Professional Documents
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EXECUTIVE SUMMARY
This case presents a cloud computing technology solution that gives promise to a company devastated by a
natural disaster. After a hurricane, the company recovered because of a solid disaster recovery plan, although
it was financially strapped. The Vice President of Information Technology suggested using cloud computing
to cut internal information technology costs. With a cloud computing solution, the IT department would go
from twelve people to six. IT infrastructure (servers, hardware, programs, processing) would be done by a
vendor (the cloud), although responsibility for information technology would be retained by the company.
The case presents a background in cloud computing and cloudonomics. As the case unfolds, the authors find
that proper oversight was neglected; rash decisions were made; and a crisis developed. The president took
matters into his own hands, and without following proper protocols, selected a vendor that later went bankrupt
and forced the company into dire circumstances.
Keywords:
ORGANIZATIONAL BACKGROUND
Founded in 1970 by Don Feckle, Hafford Furniture began as a small furniture manufacturer
based out of Beaumont, Texas. Hafford originally sold office furniture to businesses in Texas,
Oklahoma, and Louisiana, but, by 1978, was supplying furniture to businesses throughout the
entire South. By 1980, Hafford was the third largest furniture manufacturer in the United States,
supplying a variety of furniture to retailers and wholesalers throughout the entire country. When
asked in a 1981 interview what Feckle attributed the rapid success of Hafford to, he said Hard
work, perseverance, and a watchful eye over each penny.
However, the recession during the early 1980s severely hurt Haffords business, and forced
the company to close one-third of their factories. Sales fell by 73 percent over a two year period.
Hafford was able to recover from its downturn, but never quite to the level of success and growth
the company enjoyed before the recession. Additionally, as Feckle aged, his ability to run the
company as astutely as he had in the past began to diminish, and many employees questioned
some of his business decisions which typically included cutting costs in vital areas of the comDOI: 10.4018/jcit.2011010104
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pany. Beginning in 2007, the company began to experience tremendous financial difficulty as a
result of the rising cost of commodities used by Hafford, as well as decreased demand for their
products, which had begun to decline in quality due to some of the questionable cost-cutting
measures implemented by Feckle (Figure 1).
In the beginning of 2008, the financial crisis exacerbated the companys financial difficulties. That same year, Hurricane Bruce, one of the worst on record, devastated coastal Texas.
Haffords operations, including its entire IT infrastructure and data storage were destroyed.
Business was halted for three days while the companys disaster recovery plan was initiated.
While Hafford had the financial capacity to replace the physical building that housed its headquarters, Don Feckle was advised that the company would not be able to make the investment
to restore its IT function.
In a television special entitled Beastly Bruce: The Effects One Month Later, Feckle was
quoted in an interview from the disaster recovery cold site as saying that I dont know where
to turn. How can we go on?
General
Hafford had six factories located across the south and northwest. Furniture was manufactured
based on custom orders received from customers with whom Hafford has had longstanding relationships. In 2010, Hafford had contracts to supply furniture to 23 customers (down from 38
in 2006). Seventeen of these customers were major retail furniture outlets which sold directly to
residential end customers. For example, one of these customers was American Furniture Showcase, with 106 locations in the northeast and eastern United States. Some of Haffords furniture
was branded as American Furniture Showcase in those stores, and yet other furniture was sold
under Haffords brand names. Four of these customers were wholesalers who sold to furniture
retail outlets themselves. The remaining two customers under contract were businesses in the
process of constructing new office locations. These types of customers, with whom there were
no longstanding relationships, typically require large one-time orders. Hafford accepted these
orders if they have unused manufacturing capacity, and typically sold furniture to these onetime customers at cost plus ten percent. The retail and wholesaling customers have longstanding
relationships with Hafford and require regular shipments based on their current inventory levels
and customer demand.
Furniture styles have not change drastically over the years, although fabrics and other materials have changed. A chair could be produced from materials in one of Haffords factories in
a matter of hours. Wholesale customers could select either special orders (like a chair for one of
their specific customers with a certain fabric) or more generic items that went on showroom floors.
