5-32. Why shouldn’t Petrie’s staff build their own unique system in-house? Although the customer loyalty project at Petrie's Electronics had gone slowly at first, thepast few weeks had been fast paced and busy, Jim Watanabe, the project manager,thought to himself. He had spent much of his time planning and conducting interviewswith key stakeholders inside the company. He had also worked with the marketing groupto put together some focus groups made up of loyal customers, to get some ideas aboutwhat they would value in a customer loyalty program. Jim had also spent some timestudying customer loyalty programs at other big retail chains and those in otherindustries as well, such as the airlines, known for their extensive customer loyaltyprograms. As project manager, he had also supervised the efforts of his team members.Together, they had collected a great deal of data. Jim had just finished creating a high-level summary of the information into a table he could send to his team members (PETable 5-1 D).From the list of requirements, it was clear that he and his team did not favor building asystem from scratch in-house. Jim was glad that the team felt that way. Not only wasbuilding a system like this in-house an antiquated practice, it was expensive and timeconsuming. As nice as it might have been to develop a unique system just for Petrie's,there was little point in reinventing the wheel. The IT staff would customize the systeminterface, and there would be lots of work for Sanjay's staff in integrating the new systemand its related components with Petrie's existing systems, but the core of the systemwould have already been developed by someone else.Just as he was finishing the e-mail he would send to his team about the new system'srequirements and constraints, he received a new message from Sanjay. He had askedSanjay to take the lead in scouting out existing customer loyalty systems that Petrie'scould license. Sanjay had conducted a preliminary investigation that was now complete.His e-mail contained the descriptions of three of the systems he had found and studied(PE Table 5-2 L). Obviously, Jim and his team would need to have a lot moreinformation about these alternatives, but Jim was intrigued by the possibilities. He sent areply to Sanjay, asking him to pass the alternatives on to the team, and also asking himto prepare a briefing for the team that would include more detailed information abouteach alternative. PE TABLE 5-1:Requirements and Constraints for Petrie's Customer Loyalty ProjectRequirementsEffective customer incentives-System should be able to effectively store customer activity and convert to rewards and other incentivesEasy for customers to use-Interface should be intuitive for customer useProven performance-System as proposed should have been used successfully by other clientsEasy to implement-Implementation should not require outside consultants or extraordinary skills on the part of our staff or require specialized hardwareScalable-System should be easily expandable as the number of participating customers growsVendor support-Vendor should have proven track record of reliable support and infrastructure in place to provide itConstraints• Cost to buy-Licenses for one year should be under $500,000Cost to operate-Total operating costs should be no more than $1 million per yearTime to implement-Duration of implementation should not exceed three monthsStaff to implement-Implementation should be successful with the staff we have and with the skills they already possessPE TABLE 5-2:Alternatives for Petrie's Customer Loyalty ProjectAlternative AData warehousing-centered system designed and licensed by Standard Basic Systems, Inc. (SBSI). The data warehousing tools at the heart of the system were designed and developed by SBSI, and work with standard relational databasemanagement systems (DBMSS) and relational/object-oriented (00) hybrid DBMSS. The SBSI tools and approach have been used for many years and are well known in the industry, but SBSI-certified staff are essential for implementation, operation,and maintenance. The license is relatively expensive. The customer loyalty application using the SBSI data warehousing tools is an established application, used by many retail businesses in other industries.Alternative BCustomer relationship management (CRM)-centered system designed and licensed by XRA Corporation. XRA is a pioneer in CRM systems, so its CRM is widely recognized as an industry leader. The system includes tools that support customerloyalty programs. The CRM system itself is large and complex, but pricing in this proposal is based only on modules used for the customer loyalty application.Alternative CProprietary system designed and licensed by Nova Innovation Group, Inc. The system is relatively new and leading edge, so it has only been implemented in a few sites. The vendor is truly innovative but small and inexperienced. The customerinterface, designed for a standard Web browser, is stunning in its design and is extremely easy for customers to use to check on their loyalty program status. The software runs remotely, in the "cloud," and data related to the customer loyaltyprogram would be stored in the cloud too.

