Case Study Report for Cisco System, Inc. Implementing Erp
Case Study Report for Cisco system, Inc. Implementing ERP Team Members: Nick Qiao, Ginger Yang, Cynthia Lai, Wellington Chou BACKGROUND * Cisco Company Cisco was set up in 1984 and developed into one of the top companies in the world. Its main business was related to the network which remained in IT industry. In this industry, the competition was fierce. Cisco faced competition from rivals such as 3Com, Nortel, Lucent etc. To strengthen its market position, Cisco integrated the strong spirit of innovation in both technology and management which represented the value of Silicon Valley.
The talents in Cisco can be addressed as IT expert and elite as Cisco itself was attractive enough for the young and smart. As we mentioned above, the company’s IT background and its company innovation culture helped to launch the ERP system in a short time period. Besides the IT talents the company had actually became a big advantage when Cisco began to choose manpower within company for the ERP implementation team.
* the Management Team In 1988, John Morgridge was nominated as the CEO of Cisco who was an experienced executive in the computer industry.
With the departure of the two founders in 1990 due to the IPO, Morgridge was free to continue his plans to install an extremely disciplined management structure. Besides Peter Solvik joined Cisco as CIO later on, he made reforms. Firstly, the IT-reporting relationship was changed from accounting to the Senior Vice President of Customer Advocacy. IT department was no longer viewed as a cost center reporting through accounting department since then. This reform enhanced the function of IT department in the whole company and made the importance of IT department obvious.
Secondly, the IT budget pertaining to the functions were returned to the functions, leaving a small portion in the general and administrative account. This created a structure in which all IT application projects were client-funded. All the change of the management team and the reforms regarding to IT department created a better circumstances under which the following ERP system could be implemented more smoothly. * the original IT system Prior to ERP system, Cisco was running a UNIX-based software package to support its core transaction processing.
The functional areas supported by the package included financial, manufacturing and order entry systems. The scale of IT systems was too limited to support Cisco’s growth. The IT systems were not standardized which meant they were not flexible or robust enough to meet management requirements. The applications didn’t provide the degree of redundancy, reliability and maintainability. Thus it was hard to make changes to meet the business needs. All the above shortcomings of legacy systems led to the final ERP implementation. SUCCESS OF ERP SYSTEM * Clear goals, objectives and scope
Cisco faced the dilemma of the functional areas in late 1993, and the systems replacement difficulties of functional areas perpetuated the deterioration of Cisco’s legacy environment. In January of 1994, Cisco’s legacy environment failed so dramatically that the shortcomings of the existing systems could no longer be ignored. As a result, the company was largely shutdown for two days. Cisco’s struggle to recover from this major shutdown brought home the fact that the company’s systems were on the brink of total failure. In order to solve this problem, an alternative approach was needed.
The IT release team focused on detailed data gathering during the global design review process. Clearly defined business and strategic objectives are in the most cases very important critical factor. Clear goals and objectives should be specific and operational and have to indicate the general directions of the project. They should also provide a clear link between business goals and IS strategy. Well-defined objectives help to keep the project constantly focused, and are essential for analyzing and measuring success. * Management support The Board attached more importance on this project.
Cisco committed to do it in nine 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. The project emerged as one of the company’s top seven goals for the year. Top management support is critical because top managers have to make fast and effective decisions, resolve conflicts, bring everyone to the same thinking to promote company-wide acceptance of the project, and build co-operation among the diverse groups in the organization. * Choosing Partners
Cisco needed strong partners consistent with the need for a strong Cisco team. Solvik chose KPMG as the integration partner which could assist in both the selection and implementation of whichever solution the company chose. Meanwhile, KPMG had great technical skills and business knowledge, which was building a practice of people that were very experienced in the industry. Randy Pond, a director in manufacturing and eventual co-leader of the project, recalled that size was an issue in the selection, because they should not put Cisco’s future in the hands of a company that was significantly smaller than they were.
Cisco provided sample data by visiting a series of reference clients offered by each vendor and selected Oracle between two candidates based on a variety of factors: First, this project was being driven pretty strongly by manufacturing and Oracle had a better manufacturing capability than the other vendor. Second, they made a number of promises regarding the long term development of functionality in the package. Oracle was touting the new version as having major improvement in support of manufacturing. A successful implementation at Cisco would launch the new release on a very favorable trajectory.