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The entire BIS was housed internally and was maintained by the System Administrator (Hank
Kopel). The EIS was used primarily by the President, Don Feckle, to assist with the formulation
of long-term strategy. Occasionally, some of the vice presidents have been permitted to access
the EIS, but only with the Presidents prior approval.
The MIS was primarily used to generate periodic scheduled reports, as well as exception
reports which were produced if predefined criteria were met. As noted above, the DSS and AIS
were extensions of the MIS. The DSS was similar to the EIS, but was used at a lower managerial
level and assisted managers in making shorter-term decisions. Most of the Hafford Vice Presidents have used some of the accounting information systems (AIS), management information
systems (MIS) and decisions support systems (DSS). The AIS overlapped with the TPS, which
interfaced with Haffords VAN-based EDI system (discussed below).
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for disaster recovery and business continuity plans, as well as acting as a liaison with the disaster
recovery vendor.
The System Analyst (Dan Husk) was responsible for working with end users to develop
the overall application system. He was responsible for determining whether systems should be
developed internally or purchased and for finding ways to do things better, faster and (hopefully)
cheaper. For internally developed systems, he worked closely with the Application and Systems
Programmers (Karen and Bill) in developing these systems. When Hafford purchased systems,
Dan, as the System Analyst, was primarily responsible for training end users, converting data
to be used by the new applications, and for designing interfaces with existing applications. The
Vendor Liaison (Tom Faulk) was responsible for contracting for purchased systems, establishing
communications and dealing with complaints, as well as ensuring licenses were maintained, and
source code, if any, was properly escrowed.
User Support (Gail Hammond) was responsible for assisting end users with daily computing
inquires or difficulties. Although just a staff of one person, she helped users with logon problems,
computer errors and more and frequently has been the eyes-and-ears of the IT department.
The Hardware Technician (Melissa Nort) was responsible for setting-up, configuring, and
troubleshooting all hardware utilized in the IT infrastructure. The Senior IT Buyer (Panaj Depal)
was responsible for purchasing any necessary hardware requested by the Hardware Technician.
Together Melissa and Panaj developed requests for proposals (RFP) in conjunction with Paul
Norris and the rest of the IT staff. They also have conducted research into hardware developments that might be of interest to Hafford (Figure 3).
Paul Norris, as Vice President of IT, has worked with his six administrators on a regular
basis and oversaw planning and operation.
CASE DESCRIPTION
Disaster at Hafford Furniture
Early in January 2010, the 2009 sales report had just been downloaded, and it did not look
good. Charlie Shelt, the Vice President of Sales for Hafford Furniture knew the report would
be below budget, but didnt think it would be this bad. Shelt knew that Don Feckle, the President, would not be happy, especially after the extensive and costly improvements that were
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made to improve their product lines. Shelt tried to determine why this quarter was so poor,
but could not think of a reason before he reached Feckles office with the bad news. Are you
kidding me? This is unacceptable. All of Woodruffs marketing reports indicated that these
product improvements would increase demand by 30 to 35 percent, not decrease it by 26!
yelled Feckle. Call an emergency executive meeting with all of the vice presidents. I want to
know what happened! This better not have something to do with that new cloud computing
thing Norris in IT made us use. I was perfectly content with our old system and dont see why
we couldnt replace it. As Shelt left the Presidents office, he muttered, Because you ran this
company into the ground, how could we afford to replace our entire IT infrastructure? Then
Shelt began to wonder if Feckle was right. Could this decline in sales have something to do
with the new cloud computing architecture the company currently utilized?
Shelt remembered how it all happened. Two years ago, Haffords headquarters were
destroyed in a massive hurricane that struck the coast of Texas. Its entire business campus
was underwater, and every functional area of the business, from Accounting to Information
Technology (IT) was destroyed. Thankfully, Norris had been able to convince Feckle of the
need for a disaster recovery and business continuity plan before the companys current financial
quandary. The entire company had to move to the cold site located further north. Shelt had
never even heard of the term cloud computing until the business reestablishment meeting
held in the two months following the hurricane, and he was sure Feckle hadnt either.
