Cisco Case Study: an in-depth look at IT Management during an ERP implementation Essay
The challenges that arise in the management of IT span multiple facets depending on the involvement of the party. For instance an investor views the management if IT from the return on investment (ROI) perspective while an Operation’s manager views the management of IT from the ability to successfully complete tasks or products routinely. The core essence of IT management lies in the ability to harmonize the various expectations of all key stakeholders without jeopardizing business processes or customer satisfaction. 2
The business terrain has been impacted by the growth and development of IT systems. Systems such as Enterprise Resource Planning (ERP) are used to coordinate the sequencing, flow and interaction of activities between divergent business units.
In the reviewed case study of Cisco, it was imminent that the in-house legacy systems utilized by the various business units could no longer support the scale at which the company operated and the competitive environment that existed in the industry. These legacy systems may have been effective at the early stages of Cisco’s existence when few changes were required during the manufacturing/ordering process or when competitors did not offer similar products. With Increased competition in the industry, higher customer expectations and numerous companies migrating to the just-in-time supply method, the need for ERP systems in Cisco shifted from being an option to a necessity.
There are many reasons for adopting ERP systems but majority focus on the potential reduction in long-term costs, although in the short-term they tend to be higher because of the costs of implementation and staff training involved. Making a particular ERP system work effectively for an organization often requires significant resources, particularly time and people. The amount of resources depends on how well the ERP system fits with existing (or planned) business processes (Hong & Kim, 2002): if business processes are closely aligned with the best practices model built into the ERP system the need for extra resources will be minimized. If there is not a close match, however, a process of mutual adaptation is needed in which the company may need to adapt some of its business processes to align with those of the ERP system, and have the ERP system adapted to existing processes that cannot be changed.
The numerous legacy systems that individual business units within Cisco utilized did not interface well with each other. The need for the output of one system to be converted into another format for input into the next system was one of the many problems that they were faced with. Attempts to salvage them were futile and the need to replace the entire legacy became necessary when the legacy system crashed. An evaluation of Cisco’s ERP implementation; processes employed, challenges faced and recommendations for future endeavors is discussed in the sections below, along with how this case study was approached by a team of IT management students.
Method of approach
Six graduate students with educational and professional backgrounds in different fields ranging from communications, electrical engineering to information technology, participated in this case study research. The participants met weekly to discuss their research findings and fine tune the final presentation of the review. Each member was tasked with researching different sections of IT Acquisition with a focus on ERP implementation.
This paper utilizes materials from print, verbal interviews and individual experiences in IT project participation or management. The main text used is the assigned course material; Corporate Information Strategy and Management: Text and Cases by Lynda Applegate, Robert 3
Austin and Deborah Soule. Other cases of ERP implementations were reviewed in companies like Wipro and Hershey. Finally, Cisco Systems Inc. was contacted to discuss the value of the pillars of IT (Applegate, Austin and McFarlan).
An overview of the IT processes in Cisco was initially developed. The problems encountered were listed in view of the business environment which the company operated in. The system acquisition life cycle approach was used to evaluate the Cisco ERP implementation case study and the gaps were identified. Finally a summary of the case is drawn and a recommendation is provided for implementing a similar solution in today’s dynamic IT environment.
Problem- Binary Decision
Cisco system’s unreliability and outages brought into question the dependability of trying to modify the current system for their growing needs. The current company system software package supported their need however an upgrade was made available to Cisco. This upgrade was a solution that offered more reliability and redundancy without maintainability or room for growth.
CIO Pete Solvick did not initially want to undertake a huge companywide ERP project, but in January of 1994, a system failure halted nearly the entire business for two days. This problem could no longer be ignored so Pete, along with other managers, put together a plan to take on replacing all the faulty legacy applications into a single ERP project that would provide a common data architecture throughout each business area.
Cisco has been a leading organization in the information and technology world. It was founded in 1984 and became publically traded in 1990. The primary product of CISCO was the “router”. CISCO was ranked among the top five companies in fortune 500. Its capitalization passed over $100 billion in sales just 14 years after its foundation. Its competitors were Microsoft and Intel. It was considered the third dominant company to shape the digital revolution.
Don Valentine, vice chairman of CISCO was the first person to invest into CISCO. John Morgridge was the CEO in 1988 and maintained the organization’s centralized management structure. Only the product marketing and research and development departments were decentralized into three lines of business: enterprise, small/medium and service provider. Other departments such as manufacturing, customer services, finance, human resources, information and technology and sales remained centralized.
