Cisco case report


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Cisco case report

  2. 2. The decision to implement ERP:The reason which acted as a catalyst, forced Cisco to no longer ignore the loop holes in itsexisting system and implement ERP was the fall out of its existing system. The decision toimplement ERP is justified as it has increased the operational efficiencies to the optimumlevel by standardizing the whole process, making the system robust and thus increasing thescalability of the system making it almost future proof. The other reasons that cement thestance taken by Cisco to implement ERP are as follows Traditional IT department did not operate optimally. Inflexible current systems couldn’t support Cisco’s growth. Corrupted Cisco’s central Database (Two-day company shutdown) Exposed need for alternative approach (autonomous approach to systems replacement deemed insufficient) Autonomous approach to systems replacement was slow and insufficient.To overcome all the above reasons were a hurdle for Cisco’s goals which were to becomelead architect and provider for new Internet-based infrastructure and change the waycompanies and Industries operate.Therefore, Cisco’s decision to implement ERP was justified.Key factors that enabled Cisco implement the system in nine months:Team strategy Build as much knowledge as possible (leverage experience of others) Ask for help from large corporations and big 6 accounting firms. Tap research sources (i.e. Gartner)Cisco narrowed field to 5 packages in 2 days Evaluated packages at a high-level. Chose between Oracle and another major player. Decision based on size (did not want a company smaller than Cisco)Worked with business community (not an IT-only initiative) KPMG = integration partner  KPMG saw project as opportunity to build a business around implementing these applications.  Brought very experienced people into the project. Internally, Cisco pulled best people out of their jobs into the project.RFPs (request for proposals) Spent 10 days on RFP, vendors had 2 weeks to respond. Cisco team researched on client past performance (reference clients) Vendors invited to 3-day software demonstration. Candidates had to show how they could meet Cisco’s requirements.Oracle won the project Decision based on 3 major points.  Project was manufacturing driven & Oracle had a better manufacturing capability.  Oracle promised long-term development of functionality.  Flexibility offered by oracle’s being close by. Cisco believed that Oracle was motivated to make the project a success.  Cisco project is 1st major implementation of a new release of the Oracle ERP product.  Oracle touting new version as having major improvements.  Success would be favorable for both parties.
  3. 3. Benefits of the Web Enabled architecture at CISCO:Employee Self-Service – Internal Applications.  Majority of internal applications web-enabled.  Corporate Intranet (Cisco Employee Connection, CEC) - Provided centralized access to information. - Provided tools and resources needed to streamline processes. - Facilitated knowledge exchange. - Maximized employee productivity.  Leveraged web to revolutionize existing processes and create new end-to- end capabilities.  By 2001, virtually every application in the company used a web browser as the only user interface.Communication and Distance Learning  Network enhanced ability to communicate with employees and added important dimension to training.  Distance learning was made available to Cisco employees.  Tracking capability effective as a measure of as organization’s changing needs.Customer Self-Service – Electronic Connection with Customers Customer as the focal point.  1. Answers customer questions. 2. Diagnoses network problems and Provides solutions. 3. Provides expert assistance worldwide. 80% of technical support for customers and resellers delivered electronically. Improved customer satisfaction.Net Commerce – Shipping product over the Internet Cisco = Pioneer at using internet for full electronic commerce. Allow customers to place orders from anywhere in the world. Order status can also be obtained online. Productivity gains for all online commerce players.Cisco’s Supply Chain Management Initiative (1992) outsourced much of its manufacturing to contract manufacturers while performing final assembly and test. Recently, focused on core competencies in design and fulfillment processes rather than physical transformation of product. Formed partnerships with suppliers that performed physical transformation as their core competency.Automated supply chain involved 5 initiatives. Single Enterprise. New Product Introduction. Auto test. Direct Fulfillment. Dynamic Replenishment.EIS (executive information systems) and DSS (decision support systems) Employees use web browser as front end access to all executive and decision support information in the company Web-based EIS system used by all sales managers and executives
  4. 4. Drawbacks of the Web Enabled architecture at CISCO: Security breach was a threat as this interconnected model was vulnerable to internet hackers. Cost involved in web enabling was $100 million which was huge compared to the cost involved in ERP implementation which was only $15 million. As a CIO I would have definitely gone the same way but also ensured that the security issues are given priority and tackled properly.Cisco’s expenditure incurred in implementing the web enabled architecture: Cisco wanted all their processes to be standardized and robust so that the scalability is improved. They decided to implement ERP for this and chose to enable it using web instead of EDI. The cost they incurred was $100 million dollars and another $15 million dollars for implementing ERP. This expenditure, though at a large scale, is justified as the cost saving amounted to $506 million which is more than 5 times the expense incurred. Also, the following advantages were the result of this decision: It gave Cisco a direct competitive advantage over others as implementation of internet business solutions put them ahead of time and made them technologically very advanced. Employees could be trained in a cost effective manner through the use of self service applications. Dynamic Replenishment reduced delays and errors, and saved them $275 million through increased profitability.The approach was correct in the sense that the implementation of this required hugeinvestment and called for risk taking ability but the company went ahead with this keepingthe long term benefit in mind.Breakdown of Implementation Costs for Cisco ERP Implementation Hardware 32% Headcount 14% System Integration 38% Software 6%