Cloud Computing
Cloud computing is a way of providing computing services that is dynamically scalable and
virtualized (Kambil, 2009). The concept is that computing can be viewed as a utility always
available, metered and scalable (Winans & Brown, 2009). Another view of cloud computing
comes from Katzan (2010) Cloud computing is a means of providing computer facilities via
the Internet, but also stresses that means access to the same computer facilities, functions, data
from anywhere via the Internet.
As cited by Buyya, Yeo, and Venugopa (2008), in 1969, Leonard Kleinrick, a chief scientist
of the Advanced Research Projects Agency Network said that computer networks are still in
their infancy, but as they grow up and become sophisticated, we will probably see the spread of
computer utilities which, like present electric and telephone utilities, will service individual
homes and offices across the country. Buyya et al. (2008) continue by stating:
This vision of the computing utility based on the service provisioning model anticipates the massive
transformation of the entire computing industry in the 21st century whereby computing services
will be readily available on demand, like other utility services available in todays society. (p. 1)
Prior to cloud computing, companies were forced to supply their own computing capacity
in-house, which requires large capital expenditures and forces businesses to view computing
capacity and data storage as a scarce resource. With cloud computing, to borrow from Kleinricks
analogy, companies are able to keep the lights on for as long as they can afford, and are only
billed for what they use.
Characteristics
As defined by the National Institute of Standards and Technology (2009) or NIST, cloud computing is defined as a model for enabling convenient, on-demand network access to a shared
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pool of configurable computing resources (e.g., networks, servers, storage, applications, and
services) that can be rapidly provisioned and released with minimal management effort or service
provider interaction.
NIST (2009) state that the cloud computing model has five essential characteristics:
1. On-demand Self-service
Cloud computing clients can automatically access computing capacity as needed without
having to interact with the service provider. This characteristic is the essence of the view of
cloud computing as a utility.
2. Broad Network Access
Since the computing capabilities offered by cloud computing are delivered typically via the
internet, access to this computing power can be had by any end user with access to the network.
3. Resource Pooling
Resources, such as bandwidth, data storage, and processing power are pooled to serve many
clients at a single time. Resources can be shifted and altered to meet the demands of each client. This is known as a multi-tenant model. Relating back to the utility analogy, instead of each
building owner purchasing coal and machinery to generate electricity for their own building,
the power plants pool these resources and deliver electricity to each building. In addition, the
building may not know exactly where the electricity is being generated. The power plant is the
service provider and the building is the client.
4. Rapid Elasticity
Cloud computing has the alluring characteristic of seemingly unlimited scalability. Computing capability can quickly be increased or decreased by the provider depending on the needs
of each client.
5. Measured Service
Just as a utility, the usage of resources (bandwidth, data storage, processing power) can be
measured, monitored, and controlled. This not only allows for resource use to be optimized, but
it also provides a mechanism by which clients are billed only for the resources they use.
Part of the attraction toward cloud computing relates to the cost and time efficiency it
provides its users. Developing an IT infrastructure requires large capital expenditures to obtain
hardware for servers, data storage, and computing power, and it is costly and time-consuming to
maintain the entire system. Describing this problem, Hayes (2008) says that software must be
installed and configured, then updated with each new release. The computational infrastructure
of operating systems and low-level utilities must be maintained. Every update to the operating system sets off a cascade of subsequent revisions to other programs. Cloud computing
essentially outsources these problems and provides clients with the advantage of mobility and
collaboration (Hayes, 2008).
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Service Models
According to NIST (2009), there are three service models that can be deployed to utilize cloud
computing, and, consequently, minimize a businesss IT costs by outsourcing the IT problems
noted above by Hayes (2008). These service models effectively represent three levels of client
control.
