1Utilities © 1999, Cisco Systems, Inc. Internet Business Solutions Group Competitive Advantage Through Internet Business Solutions

1Utilities © 1999, Cisco Systems, Inc.

Internet Business Solutions GroupInternet Business Solutions Group

Competitive Advantage Through Internet Business Solutions

Competitive Advantage Through Internet Business Solutions

2© 1999, Cisco Systems, Inc. Cisco Confidential

Cisco's Leverage of Internet Business SolutionsCisco's Leverage of Internet Business Solutions

Lessons LearnedLessons Learned

Agenda


For all of 1999, productivity rose to 2.9%, the fastest growth since the economy

was recovering from recession in 1992. Economist say the growth —unusual this late in an expansion— is driven chiefly by driven chiefly by

companies’ increasing ability to use companies’ increasing ability to use computers and the Internet to do computers and the Internet to do

business more efficientlybusiness more efficiently.

3

US Labor Department, February 2000

American Productivity Fastest Annual Rate in Seven Years

American Productivity Fastest Annual Rate in Seven Years


Cisco’s Meteoric Growth

A StanfordStart

2 Employees

A StanfordStart

2 Employees

$12 Billion

34 Completed Acquisitions

Single Network Architecture

for Data, Voice and Video

20,000 Employees

$12 Billion

34 Completed Acquisitions

Single Network Architecture

for Data, Voice and Video

20,000 Employees

19841984

19861986

19901990

19941994 19981998 19991999

1st Router Shipped: The AGS

1st Router Shipped: The AGS

IPOAdjusted12¢ per share

IPOAdjusted12¢ per share

LAN Switching Remote Access

WAN SwitchingIntroduced

LAN Switching Remote Access

WAN SwitchingIntroduced

23 Acquisitions

Completed

End-to-End Solutions Provider

23 Acquisitions Completed

End-to-End Solutions Provider

*Fiscal Years*Fiscal Years4F0_4665_c1 © 1999, Cisco Systems, Inc.


Source: BloombergNotes: Dates are calendar years, Numbers are annualized from most recent reports

Internet Business SolutionsFuelled Cisco’s Acceleration

Internet Business Solutions

Internet Commerce

Supply Chain Mgmt.

Customer Care

Employee Services

Finance


e-Enabled Companies Win because they are better able to ...

e-Enabled Companies Win because they are better able to ...

attract and retain top talent

drive change across entire organization

anticipate, respond with agility and adapt to fast market changes

continuously identify new opportunities and execute courageously

self-analyze performance and take constant proactive steps towards continual improvement

learn from mistakes and move on


Internet Business Solution: e-Commerce

• $32M in products each day• 86% of orders placed

on line• Through our web site, customers

can configure, price, and order Cisco products on-line as well as check order status.

• 25% satisfaction increase• Productivity increase for Cisco

and customer

Customer’s are happier configuring and purchasing over the web, we save money, and our sales force is more productive


Configuration

Service Order

Order Status

Order Placement

Pricing

Invoice

“Full Service” Internet Commerce on CCO


Internet Business Solution:Service and Support

• 83% of all calls resolved by a visit to our website saving over $75 million a year or the equivalent of 500 engineers

• $86M saved with electronic downloads (50,000 pieces of software each week)

• $107M saved with online configuration and documentation

• 25% higher customer satisfaction

While Cisco bookings have doubled since 1996, our customer support call center headcount grew only 10%.


Problem Detection:CiscoWorks

Problem Notification: Bug Alerts

Problem Identification: Bug Navigator

Operation Support Software Library

Cisco Connection Online

Problem Resolution: Open Forum, Troubleshooting Engine

Installation and Configuration Documentation

Customer Care


• 70% cut in order cycle time (6-8 wks to 1-3 wks)

• $175M savings in annual operating costs

• 45% inventory reduction for Cisco and partners

• Time-to-volume cut by 25%; $270M annual revenue contribution

Internet Business Solution: Supply Chain Management

This is the area that delivers the biggest overall financial impact to Cisco.

Automated Testing on Outsourced Supplier Line

CiscoCentral Control

Supplier Test Cell

WAN

Supply Chain Management

19© 1998, Cisco Systems, Inc. 1258_05F8_c9

• Developed partnership with suppliers and created test cells on supplier line

• Test procedures automatically downloaded on order configuration

• Suppliers test using Cisco methodology

• Extended ERP systems to suppliers

• Automated routing data transfer through EDI

• Eliminated need for purchase orders and invoices

Product

Cisco

Supplier

“Single Enterprise” with Suppliers

Build Plan

Money


Supply Chain Management (Cont.)

