Cisco Systems, Inc: Implementing ERP

Cisco Systems, Inc.: Implementing ERP

• Describe the issues surrounding CISCO's information systems failures back in 1994 and the organizational problems that they faced.

• Analyze the approach that CISCO took to addressing their IT problems and implementing an ERP.

• Identify and discuss the critical success factors that enabled CISCO to implement their ERP on time and within budget.

• How does CISCO's ERP contribute to its Web-based activities and business strategy?

• Discuss CISCO's Web-based applications (both internal and external) and how they contribute to maintaining strategic advantage.

• Explore the CISCO/KPMG/Oracle relationship.• Discuss any relevant things that CISCO has done since 1999

and where they might be headed in the future.

Cisco in the early ’90s

• Through a series of acquisitions, Cisco entered new markets, broadened its product offering and identified new channels of distributions– high-performance work group solutions– software based routers for remote network sites– ethernet switches

• 4K employees worldwide• 69 offices in the United States• Continued to expand into new geographic markets• Net sales grew exponentially • Experienced rapid growth, technological change and a

convergence of technologies

Cisco in the early ’90s

• Competitive factors were performance, price, value-added features, reliability, conformance to industry standards, service and market presence.

• Marketplace that creates competition and requires cooperation to achieve interoperability

Cisco in the early ’90s

Cisco Net Sales

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$1,978,916

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$1,242,975

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1993 IT Issues

• UNIX-based support for core processing

• Largest customer of its software vendor

• No longer meeting business needs

• Needed higher degree of redundancy + reliability to support future growth

• Searched for a non-ERP solution for a year

• Autonomous solutions for individual departments?

Legacy systems central to business operations

Cisco’s Infrastructure in 1994

• Legacy systems – Disparate inflexible financial, manufacturing and

sales systems could not support business needs nor anticipated future growth

– These systems caused routine system outages– Each Department was working independently

creating silos of information which led to redundancy and inefficiency…prevented top mgmt from seeing “big picture”

– Cisco was the largest customer of their current software and it was being bought out by another company

ERP’s Fit into Cisco

• State of Company– Still in growth phase– Young company still nimble enough for

change– Cash rich; poised for change– Young/eager employees– Already centralized– Fearful of another disaster

Choosing ERP Product

• Employees Involved– All aspects of Cisco’s business to be

represented• KPMG selected integration partner

– Experienced• Technical Skills• Business Knowledge

Selection of OracleCisco:• Strong manufacturing capability• Long term development of functionality• Close proximity of facilities to Cisco’s

headquarters

Oracle:• Needed to prove ERP proficiency• Eager to work with company of Cisco’s size• Had same goals as Cisco for ERP

The Dream Team

• Extended core team from 20 to about 100• Best and brightest from across all Cisco’s business

community• 5 team tracks

– Order entry– Manufacturing– Finance– Sales/Reporting– Technology

• Team management structure

Conference Room Pilots

• CRP0– Train and set up applications– Configure Oracle package– Intense Training Immersion

• 2 Day/16 Hour sessions!• CRP1

– Build off CRP0– Develop for each functional track

• Scripts, Prototype tracking• Monitor Issues

• CRP2– Modify and test– Data Warehouse

• CRP3– Full system readiness testing

Implementation Analysis

• Attempts to complete processes without modifications indicated exactly what kind of customization would be necessary.

• This strategy served two purposes:

1. Find what modifications are necessary.

2. Make system work within each area.• Modification strategy was developed to keep the

project moving.

Implementation Analysis

• Testing was conducted before complete cutover; although results satisfied everyone, it was clear that tests were not complete.

• Failure to have proper tests led to a below expectations performance of system at the beginning.

• Forward thinking of Cisco allowed problems to be corrected without additional expenditure for this project.

Challenges

• Substantial modifications had to be made to Oracle’s software which drive up the cost– Many business processes that the software could not

support

• Cisco needed an after sales support package which would be implemented at the same time as the ERP system

• Cisco needed a data warehouse to allow all of their applications to access a single source for their information needs– Drove the need for additional resources, mainly from their IT

department

Cisco’s “SMART” Moves:

• Efficient Decision-Making• Focus on Core Business• Strong Cross-Functional Teams• Reputable, Committed Partners (KPMG, Oracle)• Aggressive Implementation Schedule• 100% Support of Top Management• Limited Customization of ERP Software

Potential Risks:

• Double “Big-Bang” approach (ERP & After Sales Support System)

• Overly aggressive implementation timeline• No cost-benefit analysis performed to determine

ROI• First major release of Oracle’s new ERP product• Insufficient testing on large volume of data

How ERP Has Contributed to Cisco’s Success

• Laid the foundation for Cisco’s IT infrastructure • Benefited from a stable transaction platform• Many supply chain initiatives including direct

fulfillment and dynamic replenishment were made possible with ERP

• Firmly established CISCO as global IT leader

Cisco Today

• Worldwide leader in networking for the Internet. Cisco's Internet Protocol-based (IP) networking solutions are the foundation of the Internet and most corporate, education, and government networks around the world.

Cisco Today

• 1999 – went public (CSCO Nasdaq)• More than 34K employees worldwide,

compared to 4K employees in 1994• All of the companies operations are

internet-based• Competitors

– NorTel, Lucent, Juniper, Foundry

• Equipment becoming “interoperable”

Cisco’s Achievements

• Rankings:– No. 2 in Fortune Magazine's annual "America's Most

Admired Companies" for its industry segment – No. 23 on The Financial Times' "World's Most

Respected Companies“– No. 24 in Fortune Magazine's annual "Best Company

to Work for“– No. 95 on the Fortune 500

Future of ERP

• Introduction of B-to-B– Replacement– Driver for new opportunities

• “Oracle is also reporting a surge in customers for its E-Business Suite 11i…every month, 100 new companies are implementing the suite.” – Don Klaiss, Oracle SVP*

• ERP II

• Recognizing immediate ROI