HBP Product ID: ST59

UST059

RONALD LAU
KENNY YIU

Bloom & Grow Asia (I): ERP Strategy and Planning

If we are slow in the way that we execute our business, the market is going to run past us. We
bring the product to market, the marketing machine turns on, and we get it done. So we expect
the same from our internal systems.
Peter Deacon, CTO, Bloom & Grow 1

Bloom & Grow was a Hong Kong–based sourcing agent and wholesale distributor of maternity, baby,
and children’s products. It was founded in 2004 by Alexandra Dickson Leach, a British entrepreneur who
was born and grew up in Hong Kong. By 2014, the company had grown from a small venture into a pan-
Asian business with subsidiaries in Singapore, Malaysia, Australia, and China. It was the regional distributor
of 30-plus international brands from Europe and North America and was constantly approached by other
brands seeking expansion into Asia.

While management enjoyed the rapid development, it was obvious that a company with this sort of
growth profile could not be run simply on spreadsheets and off-the-shelf accounting software. Alexandra
knew that it was time to introduce a more systematic approach to the company’s operation.

Alexandra asked her husband, Peter Deacon, a director on the board, for assistance. Peter had
experience running information technology businesses. He had joined Bloom & Grow in 2009, with the
mandate to implement an e-commerce strategy that would include upgrading the company’s operation flow
and information systems.

Having witnessed the development of the business firsthand, Peter had a fairly comprehensive idea of
Bloom & Grow’s operations. He was ready to dive right into the core issue to resolve what he had been asked
to do. He needed to know whether the company should invest in an enterprise resource planning (ERP)
system at this stage. He also wanted to ensure that all actions he took would align with the company’s long-
term e-commerce strategy.

1 Peter Deacon, chief technology officer, Bloom & Grow Asia, interview by author, Hong Kong, November 2014.

Kenny Yiu prepared this case under the supervision of Professor Ronald Lau solely as a basis for class discussion. The authors have
disguised certain data to protect confidentiality. Cases are written in the past tense; this is not meant to imply that all practices,
organizations, people, places or facts mentioned in the case no longer occur, exist or apply. Cases are not intended to serve as
endorsements, sources of primary data, or illustration of effective or ineffective handling of a business situation.

Inquiry on ordering and permission to reproduce the case and its materials, write to bmcase@ust.hk or visit cbcs.ust.hk

© 2017 by The Hong Kong University of Science and Technology. This publication shall not be digitized, photocopied or
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Technology.

Last edited: 21 July 2018

This document is authorized for use only in Prof. Pieter Nagel's MAIB Sept 23- Term 2 Syd Operations Mgmt at S P Jain School of Global Management - Dubai from Jan 2024 to Jul 2024.
 HKUST Business School Thompson Center for Business Case Studies

The Bloom …
Alexandra, whose family had deep roots in Asia and Hong Kong, founded Bloom & Grow in 2004.
The story of Bloom & Grow was similar to many other entrepreneurial stories. Alexandra first had the idea
of starting Bloom & Grow when she was trying to solve her own problem. As a first-time mother, Alexandra
had difficulty finding quality maternity and baby products, even with her extensive local knowledge of Hong
Kong.

Determined to find a solution, Alexandra reached out directly to overseas brands and suppliers in an
attempt to pinpoint a local distributor. To her surprise, many of the well-known foreign brands were not
represented in Asia, let alone in Hong Kong. Alexandra believed many mothers in Asia with similar
backgrounds—educated, with mid-range to high incomes—were facing the same situation: they were unable
to find quality maternity and baby products. Alexandra saw an opportunity and quit her job as e-commerce
manager at a multinational corporation to venture into the baby product business.

