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InformationTechnologySourcingChangesinanSME:

ÇaVadeSoiintheCloudwithDiamonds

ForthcominginJournalofInformationTechnologyTeachingCases

(August2017)

ThefinalpublicationisavailableatSpringervia:

https://doi.org/10.1057/s41266-017-0023-5

SimonBourdeau,PH.D. DragosVieru,PH.D.

UQÀM TÉLUQUniversity

ABSTRACT

Thiscasestudypresentstheinformationtechnology(IT)sourcingdecisionsmadebyaCanadiansmallandmediumenterprise(SME)specializinginknitwear,calledÇaVadeSoi(CVDS),duringthe deployment of the second phase of their two-phase organizational strategy based on a“BricksandClicks”businessmodel.CVDShas30employeesand5storeswithannual salesofaround$CDN5million(2015).Thecasefocusesonphasetwo,the“Clicks”,whereanITproject,divided into two parallel subprojects, was realized: 1) the custom development of an ERPsystem, and 2) the creation of an online e-commerce. The project was based on an “on-premises” sourcing strategy where the information systems were developed “in-house” byexternalserviceproviders.Afterseveralmonthsofefforts,thesubprojectswereabandonedandCVDS’ activities were rolled back to their legacy systems (Part A). Pulling the plug on the ITprojectwasatoughdecisionforCVDSwhostillneededtheonlinestoretobeimplementedinordertosupportitsstores’activities.However,CVDS’managementteamconsideredthisfailureas an opportunity to learn from theirmistakes, reviewand transform its IT sourcing strategy(PartB).Keywords: Small andmedium enterprise (SME), IT project failure, IT sourcing Strategy, SaaS,Organizationalvision,Partnerselection.

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PartA–“On-Premises”

ÇaVadeSoi:ABricksandClicksBusinessModel

“TheinitialITinvestmentfocusedondevelopingacustomizedonlinestoreandERP,

hostedandmaintainin-house.Itwasabeautifuldreamadaptedtoourneeds.”

NathalieGiroux,ÇaVadeSoi’swebstoremanager.

“DevelopingacustomizedsolutionwastoocomplexanddemandingforaSME

likeours.Wejustdidn’thavetheexpertise,experienceandfinancialresourcesto

supportsuchendeavor.Wehadtopulltheplugandchangeourapproach.Ithink

that,wherewearenowandwherewewanttogo,wereallyhavenochoicebut

tochangeoursourcingstrategy.It'sclearlyatransitioninthisorganization.”

Marie-LouJoli,ÇaVadeSoi’saccountantandprocessspecialistÇaVadeSoi (CVDShereafter)1 isa family-ownedandmanagedsmallandmediumenterprise

(SME) located in Montreal, Quebec, Canada. This company specializes in the design,

distribution,andsaleofknitwear.CVDSfocusesonclassicEuropeangarmentsandhasawide

varietyofproducts.

Thecompanyproductsarehigh-endintermsofrawmaterialandfinishes.Ithasaccesstothe

samenatural rawmaterialsandyarnusedby internationalbrandssuchasPrada,Gucci,Louis

Vuitton,HermèsandChanel. Like its competitors,CVDS standsout for thequalityof the raw

materialsused in itsproductsand itscontrolof the finishes. Itsproductsaretimeless,classic,

modern and multi-purpose, which go to all ages. CVDS manages over 750 styles, with an

averageoffivecolorsandthreesizesforeachstyle.However,intermsofprice,thecompanyis

positioned in the middle market since CVDS sells its products at a third of the price of its

internationalcompetitors.CVDSisassociatedwiththe“slowfashion”2movement.

1http://www.cavadesoi.com/2Theslowfashionmovementpicksuponthespiritoftheslowfoodmovement,encouragingenvironmentallyfriendlyprocesseswith timeless style (Jung, S.,& Jin, B. (2014). A theoretical investigation of slow fashion: sustainable future of the apparelindustry.Internationaljournalofconsumerstudies,38(5),510-519)

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HistoryandNewBusinessModel

CVDSwasfoundedin19723byOdileandAntoineNasri4.Atthebeginning,itspecializedinthe

design,productionandwholesalingofknittedgarments.Since its inception,CVDShadalways

paid a lot of attention toquality, both inmanufacturing and in thedesignof its products. In

1988, thecompanystrengthened itsposition in thepremiumproductsmarketandadopteda

mission to design products with a “soul”. In 1996, CVDS started sourcing its yarn, the raw

materialforitsclothes,fromItaly.

Intheearly2000s,withtheopeningofinternationalmarketsandchangesinconsumers’habits,

CVDSfacedasignificantsalesreduction.Facingdramaticmarketchanges,suchascompetitors’

development of multi-brand businesses in various locations and new product placement

strategies intheselocations,CVDSdecidedin2004toreorient itsactivitiestotargetthehigh-

end segments of themarket and to focus only on noblematerials, such as Egyptian cotton,

cashmere and superfineMerino.With this strategic reorientation came the deployment of a

two-phase organizational strategy based on the “Bricks and Clicks” businessmodel. In phase

one, the “Bricks”, CVDSopened fivephysical stores anddeveloped its brand image. In phase

two,the“Clicks”,CVDSdevelopedanddeployedanonlinestore.Asmentionedbythewebstore

manager,Nathalie:

“Itwasjustanewandinevitablereality.Allcompaniesnowadayssellonline.Not

sellingonlinekindofgivesaweirdimpression.”

3AppendixApresentsatimelineofthemaindecisionsandeventsinCVDS’shistory.4AppendixBpresentsabriefdescriptionofCVDS’semployeesandthemembersofthemanagementteam.