1. Cloud Software as a Service (SaaS)
The client utilizes applications, which would normally be run off internal servers, by accessing them through a cloud infrastructure using a web browser, for example. Additionally, as
NIST (2009) state, the [client] does not manage or control the underlying cloud infrastructure
including network, servers, operating systems, storage, or even individual application capabilities,
with the possible exception of limited user-specific application configuration settings. [Note,
this is the model that was selected by Hafford].
2. Cloud Platform as a Service (PaaS)
The client is able to use the cloud infrastructure provided to them by the service provider
to deploy their own applications which have been developed using programming languages and
tools approved and supported by the service provider. While the client is not able to control the
cloud infrastructure, including the network, servers, operating systems, and storage, they do
exert some control over the applications they have deployed.
3. Cloud Infrastructure as a Service (IaaS)
The service provider enables the client to provision processing, storage, networks, and
other fundamental computing resources where the consumer is able to deploy and run arbitrary
software, which can include operating systems and applications (NIST, 2009). This service model
allows the client to have the greatest amount of control. While the client is still unable to control
the cloud infrastructure, they are able to control the network (i.e., firewalls), servers, operating
systems, and storage in addition to the applications, as noted above.
Cloudonomics
With the implementation of a cloud computing infrastructure, companies can effectively outsource the bulk of their IT function, and many of the constraints that come along with it. As
companies continue to collect rapidly growing amounts of data, and require the use of increasingly demanding applications, IT is required to maintain pace by ensuring its users are able to
access the resources they need to compete.
As noted above, this explosion of necessary, in-house IT telecommunications, hardware,
and processing capability is extremely costly to obtain and maintain. Cisco advocates against
in-house IT resources by stating that since data center IT assets become obsolete approximately
every five years, the vast majority of IT investment is spent on upgrading various pieces of
infrastructure and providing redundancy and recoverability (Cisco, 2009). Cloud computing
removes this expensive dilemma that most businesses face which drastically reduces the need
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for capital expenditures in the area of IT and allows this capital to be used elsewhere in the
business. These cost benefits have been termed by some as cloudonomics (Wikipedia, 2010a).
Security
While there are many benefits associated with cloud computing, it does have one major risk:
security. By effectively outsourcing a companys entire IT function, or crucial components of
it, how can that company be sure its data is secure, and furthermore, how can it be sure that the
service provider is reliable? With IT as the backbone for most companies, an inability to rely on
necessary IT functions could be fatal. This is a major concern for many executives, and is likely
to be the primary impediment to large-scale adoption of cloud computing.
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the software and data, as well as internet capability to connect to the internet. Hafford personnel
would be able to access these systems and data through a web browser application just as if
the applications and data were still in-house using a virtual private network (VPN) connection.
The customer order process would require Haffords customers to transition to an internetbased EDI system that would interface directly with Haffords BIS housed at the service
provider in a similar fashion. The only difference would be the use of the internet instead of
a VAN, which would transform the system processing from batch to online real-time, which
could be an improvement.
Using this cloud SaaS infrastructure would extend Hafford all of the cost benefits associated with cloud computing. Hafford would only pay for the computing resources it used and
would be able to virtually remove the need for capital expenditures to regain its IT function,
as well as be able to drastically reduce IT maintenance costs. In addition, since the majority
of the companys IT function would be effectively outsourced, almost half of the IT personnel
could be let go, which would provide additional cost savings (Figure 4). There would be no
need for a systems administrator, application programmer, systems programmer or a database
administrator since those functions would exist on the cloud computing vendors system. The
systems analyst (Dan Husk) will also take over the duties of the Vendor Liaison and work
closely with the vendor selected for the SaaS solution. Since they would not be buying any
servers or major IT equipment, Melissa Nort, currently the Hardware Technician would also
assume the function of Senior IT buyer.
To meet Haffords auditing requirements, the service provider would need to comply with
Statement on Auditing Standard No. 70 (SAS 70), which relates to the auditing of service providers.
