making criteria such as cost, flexibility, implementation time, vendor support, and very importantly minimizing the complexity of the IT system on which we would like base our final decision, it became apparent that PaaS would be the most ideal option in upgrading our IT system. We must consider the fact that although we are looking to grow the franchise, we are still a small business operating in a unique business environment that does not require the implementation of a sophisticated and complex IT system that will need a large infrastructure and understanding to support and operate the application.

The biggest benefit I see for adapting to PaaS is that we can easily franchise the business with this IT system since PaaS can migrate data quickly. It will reduce company costs by saving on the maintenance of the platform and we can get immediate updates and new features as and when available. Another benefit is that it takes only three days to implement the software including data migration and it does not require long term contracts. Last, but not least is to see how the cost of this option will affect our bottom line. As per the consultants the total implementation cost for PaaS will be about $ 36931. Taking into consideration the cost involved in implementation, training the staff members, I analyze the comparison of the old business model with the new business model to understand the future profitability of our company JUNK VAN, and I believe we might see an increase in profit of not only about $ 45,000 (36% of sales) as mentioned in the presentation but may be even more in the future years by taking the compounding effect of this initial investment. 

The above facts and evidence surely makes us take up the suggested route and upgrade our IT system to PaaS before we loose out our important customer base to other companies. Please do not hesitate to contact me for further details on the suggested alternative.


 

Zara: IT for fast Fashion - Case Preparation

Inditex, the owner of Zara is the one of the largest chain retail store with revenues of € 3974 million and a net profit of € 438 million for the year 2002. Their biggest competitors are Gap, H&M, and Benetton.   Zara continuously maintains its mission to provide fast and affordable fashionable items. Unlike these companies, Zara does not predict trends rather its approach to design is more closely related to their customers. The maximum time from conception to distribution center is 3 weeks therefore the vertical integrated supply chain ensured constant introduction of new items with short lead times.
 
Key Problem: 
At Zara stores, the POS terminals used an outdated operating system DOS, that was no longer supported by Microsoft.  Zara has not upgraded its operating system since 10 years and remains to be the only customer still using DOS.  While this system is efficient in all ways and Zara is able to run their POS application, there is no guarantee that their vendors will change their hard drive & decide to upgrade its software.   There are over 550 Zara retail stores worldwide; however, they do not have a centralized network nor are they always connected to headquarters by a modem due to connectivity issues.  The PDAs used by all of the employees are not able to detect whether another store has an item in inventory; this causes employees to become less efficient because instead of having access to look up in their system to see if a store has a particular SKU item, the employee has to call the store to find out if they have a specific item. Zara’s inventory system works on “estimation” not 100% accuracy, which leads to incorrect inventory amounts and have an impact on keeping equilibrium between supply and demand of their products. Values between the systems were incorrect & Zara’s headquarters in La Coruna, have to wait until the end of the business day to find out the total sales for the day.
 
The scope of the problem involves how the 550 Zara stores be moved from an archaic operating system to a new operating system that involves a lot of money, essentially creating a need for an IT division to keep up with constant monitoring, upgrading and training of sales personnel. Though it would be beneficial to the distribution centers who would now have access to the store’s inventory. Therefore the initial investment of money spent on making this change would affect Inditex by incurring these new costs as an advantage in future.
Situation Assessment:
 
Zara’s process has been working fine for all these years and the company is growing at a rapid pace, adding 24 stores from 2001 – 2002 in various different countries. This expansion and growth would not stop Inditex in the coming years and to continue using an archaic system with no vendor support in the future would mean a risk of having more problems later when the company has more stores coming up across the globe.
The decision criteria for Zara should be adding functionality in the business processes, networking capability, sharing information between stores as smoothly as possible, and making the company run more efficiently with ordering and restock the items. It is not necessarily in relation to the cost of the changing to a new operating system in 2003, but what would be the difference in cost if they are stuck by their outdated IT system in the future. The company will need to evaluate where they see the most risk and combine that with the cost of an upgrade.

