Zara & Inditex

Identification of Issues: Top management at Inditex, Zara’s parent company, must make the decision whether or not to upgrade the current IT system that they utilize, specifically their Point of Sales (POS) terminals in which they utilize in all their stores. Currently, the system that they use is based on a DOS operating system. In comparison to current technologies, DOS based applications are considered to be antiquated, although still in use by some organizations. Zara’s terminal vendor has assured them that they are not likely to make any internal changes that will affect their support for Zara’s DOS based system, but the terminal maker will not give any assurances by contract with Zara. The vendor also informed Zara that they are the vendor’s only customer still running DOS based applications. Store managers at Zara also utilize handheld PDA for inventory purposes and for ordering new inventory, the use of which are not necessarily as effective as alternate technologies.

There is a risk that the terminal vendor will make changes in the future and as such, they will no longer make terminals that are DOC compatible, leaving Zara to face obsolescence in the technology in their current stores, and any new stores that they may open.

The IT managers must decide if it is advantageous to upgrade to the newer software applications and hardware. The must weigh the cost benefit associated with an upgrade, and question whether or not an upgrade will make Zara more competitive, and allow them to also expand their customer reach via the internet. The final decision narrows to whether to upgrade or not, and if so, if it will be economically feasible.

Importance of Key Issue: Currently, less than 0.5% of Zara revenue is spent on IT, where their competitors spend 2% of their total revenues on IT development. From a strategic perspective, it is obvious that Zara has not allowed themselves to grow technologically, but has reached a plateau and remained there, while