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ThisnewbusinessmodelalsomeantthatCVDSabandonedmostofitswholesaleactivities.The

“Bricks”phasedeploymentstartedwiththeopeningofCVDS’ firststoreonLaurierAvenue in

Montrealin2006.Thismarkedthebeginningofthedirectsalesmodelforthecompany.Italso

involvedthedevelopmentandimplementationofanewmarketingstrategybasedoneducating

consumersabout fibrequality andhigh-endknittingexpertise.During thenext7 years,CVDS

openedfourmorestoresinMontreal,Ottawa,QuebecCity,andToronto.CVDS’headofficeis

locatedintheMileEndneighborhoodinMontrealanditservesasadesignstudio,warehouse

anddistributioncenterforitsstores.

ThreeBusinessCyclessinceÇaVadeSoi’sInception

Fromtheowner’sperspective,CVDShasbeenthroughthreebusinesscyclessinceitscreation.

Thefirstcycle,labelled“productmastering,” lastedfromthecompany’sinceptiontotheearly

2000s.Duringthiscycle,CVDSfocusedonmasteringitsproductsandprocurementactivities.It

haddevelopedknowledgeandknow-howofthedesignandmanufacturingofitsproductsand

identified and selected specialized high-end raw materials while developing preferential

relationshipswithasmallbutloyalgroupofspinners5andmanufacturers.Oncetheownerfelt

thecompanyhadfinallymastereditsproducts,CVDSembarkedonthenextcycle.

Thesecondbusinesscycle, labelled“customermastering,” lasted from2002–03to2013.This

cycleisassociatedtothe"Bricks”phaseofCVDS’strategyandwascharacterizedbytheopening

of the five stores. This reorientationmeant that CVDS needed to change several of itsmain

5“Spinners”arethetextilemanufacturerswhoconvertthefibre,suchascottonandwool,intoyarnandfabric.Spinningisaprocessinwhichfibresareconvertedbypassingthroughcertainprocesseslikeblowroom,carding,drawing,combing,simplex,ringframeandfinallywindingintoyarns(Wikipedia).

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processessuchaslogistics,inventorymanagement,accountability,hiringandtraining.However,

themaintransformationwasrelatedtocustomerrelationships.Now,withitsstores,CVDSwas

in direct contact with its customers. The company had to learn how to develop long-lasting

relationships,whichmeantapproaching thecustomersandcapturingand storing information

about them. Further, newactivities had to be learned and rolled out such asmerchandising,

customer service, catalogue preparation, etc. After almost ten years of building solid

relationshipswithitscustomersCVDSfeltconfidenttoembarkonitsthirdbusinesscycle,based

one-commercetechnologies.

Thethirdbusinesscycle, labelled“e-commercemastering,”beganin2013.Themaingoalwas

to implementaB2Ctransactionalwebsite.AsmentionedbyAntoine,“theonlinestorewillbe

our larger showcase.” To launch an integrated online store, CVDS needed to develop and

implement in parallel an Enterprise Resource Planning (ERP) system to support thewebsite-

basedtransactions.TheERPwouldallowCVDStobettermanageitsinventorybydocumenting

all its products (i.e., detailed descriptions and photographs) and identifying where to

automatically locateeachproductamongthevariousstoresandthewarehouse.Thiswasnot

possiblewithCVDS’legacyinventorysystems,i.e.MBI,FashionCart,Raymark6,whichwereold

and not integrated. In addition, the online storewould be supported by a CRM system that

wouldenableCVDStoassesstheimpactoftheonlinesalesoninternationalmarkets,facilitate

returnmanagementbyintegratingproductdata,andbroadcasttheimageofahigh-endbrand.

Thus, this transformation would ultimately help CVDS to acquire better management

6 At CVDS, there are threemain inventory systems: (1) Raymark is the point-of-sale and inventory system in the stores, (2)FashionCart is used in the stores and at thewarehouse to place orders, and (3)MBI is used in thewarehouse tomanageinventory.AppendixCpresentsadetaileddescriptionofthesethreesystemsandCVDS’sexistingITinfrastructure.

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informationandallowittooptimizeitsprocurementprocessbyinvestingintherightinventory

attherighttime.

ÇaVadeSoi’sTwo-PillarBusinessStrategy

Thecompany’sfirstbusinessstrategypillaristoofferaqualityproductintermsofmaterialand

know-howatareasonableprice.CVDSputsalotofeffortandresourcesintotheresearchand

developmentof itsproducts.Since its inceptionmorethan40yearsago,Antoine, theowner,

has travelled around the globe several times to find the best raw materials and develop

privilegedrelationshipswithalimitednumberofspinnersandmanufacturers.Overtime,most

of the spinners have entered in partnership with CVDS in two manufacturing plants that

produceCVDS’products.

Toofferitsproductsatreasonableprices,CVDShaseliminatedthehiddencostsassociatedwith

marketing.ThisexplainswhyCVDSnever launchesany self-advertisingcampaignsand invests

insteadinabi-annualcataloguethatissenttoitscustomerstoinformthemaboutthevalueof

the company and its products’ qualitative aspects, such as yarn sourcing andmanufacturing

know-how. The underlying goal of the catalogue is to promote “Ça Va de Soi’s philosophy”:

high-qualityproductsandexceptionalknow-how.

ThesecondbusinessstrategypillarisrelatedtoCVDS’employeesanditscustomerservice.Itis

apriorityforCVDS’managementteamtocontinuouslyassessandimprovecustomerservicein

its stores network. The company emphasizes relationship management with its employees,

havingweeklymeetingswithallthestoremanagersandbi-annualoffsitemeetingswithallthe

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company’s employees. For CVDS, it is important that all employees believe in the company’s

product philosophy. The working environment is characterized by openness and a lack of

hierarchy.Asseveralemployeesmentioned,theyarenotafraidtoshareideasandexpresstheir

viewsbecausetheyknowtheiropinionswillbeheard.Asastoremanageralleged:

“He[Antoine,theowner]isveryopen.Helistenstoeverybody,hewantstohear

ideas,andhewantstoknowwhatapersonthinks.Yes,heisveryattentive.Each

timethereisanissueoraproblem,hewantstocommunicatewithemployeesto

makethebestdecisionpossible.”

