Cisco Systems, Inc.

Implementing ERP

BA401_Case III-6

Corporate History

• was founded in 1984 by Len Bosack, Sandy Lenner, and Richard Troiano

• Primary product is the “Router”• was listed on NASDAQ stock exchange in 1990 • With the rise of Internet technologies, demand for

Cisco’s products boomed and Cisco soon began to dominate its market

• Ranked among the top five in Return on Revenues and ROA in Fortune 500 in 1997

This figure represents significant growth in Net Sales year on year

History of IT@ Cisco

• Pete Solvik joined Cisco in January 1993 as the company’s new CIO

• Cisco was $500 million company running a UNIX-based software package to support its core transaction processing which supported the functional area of Financial, Manufacturing, and Order Entry Systems

• Solvik’s experience and company’s significant growth prospects convinced him that Cisco needed a change

“We wanted to grow to $5 billion-plus. The application didn’t provide the degree of redundancy, reliability, and maintain ability we needed”

-Pete Solvik-

A Defining Moment

“ We knew we were in trouble if we did not do something. Anything we did would just run over the legacy system….None of us was going to throw out the legacies and do something big.”

-Randy Pond-

A Director in Manufacturing

• Finally, in January of 1994, Cisco’s legacy environment failed so dramatically that the shortcomings of the existing systems could be ignored no longer

• As a result, the company was largely shut down for two days

A Defining Moment

• Solvik, Pond, and a number of other Cisco managers came to the conclusion that the autonomous approach to systems replacement they had adopted was not going to be sufficient. An alternative approach was needed.

UNIX-based software package

Enterprise Resource Planning (ERP)

A legacy system can no longer support the large volume of transaction as Cisco continued to grow anymore

Selecting an ERP Product

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

“KPMG as the integration partner”

• Mark Lee, the program manager from KPMG to help in selecting an appropriated ERP product

• The team’s strategy was to build as much knowledge as possible by leveraging the experiences of others

Selecting an ERP Product

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

Cisco’s team decision points were

• Oracle had a better manufacturing capability than the other vendor

• Oracle made a number of promises regarding the long-term development of functionality in the package

•The flexibility offered by Oracle’s being close by

Then, critical questions would be

“How long the project would take? and How much would it cost?”

Going to the Board

• In solvik’s view, Cisco had little choice but to move

• We replace our systems, big-bang, with one ERP solution.

“We committed to do it in 9 months for $15 million for the whole thing”

• At $15 million, the project would constitute the single largest capital project ever approved by the company

“You know, careers are last over much less money than this”

-Morgridge, CEO-

• The board ended up approving the project.

Building the implementation Team

Cisco ERP Implementation Team Structure

Building the implementation Team

• A cross section of Cisco’s business community was formed to work on the project

• Each track was managed from “Project Management Office”.

• The committee’s role was to provide high-level sponsorship for the project, to ensure visibility, and to motivate the team.

Implementing Oracle

• The team’s implementation strategy employed a technique called “rapid iterative prototype” which was broken into a series of phases called “conference room pilots (CRPs)”

CRP0

Objective: Training the implementation team on the Oracle application and setting up the technical environment

Conclusion: Cisco would not avoid modification of the ERP software, some changes would be required to fit its

business

Implementing Oracle

CRP1

Objective: Making each track made the system work within their specific area

Conclusion: There were huge numbers of business processes that the software could not support which led to unplanned changes in the project plan and budget

Implementing Oracle

CRP2

Objective:

• Expanding project scope to include major modifications, and a new aftersales support package

• Utilizing data warehouse would allow all of Cisco’s applications to access a single source for their information needs

Conclusion: Deepening its understanding of the Oracle and Service packages

Implementing Oracle

CRP3

Objective: Testing the full system with a full transaction load and all users involved and assessing the company’s readiness to “go live”

Conclusion: Ready for cut-over!

Cutting over to the Oracle

[After cutover] I wouldn’t say the company hit the wall, but I would say we had major day-to-day challenges that needed to be solved quickly to avoid significant impact to the company. For example, our on-time ship, shipping on the date we commit to the customer, fell from 95 percent to about 75 percent; it was still not miserable but it was not good.

-Pete Solvik-

Cutting over to the Oracle

The problem when cut over were

• The hardware architecture and sizing

• The ability of software itself to handle the transaction volume required in the Cisco environment

“Some things were seriously broken at big data volumes”

-Randy Pond-

Anyway, Cisco purchased equipment based on a promised capability rather than a specific configuration so the extra expense would fall on the hardware vendor

After Stabilization

Solvik tried to think about the decisions he and the team had made during the course of implementation

• What factors had made the difference between success and failure?

• Where had they been smart?

• Where had they been just plain lucky?

• Could they do it again if they had to?

Thank You