… and the Grow

Bloom & Grow’s business model was rather straightforward: it secured the distribution rights, mostly
exclusive, of maternity and baby products brands from countries in North America and Europe, and
distributed these products to various retailers in Asia. Bloom & Grow was responsible for the logistics, from
manufacturer sourcing, inventory management, to point-of-sale display and goods replenishment. In addition,
Bloom & Grow was also responsible for the local brand building, marketing and promotion of the products
it distributed.

Business took off immediately after the company’s establishment. Within the short time span of seven
years, Bloom & Grow was distributing products for over 15 brands, running five warehouses under eight
subsidiaries with 50 staff members, covering 800 retail points in Hong Kong, Singapore, Malaysia, Australia,
and China.

The revenue of Bloom & Grow grew at a rate of 30% per year during this period. In fact, the company
was approached by or received frequent enquiries from foreign brands that were looking for partners and
distributors in the Asian market.

The Need for an ERP System

At the early stage, the company put its focus on market development. To preserve capital, it did not
invest in any management software to run its operations. The scale of the business at the beginning also did
not justify such investment. All operational data and records for each department were kept on Excel
spreadsheets.

As the company grew in scale, the business grew in complexity. To expedite the internal flow process
and improve record keeping, the company installed off-the-shelf bookkeeping software for its accounting
department. The information flow for the rest of the company, however, still depended on spreadsheets.
Alexandra realized that the growing number of spreadsheets flowing across various departments caused
occasional time lags and inaccuracies in information. In 2009, Alexandra recruited her husband, Peter Deacon,

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UST059 Bloom & Grow Asia (I): ERP Strategy and Planning

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 HKUST Business School Thompson Center for Business Case Studies

who had been serving as a director on the company’s board, to become the chief technology officer (CTO)
of the company.

A Quick Decision

As the husband of the founder and a director on the board since inception, Peter was well informed
about the general business operations of Bloom & Grow. He also had vast experience in the information
technology field working for a multinational company and a global financial institute. He had been a product
engineer at IBM early in his career and subsequently worked as sales head of a number of software solution
providers. Peter gained further operational experience from being in charge of the business technology
infrastructure of treasury and securities services in Asia Pacific for J.P. Morgan Chase Bank.

Immediately after becoming CTO, Peter spent time to fully understand the workflow of the company.
He spoke to operation staff and record/data keepers in each department to understand their challenges. He
also studied the spreadsheets created by each department in great detail.

Coming from an established environment, Peter quickly realized that Bloom & Grow would benefit
from an ERP system. The number of spreadsheets that various departments used was ever growing,
increasing the chance of errors and misplaced information. There was also a time lag for information flow,
given that one department would have to rely on the input from another. This was a particular concern for
the sales department, since the information shown on the inventory list was not the most up-to-date. This
caused an unacceptable risk; sales executives were promising quick delivery of goods to customers when the
company did not have sufficient stock.

Along Came NetSuite 1.0

The most decisive factor for Peter when selecting an ERP system was cost, both from investment and
maintenance perspectives. Peter knew it would not make sense economically to invest in a leading system
such as SAP or Oracle. He also did not want to invest heavily in hardware and servers. Peter thought that a
system with cloud computing ability, therefore, was a natural choice for Bloom & Grow.

One of the system vendors of cloud-based ERP that Peter knew was NetSuite. NetSuite was a
California-based company founded originally as an accounting software company in 1998. It was later
renamed NetSuite and offered web-based comprehensive business software as a service (SaaS). 2 NetSuite
was ranked the number-one cloud business software. It counted Siemens, Jollibee, Browns Shoes, and
Wine.com as its customers. In addition to offices in the United States, NetSuite had offices in Canada, the
United Kingdom, Spain, Czech Republic, and Uruguay. In Asia, NetSuite had offices in Japan, Hong Kong,
Singapore, plus a call center in the Philippines. The company was listed on New York Stock Exchange in
2007 with a total of 2,550 employees.