BusinessVisionofÇaVadeSoi’sOwner

The way CVDS has evolved over time in terms of organizational culture and working

environmenthasbeeninfluencedbyAntoineNasri’svision.Inhisview,tobesuccessfulinthe

knitwearindustry,threeintertwinedkeyelementsmustbepresent.

First,youneedtohaveaqualityproductintermsofmaterialanddesign/manufacturingknow-

how.Thisisanecessaryconditionbutnotasufficientone.Second,youneedtohavethebest

human resources available and surround yourself with exceptional individuals, whomust be

creativebutshouldalsoactwithintegrityandpassionfortheproduct.Finally,itisessentialto

master every aspect of your business, e.g. productmastering or customermastering, before

launchingnewandmajorinitiatives.Theseinitiativesshouldbeclearandalignedwiththerest

ofthecompany’sactivitiesandshouldnotcompromisethequalityofeithertheproductorthe

employees’work.For instance, intheearly2000s,thedecisiontochangeCVDS’saleschannel

from wholesales to retail was based on more than 25 years of accumulated experience on

design, manufacturing and procurement of knitwear clothing. Thus, CVDS’ team could focus

thenonlearningtheactivitiesandchallengesassociatedwithretailing.

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InformationTechnologyatÇaVadeSoi:ContextandConstraints

Since its inception, CVDS activities have been supported by information technology (IT). The

companyinvestsannuallybetween1.5%and2%ofitsturnoverinIT,whichisastrongratioin

thefashionindustry7.

CVDS’managementteamstronglybelievesinWeb-basedsystemsandopen-sourcesoftwarefor

thedevelopmentandmanagementof its futureonlinestore.These technologieswouldallow

CVDStominimizeitsdependenceonexternalITconsultantsandgivemoreflexibilityforfuture

changes.However,CVDSremainsanSME,thatis,ithadalwaysfacedchallengesandconstraints

suchaslimitedcapabilitiestoexpanditsITresources,limitedaccesstoITskillsandrelianceon

external IT expertise. Therefore, at CVDS the prioritization of IT investments seemed to be

based more on a spur-of-the moment approach, and the company had no hardware

replacement policy. In terms of IT staff, even though most employees were young and

comfortable with new technologies,8 only one part-time employee had the skills to do the

maintenanceofonlyonesystem(Raymark)ofthethreemaininventorysystemsusedbyCVDS.

AnexternalITconsultant,Fadi,providedtherestoftheITsupportanddevelopment.Overthe

lastdecade,FadihasdevelopedafriendlyrelationshipwithAntoine.

The three inventory systems (MBI, FashionCart, Raymark) and the accounting system,

QuickBooks,were not integrated in the existing IT infrastructure. This implied that the same

7DiagnosticreportonCVDS’digitalcapacityrealizedbyVESTECHPRO(https://vestechpro.com/en/)withthecollaborationofCEFRIO.8MostofCVDS’semployeesareunder35yearsold,areveryfamiliarwithdigitaltoolsandareenthusiasticaboutnewIT.

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datahadtobeseparatelyentered ineachsystem,manually.Thesesystems,whichhavebeen

developed and implementedby external consultants, hadnot been regularly updated. As for

the data backup, a daily backup was done automatically at the stores through the Raymark

systembutnoautomaticbackupsweredoneattheheadoffice.

InformationTechnologyStrategyatÇaVadeSoi

Since2006,CVDShasgrownfromonetofivestores.Withonestore,itwaspossibleforCVDSto

continueusingpapertosupportbusinessactivities,butwithfivestores,CVDSneededtomove

toelectronicsupport.Whilenowofferingawidevarietyofproducts,someofCVDSstoreswere

notabletostockallof thembecauseofphysicalspace limitations.Sometimescustomershad

specific requests from the company catalogue and, if the product was not available in the

stores,CVDSlostsalesopportunities.

ThestrategyestablishedbyCVDStoguidethedevelopmentandimplementationofthenewIT

infrastructure (the online store and the ERP) was clear: in the short term, the new IT

infrastructurewouldenableCVDS to consolidate its operations andmaximize sales at its five

stores.Thisgoalwasimportantbecause,sincetheiropenings,thestores’saleshaveincreased

consistently.TheonlinestorewouldalsoenableCVDStorestartitswholesaleactivities,which

havebeendormantformorethanadecade,bydevelopingB2Brelationswithretailers. Inthe

long term, this new IT infrastructure would give CVDS the prospect of offering franchise

opportunities. Indeed, thedeploymentofanew IT infrastructurewould forceCVDStoreview

and formalize its business processes at a granular level.With the growth of its stores’ sales,

combinedwithagreatpotentialofexpansionofonlinesales,CVDS’managementteamrealized

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that thecompanycouldno longeroperate ina contextwhere rolesand responsibilitieswere

notclearlydefined,operatingmodewasreactive,andoperationsplanninglackedrigor.

CVDS’managementteamwasconvincedthathavinganonlinestorewouldallowthecompany

tocaptureallsalesopportunitiesandoffercustomerslivingfarfromthestoresthepossibilityof

buyingCVDS’products.Itwouldalsohelpstoreemployeestoefficientlymanageall750product

stylesCVDSoffers.Withanonlinestore,employeeswouldstartatransactiononanelectronic

tabletandcomplete iton thepoint-of-sale (POS) systemwhere theywouldprint the invoice.