20© 1998, Cisco Systems, Inc. 1258_05F8_c9

Direct Replenishment SupplierSingle Forecast for

Entire Supply Chain

Distributor

Supplier Customer

Direct Fulfillment

WANCustomer Cisco

3 Days


New Product Introduction

Cisco “One Button Push”

CiscoIntranet

PDM

CDMS

ERP• Automated data gathering • Engineers aggregate

design information at the touch of a button

• All companies in supply chain work off of same demand forecast reducing inventory costs

• Suppliers ship directly to customer and do not require Cisco interface


Internet Business Solution:Employee Services

• Self-service for23,000 employees

• Two auditors; 2-day reimbursement for 16,000 U.S. employees

• Purchasing, recruiting, stock options, travel, expenses, directory, training, etc.

• $55M in annual savings

• 50% reduction in voluntary employee turnover (now 3%)

Self service applications means our employees are more productive and more satisfied


Internet Business Solution:E-Learning

• 40-60% cost savings vs. instructor-led training

• 80% of sales and technical training on line

• 100% of Cisco sales staff to use in FY 2000

• Anytime, anywhere access and accountability

Cisco FieldE-Learning Connection

We expect faster ramp to job proficiency and reduced learning time to accelerate Cisco’s time-to-market and make us more agile.


• One day close cycle

• 50 % cost reduction

Internet Business Solution: Finance

Less time equals less cost and near real-time data for decision making


Financial ImpactFinancial Impact

Customer Care

Workforce Optimization $55,000,00

Supply Chain Management- Cost benefits

- Profit contribution

$444,000,000$175,000,000$269,000,000

Internet Commerce $57,000,000

Total Financial Impact $825,000,000

The annual financial impact of Internet Business Solutions is outstanding ...

$269,000,000

Internet Business SolutionInternet Business Solution


FY ’99 Impact: $825 Million

Productivity Per Employee:• Automotive: $160,000• Financial: $180,000• Internet Co’s: $250,000• Cisco: $688,000

… and a source of competitive advantage for Cisco.

18F0_4665_c1 © 1999, Cisco Systems, Inc.

These savings can be poured directly into hiring more R&D engineers, or whatever helps to build competitive advantage for our company and better serve our customers.


Cisco’s Leverage of Internet Business SolutionsCisco’s Leverage of Internet Business Solutions

Lessons LearnedLessons Learned

Agenda


Internet Business Solutions are a source of competitive advantage


Key Success Factors to become an e-business

PrinciplesPrinciples ApproachApproach

Align business and IT, structuring efforts – process, organization and technology – around successes

Align business and IT, structuring efforts – process, organization and technology – around successes

Solve customer facing problems first, developing “networked applications” through customer-funded projects

Solve customer facing problems first, developing “networked applications” through customer-funded projects

Achieve “information democracy” using network as

enabler and changing business processes where required

Achieve “information democracy” using network as

enabler and changing business processes where required

Create ubiquitous, enterprise-wide connectivity and electronic publication model

Create ubiquitous, enterprise-wide connectivity and electronic publication model

Prioritize business opportunities based on

customer needs

Prioritize business opportunities based on

customer needs

Leverage relationships with partners to focus each on its core competence

Leverage relationships with partners to focus each on its core competence

Identify and build source competitive advantage using technology need

Identify and build source competitive advantage using technology need

Maintain enterprise view of business and technology

Maintain enterprise view of business and technology


Speed is the Driving Factor

• Cisco uses a quick approach to ROI– Short projects (3 to 6 months) are much easier to justify– Start small and phase in functionality, break up long-term goals into

short term projects with easily defined and measurable goals– All applications designed to meet identified customer needs, validate

as you go, rapidly prototype, constant user feedback, evaluate and refine

– Figure ways to measure everything, adoption, usage rates, “hits” ...

• Include cost of not doing project into the equation (e.g., save incremental headcount)

• All e-business applications required to pay back within 6 months


Input the “voice of the customer”

• Make it easier to do business with Cisco by, for example, reducing the complexity of ordering

• Increase the accuracy of orders and deliveries• Reduce the delivery times to customers• Increase responsiveness to customers, ultimately

improving customer satisfaction• Scale the customer service, ordering and support

functions• Leverage the internet for competitive differentiation


Barriers and Pitfalls

• Most Internet business efforts have been ad hoc; Most Internet business efforts have been ad hoc; opportunistic; and somewhat chaoticopportunistic; and somewhat chaotic

• Companies usually chase too many opportunities Companies usually chase too many opportunities without a clear sense of directionwithout a clear sense of direction

– difficulty for senior management to focusdifficulty for senior management to focus– big opportunities are often hiddenbig opportunities are often hidden– me too strategiesme too strategies

• Oftentimes e-business initiatives are developed and Oftentimes e-business initiatives are developed and funded by the IT department lacking support and funded by the IT department lacking support and commitment from the business units. commitment from the business units.

251130_06F9_c2 © 1999, Cisco Systems, Inc.

Documents

1Utilities © 1999, Cisco Systems, Inc. Internet Business Solutions Group Competitive Advantage Through Internet Business Solutions