Hh Gregg Case Study

Overview

Heading into Labor Day weekend 2006, Steve Nelson, the new Chief Information Officer at HH Gregg, a regional appliance and electronics retailer doing business for the last sixty years, was facing two deadlines. First, Hewlett Packard ("HP"), the vendor for HH Gregg's primary computer information system used in its business operations, has discontinued its system and will no longer provide support for the system by year's end. Second, Gregg's Chief Administration Officer (CAO) along with the Board of HH Gregg is expecting Steve's plan on what the company should do to address the pending crisis by next Tuesday. Steve knows that the Board wants a clear statement of goals that is to be included as a result of any decision recommendation. The Board also wants detailed cost estimates for each decision alternative including the risks and benefits of each.

The business began as a small retail store in Indianapolis and then expanded to Indiana, Tennessee and Ohio with 60 locations by 2006. As the company grew, the management recognized the need for a management information system and chose IDEAS/3000 from American Data Industries (ADI), now defunct, to support its business operations.

The IDEAS/3000 application was designed for HP hardware. It has worked well with the HP 3000 mainframe processor, HP's operating system (MPE), and the proprietary database management system called IMAGE. When HP pulls its support for the HP 3000 processor, its MPE operating system and IMAGE, HH Gregg will be left in a very vulnerable position. Worst-case scenario, HH Gregg could face an abrupt slowdown of its business and or lose vital business records if the hardware fails unexpectedly, the operating system crashes, or the database becomes inoperable. At best, the system would continue to perform but the business would be left using old hardware and outdated applications that will eventually need to be replaced.

This type of information system change is a major event for the company, which is akin to a heart transplant. Some of the risks involved include lost or corrupted data, interface problems and of course the system not working at all. All of which lead to the greatest risk of loss of business due to downtime from system problems.

To make matters worse, the system has grown to include sixty databases, 3600 programs, and several programming systems, primarily COBOL and BASIC, used for inventory management, purchasing, general ledger, AP/AR, sales order processing and delivery. These were all designed to work with IDEAS/3000 on the HP MPE operating system. Hence, without HP support, HH Gregg's entire business is affected, including HH Gregg's future 100-store nationwide expansion plan.

There is difficulty in predicting whether any information systems vendors will be around from one year to the next to support their products. For this reason, HP appears to have been a safe choice for Jerry Throgmartin, then President and Chief Operating Officer (COO), and Mike Stout, the Chief Financial Officer (CFO), to make the decision to implement the HP information system. Jack McKenney, the Senior IT Director that has been with Gregg since the implementation of the information system, has led the growth and development of IDEAS/3000 system.

McKinney, now Gregg's Applications Development Director, believes that any new system needs testing before the system conversion can take place. Additionally, he hasn't been able to figure out a way to phase in the conversion saying that the conversion to a new system would have to be "flash cut". A "flash cut" conversion is defined as a switch to a different system at once with no phase in period.

Back in 2003, when HP first announced its plan to cease its systems support to HH Gregg, the previous CIO, John Baxter Burns, prepared a project definition report for the move from IDEAS/3000 to a new platform. Under Burns, the project's approach to the migration had been what's known as a "greenfield" start, which means that there are no requirements on the new system based on current business processes. Further, the project was opened for vendor proposals and their opinions on how HH Gregg could or should use their systems and applications to run the HH Gregg business. Consistent with this approach, request for proposals (RFP), which would have included detailed system requirements were not solicited from potential vendors.

Under this approach, as HH Gregg soon learned, the vendors would not get a clear mandate of what HH Gregg really wanted or needed from them. All of which, has worked to prolong the time for HH Gregg's management to review vendor systems and their capabilities. By early 2006, some three years later, the evaluation team came up with two finalists, Delphi and Sentra.

Once Steve Nelson became the new CIO, he reviewed the situation and assessed the analysis on both finalists created by Jack McKenney, the Applications Development Director, and Irene Castle, a project manager on the transition project team. The analysis showed significant gaps in what the Delphi and Sentra systems could support and what HH Gregg business needs are. The situation is not surprising in that HH Gregg did not ask vendors for a system that fits the way Gregg already does business.

Analysis

Based on the information provided, Nelson has five options to consider with his dilemma. The first two options are consistent with the Burns approach in that they provide a whole new business processes for HH Gregg. The five options include:

1. Recommending Delphi's retail application suite

2. Recommending Sentra's new retail application development tool.

3. Recommending keeping the current system and having a copy of its code rewritten for the UNIX operating system using Gregg's IT staff with help from the Texas firm that successfully recently migrated a large automobile manufacturer's system.

4. Recommending the former ADI contractors rewrite the current code for use on the UNIX operating system.

5. Recommending that HH Gregg do nothing about the upcoming deadline and crisis. Of course doing nothing is not realistic given that Nelson himself concedes that doing so will buy HH Gregg a year or two of time before the existing system is no longer functional. This option is not realistic given the stated need for change by management.

Gregg's staff would like to have the latest and greatest technology but does not want to lose the functionality, familiarity, and productivity they currently have. Many members of the executive

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