Alternative Courses of Action & Evaluation of Alternatives:
Zara has two main alternatives – whether to keep their existing DOS operating system for their POS terminals or to replace it with a new, supported operating system i.e. Microsoft, UNIX or Linux.
§  Alternative 1:
By continuing with the existing DOS on their POS terminals and not making any changes, ZARA will be able to eliminate the risks of the IT failure during implementation and changing the IT infrastructure of a company & there will be no need to create an IT department to handle the upgrades. It will save money for not having to replace the operating system in every store & also the training cost for the employees on the new software and functionalities. It will not put the company at risk in regard to the robust and scalable infrastructure that would have to be built. It will allow an easier process of store openings by just uploading two floppy disks into the terminals and being ready to start the store.
Evaluation: While this would cost the company nothing currently, this runs a very high risk of having problems in the future that will need to be taken into consideration. If Zara’s terminal vendor were to make changes to the terminal that would prohibit the use of DOS going forward, this could delay Zara from opening any new stores itself. If the Inditex kept continuing the current expansion, averaging one new store every two weeks, this could end up costing Zara millions of dollars in lost sales in the future due to a temporary or long term halt in its business process.
§  Alternative 2:
By upgrading and adding functionality, Zara will gain access by connecting to the stores across the globe to arrive at the current inventory levels and not having to manually call each store which will make the transmission of current data to the headquarter and the distribution centers, specifically if needing to order an item that is running low in the store. It will eliminate the need to use a PDA, which is time consuming and inconvenient due to its small screens. By having a wireless network, managers would no longer have to rely on floppy disks to compute the total sales from the registers and then transmit. If all the stores were permanently connected to the Internet, every location would know the theoretical inventory of all its SKUs.
 
Evaluation: While choosing a new operating system, the Company will need to evaluate three operating systems - Microsoft, Linux and Unix mainly on cost. These three options will be able to provide the Company with an updated, vendor supported operating system that they can use for all retail stores in the future. They can have networking capabilities, the ability to better monitor inventory and continue to be used for point of sale transactions. The main difference will lie in the upfront and annual costs for all three.


Zara does not have any cost problems to overcome as per the financial statements and does not use cost-benefit analysis for justifying IT decisions, however their decision criteria should be to evaluate the cost of each of the three providers for a new operating system; running that analysis will give management an idea of the costs in front of them at the present time. They will also need to be very realistic about the probability that terminals will not be able to use DOS in the future.

Recommendation:

The logical and quality recommendation is to make a switch from the outdated DOS on the POS terminals to a more stable operating system that is current with technology.  As Zara grew at a rapid pace, it should not only focus on what is working currently across the stores, but should also be thinking from the future perspective of having an obsolete system which is not supported by Microsoft itself & if they decide to upgrade the software leaving them in a dilemma that will halt the operations of the stores.  The current PDAs which look up SKUs are accurate; however, it would be more efficient if all of the company’s stores were on the same network.  Zara is a company in which their employees are very autonomous; managers decide which clothes to order and decide which clothing goes on sale.  There are very tight deadlines in the Operations department.  When supply does not meet demand it is individuals that choose which stores receive the items.  I believe that there would be more accurate accounts for inventory if Zara invested in a new operating system that supported the newer POS application software.  Reports would be run more often to create optimal plans to begin production, stores would be able to check up SKUs from other stores, as well as have a faster system with more functionality.  There are too many potential problems that could come up in the future by not updating the system, our company can be running fine on today’s POS terminal, but we are living in a fast paced world where technologies change frequently.  Store managers will learn how to use the new system, and if they run into any problems that is Zara has an IT team that includes experts in Store Solutions, Logistical Support, and Administrative systems.  It will be a wise decision to keep Zara’s IT infrastructure current with the technology, so that the company grows even more and continues to be Inditex’s largest chain store. 
Presentation
If I were presenting, I would sum up the case by stating how soon Zara is considering the benefits and disadvantages of upgrading Zara’s POS system from DOS to a Windows, Unix, or Linux based. There are many changes (both positive and negative) for making the change and continuing with the current system.
The key visuals I would include in the powerpoint slides will be giving a cost analysis of upgrading to Windowa/UNIX/Linux platform with regard to fulfilling orders and increasing customer convenience functionality. I would also include some screenshots of how the new system would look like and give a demonstration by running a test with few stores after having a discussion with the store managers if that is what they would like their IT infrastructure to work in future.
I would “sell” the recommendation by keeping the focus on Zara being a growing company and showing that their DOS system is working, albeit is outdated. Yet, I would still be just as unbiased in explaining the benefits of upgrading to a newer system.
The other delivery considerations to keep in mind are to always remain unbiased, but to have the understanding that a decision is needed and needed at the earliest. Just like in the clothing industry, styles come and go in a matter of weeks and Zara has to know how important it is to stay ahead of competition, which could cause them to upgrade their OS in the future.