Theonline storewould also give themanagement teamaccess to consolidatedmanagement

informationsuchasproductmargins, sales trends,product returns,and inventory levels.This

information, not generatedby the legacy systems, is essential to analyze sales opportunities,

better place products in stores, and develop new products. By the end of 2012, CVDS’

managementteamrealizedthatthecompanyhadreachedtheendofitssecondcycleandtime

had come to initiate the third phase of the organizational strategy: the development and

deploymentofatransactionalB2Cwebsite.AsAntoineputit,

“Nowthatwehavemasteredwhatwedoandmasteredourproduct,theonline

storewillbeanopportunitytoreviewandsimplifyourstructureandprocesses

andfocusontheessentials.”

ÇaVadeSoi’sITProject–FirstAttempt

At thebeginningof 2013, itwasdecidedbyCVDS’management team that their online store

wouldbetheirsixthone,andlikeanyotherbrick-and-mortarstore,itwouldhaveitsownsales

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andmanagementteams,budgetandobjectives.AsformulatedbyKinza,theVPmerchandising

andmarketing,ITprojectmanagerandtheowners’daughter:

“Theonlinestoreisperceivedasacomplementary‘tool’tofirst,supportthe

stores’activitiesandsecond,raisethebrand’sprofile.Thewebsitewillbea

goodtooltogathereverythingandseeeverythinginoneplace.”

ITProject’sObjectives,AnticipatedBenefitsandChallenges

The development and implementation of the transactional website along with a new ERP,

would allow CVDS to achieve certain objectives. First, the new infrastructure would simplify

datamanagementandthusallowemployeestofocusonkeyactivitiessuchasselling,customer

service and support, new product/market development, etc. Second, with access to more

accurate, up-to-date management information, CVDS’ management team would be able to

makethebetterdecisionsandbemoreefficient.Third,bybeingabletosellonline,itwouldgive

CVDStheopportunitytoenternewmarkets(e.g.UnitedStates,Europe,andJapan).Finally,the

new online store would allow CVDS to be a more independent brand, which means having

bettercontroloveritsownchannelsfordirectsalestoconsumers.

CVDSanticipatedanincreaseinsalesbygivingdirectaccess,viaitsnewtransactionalwebsite,

to its existing customers but also to new international customers. As Kinza, the VP

merchandisingandmarketing,stated:

“Thee-commerceplatformwillhelpoursales.Itwillgiveconfidencetothegirl

whosellsinthestoretosay:‘IamsureIdidn’tmissanythingthatIcouldhave

offeredtothecustomer.’Majoreffortswerealsodeployedinthedevelopmentof

theplatformtoprovideanonlineexperiencewhichwouldbeascloseaspossible

tothestoreexperiencewhilebeingcomplementarytothestores.”

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CVDSalsoexpected,throughbetteraccesstoavailableinventoryinformation,tomakebetter

purchasingdecisionsandthusreduceitsinventory.Withthenewsystems,allproductdata

wouldbecleanedoutandindexedinvariousidentificationcategories,whichwouldfacilitate

accesstomanagementinformation.Inaddition,byhavingmorepreciseproductandsales

information,CVDSwouldbeabletogrowitsmarginbecauseitwouldbeabletoreducecertain

costs,betteradjustproductpricesandhavegreaterbargainingpowerwithsuppliers.AsKinza

putit,thisinformationwouldbecome“the‘mind’ofourproduct”.

A major challenge associated with this IT project was CVDS’ lack of internal IT expertise,

meaningthecompanyhadtorelyonoutsourcedITexpertise.Tomitigatethisrisk,Kinzawho

wasput inchargeoftheITproject,self-trainedandsoughtadvicefromexternal ITspecialists.

An informalassessmentofCVDSemployees’digitalcompetenceswasalso realized to identify

the IT skills gaps. Finally, a project steering committee, which included CVDS’ management

team,wasestablished.

AnITProjectbasedonTwoInterrelatedITSubprojects

TheITproject,whichstartedlate2013,wasstructuredaroundtwointerrelatedsubprojects:(1)

thedevelopmentofanERPsystemand(2)thedeploymentofaB2Ctransactionalwebsite.The

ERPsystem,whichwascreatedbyaconsultancyfirmcalled INBIZ9,asmall firmfromOttawa,

was supposed to be custom developed for CVDS’ needs. It was the largest project ever

9http://www.inbizerp.com/

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undertakenby INBIZ.TheERP system’smainobjectiveswere to standardizeandcomputerize

CVDS’processes,aswellas,tolinkwiththenewtransactionalwebsite.Itwassupposedto:

1. Giveaccessinrealtimetoinventoryinstoresandinthewarehouse/distributioncenter,2. DocumentallCVDS’products,3. Interface with the accounting system (QuickBooks) by using application programming

interfaces(API),4. Createlinksbetweenthedistributioncenteranditsstores,5. Assessonlineinternationalsales,6. Supportreturnactivities,and7. Facilitateproductlifecyclemanagement.

The B2C transactional website was developed on Magento10, an open-source e-commerce

platform.FlyConseil,11aWebagencylocatedinMontreal,configuredMagento’stemplatesto

meetCVDS’needs.Theobjectivesoftheonlinestorewereto:1)projectthe imageofahigh-

end brand name with a unique know-how; and 2) present CVDS’ product philosophy to

domestic and international customers. Themain functionalities of the e-commerce platform

wereshoppingcart,integrationwithCVDS’inventory(instoresandwarehouse),CRManddirect

integrationwithMonerisfinancialsystemforpaymentsandwithFedExfordelivery.

