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SMB Case – Rock Solid Industrial Parts, Inc.
(Information for: Case Analysis, Presentation and Briefing)
You work for a family owned industrial parts distribution business (Rock Solid Industrial Parts, Inc.) located
in San Jose, California that is expanding very rapidly. Currently at about 36 employees, the business is
expected to grow to over 70 employees within 3 years and cover the entire west coast and mountain
states. Current sales of $33 Million/year are expected to more than double to $72 Million in that
timeframe. Your background and education (MIS from SJSU) has made you the go-to-person for all
technology related issues in the company. As the only individual in the company with a technical
background, the Owner/CEO of the company, Philip Hurd, has come to you for advice on what IT/IS
systems the company should be thinking about implementing to enable continued profitable revenue
growth by improving the efficiency and effectiveness of the business over all. You know the company is in
the process of hiring a Senior Director of IT, Janice Drake, who is a relative newcomer to the industry and
may not be onboard before the presentation is due. This is your big opportunity to show what you can do
to help drive continued growth as well as insure the solutions you pick today will continue to scale with
the business over the next decade. A great job will look good on your resume.
In the late 1930’s Philip Hurd’s grandfather, Hugh Hurd, started an industrial parts distribution company
in Sunnyvale California close to the Joshua Hendy Iron Works. Upon returning from the Pacific after WWII,
Hugh’s son Jack took over the business and moved it to its current location in South San Jose. Throughout
their high school years his sons Philip and Tim worked in various roles within the company gaining
extensive working knowledge of the industry. In 1970 Jack retired leaving the business to Philip and Tim.
Today, Philip (61 years old) and his brother Tim (59 years old), CEO and COO respectively, run the
company. Their high school buddy Don McCloud (60 years old) is the CFO. David Simpson has been with
the company for over 25 years moving up the ranks to VP of Sales. The four C-level executives are steadfast
golf buddies, playing almost every Sunday at the Silver Creek Valley Country Club. Tom Smith, Regional
Sales Manager for the pacific states is married to Tim’s daughter Becky. When David retires, he will most
likely become the VP of Sales. Philip’s son, Phil Jr, is planning on leaving his finance job at Northrup
Grumman to join the business as CFO when Don McCloud retires in 5 years.
Having worked outside the family business for many years, Phil Jr. sees the potential for growth and is the
main strategic architect for growing the business. He has counseled his father on what technologies might
be needed to expand the business. Being in finance at Grumman, driving profitable revenue growth is his
primary objective. He operation is heavily supported by IT/IS so he knows the potential benefits of
technology use in a business. When his father retires in 10 years he will likely become CEO.
The Strategic Plan
The strategic plan is to grow the company from current sales of $33 Million/year to $72 Million in three
years by aggressively expanding into southern California and the Mountain states. Jim Donner, a 27 year
veteran employee and rising sales star, has been chosen to lead the effort in the Mountain States. A mixed
model of direct and independent sales representatives supported by inside sales has worked well for the
company over many years so the intent is to continue the model. The company has no sales offices – The
Sales Reps all work from home or an office of their own choosing. Southern California will have a small
satellite office in LA or San Diego and the new Mountain States Region will have a regional office in Denver.
3 Year Expansion Plan
LA or San Diego
C- Level Executives
1 (Doubles as Office
1 (Doubles as Office
Field Sales 10 + 1 RSM
Inside Sales 4
Apps Engineers 2
Field Sales 10
Inside Sales 4
Apps Engineers 2
Field Sales 10 + 1 RSM
Inside Sales 4
Apps Engineers 2
1 Technician (addition of 1 0
senior manager and 2 staff
In this type of business, long term relationships are very important. Sales reps tend to bring their best
customers with them as they move from distributor to distributor. Rock Solid is intending to leverage this
fact to grow very quickly by sticking to an experienced independent sales representative model with only
a few direct sales people for large critical key accounts.
Sales Staffing Table
The company plans to use technology to minimize operating overhead as they grow and to keep the
organization as flat as possible by improving the efficiency and effectiveness of the organization.
