Casa del Libro

Who:  Casa del Libro, only large bookstore chain in Spain. plan: to expand into the an international reference for books published in Spanish.  the company belonged to Planeta, the primary editorial group in Spanish.
What: should executives decide to scrap the original system that was well on its way to being functional, though expensive and needing ongoing maintenance or should they opt for a the new, simple and cheap model?
Where:  Spain
When:  mid 90's Casa del Libro teamed with AOL to sell books online, by the late 90's they decided to develop a new virtual company from scratch.  in 2000 they begin developing an elaborate, expensive system and by 2001 are in need of cost cutting measures.
Why:  because of changes in the economic and political environment post the bursting of the tech bubble and 9/11, Planeta altered its aggressive growth plan and focused on cost control.
How:  Casa del Libro was faced with how to decide between two opposing yet feasible options in order to shave costs yet remain competitive.  The first choice was to remodel and maintain the existing, complex, best in breed platform (Sun machines, 4 servers with 2 CPU's, running in Solaris/Unix operating system, database manager, Vignette 5.6 for content and e-commerce support, and Excalibur v5.3 for the server).  The second new platform option was simpler and considerably cheaper (Microsoft tech on HP servers, powered by Windows NT, with SQL Server as database engine, and MSFT Commerce Server 2000 as e-commerce app).

As a manager the cheaper and simpler model would win out in Casa del Libro's case.  
In a downgraded industry it would be necessary to do some quantitative analysis, specifically risk analysis for a best, worst and most likely scenario in order to go beyond intuitive feelings that the cheaper system under Microsoft would be a better investment.  Investing in a risk consultant would be a logical short term investment.  After running a few scenarios through Monte Carlo Simulation the results would be more tangible and justified.  Another way to select the best project quantitatively would be to again create possible outcomes using a decision tree and running a sensitivity analysis.  In the end the cheaper, simple structure must win out given the ephemeral nature of technology.  In five years to ten years it is likely both systems will be outdated, to invest in the cheaper, simple model does not mean compromised quality it says more that you are being cautious about the industry outlook and weak economy and that you will be ready to invest once again in a new or adjusted system in the future.  If you commit to the laborious, expensive platform, it sends a message that while you want to have the best, you are being unrealistic in an industry that will likely slow due to technology trends and changes or simply from a weak economy.  Sticking to the old platform reveals some rigidity and stubbornness to continue with a system that exhausts your financial resources.


In summary the most relevant criteria to make the decision:
1) macro/micro econ view in the short and long term
2) market analysis, where are book sales going?  what technologies may keep book sales down, time on the internet, movies, tv, video games?  are there any technologies that could replace physical books?
3) industry analysis, what about a competitor like Amazon?  what about some of the big book store chains in the US that may push to expand aggressively?
4) company sensitivity to time and money, forecasting in the short term and long term