ITProject’sBusinessPartnersSelection

TheinitialoutsetdatewasNovember2013withadeliverydateaftersixmonths.Theapproach

was to implement the two subprojects in parallel. For the first subproject (the ERP), INBIZ

selectionastheoutsourcingservicesupplierwasbasedontherecommendationsofFadi,CVDS’

externalconsultantandtheowner’sfriend.Thedecisiontoselect INBIZwasmadebyAntoine

whoreliedonFadi’s recommendationwhohada friendworking for INBIZ.EventhoughKinza

10http://magento.com/11http://www.flyconseils.com/

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had approached various SMEs to get advices regarding IT projects and had developed an

evaluationgridtohelpCVDS’managementteamduringtheserviceproviderselection,shehad

no saying in thismatter, as no formal selection processwas done and no due diligencewas

performed.INBIZwasasmallandinexperiencedconsultancyfirm.Itreceivedtheresponsibility

ofdevelopingandtestingthenewERPsystem,migratingdatafromCVDS’legacysystemstothe

ERP,anddevelopingthenecessaryinterfaceswithMagento,thee-commerceplatform.

TheothersubprojectwasthedevelopmentofthetransactionalB2Conlinestore.Thistime,to

selectthevendor,CVDSwentthrougharigorousselectionprocessby:1)identifyingalistofe-

commerceplatforms and consultancy firms; 2)meetingwith those firms andhaveplatforms’

demonstrations;and3)evaluatingeachplatformandconsultancyfirmusinganevaluationgrid.

TheoutcomewasthatFlyConseil,anexperiencedwebagencywithmorethan600web-related

projectsrealized,wasselectedtoconfigureanddeploytheonlinestore.Magentowaspreferred

because itwas open-source-based and it had been successfully used by other companies for

years. Fly Conseil was responsible for configuring Magento based on CVDS’ requirements,

ensuringthattheinterfacesbetweenthenewERPandMagentowerefunctional.

TheProjectFailure

Fromtheoutsetoftheproject,thedevelopmentoftheERPwasverychallengingforbothCVDS

and INBIZ. Several of these challenges stemmed from thediscovery of important operational

limitsassociatedwith1) INBIZ’s technologicalplatformonwhich theERPwasdeveloped (e.g.

INBIZ’s platform supported only one warehouse) and with 2) INBIZ’s lack of appropriate

expertiseandexperiencetoundertakeacomplexprojectsuchastheoneatCVDS.

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Nonetheless,theERPwasofficiallylaunchedonAugust1,2014aftermorethanfourmonthsof

delay.MostdelayswereduetotechnicalproblemsfacedbyINBIZ indevelopingacustomized

ERP. INBIZhadputa lotofpressureonCVDStoagree to launch thesystemeven thoughthe

interfaceswith the e-commerce platformwere not yet developed. Right from the beginning,

CVDSwasconfrontedwithbothtechnicalandmanagerialdifficulties.First,INBIZrealizeditwas

unable to develop bridges between the ERP and theMagento platform. Second, therewere

recurrent technical problems, such as incorrect end-of-the-day revenues and sales, inventory

mistakes,missingorunappliedsalestaxes,non-functionalinterfacebuttons,etc.Thissituation

forcedCVDStousea“parallel”deploymentstrategyinvolvingtheuseofbothINBIZ’sERPand

CVDS’ legacy systems simultaneously for several weeks. This meant that employees had to

doubleenteralltheirtransactionsinbothsystems.Aroundthesamedate,CVDSlaunchedthe

Magento-based transactionalwebsite.However, thenewwebsitewas in a standalonemode,

without any links to theERP systemor to any inventory system, therefore,useless forCVDS’

needs.Finally,inearlyNovember2014,Antoinemadeabolddecision:

“Youknowwhat,we’reputtingourstoreactivitiesindanger,we’reputtingour

employees’confidenceatrisk,we’reaskingouremployeestouseasystemthat

doesn’tworkproperlyandwe’realltired.Weshoulddothingsdifferently.

EnoughwiththisERP,let’sstop,pulltheplugandtakeabreak.”

The IT projectwas abandoned and CVDS’ activitieswere rolled back to their legacy systems.

However, at that point CVDS was in a difficult situation: the customized ERP development

projecthadfailedbuttheonlinestoreneededtogrowandtosupportthestores’activities.

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CasePartA:DiscussionQuestions

YourtaskistobuildacompellingrecommendationtotheCVDS’managementteam.Togetyou

started,considerthefollowingdiscussionquestions:

1. Analyze Strategy: If you were CVDS’ owner, what would be your strategy for the

development and implementation of the online store?Would you use the same “on-

premises”sourcingstrategy?

2. Alternatives: What could be the other options? Identify and suggest alternative

strategies.

3. Recommendation:KnowingthatCVDS’growthdependsonthedeploymentofitsonline

store,whichstrategywouldyourecommendinthissituation?Justifyyouranswer.

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AppendixA.TimelineofMainEventsinCVDS’History

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AppendixB.CVDS’Stakeholders

Names Functions TasksDescriptions ManagementTeam

AntoineNasri

-Founder

-OwnerofCVDS

-Inchargeofproductdesign,supplier/manufacturer

relationships,financeandbudgetapprovals

X

Fadi

-ExternalIT

consultant

-InchargeofmaintenanceandevolutionofCVDS’sIT

infrastructure

GenevièveLabrosse

-Storemanager -Montrealregionalmanagerandheadoftrainingfor

thetwostoresinMontreal

GabrielleNasri

-VPoperations

-VPHR

-Inchargeofhumanresourcemanagement,store

operations,trainingandinternalcommunications

X

GonzalesElpidio

-Warehouse

manager

-Inchargeoflogisticsandwarehouse

-Managesinventorylevels

KinzaNasri

-VPmerchandising

-VPmarketing

-Inchargeofmarketingstrategy,suchascampaign

management,webstrategy,socialnetworks,etc.

