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MGB 207 – Team 3  Cisco ERP implementation case Joann Suen Seema Sangari James Sun Sekhar Varanasi
<ul><li>Founded in 1984, IPO in 1990 </li></ul><ul><li>Primary product at that time-router </li></ul><ul><li>High growth c...
<ul><li>Infrastructure </li></ul><ul><li>Running a UNIX-based software package to support core transaction processing  </l...
<ul><li>IT Problems </li></ul><ul><li>“ It had become too much spaghetti, too customized”-Pete Solvik </li></ul><ul><li>Th...
Vendor/partner evaluation <ul><li>Not all vendors can serve a billion-dollar company </li></ul><ul><li>ERP is a commodity ...
Cisco’s evaluation <ul><li>Implementation partner should have – Technical skills, business knowledge, prior ERP implementa...
ERP implementation Cost <ul><li>Software (Licensing) </li></ul><ul><li>Hardware </li></ul><ul><li>System integration </li>...
Cisco cost estimates <ul><li>Cisco’s justification </li></ul><ul><ul><li>No cost-benefit analysis </li></ul></ul><ul><ul><...
Implementation Timelines <ul><li>Cisco’s financial year :  Aug 1 – July 31 </li></ul><ul><li>Constraint was it cannot impl...
ERP customization <ul><li>Lets go “Vanilla” with some parameter changes to system ->  Well, I need some customization -> 2...
Other issues and decisions <ul><li>Immediate upgrade? </li></ul><ul><li>It wasn’t an IT-only initiative </li></ul>
<ul><li>Structure of Project Team:  Sought the best people;  </li></ul><ul><li>5 Track teams -> PMO-> Executive Steering C...
<ul><li>Prototyping:  Rapid, iterative implementation was broken down into a series of phases called CRP’s. </li></ul><ul>...
Crunch time <ul><li>Testing and “Go Live” </li></ul><ul><ul><li>Official Testing begins at the end of CRP2 </li></ul></ul>...
Wrap up <ul><li>Total system replacement: $15 million, 9 months </li></ul><ul><li>Initial Problems with Cisco ERP System: ...
Wrap up continued….. <ul><li>Why Successful? </li></ul><ul><ul><li>Implementing an ERP system was top priority  </li></ul>...
Q & A
Wrap up
Backup slides
<ul><li>Major Players </li></ul><ul><li>Pete Solvik, CIO of Cisco </li></ul><ul><li>KPMG –Implementation Partner </li></ul...
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Cisco erp v12

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Cisco erp v12

  1. 1. MGB 207 – Team 3 Cisco ERP implementation case Joann Suen Seema Sangari James Sun Sekhar Varanasi
  2. 2. <ul><li>Founded in 1984, IPO in 1990 </li></ul><ul><li>Primary product at that time-router </li></ul><ul><li>High growth company-return on revenues and on assets </li></ul><ul><li>First acquisition –Crescendo communication in Sept 1993 </li></ul><ul><li>By 1997, its first year on the Fortune 500 </li></ul><ul><li>On July 17,1998, market cap passed the 100 billion mark </li></ul>Company Background
  3. 3. <ul><li>Infrastructure </li></ul><ul><li>Running a UNIX-based software package to support core transaction processing </li></ul><ul><li>Function areas supported by the separate packages -financial, manufacturing, order entry systems </li></ul><ul><li>Governance </li></ul><ul><li>Only core IT infrastructure spending was centralized and budgeted out of general overhead accounts </li></ul><ul><li>Most IT expenditures delegated to individual business unit-Client Funded Model </li></ul>Background - Cisco IT
  4. 4. <ul><li>IT Problems </li></ul><ul><li>“ It had become too much spaghetti, too customized”-Pete Solvik </li></ul><ul><li>The original upgrade/patch approach made little progress, system outage became routine, hard to recover from outage </li></ul><ul><li>It would take too long to get applications in place by making decision and implementation separately within group </li></ul><ul><li>It would take a lot longer to implement a too customized system to end up as a mega-project </li></ul><ul><li>Systems were on the brink of total failure </li></ul>Background - Cisco IT
  5. 5. Vendor/partner evaluation <ul><li>Not all vendors can serve a billion-dollar company </li></ul><ul><li>ERP is a commodity </li></ul><ul><li>ERP usually has 10 to 12 year life span </li></ul><ul><li>Horizontal, functional and external integration aspects </li></ul><ul><li>Think about product scalability (rich features, security, etc.) </li></ul><ul><li>Service scalability (partner, 3 rd party vendor support, etc) </li></ul><ul><li>How quickly can the vendor support the market changes (e.g. SOX, M&A, etc.) </li></ul><ul><li>Contract friendliness – “Am I getting a good deal?” </li></ul><ul><li>What is the TCO (Licensing, implementation cost, support, infrastructure needs, etc.) </li></ul><ul><li>What is the criteria in ERP vendor evaluation ……. </li></ul>How did Cisco do……?