Peter had a series of meetings with NetSuite’s sales engineer and held several rounds of discussion on
Bloom & Grow’s requirements. The single most important criterion at that stage was cost. As cloud-based

2 Software as a Service (SaaS) was a software distribution model in which software applications were hosted on the Internet (or a
dedicated network), as opposed to being installed on a specific server or computer unit. With SaaS, the users did not pay and own
the license of the software. Instead, they received the authorization to use it for a period of time and paid for what they were using.

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UST059 Bloom & Grow Asia (I): ERP Strategy and Planning

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 HKUST Business School Thompson Center for Business Case Studies

software, NetSuite was the most cost-effective option when compared to SAP and Oracle. Not only could
Bloom & Grow save the up-front software cost, but it could also avoid the heavy investment in hardware and
servers.

As with many software implementation projects, a system integrator was required for the installation.
With help from NetSuite, Peter identified a system integrator located in Hong Kong to assist in the
implementation of the program. 3 The role of system integrator was essential, given the limited in-house
human resources at Bloom & Grow, especially in the information technology and technical fronts. As his
proposal seemed to be moving in the right direction, Peter made a recommendation to the board of directors
to go with NetSuite.

Reality Check

We bought NetSuite with our eyes wide open. But it had limitations which we discovered quite
early on, that is, what it said it could do . . . in reality it couldn’t do, albeit at that point in time.
Peter Deacon, CTO, Bloom & Grow Asia 4

It took the system integrator five months to install NetSuite at Bloom & Grow. Since NetSuite was a
SaaS solution, it was relatively easy to set up the basic software at each location of the company. Management
at Bloom & Grow, however, soon realized that there were a number of limitations to NetSuite that it had
assumed were non-issues.

First, the company was run as a group of wholly-owned subsidiaries but the version of NetSuite that
Bloom & Grow installed did not allow the company to have multiple subsidiaries. Second, given the
company’s broad coverage in Asia, basic features such as multiple currencies and multiple language input,
which NetSuite lacked, became crucial. Last but not least, NetSuite’s accounting solution was not built on a
first-in-first-out (FIFO) basis, which Bloom & Grow used. This created a challenge for the company’s
accounting team, which was required to recalculate its costing base.

Bloom & Grow originally purchased the new system to smooth operations and facilitate work flow.
Instead, it created more obstacles. These seemingly basic aspects perhaps would not have arisen as issues in
Peter’s previous working environments. To Peter, functions like multiple language and multiple currency
would have been standard features. As the CTO of Bloom & Grow, Peter took a painful but necessary
decision.

We made the decision that we were going to get rid of NetSuite. It was probably in hindsight
one of the worst decisions I have made, because what happened next cost me an awful lot of
money and even more time.
Peter Deacon, CTO, Bloom & Grow 5

3 A system integrator was a company (or an individual) that provided the service to combine different components and sub-systems,

both in terms of hardware and software, and to ensure the proper functioning for the clients.
4 Deacon, interview by author, November 2014.
5 Deacon, interview by author, November 2014.

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UST059 Bloom & Grow Asia (I): ERP Strategy and Planning

This document is authorized for use only in Prof. Pieter Nagel's MAIB Sept 23- Term 2 Syd Operations Mgmt at S P Jain School of Global Management - Dubai from Jan 2024 to Jul 2024.
 HKUST Business School Thompson Center for Business Case Studies

Parting with NetSuite

After wrestling with the system for about 18 months, Peter made the decision to leave NetSuite. He
identified an open source ERP platform called xTuple. It was a general ledger platform and was designed as
a core engine for further customization. Peter particularly liked the fact that xTuple was highly customizable. 6
After the unpleasant experience with the limitations of NetSuite, Peter was persuaded that only a system that
was designed and built in-house according to Bloom & Grow’s requirements could work without interference.

Beginning of Another Challenge

As an open source system, there was no up-front cost to install the core platform. There were, however,
other costs associated with customization and implementation. Peter had to engage a team of three
programmers to build an ERP system from the core skeleton.