-ITprojectmanager

X

Marc-OlivierJolyComptois

-Warehouseclerk -Warehouseandlogisticsemployee

-In-housespecialistinRaymarksystem

Marie-LouJoly

-Accountant

-Processspecialist

-Inchargeofaccountingandformalizingbusiness

processes

X

NathalieGiroux

-Webstore

manager

-Inchargeofthewebplatform:productentry,data

analysis,servingonlinecustomers,etc.

OdileBougainNasri

-FounderofCVDS

-Headofmarketing

-InchargeofCVDSstoresandbranding X

StephanieBoridy

-Contentmanager -Inchargeofcontentmanagement(newsletter,web)

-Managessocialmediacampaignsandblog

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AppendixC.CVDS’InformationTechnologyInfrastructure(beforetheITprojects)

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PartB–“Cloud-Based”

From“On-Premises”to“Cloud-Based”SourcingStrategy

“Ourgoalwiththisnewapproachwastodeploy,gradually,awebbasedplatformhostinthecloudbyserviceproviders.Asolutionwherewepayfortheservicesusedwherewecandoabouteverythingourselveswithlittletechnical

backgroundandwherewekeepcontroloverdata.Sofar,sogood!!!”KinzaNasri,VPmerchandisingandmarketing,ITprojectmanagerandowners’daughter

In December 2014, onemonth after decommissioning of INBIZ’s ERP and rolling back to the

legacy systems,CVDS’management teamdecided that they should resuscitate the ITproject.

TheinitialideawasstillrelevantandCVDSbadlyneededanonlinestoretosupportitsgrowth.

InJanuary2015,theteamdecidedtoreactivatetheproject,butthistimebasedonadifferent

approach.CVDSdecidedthattheywouldlauncha“standalone”e-commerceplatformwithno

integration with CVDS’ inventory legacy systems. To do so, CVDS would use standardized

templatesprovidedbyacloud-basedsourcingsolutionprovidertosupporttheonlinestore.For

thissecondattempt,CVDSmanagement teamsdecidedthat thingswouldbedonedifferently

basedonthelessonslearnedfromthepreviousfailure.

TheITProjectFailureasaTriggertoChangetheSourcingStrategy

The first lesson CVDS’ management team learned from the failed IT project was to work

progressivelywhile simplifying thechanges involvedand tohaveacompletecontrolover the

projecttasks.ForCVDS,thismeantseparatingtheITprojectintosmaller,manageablephases,

anddeployingthemoneatthetimeinalogicalsequence.Thesecondlessonlearnedwasthat

CVDS’managementteamwillhavetorigorouslyselecttheirbusinesspartnersinthefutureby

evaluatingprosandconsofeachservicesproviderandtechnologicalplatform.Finally,themost

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importantlessonlearnedconcernedtheCVDS’sourcingstrategy.Thecompanylearnedthehard

way that developing a customized system, hosted andmaintained in-house, could be a very

demandingand risky task,especially foranSME.For its futureprojects,CVDSdecided that it

would choosea cloud-based, configurable systembasedon standardized templatesproposed

bysoftwareasaservice(SaaS)providers.Templateswillonlyneedtobeconfiguredtoadaptto

aspecificorganizationalcontext,whereasintheirfailedITproject,thewholesoftwarepackage

hadtobecustomdevelopedforCVDS’needs.AsmentionedbyNathalieGiroux,thewebstore

manager:

“Wejustwantedsomethingsimplebecausesimplicitysells.Wewantedtoremoveallthefancystuff.Wewantedtokeeptheessentialanduseastandardized

templatethatisbeautiful,cleanandthatworks.”

SoftwareasaServiceSourcingStrategy:AdvantagesforanSME

By simplifying the system’s functionalities, by targeting software providers that offer SaaS

business models and by using standardized, cloud-based templates, CVDS’ new online store

wouldbeeasier tomaintain andevolve. Touse sourcing cloud-based solutions such as SaaS,

SMEs only need reliable Internet connections and basic IT equipment (e.g. computers, cell

phones, tablets) with web browsers. Furthermore, the development, deployment and

maintenancewouldbetransferredtotheserviceproviderinthisbusinessmodel.Asmentioned

byKinza:

“Withournewsourcingstrategy,wehostthedata,weownthedata.Afterall,LightSpeed[theSaaSproviderselectedbyCVDS]isjustaplatformthatweusetoprocessdata.Wepayamonthlymembershiptousetheirapplications.Ifwearenotpleasedwiththeirservices,wetakeourdata,wesay‘thankyouandgoodbye’

andwetransferthemtoanotherserviceprovider’splatform.”

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Bychangingfroman“on-premises”,whereCVDS’ITinfrastructurewasmanagedanddeveloped

internally, to a “SaaS” sourcing approach, this new sourcing strategy would facilitate the

identificationandprioritizationofCVDS’ futureneeds.Thecompanywoulduseamorestable

applications platform that has been previously tested and populated. The employees would

have access to data and applications fromanywhere at anymoment. Furthermore, since the

web communities around SaaS solutions such as LightSpeed andMagento are large andwell

established, it is relatively easy to get online support and/or training. It would also simplify

CVDS’ITmanagementneeds:minimizetheITcostsandriskswhilespreadingthemoveralonger

period.Additionally,Kinzamentionedthat“withSaaSagreement,youarenotstuckwithlong

termsagreements,youhavemoreflexibility”.

For CVDS’ management team, the new sourcing approach also meant modifying CVDS

governancestructureintermsofdecision-makingprocess,controlandaccountability.Whilein

the previous approach (on-premises sourcing), its IT infrastructure maintenance, and

applications licensing and upgrade would have been done “in-house”, in the cloud-based

approachCVDSwilljustpaytheSaaSproviderforallthenecessaryITservices.Thecompanyjust

wantedtokeeptheownershipoftheirkeyasset,itscustomerdata.ThisisreflectedbyKinza:

“ThebiggeststrategychangescomefromthefactthatCVDSrealizedthat,whatisimportantforusistokeepcontroloverourdata,notovertheapplications.”