The Headquarters’ organizational structure and operational functions are very typical of an old line
industrial distributor. (Blue = Existing Organization Green = New Positions being added)
VP Sales &
Regional Sales Mgr
Regional Sales Mgr
Senior Director of IT
Outside Sales &
Outside Sales &
Advised by Phil Jr., Philip Sr. is driving the change. Having read about the benefits of CRM automation,
David, acknowledges the need for better technology as the sales force grows in number and territory
reach. Don McCloud, CFO, has serious reservations about changing anything. His tight control of the
financials has kept the company very profitable even during the “great recession” of 2007/2009. Everyone
in the company is making good money. His view: “Why change what isn’t broke?” Don is not technical (he
gets his technical information from the Geek Squad) and doesn’t appreciate importance of technology’s
role in helping companies scale. Tim Hurd, COO, is on the sidelines with a wait and see attitude. As an
executive team, they have all agreed to give the Strategic Growth Plan a shot and on the advice of Phil Jr.
they have hired Janice Drake as Senior Director of IT from a small technology company in San Jose to
manage the new IT/IS implementation. You will most likely report to her with a promotion if things go
well. They are even thinking about remodeling the office space to make it look more modern and inviting.
The company is not very technologically oriented. Today, most everything is being done with desktop
computers, paper forms, Excel and Quicken. The company has only a rudimentary online presence and an
antiquated Plain Old Telephone System (POTS). Most of the workers are conservative, older (average age
55) and have been with the company for more than 25 years. They are comfortable with computers but
do not Facebook or TXT. Many do not even have smartphones. In short – they are not very technically
savvy and will likely be very resistant to change.
The current field sales operation is very local. Even though most of the sales people work from home, they
come into the office every Monday morning for a weekly sales update meeting (issues, resolutions, sales
forecasting) that sometimes includes training by key vendors. During a brief conversation with David (VP
of Sales and Marketing) you discovered vendors often require both a white board on which to draw
diagrams and a projector for PowerPoint slides during training meetings. Provisions must be made to
continue these meetings to include sales people who are in remote locations or working from home.
The Warehouse Operations is automated to the degree that they use barcode scanners, however, there
is no automated inventory control and no LAN in the building except in the front office. Everything is
handled with Excel spreadsheets that are PDF’d and emailed weekly to the sales reps. Inventory
management is becoming an issue. Today there are 100K SKUs in inventory and growing as they expand
into new repair service areas.
A small room is located in the building
at the comm utility point of presence.
A high-speed commercial grade fiber
internet termination is available but
un-used. AT&T consumer DSL plus
consumer grade switches are currently
supporting the company’s connection
to the internet. An old PC is being used
as both an FTP and a print server. The
desktop PCs are old and running
Windows 7 – some are still using CRT
monitors. The PCs are running various
older versions of MS Office and
QuickBooks is being used for the
accounting software. HR is completely
paper based with payroll outsourced
Over the past decade, the small business market has become a popular and increasingly contested market
for technology companies. While there are many definitions of what constitutes an SMB, the most
common are based on the number of employees. Generally, businesses with fewer than 100 employees
are classified as small and those with between 100 and 250 are classified as medium. The opportunity in
the SMB market is significant; however, the large number of small businesses and the low IT spend per
business makes it a difficult market to penetrate. For example, according to Compass research, there are
2.4 million businesses with fewer than 1,000 employees in the US and 2.3 million of those have fewer than
Small businesses constitute the majority of businesses worldwide and they are growing at a faster rate
than large enterprises. According to IDC, worldwide SMB IT spending continues to grow beyond the halftrillion-dollar threshold at roughly 2 percentage points over the rate of GDP. SMB IT spending will be
approaching $700 billion in 2019. In a recent market research study conducted by Compass, small business
owners identified their most important IT needs as: attracting new customers, serving existing customers
better, increasing employee productivity, lowering operating expenses, and improving collaboration
among workers. Now, more than ever, hardware and software technology companies are focusing on
providing SMBs the products they need to meet these challenges.