Cisco team had spent 75 days to settle it from inception to final selection. * Smart Team They built a project team competence and organization expanding from its core 20 members to about 100, representing a cross-section of Cisco’s business community. They had picked the best and the brightest for this team. To each person it was a career advancement possibility. Selecting and motivating the right employees to participate in implementation processes is critical for the implementation’s success. 1. Effective Communication and Teamwork
Teams consisted of the right mix of business analysts, technical experts, and the users from within the organization and consultants from external companies, chosen for their skills, past accomplishments, reputations, and flexibility. Because ERP systems cross functional and departmental boundaries, cooperation and involvement of all people in the organization are essential. Because there is always threat to users’ perceptions of control over their work involving users in defining organizational information system needs can decrease their resistance to ERP systems.
Users often perceive their role in ERP implementation as central in their judgment about new system. 2. Strategy The team’s implementation strategy employed a development technique referred as “rapid iterative prototyping. Using this approach, team members broke the implementation into a series of CRP, which was in order to build on previous work to develop a deeper understanding of the software and how it functioned within the business environment. From CRP0 to CRP3, they concluded work and adjusted work content after each stage, which made the project more effective and efficient. 3. User training and education
The first CRP began with training the implementation team and setting up the technical environment. Cisco directed Oracle to compress its normal five- day training classes into two 16-hour days. In a two-week period the majority of team members participated in this “immersion” training for the entire application suite. Following training and setup of the system, the core team met in a session designed to quickly configure the Oracle package. A lack of user training and understanding of how ERP systems work appears to be major reason for many problems and failures in ERP implementation.
Several authors highlight cases of inadequate training. If the employees do not understand how a system works, they will invent their own processes using the parts of the system they are able to manipulate. * Plain Lucky 1. Win-win Situation The Cisco project would be the first major implementation of a new release of the Oracle ERP product. Oracle was touting the new version as having major improvements in support of manufacturing. A successful implementation at Cisco would launch the new release on a very favorable trajectory.
Oracle wanted to win this project based on such a low quotation and urgent project schedule. 2. Vendor commitment Oracle made a number of promises regarding the long term development of functionality in the package. Not all of these promises were met in the time frame agreed to during contract negotiations. The other part of it was the flexibility offered by Oracle’s being close by. Oracle and Cisco world headquarters are both located near San Jose, CA, approximately 20 miles from each other. * Other factors
Besides these factors, there are also other reasons made the difference between success and failure of the Cisco ERP project. Effective communication was vital during the procedure of this project. The implementation team’s response to the gaps found in the system was to develop a means for categorizing and evaluating each one individually. All modification requests were classified as Red, Yellow, or Green. Users were involved in Cisco ERP implementation team structure. Discussion: * Do you think that Cisco team could do such a project again if they had to?
Why, or why not? Obviously, Cisco was successful in this project of Implementing ERP. It attributed to not only management support, Implementation team’s hard working, strong vendor commitment from Oracle, KPMG and the hardware vendor, but also many other lucky factors. So I think if the Cisco would do this project again, they might not success again. 1. Management support Pete Solvik decided to upgrade the existing information system by implementing ERP when the company encountered a major shutdown for two days.
And the old system couldn’t fit the fast development of Cisco business and even affected the routine business. In this situation, the management had to support the project. But if doing again, they might not give full support for some reasons such as budget problem. 2. The vendors We can see that Oracle also wanted major improvement in support of manufacturing, so they wanted this project badly because Cisco was a word famous company; this was a win-win business. Cisco can pay a low price to gain the professional service of vendors.
The same thought as KPMG and the hardware vendor, they all wished the project succeed that it will made them more in the future business for the brand effect. So, when the system countered the problem, strong vendor commitment from Oracle, the hardware vendor, and KPMG lead to an eventual stabilization of the software and improved performance. And the contract with hardware vendor was that to buy a capability, so the vendor should pay to add capacity, and this action resulted in a decrease in total project expenditure.
It was so lucky for Cisco that the company chose a right time and a right partner. I don’t think this luck will appear again. 3. The team The 100 members’ team was described as the best and the brightest. The team members were encouraged and working hard because they knew that they were pioneers in company’s ERP system and it’s a chance of promotion for each of them. They motivated to work hard and try to make the project success. But if doing again, they might lose the motive power and the passion. In brief, the success of Cisco ERP system related to many factors. It was lucky and irreproducible.