When Cisco became publically traded, Leonard Bosack and Sandra Lerner -who? sold their stocks and left the Cisco because of clashes with the management policy of Morgridge. Pete came into CISCO as chief information officer in1993. CISCO was a $500 billion company in 1993. CISCO was using UNIX based software packages for its core transactional processing. The functional area supported by the software packages were financial, manufacturing and order entry systems.
All the functional areas were using common databases. CISCO was rapidly growing and its products were being shipped all over the world. The traditional structure of CISCO was not enough to support its growth. Pete’s experience and the company’s significant growth prospects convinced him that Cisco needed a change. This change involved keeping with 4
Cisco’s strong tradition of standardization, nevertheless, all functional areas would be required to use common architecture and databases. This approach was consistent with the organizational and budgetary structures that Pete had installed upon his arrival. Pete was not inclined towards the ERP solutions Pete felt strongly that budgetary decisions on IT expenditures be made by functional areas while the IT organization reported directly to him. Randy pond, director of the manufacturing put the dilemma that there was difficulty in replacing the functional areas of legacy systems of the company with its growth.
Product shortcomings and system outages have become the routine. In January 1994, Cisco’s central database corrupted due to the unauthorized method to access to the common database and its legacy system went down because of excessive product shortcomings and system outages. CISCO remained closed for two days because of this large shut down. Pete, Pond and other mangers of CISCO came to the conclusion that an alternative approach was required as the autonomous approach utilized previously was not sufficient
The software package supported the finance, manufacturing, and order entry applications. Pete did analyze the current UNIX-based software package being used, and he found that it did not provide the level of redundancy, reliability, and maintainability that Cisco needed to keep up with their current business practices. While analyzing the current software vendor of the company, Pete realized that this could not suffice their needs and a change was needed. In 1993 management from each functional business area made its own decisions regarding the future of IT so a representative was appointed to provide Pete a expense report.
Each representative knew that the current system was not going to keep up with the company’s growth but do to cost of replacing the legacy system no one was ready to approach the board. So Cisco had little to no change in the software support system nor did they add new and updated packages to the system. Instead, they kept on operating by fixing the existing legacy systems. In late 1993, Randy Pond confirmed that just fixing the existing system was pointless as it could not serve the growing needs of the company. In January 1994, Cisco’s legacy system failed entirely. This became the tipping point as a number of managers came to the conclusion that they needed to replace or upgrade the system for it would be able to succeed with the growth of the company.
To avoid too much time in integrated separate projects in different areas, Carl Redfield, the senior vice-president of manufacturing took the lead in getting a single integrated replacement system of all the applications at Cisco. A team was formed to investigate the best possible replacement for the existing software support system. The factors that would govern the implementation of the new system were decided to be less time, low customization, and a high priority. The company had two options to consider:
Option 1 Purchase a single ERP system, which would be expensive to acquire, time consuming to implement and would replace each department’s autonomous structure. Option 2 Upgrade the existing legacy system
Cisco chose option 1 which is to purchase a single ERP because of the need for a much larger system to support the company’s growing needs. Pete initially wanted to avoid an ERP solution, which he saw as taking too long to implement as well as tremendous expenditures. Pete’s plan was to allow each department to make their own decision regarding software applications as long as they used a common architecture and database for standardization within the company. Since 5
the departments had no new and updated package to the software in the year to follow they carried on by fixing the existing systems. This process worked until the failure of the legacy system. At this point Cisco had a binary decision to make of whether to Buy vs Make. Cisco’s decision to buy a system instead of making was successful in terms of overall performance. The implementation of the system worked well after resolving the issues, so Cisco valued their decision a success by rewarding bonus distributions for the ERP team.
There was not much distinction in Cisco’s business concept before the binary decision of deciding to continue to add on to a system versus replace it with one that would match the desired growth of the company. The current system would eventually pigeon hole the company into remaining a sub-$500 million company. Cisco perceived their goal of going to a multibillion dollar enterprise within a short duration of time. Also, Cisco determined that they needed to provide a solution for a company that was as big as Cisco or bigger. The importance of choosing a solution that was bigger was to have a system that the company could grow into, not grow out of.
Before the decision to proceed with a new system, Cisco’s business concept revolved around manufacturing software and hardware resulting in the product of routers. Cisco was still in its early stages, but was providing high value and return on investment to its investors. After six years of Cisco’s inception, the company went public, and any long term investors would have benefit from initial IPO investment in 1993 when the binary decision was made. “If you had bought 1,000 shares of Cisco Systems Inc. during the company’s initial public offering in February 1990 for $18,000, today the stock would be worth $432,000.” (Carlsen, Clifford.)