Technology Infrastructure Overview
As a business’s networking needs expand, the need for managed switches increases. Managed
switches are essential for larger networks and those with voice or video traffic (video conferencing) which
needs to be prioritized above data traffic to ensure high quality feeds. Another important feature on
managed switches is Power over Ethernet (PoE) used to supply power to devices such as wireless access
points or IP phones so that these devices can be installed in locations that lack easy access to a power
Routers are used to connect to the internet and to send traffic between Local Area Networks
(LANs). Routers connect physically separate networks such as office floors, different office locations or
VLANs (Virtual LANs) into one seamless network to the end users. Routers also provide additional security
and protect against denial of service attacks and other security threats.
Designing the right network architecture requires a degree of technical expertise that most SMBs do not
have in-house. As a result, the majority of managed and unmanaged switches are sold through Value
Added Resellers (VARs) who perform a network assessment to understand the business’ needs and then
design the architecture, install the network and often remotely manage the network for the SMB.
More advanced infrastructure technologies include security, Unified Communications, and wireless
Security – Most vendors today build security features into every product it sells. In addition, many vendors
also sell a number of other security products such as spam blockers, firewalls, and identity management
Unified Communications – Unified Communications, or UC, is a broad category that refers to applications
that combine voice, data, and video over the same network. Cisco is the worldwide leader in Unified
Communications followed closely by Microsoft. Historically, PBX (public branch exchanges) were used as
the network to carry voice traffic. However, with UC, voice traffic can be converted into packets and
passed over an IP network and reassembled on the other end.
Combining voice and data networks generally saves businesses money because they only must
maintain one network and allows for new productivity features such as accessing voice mail on the
desktop as an example.
Installing UC begins with a network assessment and often requires an upgrade to the existing
network infrastructure to ensure that the network can support high quality voice traffic. Nearly all SMBs
work with a VAR to conduct the network assessment and deploy the UC solution. One of the barriers to
adoption of UC has been the upfront capital cost, which many SMBs are not willing to undertake even
though UC will save money over time through lower telecom and network maintenance costs.
UC adoption has accelerated in the Enterprise market over the past few years, but SMBs are only just
beginning to adopt this technology. The most popular UC products for SMBs are IP telephony solutions,
such as Cisco’s Smart Business Communication System that combines a network foundation with security,
wireless, and voice applications all in one system.
Wireless – Wireless networks consist of Wireless LAN controllers and access points (APs). Similar to UC,
wireless networks have been widely adopted among large enterprises, but SMB adoption is much lower.
Wireless products range in complexity from simple standalone access points that are easily installed and
require little or no setup to more complex networks consisting of multiple APs integrated into a seamless
m anaged network.
In an industrial setting, AP specifications, placement and antenna design become more critical to maintain
speed and connectivity than in a consumer application, particularly in buildings with metallic structure
interference/multipath reflections. A standard consumer AP will not perform well in this environment. To
help solve this problem, APs with MIMO and beam forming technologies use multipath reflections to gain
significant signal strength and improve reliability. Improved reliability translates to a greater coverage
area for a given data rate.
As the complexity of the network increases, many SMBs will enlist the services of a Va lu e Ad de d
R ese ll er ( VAR) to help them optimize the locations of the APs to avoid dead spots and improve
connection speeds throughout their office. As a result, wireless products are sold through a variety of
channels including retail, online resellers, and VARs. Wireless is high growth segment for SMB.
Your task is to understand the issues involved and to apply new/modern IT/IS solutions to marketing, sales
(independent mobile workers supported by an inside sales desk), inventory management and accounting
to support the Strategic Growth plan. To keep overhead expense growth to a minimum the entire business
must become more effective and efficient as it expands. Your budget is $250K to $750K. What do you
recommend doing – Automate, Informate or Transform? How are you going to implement the chosen
technologies considering that the workforce is old and not tech savvy? Knowing up to 80% of all IT/IS
initiatives fail, what are you going to do to make sure you are the 20% that succeed? Consider all areas of
the business system to include Technology (hardware, software and data), Process, People and Structure.
Use the Enhanced Levitt Diamond Model as a guide to inform the elements of your solution.