Question

5-32. Why shouldn’t Petrie’s staff build their own unique system in-house? Although the customer loyalty project at Petrie's Electronics had gone slowly at first, thepast few weeks had been fast paced and busy, Jim Watanabe, the project manager,thought to himself. He had spent much of his time planning and conducting interviewswith key stakeholders inside the company. He had also worked with the marketing groupto put together some focus groups made up of loyal customers, to get some ideas aboutwhat they would value in a customer loyalty program. Jim had also spent some timestudying customer loyalty programs at other big retail chains and those in otherindustries as well, such as the airlines, known for their extensive customer loyaltyprograms. As project manager, he had also supervised the efforts of his team members.Together, they had collected a great deal of data. Jim had just finished creating a high-level summary of the information into a table he could send to his team members (PETable 5-1 D).From the list of requirements, it was clear that he and his team did not favor building asystem from scratch in-house. Jim was glad that the team felt that way. Not only wasbuilding a system like this in-house an antiquated practice, it was expensive and timeconsuming. As nice as it might have been to develop a unique system just for Petrie's,there was little point in reinventing the wheel. The IT staff would customize the systeminterface, and there would be lots of work for Sanjay's staff in integrating the new systemand its related components with Petrie's existing systems, but the core of the systemwould have already been developed by someone else.Just as he was finishing the e-mail he would send to his team about the new system'srequirements and constraints, he received a new message from Sanjay. He had askedSanjay to take the lead in scouting out existing customer loyalty systems that Petrie'scould license. Sanjay had conducted a preliminary investigation that was now complete.His e-mail contained the descriptions of three of the systems he had found and studied(PE Table 5-2 L). Obviously, Jim and his team would need to have a lot moreinformation about these alternatives, but Jim was intrigued by the possibilities. He sent areply to Sanjay, asking him to pass the alternatives on to the team, and also asking himto prepare a briefing for the team that would include more detailed information abouteach alternative. PE TABLE 5-1:Requirements and Constraints for Petrie's Customer Loyalty ProjectRequirementsEffective customer incentives-System should be able to effectively store customer activity and convert to rewards and other incentivesEasy for customers to use-Interface should be intuitive for customer useProven performance-System as proposed should have been used successfully by other clientsEasy to implement-Implementation should not require outside consultants or extraordinary skills on the part of our staff or require specialized hardwareScalable-System should be easily expandable as the number of participating customers growsVendor support-Vendor should have proven track record of reliable support and infrastructure in place to provide itConstraints• Cost to buy-Licenses for one year should be under $500,000Cost to operate-Total operating costs should be no more than $1 million per yearTime to implement-Duration of implementation should not exceed three monthsStaff to implement-Implementation should be successful with the staff we have and with the skills they already possessPE TABLE 5-2:Alternatives for Petrie's Customer Loyalty ProjectAlternative AData warehousing-centered system designed and licensed by Standard Basic Systems, Inc. (SBSI). The data warehousing tools at the heart of the system were designed and developed by SBSI, and work with standard relational databasemanagement systems (DBMSS) and relational/object-oriented (00) hybrid DBMSS. The SBSI tools and approach have been used for many years and are well known in the industry, but SBSI-certified staff are essential for implementation, operation,and maintenance. The license is relatively expensive. The customer loyalty application using the SBSI data warehousing tools is an established application, used by many retail businesses in other industries.Alternative BCustomer relationship management (CRM)-centered system designed and licensed by XRA Corporation. XRA is a pioneer in CRM systems, so its CRM is widely recognized as an industry leader. The system includes tools that support customerloyalty programs. The CRM system itself is large and complex, but pricing in this proposal is based only on modules used for the customer loyalty application.Alternative CProprietary system designed and licensed by Nova Innovation Group, Inc. The system is relatively new and leading edge, so it has only been implemented in a few sites. The vendor is truly innovative but small and inexperienced. The customerinterface, designed for a standard Web browser, is stunning in its design and is extremely easy for customers to use to check on their loyalty program status. The software runs remotely, in the &#34;cloud,&#34; and data related to the customer loyaltyprogram would be stored in the cloud too.

Accepted Answer

They could construct their original system from scratch. However, the cost would be high, and it…