This is a clear and concise picture of the value that Cisco was providing within its infrastructure producer market. The software and hardware sales were from an infrastructure revenue perspective. Maintenance and update fees were associated with the customer support that Cisco provided via its updates to the software on the routers. Costs were associated with the employees that Cisco hired, the materials and supplies to build routers, labor hours to develop software, and costs associated with Cisco’s suppliers. Cisco had begun to develop some key relationships, and the technical knowledge passed down from the founders was all intangible assets that could not be measured.
Cisco was able to fulfill and exceed the expectations of the company’s founders with limited resources. The founders had not taken into account the growth that they would meet in their short duration with the company. The company had a strategy of mass producing equipment with suppliers of several components that made up the router. Cisco did not take into account exponential growth from their customers and were barely able to keep up with expectations from a customer service aspect.
“In 1985, the company started a customer support site through which customers could download software over FTP and also upgrade the downloaded software. It also provided technical support through e-mail to its customers… By 1991, Cisco’s support center was receiving around 3,000 calls a month. This figure increased to 12,000 by 1992. In order to deal with the large volume of transactions, the company built a customer support system on its website.” (Scribd.)
This statement demonstrates Cisco’s lack of concept and preparation for growth as a small company. The databases that contained the bug report and supported the call center were other systems that needed revamping. These systems would eventually be impacted by tying into the ERP system solution. The small scale customer service IT system represented Cisco’s small capabilities in terms of IT systems resources.
The bulk of the manufacturing process was done within Cisco, proving that Cisco had a concept of make versus buy for certain parts of the router. Cisco was limited on human capital as well and begun to recruit talent from smaller companies and outsource manufacturing of hardware to suppliers.
“The growing size of the company had necessitated larger office space. The company’s workforce had grown from 1,451 in July 1993 to 2,262 in July 1994, as Cisco hired talent from smaller, struggling networking companies which were laying off personnel.” (Funding Universe.)
The lack of human capabilities, lead to a hiring of more technical knowledge and the acquisition of other companies. The philosophy of Cisco was changing, not only from an internal human factor, but also from a growing company that wanted to begin competition with other infrastructure producers such as Alcatel, Cabletron, and Juniper.
Cisco not only began swallowing smaller companies for human capital, but also to gain experience within the industry. Cisco had ideas of expanding and enhancing its evolving business model that was in parallel to the evolving technology that was growing at exponential rates. Around the time of the decision (to go to an ERP system), Cisco was beginning to immerse itself into international geographic markets. Cisco was beginning to solidify itself as an international OEM, while penetrating new technological markets.
“Most of Cisco’s international sales were through distributors, whereas in the United States the majority of sales (65 percent in early 1994) were made directly to the end users. International sales became an important part of Cisco’s business. Subsidiaries were established in Japan and Australia, and a European Technical Assistance Center was established in Brussels, Belgium. In March 1993, Cisco Systems (HK) Ltd. became a new subsidiary in Hong Kong. International sales steadily increased, accounting for 35.6 percent of sales in fiscal 1991, 36 percent in fiscal 1992, 39 percent in fiscal 1993, and 41.9 percent in fiscal 1994.” (Funding Universe.) Cisco not only was expanding its enterprise to international and new geographic markets, but the company was extending and enhancing its core business of producing IP routers to new technologies. IP and ATM technologies are both prevalent in the Internet Service provider markets. Most telecommunication companies were still taking advantage of ATM based 7
networks that were the best technology implementation of cost savings and higher bandwidth, before the now IP over Ethernet solutions that are taking over the telecommunications industry. “In February 1993, Cisco announced a strategy to include ATM among the protocols supported by its products. In fiscal 1994, Cisco introduced its first ATM switch.” (Funding Universe.) Enhancing the functionality of Cisco routers and expanding into new international markets, with a customer support system that involved a web site and correspondence via e-mail was not going to produce the forecasted results that Cisco anticipated. Needless to say, Cisco desperately needed to have a dramatic shift in IT capabilities, to match the dramatic shift in business market and demand.
After the paradigm shift to thinking bigger and better, Cisco’s decision to buy versus make ultimately affected other systems and opened the doors to become virtually integrated with its customers and suppliers. The business concept for Cisco changed as well, by beginning to retain a business concept and strategy of acquiring other network companies, thus increasing its capabilities in terms of intellectual property. When Cisco wanted to add to its conglomerate of technical suites, the company would purchase a company which contained experts in that genre. “Cisco’s key wireless acquisition also came in late 1999 with the announcement of the $800 million purchase of Aironet Wireless Communications, Inc., maker of equipment that creates LANs without wires in small and medium-sized businesses – further clarification that Cisco was trying to lead in all technology fields.” (Funding Universe.) Cisco would not have been able to lead, engage, and change business concept without the changes made to the IT systems. Cisco was able to create a robust system that not only delegated the supplier network, but also merged the customers via e-commerce web based systems.
