CISCO ERP CASE STUDY

Company Background Cisco designs, manufactures, and sells Internet protocol (IP)-based networking and other products related to the communications and information information technology (IT). •

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Founded by two Stanford University computer scientists in 1984. The name "Cisco" was derived from the city name San Francisco. In 1995, appointed John Chambers as CEO. (still to date) By 1997, its first year on the Fortune 500 (till to date) Cisco ranked among the top five companies in ROR and ROA. On July 17, 1998, Cisco’s Cisco’s market capitalization passed the S100 billion mark. Total Employees 74,044 in 92 countries and over 372 locations. Total Revenue USD 47.14 Billion (Top 46 th in the World)

ERP System Implementation - 1994 Peter Solvik appointed as CIO if Cisco in 1993. Cisco then using a UNIX- based software package for its core transaction processes. Finance, manufacturing and order entry were supported by this software package. Solvik let the each functional are to make its own decision regarding the application and timing its move, as he avoided the implementation of the ERP solution. By 1994, Cisco already facing many IT problem with the legacy software, which lead to implantation of ERP: 1. 2. 3. 4.

Company's annual growth rate was 80%. Transaction rate had increased drastically. The legacy systems did not have the capacity to handle the load. Any attempt to improve the applications would crash the system. IT department would spend its time repairing the legacy systems. and

One day, the legacy system corrupted and shut down for 2 days. This made the company realize that the system is brink of total failure.

QUESTION 1: How was the decision made to implement ERP?

Why ERP System needed?

  Shortcoming of the existing system

  Inability for the system to perform , corrupting the central database

  System replacement approach that they adopt is not sufficient to solve the problem

  Virtual shut down for 2 days, brink of system failure

Selecting an ERP System

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Consistent with the need for a strong Cisco team, the company would also need strong partner

“KPMG as the integration partner” •

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Mark Lee, the program manager from KPMG to help in selecting an appropriate ERP product The team’s strategy was to build as much knowledge as possible by leveraging the experiences of others

Decision Made To Implement ERP

“Oracle’s ERP product was the winner of all choices” • • •

ORACLE was chosen as the ERP vendor. The whole process took 75 days (Initiation to Final Selection) Oracle have been chosen based on their 1. Manufacturing capability 2. Long Term development 3. Location wise (being close by) Then, critical questions would be “How long the project would take? and How much would it cost?” • • •

The project was approved by the Board Project duration 9 months The project appears to be the largest capital project ever approved by Cisco for USD 15 million.

QUESTION 2: Evaluate the analysis made to recommend ERP to the Board, and the quality of the  justification.

Going to the Board

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In their CIO point of view, Cisco had little choice but to move on.

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The best alternative selected was to replace the systems, big-bang Implementation, with one ERP solution.

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Two very important critical questions was answered with critical analysis approach The duration of the project and the cost associated with the project “ We committed to do it in 9 months for $15 million for the whole thing” - Solvik , CIO “You know, careers are lost over much less money than this” - Morgridge, CEO •

The board ended up approving the project.

QUESTION 3: What were the key factors that enabled the team to implement ERP in 9 months at Cisco?

The Key Factors

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ERP project was made as company’s top priority

The IT platform architecture was standardized throughout CISCO   Gave the company high level of flexibility   Virtually all business functions used single applications packages worldwide

QUESTION 4 : How did Cisco build their I-Net to electronically connect with the customer? Identify the benefits that were enabled by this initiative.

Electronic Connection with Customers Cisco.com : A comprehensive web based online resource for information and network application BENEFITS: 1. Answer question diagnosed network problems and provide solutions and expert assistance world wide. 2. Primary vehicle for delivering responsive around the clock customer support and improve customer satisfaction. 3. Customers express higher satisfaction and enjoy a lower cost of doing a business. 4. Orders could be placed via internet from anywhere in the world 5. Customer could use the application to check their order status.

QUESTION 5: Identify the main benefits of the strategic INet at Cisco, and estimate the range and type of benefits you think that they achieved.

Strategic I-Net at Cisco Benefit: 1. Employee Self-service provide centralized access to information tools and resources needed to stream line processes facilitate knowledge exchange maximize employee productivity •

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Communication & Distance Learning access training modules form their desktop tracked information about effectiveness and could be assessed to ensure high levels of effectiveness as the needs of the company changes making the company seem closer to each employee My Yahoo Executive Information System (EIS) & Decision Support System (DSS) Used by all sales managers & executives (in their day-to-day process) Sales tracking and reporting

Cisco’s Supply Chain Management

Single Enterprise New Product Introduction (NPI) Autotest Direct Fulfillment Dynamic Replenishment

Financial Results

FY 1995 Net Sales

FY 1996

FY 1997

FY 1998

2,232,652,000.00

4,096,007,000.00

6,440,171,000.00

8,458,777,000.00

Net Income

456,489,000.00

913,324,000.00

1,048,679,000.00

1,350,072,000.00

Total Assets

1,991,949,000.00

3,630,232,000.00

5,451,984,000.00

8,916,705,000.00

No of Employee

4,086

8,782

11,000

15,000

Sales Growth

105%

83%

57%

31%

Net Income Growth

24%

100%

15%

29%

Asset Growth

93%

82%

50%

64%

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Since implementation of ERP Cisco recording an USD 2 billion increase in yearly sales. Without the new ERP system Cisco unable to cope with such sales volume Their Total Asset increased by USD 6 million with-in 4 years of ERP implementation The company also increase their total employees by 300%

Conclusion

Why Cisco ERP implementation was successful? Implementing an ERP system was the top priority in 1994 Best People was put into this project Strong partners KMPG and ORACLE Very Timely and Less Costly • • • •

After implementation of ERP, Cisco saved around USD 500 million on overheads per year. Cisco also managed a write-off of USD 2.5 billion on parts and inventory in its warehouses

The web enabled ERP also benefits Cisco in term of : Available for 24*7 / 365 days Improved Customer Service Research New Markets Automation of Productivity and Profitability Customer Feedback Improved Advertising • • • • • •

Thank you……………..