AnimportanteffectofadoptingaSaaSapproachwasthatCVDSmanagementteamwouldhave

tochangeitsfocusfrommanaginganITstafftomanagingrelationshipsandcontractswiththe

cloudservicesprovider.Withthe“on-promises”strategy,mostofCVDSfocuswasonmanaging

their relation with Fadi, CVDS’ IT infrastructure adviser and developer. With a cloud-based

sourcingstrategy,CVDSmanagementteamwouldhavetoestablishanappropriatecontractand

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follow-uponhowservicelevelagreementsarerespected.Inthissituation,CVDSmanagement

team would also have to face other important issues such as deciding if it would be more

appropriatetogoforasingleserviceproviderormultipleones?Woulditbemoreappropriate

to be selective in identifying which IT service to outsource, or should it opt for a total

outsourcingapproach?CVDSmanagementteamwouldalsohavetodecidebetweenlongterm

and short term contracts. The SaaS sourcing approach was not totally new for CVDS. A few

monthsbeforelaunchingthefailedITproject,CVDSimplementedanenterprisesocialnetwork

applicationcalledYammer12.

YammerImplementation:AKeyTriggeroftheSourcingStrategyChange

Atthebeginningof2014,beforelaunchingtheERPandonlinestoreproject,CVDSmanagement

teamdecidedtoimplementaSaaS-basedprivatesocialnetworkapplicationcalledYammer.The

idea behind this small project was to stimulate communication between employees and

facilitatemutualassistanceduringtheimplementationoftheERPandtheonlinestore.AsCVDS’

network of stores grew over the years, it had become increasingly difficult to share the

enterprise’s values and culture. By implementing Yammer, CVDS’ goal was to increase the

exchangesbetweenemployees, facilitate the flowof ideas, foster collaboration, and createa

senseofclanspirit.

“YammerislikeakindofFacebookbutforbusinesses.Ithasprofilesforeachperson,we‘like’anotherpersontofollowhimorher,groupscanbecreated,so

eachstorehasitsgroup,andtrainingvideoscaneasilybedistributed,”(Gabrielle,HRandoperationsVP).

12https://www.yammer.com/

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Yammerwasoneofmaindriversof thedecisionalprocessof sourcing change.Yammer is an

application that relies on a SaaS businessmodel,meaning that licensing and delivery is on a

subscription basis and is centrally hosted by Yammer. To activate the service, only a simple

configurationisrequired.AtCVDS,theconfigurationwasdonebyKinza,whooversawthissmall

ITproject,withthehelpofMarie-Lou,theaccountant.

Atthebeginningof2014,Marie-LoupresentedtheYammerapplicationtothestoremanagers.

Since most of CVDS’ employees are under 35 and social media savvy, no prior training was

required.Asstatedbyastoremanager:“Weweretold‘goahead,useit,tryit,expressyourself,

experiment,postpictures,thingsthatyou like.Explore itandseehowitworks.’”Afewweeks

later, a two-daymeetingwith all storemanagerswas held to share impressions and suggest

improvements.Duringthemeetingtheparticipantsco-createdalistof“rules”and“procedures”

regarding how Yammer should be used at CVDS. These rules and procedures were then

disseminatedtoallemployeesthroughYammer.

Since its successful implementation in February 2014, all employees have used Yammer for

most of their communications. Several advantages for using Yammer were identified. First,

Yammerrequiredverylimitedfinancialandtechnological investments.Second,Yammerwasa

platform that efficiently enabled the communication among employees. By installing this

application,CVDSgaveasignaltoitsemployeesthattheirideasandcommentsareimportantto

the company. Third, the company used this preliminary project to evaluate employees’

motivation and readiness for the upcoming IT change. Finally, the Yammer project allowed

CVDS’managementteamtoexploreandexperimentwithanewsourcingapproachandassess

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itsadvantagesanddisadvantagesinordertoreduceCVDS’dependencyonFadi,theexternalIT

consultant.AsmentionedbyMari-Lou:

“Withacloud-basedsolution,youdon’tneedtobeatechnicalgeniusorrelyonanITspecialist

becauseeverythingisonlinenow,youpayfortheservice,youlimittheneeds,yougiveaccess

andthat'saboutit”.

ÇaVadeSoi’sITProject–SecondAttempt

SelectingBusinessPartners

In January 2015, CVDS’management team launched the “stand-alone” e-commerce platform

developmentproject.Toaccomplishthat,itwasdecidedthatthecompanyneedstoidentifya

reliableandtrustedsourcingserviceprovider.Duringthepost-mortemmeetingsfollowingthe

ITprojectfailure,themanagementteamrealizedthatthetransactionalwebsite,whichhasbeen

originally developed by Fly Conseil, was efficient and operational. However, it could not be

launchedduetothelackofbridgeswiththeERPsystemthatwasdevelopedbyINBIZ.Thus,it

wasdecidedthatFlyConseil,whoknewCVDS’internaloperationsandhadanimpressivetrack

record,wouldremaintheirbusinesspartner.Moreprecisely,itwasdecidedthattheMagento-

basedtransactionalwebsitedevelopedbyFlyConseilwouldbeusedinthenewstand-alonee-

commerceapproach.