Overall, this plan would solve Haffords IT dilemma while dramatically improving the
companys suffering financial position. Cost savings from utilizing cloud computing could be
used to improve the companys product line (Figure 5) Norris plan seemingly had no downside.
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Technology Issues
Hafford trusted putting their data and processing in the cloud. Cloud computing has great
advantages for cutting local IT staff and reducing local infrastructure. Data and processing, in
this case, would be done on computers at a vendor, PFI. When customers placed an order electronically, that order was sent electronically to the Hafford interface residing on the PFI servers.
As described, cloud computing has the conceptual basis of a utility. The user only contracts for
what is needed, and lets the maintenance and infrastructure issues reside with the cloud vendor
(for a fee). But, going into cloud computing was not as simple as contacting your local electrical company and asking to be connected to their power grid. The user needs to really determine
their needs, and determine if they are looking for software as a service (SaaS); cloud platform
as a service (PaaS); infrastructure as a service (IaaS); or a combination of services. In this case
Hafford seemingly did not conduct the due diligence needed to meet their IT needs. To continue
functioning, they will need to quickly assess their needs and quickly find an appropriate vendor.
A secondary issue for customers was the transition from the existing VAN EDI system to
the more open (and less secure) web based EDI system. Norris and the remaining Hafford IT
staff (especially Dan Husk as Systems Analyst and Vendor Liasion) as well as Danielle Porter,
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Vice President for Customer Relations and her staff, needed to verify that users are not having
difficulty with the new interface.
If they were unable to retrieve the orders from the order entry system in the cloud at PFI
before PFI is liquidated, they will have to idle their six manufacturing plants, and even the potential of bankruptcy for Hafford Furniture looms in the wings. Orders translate to production
and income; and no orders translates to no production, no income and dire consequences.
Management Issues
In addition, the management of information technology seemed to be in question. The Vice
President of Information Technology, Paul Norris had lost about half of his staff with the cloud
computing venture. And, the founder and CEO, Don Feckle, seemed to not understand IT and yet
got involved in IT decisions. While there was an established management structure and process
for reviewing and making major changes to the company, Feckle had blatantly ignored it. Dealing
with the current problem also meant atoning for previous mistakes in management and trying
to reestablish communication and trust. While the direct problem was with IT, the management
crisis permeates the entire company.
Hafford had a business information system, but there seemed to be a lack of information
(such as the bottle in order entry and processing). Management should be making decisions based
upon relevant, accurate and complete information.
With six vice presidents two of which are explicitly involved in sales and customer relationships (Danielle Porter, Vice President of Customer Relations; and Charlie Shelt, Vice President
of Sales); and Dan Husk from IT (as Vendor Liasion) the company should have known of the
difficulties with PFI sooner.
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Cisco. (2009). Private Cloud Computing for Enterprises: Meet the Demands of High Utilization and Rapid
Change. Retrieved from http://www.cisco.com/en/US/solutions/collateral/ns340/ns517/ns224/ns836/ns976/
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Keith Levine is an alumnus of Quinnipiac University, earning a Bachelors of Science in Accounting in 2009. He also received the degree of Master of Business Administration in Finance
from Quinnipiac in 2010. Keith is a 2009 Quinnipiac University School of Business Charter
Oak Society Scholar, and received the Dean's Emerging Leader Award in 2010. He attained the
rank of Eagle Scout in 2004. Keith began his career in Assurance Services with Ernst & Young
in 2010, with CPA licensure pending in New Jersey.
Bruce White is a professor of computer information systems at Quinnipiac University in Hamden Connecticut. He has chaired the ISECON (Information Systems Education Conference)
four times, was the AITP-EDSIG Information Systems Educator of the Year in 2008, a winner
of the Center of Excellence in Teaching at Quinnipiac University in 2008, and a winner of the
Outstanding Faculty Award at Quinnipiac University in 2011. He has also served as chair of
the Computer Information Systems department at Quinnipiac University and is an active accreditation reviewer for information systems programs under ABET.
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