cisco erp v12 - case study analysis

7/22/2019 Cisco ERP v12 - case study analysis

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MGB 207 – Team 3

Cisco ERP implementation case

Joann SuenSeema Sangari

James SunSekhar Varanasi



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Founded in 1984, IPO in 1990Primary product at that time-router High growth company-return on revenues andon assetsFirst acquisition – Crescendo communication inSept 1993By 1997, its first year on the Fortune 500On July 17,1998, market cap passed the 100billion mark

Company Background



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Infrastructure

1. Running a UNIX-based software package to supportcore transaction processing

2. Function areas supported by the separate packages -financial, manufacturing, order entry systems

Governance

1. Only core IT infrastructure spending was centralizedand budgeted out of general overhead accounts

2. Most IT expenditures delegated to individualbusiness unit-Client Funded Model

Background - Cisco IT



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IT Problems

“It had become too much spaghetti, too customized” -PeteSolvik

The original upgrade/patch approach made little progress,system outage became routine, hard to recover from outage

It would take too long to get applications in place by makingdecision and implementation separately within group

It would take a lot longer to implement a too customizedsystem to end up as a mega-project

Systems were on the brink of total failure

Background - Cisco IT



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Vendor/partner evaluation

Not all vendors can serve a billion-dollar companyERP is a commodityERP usually has 10 to 12 year life spanHorizontal, functional and external integration aspects

Think about product scalability (rich features, security,etc.)Service scalability (partner, 3 rd party vendor support, etc)How quickly can the vendor support the market changes

(e.g. SOX, M&A, etc.)Contract friendliness – “Am I getting a good deal?” What is the TCO (Licensing, implementation cost,

support, infrastructure needs, etc.)

What is the criteria in ERP vendor evaluation …….

How did Cisco do……?



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Cisco’s evaluation

Implementation partner should have – Technical skills, business

knowledge, prior ERP implementation experience and “eagerness”to work with Cisco – Mant ra “Strong Cisco team” needs strongpartner

Major decision points for vendor selection – “Vendor size”,“Strong manufacturing capabilities”, “Long -term R&D investment”

and “How close is the vendor”

Vendor evaluation process –

Reference calls (to Big “six”, research groups to identify topERP vendors )

Hone down from 5 packages to “two” in 2 days after evaluating features

Sent for request for proposal (RFP), attend vendor demos

“Oracle you won , [other vendor] you lost”



ERP implementation Cost

Software (Licensing)

HardwareSystem integration

Consulting resources (this is largest portion of the entire costs)

Internal resources (pulled out to work on ERP implementation)

Training costs (Gartner recommends 17% of the total cost) It is not uncommon to use industry benchmarks

Company sales (US$ Billions) *source AMR research

E x p e n

d i t u r e s

( U S $ M i l l i o n s

)



Cisco cost estimates

Cisco’s justification

No cost-benefit analysis “We are going to do business this way” – management

commitment to change

Customers and Competitors

Cost avoidance will be costly consequenceEstimated at $15M based on then revenues

Boy! How do I tell ya…Cost of ERP is like weather



Implementation Timelines Cisco’s financial year : Aug 1 – July 31

Constraint was it cannot implement in Q4Another option was to implement in July/August 1995 but wasrejected because it is too late

So they worked backwardsQ3 should go liveSystem should be completely stable by Q4So the target date was set to February 1995

Project time line : 9 Months, target date : Feb’ 1995

% of respondents from 479 US manufacturing companies surveyed by AMR research 1994



ERP customization

Lets go “Vanilla” with some parameter changes to

system -> Well, I need some customization -> 2 monthslater - > I need sizable customization…..so what is thebig deal?

ERP customization vs BPR

Strategic decision to reduce customization as muchpossible in order to simplify future migration and upgradeprojects

Customizations cost time and money initially and for life

of the softwareThey are deviations from the best business practices

already developed by the vendor

By the way Cisco kept it to minimum



Other issues anddecisions

Immediate upgrade?

It wasn’t an IT -only initiative



Structure of Project Team: Sought the best people;5 Track teams -> PMO-> Executive Steering Committee

Implementation partner – KPMG KPMG had both the technical skills and business knowledge;

helped in selection and implementation of ERP solutionIncentives: Reward for the ERP Team - Over $200,000 cashbonus. Success had a huge upside while failure meant threat of

job losses.

Management Choices



Prototyping: Rapid, iterative implementation wasbroken down into a series of phases called CRP’s.

CRP 0: Training and Configuration of Oracle

package. Approach - 2-days offsite and 80-20

CRP 1: Detail documentation and analysis of eachfunctional area. Needed another package to support

after-sales.

CRP 2 & 3: Centralized data warehouse developed.Final Testing with full load of users.

ImplementationMethodology



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Crunch time

Testing and “Go Live” Official Testing begins at the end of CRP2

Full system testing and assessment of company’s readinessto “Go Live” during CRP3 “Go Live” Readiness was determined by each track team,

specifically each functional lead “Go Live” Date: January 30th 1995

Testing MethodTesting did not occur at CRP0Testing was not broken down into phase, e.g. Alpha, Beta,

etc.

“Go Live” Method Big Bang roll out

“Go live” determined by each functional lead, rather than onelarge entity



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Wrap upTotal system replacement: $15 million, 9 monthsInitial Problems with Cisco ERP System:

Decrease in Business Performance due to an unstablesystem

Database lacked capacity to process the required transactionload/volume within the Cisco environment

ResolutionSwat Team-like Mode (3 months):ERP project status and complete implementation became top

priority for the companyCommitment from Oracle, hardware vendor, and KPMG

eventually stabilized the software and improved performance

Long Term Effects:Added capacity to the systemERP system would fulfill the promise of supporting the rapid

growth that the company expected and desired



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Wrap up continued…..

Cisco in 1998 Cisco in 2007

Employees: 14,500+ 61,500+

Market Cap.: $100 Billion+ $194.56 Billion

Sales $8.45 Billion+ $34.9 Billion

Why Successful?

Implementing an ERP system was top priorityBuy-in from executivesHigh visibility projectBest people were on the project

Strong vendor relations and vendor’sdetermination for success

Very timely

Cisco then and now



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Q & A



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Wrap up



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Backup slides



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Major Players

1. Pete Solvik, CIO of Cisco

2. KPMG – Implementation Partner

3. Oracle-ERP vendor

4. Hardware vendor

ImplementationManagement

cisco erp v12 - case study analysis

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