One Sunday not long ago, Michael Cloutier stopped by a Peet's Coffee & Tea in San Mateo, Calif., and tried to redeem a coupon for a free drink that he had printed out from his computer. He handed the coupon, which Peet's calls an eCup, to a clerk who looked abashed.
"I'm sorry," the clerk said. "The scanner isn't working."
Cloutier glanced at the scanner and noticed that it wasn't plugged into the cash register. He mentioned that he worked at Peet's, reached down, plugged in the scanner and paid for his coffee with his coupon.
"What do you do at Peet's?" the clerk asked.
"I'm vice president of IT," Cloutier replied.
Java junkies know Peet's for its famously strong cup of joe, but these days selling coffee requires as good a nose for IT as it does for roasting fine Arabica beans. Although it's been in business for 40 years, until recently Peet's coffehouses were exclusively in the San Francisco Bay area. Today, Peet's is a publicly traded company with five sales channels and plans for national expansion. The company projects that revenue will increase 20% to 25% a year over the next several years. Last year, sales hit $175 million, up almost 23% from the year before, and Peet's opened 20 stores, giving it a total of 113 stores. This year could see up to 30 new locations, all owned and operated from company headquarters in Emeryville, Calif.
For Cloutier, this national expansion means managing over-caffeinated growth: working with the IT systems and budget of a lower-midmarket company but planning for the near future when sales are expected to hit the $500-million mark. Like other CIOs in booming businesses, Cloutier is trying to strike a balance between bolting on solutions to the company's homegrown systems and strategically replacing legacy products without disrupting the success that's fueling sales.
"Supporting growth and being ready to be a half-a-billion-dollar company is one of the biggest projects," he says. "All our systems are homegrown. We're a unique multichannel company. The challenge is picking the right pieces to replace at the right time."
Peet's realizes that IT will not be a competitive advantage for the company, but technology does need to be a scalable enabler for growth. Which means, adds CFO Tom Cawley, that the company will decide whether to invest in an enterprise resource planning (ERP) system during the next year or so.
"We're at an inflection point," Cawley says. "We're investing in IT to turn it into an enabler. We've transitioned from being a small company where we were bolting on. It's time for the scalable systems for us to be the kind of company we dream of being. You start to look at the foundation and challenge everything you're doing. You want to understand what your business model is before you line up your IT systems. Now we know what we want for the next 10 years."
It's a huge decision, notes Paul Hamerman, an ERP analyst at Forrester Research in Cambridge, Mass. "They're looking at having to buy into a very sophisticated system," he says. "They're at the threshold point from lower midmarket to upper midmarket, potentially enterprise-class systems. The rule of thumb is spending 2% to 4% of revenue, and that's a pretty big deal, a major capital investment."
In other words, IT is on the precipice. Which way will it go?
This was first published in April 2006