  6. 6. Cisco’s evaluation <ul><li>Implementation partner should have – Technical skills, business knowledge, prior ERP implementation experience and “eagerness” to work with Cisco – Mantra “Strong Cisco team” needs strong partner </li></ul><ul><li>Major decision points for vendor selection – “Vendor size”, “Strong manufacturing capabilities”, “Long-term R&D investment” and “How close is the vendor” </li></ul><ul><li>Vendor evaluation process – </li></ul><ul><ul><li>Reference calls (to Big “six”, research groups to identify top ERP vendors ) </li></ul></ul><ul><ul><li>Hone down from 5 packages to “two” in 2 days after evaluating features </li></ul></ul><ul><ul><li>Sent for request for proposal (RFP), attend vendor demos </li></ul></ul><ul><ul><li>“ Oracle you won , [other vendor] you lost” </li></ul></ul>
  7. 7. ERP implementation Cost <ul><li>Software (Licensing) </li></ul><ul><li>Hardware </li></ul><ul><li>System integration </li></ul><ul><li>Consulting resources (this is largest portion of the entire costs) </li></ul><ul><li>Internal resources (pulled out to work on ERP implementation) </li></ul><ul><li>Training costs (Gartner recommends 17% of the total cost) </li></ul><ul><li>It is not uncommon to use industry benchmarks </li></ul>Company sales (US$ Billions) *source AMR research Expenditures (US$ Millions)
  8. 8. Cisco cost estimates <ul><li>Cisco’s justification </li></ul><ul><ul><li>No cost-benefit analysis </li></ul></ul><ul><ul><li>“ We are going to do business this way” – management commitment to change </li></ul></ul><ul><ul><li>Customers and Competitors </li></ul></ul><ul><ul><li>Cost avoidance will be costly consequence </li></ul></ul><ul><li>Estimated at $15M based on then revenues </li></ul>Boy! How do I tell ya…Cost of ERP is like weather
  9. 9. Implementation Timelines <ul><li>Cisco’s financial year : Aug 1 – July 31 </li></ul><ul><li>Constraint was it cannot implement in Q4 </li></ul><ul><li>Another option was to implement in July/August 1995 but was rejected because it is too late </li></ul><ul><li>So they worked backwards </li></ul><ul><ul><li>Q3 should go live </li></ul></ul><ul><ul><li>System should be completely stable by Q4 </li></ul></ul><ul><ul><li>So the target date was set to February 1995 </li></ul></ul><ul><li>Project time line : 9 Months, target date : Feb’ 1995 </li></ul>% of respondents from 479 US manufacturing companies surveyed by AMR research 1994
  10. 10. ERP customization <ul><li>Lets go “Vanilla” with some parameter changes to system -> Well, I need some customization -> 2 months later -> I need sizable customization…..so what is the big deal? </li></ul><ul><li>ERP customization vs BPR </li></ul><ul><li>Strategic decision to reduce customization as much possible in order to simplify future migration and upgrade projects </li></ul><ul><li>Customizations cost time and money initially and for life of the software </li></ul><ul><li>They are deviations from the best business practices already developed by the vendor </li></ul>By the way Cisco kept it to minimum
  11. 11. Other issues and decisions <ul><li>Immediate upgrade? </li></ul><ul><li>It wasn’t an IT-only initiative </li></ul>