Peter was determined to construct his own version of a FIFO module to fit Bloom & Grow’s accounting
policy. The construction of such a module, however, took longer than expected. Not only did it cost the
company a lot of money, it also tied up Peter’s resources and delayed the development of other components
of the new ERP system.

In contrast to Peter’s original blueprint to install a cloud-based system, xTuple was run on client-server
architecture. The company had to buy servers and run a data center with its own virtual private network to
provide access to other office locations.

It took Peter and his IT team six months to complete the programming and installation and have a
functioning ERP system. The IT team had to transfer the data from NetSuite to xTuple. Given the high degree
of customization on xTuple, the original data from NetSuite, which was categorized in a more generic manner,
had to be broken down and could not be mapped seamlessly during the transfer. As a result, the data on
NetSuite could not be entirely compared to that on xTuple, creating a significant challenge for the company’s
auditor during annual audit work.

Last, given that xTuple was an open source platform, there was no official vendor support for the
enterprises that installed the system. All technical support had to come from the certified implementation
partner of the system, which charged service fees. Although the system software was free, the implementation
partner charged significant consulting service fees. It would require a strong in-house information technology
team to monitor such an open source program. The worst part was that this was simply the beginning.

6 xTuple (xtuple.com) is an enterprise software company that develops and markets open source software under the brand name

xTuple ERP. The company was originally formed in 2001 as OpenMFG and rebranded as xTuple in 2007. The company is
privately held.

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UST059 Bloom & Grow Asia (I): ERP Strategy and Planning

This document is authorized for use only in Prof. Pieter Nagel's MAIB Sept 23- Term 2 Syd Operations Mgmt at S P Jain School of Global Management - Dubai from Jan 2024 to Jul 2024.
 HKUST Business School Thompson Center for Business Case Studies

To Switch or Not to Switch

It did not take long for problems to arise once Bloom & Grow began to operate using xTuple as its
ERP system. First, data integrity became an issue. Seeing a seemingly low inventory level, the purchasing
team would continue to procure products while the logistics team at the warehouse was running out of space
to store them. The sales team was committing to fast delivery for products that were not really in stock.
Second, the costing module was far from reliable. The staff at the accounting department was having
problems reconciling product cost. A product costing a certain amount to procure would double in cost the
next day on the system due to internal errors in the heavily customized code. Simple aspects such as
connectivity were also a problem. Employees from offices in other regions, who relied on VPN for
connection to the ERP platform, were having difficulties connecting to the server.

Peter found himself in a situation that was similar, if not worse, than the one he had faced 18 months
earlier. The new system that was supposed to replace NetSuite and eliminate all the operational issues was
obviously not performing as expected. Rather than giving the company a fresh start, xTuple basically created
another set of challenges to the company’s operation.

Clearly xTuple was not the system that the company wanted. But after going through two ERP
implementations in 30 months, Peter hesitated to recommend yet another system. If he was going to make
such a recommendation, he needed to be 100% sure that what he recommended and implemented would
really work. An operational ERP system would also allow him to devote his full attention to his bigger task:
to introduce an e-commerce strategy to the company.

Peter wondered what action he should take to rectify this awkward situation. Should he invest
additional capital and resources to enhance xTuple and customize the system so it was tailor-made for the
company? Or should he consider other programs and abandon xTuple as a system altogether?

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UST059 Bloom & Grow Asia (I): ERP Strategy and Planning

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 HKUST Business School Thompson Center for Business Case Studies

Exhibit 1: Example of Bloom & Grow’s Products

Source: Bloom & Grow Asia, http://www.bloomandgrowasia.com, accessed October 2015.

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UST059 Bloom & Grow Asia (I): ERP Strategy and Planning

This document is authorized for use only in Prof. Pieter Nagel's MAIB Sept 23- Term 2 Syd Operations Mgmt at S P Jain School of Global Management - Dubai from Jan 2024 to Jul 2024.