Then, CVDS’ management team had to select the inventory solution and a sourcing service

providerthatwouldsupporttheonlinestore.Tobeoperative,CVDSstand-alonee-commerce

platformneededapoint-of-sale (POS) system to support theonline transactionsandmanage

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theinventory.AfterevaluatingseveralPOSsolutionsandserviceproviders,LightSpeed’s13web-

based POS solution was selected because it was found to be reliable, simple, and it used

preconfigured templates. Furthermore, in addition to supporting CVDS’ online store,

LightSpeed’s POS could potentially be implemented in all CVDS’ physical stores. This would

provide the necessary integration between the “brick” stores and the “click” store. Before

signingtheagreements,CVDS’managementteamvalidatedthatbridgesbetweenLightSpeed’s

POSandMagento’splatformcouldbedeveloped.HyperSpace,aCalifornia-basedmiddleware

firm specialized in developing such bridges, was contacted and a meeting to evaluate its

expertiseandexperiencewasscheduled.

CVDS’managementdecidedthatHyperspacewouldconfigureLightSpeed’sPOStoCVDS’needs

byusingstandardizedtemplateswithoutanycustomizeddevelopment.Oncetheconfiguration

completed, themanagementof theLightSpeed’sPOSwouldbetransferredback toCVDSand

Nathalie, thewebstoremanager,wouldusea contentmanagement system (CMS) toupdate

andsupportCVDS’onlinestore.Then,CVDSwouldpayamonthly feetousetheLightSpeed’s

onlinePOS.HyperspacewasalsomandatedtodevelopbridgeswithMagento incollaboration

with Fly Conseil. Before launching this collaboration, Kinza, organized a preliminary meeting

betweenrepresentativesofallcompaniestoclarifyeachfirm’srolesandresponsibilitiesaswell

astoevaluatetheirmutualtrust.

“Iwillnotsignacontractwithanyonebeforeallpartieshaveprovedtomethattheyarecommittedtoworkwitheachotherbecausetheyhavelotsof

interdependenciesinthatproject”(Kinza)

13https://www.lightspeedhq.com/LightSpeed’sPOSsystemisusedbymorethan24,000organizationsworldwide.

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Theservicelevelagreementwasco-signedbyCVDS,LightSpeed,FlyConseilandHyperSpacein

whicheachparty’srolesandresponsibilitieswereclearlyidentified.Inthiscontract,itwasalso

made clear that CVDS kept the control over their data which would be hosted on servers

controlledbyCVDS’managementteam.

SuccessfulDeploymentofaCloud-BasedOnlineStore

CVDS’ stand-alonee-commerceplatformdevelopment tookplacebetweenFebruaryandMay

2015.CVDS’onlinestore,developedincollaborationbetweenFlyConseilandHyperSpace,was

a combinationof a transactionalwebsitedevelopedonMagento’s cloud-basedplatformwith

LightSpeed’s cloud-based POS. In the first phase of this project, the new online store was

separatedfromCVDS’ inventory legacysystemssincetheintegrationbetweenCVDSinventory

systems and LightSpeed’s POSwouldbedonemanually byNathalie, theweb storemanager.

Shewouldalsooverseetheordersreceptionandtransfer,beinchargeofansweringcustomers,

and checking inventory levels, etc. Gonzales, the warehouse manager would keep Nathalie

informedwhen a productwould go out of stock in the CVDS’ legacy inventory systems. She

wouldthenmanuallyentertheinventorylevelsintheLightSpeedsystem.Whena“zero”foran

out-of-stock product, would be entered in the LightSpeed’s inventory, the Magento e-

commerceplatformwouldimmediatelydisplayan“unavailable”statusontheonlinestore.This

manual procedurewas far from being ideal, but at least it would allow CVDS to control the

onlinesellingprocesswithoutjeopardizingitsstores’activities.

In developing a stand-alone e-commerce platform, CVDS not only adopted a new sourcing

strategybychoosinganeasy-to-use,cloud-based,configurableandreliablesystem,but italso

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appliedadifferentprojectgovernancestrategy.Whilemanagingtherelationshipwithitscloud

servicesproviders,CVDSkeptthecontrolovertheircustomerdata,akeycompanyasset,which

wouldbehostedonaninternalserver.BychoosingaSaaSsolution,CVDSrealizedthatthecosts

related to the IT acquisition, operation, maintenance, and update were minimized. The

companymadea smaller financial investment than ithasmade in the failedprojectandalso

minimized its risks.Moreover, since the cloud-based solution is easy touse, CVDSwouldnot

needtohavespecializedITstafftosupportitsactivities.

Following the successful implementation of this project, during the first sixmonths of 2016,

CVDS deployed several other SaaS solutions such asMicrosoft 365, OneDrive and Skype for

business. CVDS’ online store, www.cavadesoi.com,was officially launched inMay 2015 for a

“slowandsimpleopening” (Nathalie)with limitedpublicity surrounding the inauguration.The

bridgesbetweenMagento’se-commerceplatformandLightSpeed’sPOSworkedperfectlyand

onlyminoradjustmentshadtobemade.AssummedupbyKinza:

“Ithinkwehavelearnedtobelieveintechnologyanddevelopconfidenceasindividualsandasateam.Welearnedtocontroldata,nottechnology.Becausecloud-basedsolutionsareeasytoconfigure,wehaveagreatercontroland

flexibilityoverourtechnologicaldestiny.”

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CasePartB:DiscussionQuestions

Students can evaluate the advantages and disadvantages of changing the sourcing

strategyfrom“on-premises”to“cloud-based”inaSMEcontext.

1. AnalyzetheprosandconsofthetwoITsourcingstrategies:Cloud-basedcomputing

and IT outsourcing. Based on your analysis, which of the two sourcing strategies

wouldbemoreappropriateforanSMElikeCVDS?

2. What were the lessons learnt from the failed IT project that triggered CVDS’ IT

sourcingchangeprocess?

3. Whatwere thedeterminant factors that influencedCVDS’management toadopta cloud-

basedsolution?