  12. 12. <ul><li>Structure of Project Team: Sought the best people; </li></ul><ul><li>5 Track teams -> PMO-> Executive Steering Committee </li></ul><ul><li>Implementation partner – KPMG </li></ul><ul><li>KPMG had both the technical skills and business knowledge; helped in selection and implementation of ERP solution </li></ul><ul><li>Incentives: Reward for the ERP Team - Over $200,000 cash bonus. Success had a huge upside while failure meant threat of job losses. </li></ul>Management Choices
  13. 13. <ul><li>Prototyping: Rapid, iterative implementation was broken down into a series of phases called CRP’s. </li></ul><ul><ul><li>CRP 0: Training and Configuration of Oracle package. Approach - 2-days offsite and 80-20 </li></ul></ul><ul><ul><li>CRP 1: Detail documentation and analysis of each functional area. Needed another package to support after-sales. </li></ul></ul><ul><ul><li>CRP 2 & 3: Centralized data warehouse developed. </li></ul></ul><ul><ul><li> Final Testing with full load of users. </li></ul></ul>Implementation Methodology
  14. 14. Crunch time <ul><li>Testing and “Go Live” </li></ul><ul><ul><li>Official Testing begins at the end of CRP2 </li></ul></ul><ul><ul><li>Full system testing and assessment of company’s readiness to “Go Live” during CRP3 </li></ul></ul><ul><ul><li>“ Go Live” Readiness was determined by each track team, specifically each functional lead </li></ul></ul><ul><ul><li>“ Go Live” Date: January 30th 1995 </li></ul></ul><ul><li>Testing Method </li></ul><ul><ul><li>Testing did not occur at CRP0 </li></ul></ul><ul><ul><li>Testing was not broken down into phase, e.g. Alpha, Beta, etc. </li></ul></ul><ul><li>“ Go Live” Method </li></ul><ul><ul><li>Big Bang roll out </li></ul></ul><ul><ul><li>“ Go live” determined by each functional lead, rather than one large entity </li></ul></ul>
  15. 15. Wrap up <ul><li>Total system replacement: $15 million, 9 months </li></ul><ul><li>Initial Problems with Cisco ERP System: </li></ul><ul><ul><li>Decrease in Business Performance due to an unstable system </li></ul></ul><ul><ul><li>Database lacked capacity to process the required transaction load/volume within the Cisco environment </li></ul></ul><ul><li>Resolution </li></ul><ul><ul><li>Swat Team-like Mode (3 months): </li></ul></ul><ul><ul><li>ERP project status and complete implementation became top priority for the company </li></ul></ul><ul><ul><li>Commitment from Oracle, hardware vendor, and KPMG eventually stabilized the software and improved performance </li></ul></ul><ul><li>Long Term Effects: </li></ul><ul><ul><li>Added capacity to the system </li></ul></ul><ul><ul><li>ERP system would fulfill the promise of supporting the rapid growth that the company expected and desired </li></ul></ul>
  16. 16. Wrap up continued….. <ul><li>Why Successful? </li></ul><ul><ul><li>Implementing an ERP system was top priority </li></ul></ul><ul><ul><li>Buy-in from executives </li></ul></ul><ul><ul><li>High visibility project </li></ul></ul><ul><ul><li>Best people were on the project </li></ul></ul><ul><ul><li>Strong vendor relations and vendor’s determination for success </li></ul></ul><ul><ul><li>Very timely </li></ul></ul><ul><li>Cisco then and now </li></ul>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
  17. 17. Q & A
  18. 18. Wrap up
  19. 19. Backup slides
  20. 20. <ul><li>Major Players </li></ul><ul><li>Pete Solvik, CIO of Cisco </li></ul><ul><li>KPMG –Implementation Partner </li></ul><ul><li>Oracle-ERP vendor </li></ul><ul><li>Hardware vendor </li></ul>Implementation Management

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