Cisco System Inc. Implementing ERP

Case Background

It reviews cisco system approach to implement oracle’s enterprise

resource planning (ERP) software product.

It studies diverse, critical factors and obstacles faced by cisco

during its implementation.

Deterioration of cisco’s legacy environment in functional areas led

to implementation of ERP.

INTRODUCTION Cisco System, Inc., was founded by two Stanford Computer

Scientists in 1984.

The company’s primary product is the “router”.

It soon began to dominate the markets with the rise of Internet

technologies.

By 1997, its first year on the Fortune 500 Cisco ranked among the

top five companies in return on revenues and return on assets.

Cisco’s market capitalization passed the $100 billion mark just 14

years after being founded.

In 1988 don valentine, vice chairman of the board of cisco hired

john Morgridge as chief executive officer (CEO).

Morgridge maintained a centralized functional organization.

While product marketing and R&D were decentralized into three

“lines of business”.

The manufacturing, customer support, finance, human resource,

information technology (it) and sales organizations remained

centralized.

History of IT at Cisco

Pete Solvik joined cisco in January 1993 as the company’s CIO.

Cisco was running a Unix-based software package its core transaction processing.

The functional areas supported by the package included:

o Financial

o Manufacturing

o Order entry system

Solvik let each functional area make its own decision regarding the application and

timing of its move as he avoided the implementation of ERP solution

What factors led to implementation of ERP ?

Failure of cisco’s legacy environment showed the short comings in existing

systems.

An unauthorized method for accessing the core application database

malfunctioned, corrupting cisco’s central database.

The company was largely shutdown for two days, this major shutdown made

the company realize that its systems were on the brink of total failure.

It would take too long to get applications in place by making decision and

implementation separately within group.

Selecting an ERP Product

Cisco realized implementing ERP will require very strong team to work for the

project and would also need strong partners.

Cisco required a partner with great technical skills and business knowledge, so

they selected KPMG as their integration partner.

Team of 20 people were formed to identify the best software packages.

The team’s strategy was to build as much knowledge as possible by leveraging

experience of others.

By tapping research sources such as the Gartner group, cisco narrowed the field to

five packages within two days.

After week of evaluating the packages at a high level, the team decided on

two prime candidates: oracle and another major player in the ERP market.

After cisco’s analysis of the request for the proposals (rfp) responses, each

vendor was invited for three-day software demonstration.

The selection of oracle was based on the three major decision points:

The project was being driven pretty strongly by manufacturing and oracle had better

manufacturing capability than other vendor.

Oracle made number of promises regarding long term developments in the functionality in the

packages.

Flexibility offered by the oracle as the headquarters of both were 20 miles away from each

other.

Seeking Board Approval

Before going to the board for approval, the team needed to answer two important

questions :

How much would it cost?

How long would it take?

The total cost for the project was expected to be $15 million and the time duration

for completing the implementation process was 9 months.

This project was single largest capital project approved by the cisco.

Implementing the ERP project was the priority for the cisco and it emerged as one

of the company’s top seven goals for the year.

Building The Implementation Team

With board approval, the ERP team started setting up a structure for the implementation.

KPMG’s performance through the software selection process and its commitment to staff

led to extended relationship between cisco and KPMG.

The team had to expand from its core 20 members to about 100 members

Team members from were placed onto one of five tracks.

Each track had the following :

• Cisco information system

• Cisco business leader

• Business and IT consultants

All the tracks were managed from a “project management office” which included

Cisco’s business project manager, Tom Herbert.

The KPMG project manager, Mark Lee.

All these were controlled by executive steering committee composed of :

Vice President of manufacturing

Vice President of Customer advocacy

Oracle’s senior VP of applications

Partners in-charge of West Coast consulting for KPMG

The committee’s role was to provide:

High-level sponsorship for the project

Ensure visibility

Motivate the team

Implementing Oracle

The team’s implementation strategy employed a development technique

referred to as rapid iterative prototyping.

Using this approach the members broke the implementation into a series of

phases called “conference room pilots.”(CRPs)

Each CRP’s purpose was to build on previous work to develop a deeper

understanding of the software and how it functioned within the business

environment.

CRP0:

It began with training and implementation team and setting up the

technical environment.

It focused on getting the team trained in Oracle applications.

Tried to getting up the application and running.

Team members from all areas of company were “locked” in an off-site

meeting.

To discuss appropriate setting for hundreds of parameters within

software.

Team members were joined by specialist from Oracle and KPMG

Team’s experience during the first phase of project indicated that without

significant number of changes software will not support effectively.

CRP1:

The goal of this phase of the project was for each track to make the system

work within its specific area.

Emphasis was on getting the system to accommodate cisco processes

without modification.

Team members generated detailed scripts that documented the purpose for

and procedures used to complete a process.

To ensure all contingencies were accounted for, business process prototype

tracking sheets were developed.

Team members carefully documented issues while modelling,

which were addressed in weekly three-hour meetings held by

program management office.

there were huge number of business processes that the software

couldn't support.

The team’s response to gaps was to develop a means for

categorizing and evaluating each gap individually.

Need to modify oracle led to unplanned changes in the project plan

and budget.

Implementation team determined oracle package would not

adequately support after sales support needs of the company.

So, team embarked on a concurrent effort to evaluate and select a

service support package.

CRP2

In the CRP2, the implementation team found itself in the most difficult part

of the implementation.

The project scope had expanded to include major modifications and new

after sales support packages.

A new approach was employed by the team in which all data

communication took place via “data warehouse”.

Utilization of a data warehouse allowed all of cisco’s applications to access

a single source for their information needs.

It group started moving from their other projects and spent time on the core

project in the company which was changing and needed more energy and

resources.

The implementation team continued to deepen its understanding of the

oracle and service packages and determined how to best make them work

for cisco.

The final goal of crp2 was to begin testing the system to see how well it

would stand up to the processing load.

CRP3

Its focus was on testing the full system and assessing the company’s

readiness to “go live”

A final test was conducted to see how the system would perform with a full

transaction load.

At the end of crp3 each one of the functional leads presented its piece of the

process results and later the system was put into action.

Cutting Over to the Oracle

The initial success of the oracle system was something less than expected.

On an average, the system went down nearly once a day.

The Primary Problem :

Hardware architecture and sizing.

Correcting the deficiency required additional hardware purchase which would

increase the total expenditure.

Cisco had purchased the equipment on the basis of promised capability as a

result the responsibility for fixing the hardware problems fell on the hardware

vendor.

The Second Problem :

Ability of the software to handle the transaction volume required in the

Cisco.

The company had gone wrong in its final testing of the system.

Cisco had run individual processes sequentially rather than at the same

time.

After cutover, when processes were running together sytem lacked the

capacity to process the required load.

Overcoming Of The Problem :

ERP project status became the number one agenda item for weekly

executive staff meetings.

Strong vendor commitment from oracle, the hardware vendor and

KPMG led to an eventual stabilization of the software and improved

performance.

After Stabilization

Problems associated with implementation of oracle was short-lived.

Over the next three month on its implementation cisco and its vendors

together stabilized and added capacity to the system.

Thus successful implementation of the system was concluded with a

celebration party for the team and the company management.