Cisco was not only changing the business concept of their own enterprise, but Cisco was revolutionizing the market by leading with this new philosophy of integrating suppliers and buyers. This new customer service system, fueled by the new ERP system was also capable of providing the feedback necessary for Cisco to make necessary and producing a networked operations enterprise. Feedback is an important concept, because if the company does not have a measure of how it is performing, then the company cannot know its weaknesses to adjust to market demands.
“Seven out of 10 customer requests for technical support are filled electronically–at satisfaction rates that eclipse those involving human interaction. Using the network for tech support allows Cisco to save more money than its nearest competitor spends on research and development. ”It has saved me 1,000 engineers,” gushes Chambers. ”I take those 1,000 engineers, and instead of putting them into support, I put them into building new products. That gives you a gigantic competitive advantage.” (Byrne, John A.)
Not only was this a result of an ERP system, but this statement reflects the change in ideology that Cisco was no longer just an infrastructure producer, but was a borderline infrastructure portal by bridging the gap between suppliers and buyers for the hardware that Cisco 8
implemented its routing software. Cisco had now outsourced nearly all of its hardware manufacturing by creating a seamless and integrated system that virtually merged suppliers and buyers. The Infrastructure portal aspect was an applicable categorization of the “post-binary decision” Cisco that now focused on Research and Development rather than production. The concept of Cisco’s business changed to focus on new technology and software that supported the new technology. Resources were needed for research and investigating new and improved ways of routing with various technologies involved. Re-allocating 1,000 engineers from customer support or manufacturing to innovative technology is a shift that Cisco only hoped for, in order to compete with other companies that had been well established. “It’s also the company’s mind-set and culture, its willingness to team up with outsiders to acquire and retain intellectual assets, its near-religious focus on the customer, and its progressive human resource policies.” (Byrne, John A.)
Cisco had many adversaries including Microsoft that was compared to Cisco’s growth and evolving business models. Cisco did not limit its virtual integration to suppliers and buyers, but also its competition. Cisco’s concept was not only merging its own buyers and suppliers, but to create relationships with the competition and other aspiring technical companies. These relationships resulted in new lines of business and opportunity for more revenue streams. “A good example is Cisco’s partnership with Microsoft Corp. (MSFT), which last year resulted in a new technology to make networks more intelligent. The software lets networks know immediately a user’s identity and location and to respond differently to each one. The partnership allows both companies to expand this market together more rapidly. ”From initial discussion to technology, it took 18 months to get the product out,” says Listwin. ”It would have taken us four years to get to where we are [without such a partnership], and it’s not clear we had the competence to get there alone.”” (Byrne, John A.)
Perceiving Cisco from an “Analyzing Financial Performance” (Applegate, Austin, MacFarlan, p 291) perspective, the selling and marketing over an e-commerce system would save costs for Cisco, thus increasing the profit for the company. Investing is not always a financial measurement, nor is it always a financial investment that pays off financially. The capability of Cisco to have a system that positioned Cisco co MCI and telecommunication companies resulted in an increase in profit and another key strategic alliance that was formed. In 1999 alone, Cisco was able to acquire 17 new companies, an accomplishment that would not have been possible without a robust IT system for merging processes, businesses and technology. The value of Cisco was not only from a financial standpoint, but from a intellectual property aspect. The more alliances formed, the better the chances are at creating opportunities to increase revenue, reduce costs and increase profit. Numbers don’t prove value and return on investment for all scenarios. A company that is seeking to be acquired will look for companies that are thriving and innovative. The acquisition of companies proved Cisco’s value to not only its stakeholders, but stakeholders of acquired companies.
“Cisco also began to market its technology, especially its software, more aggressively to longdistance telephone companies, as the deregulation of U.S. telephone carriers enabled these companies to provide more kinds of data communications products and services. For example, 9
Cisco entered into a joint marketing agreement with MCI International to integrate Cisco’s routers into end-to-end data networks over telephone lines. Marketing – capabilities — It seamlessly links Cisco to its customers, prospects, business partners, suppliers, and employees. This year, Cisco will sell more than $5 billion worth of goods–more than half its total–over the Internet, nearly three times the Internet sales booked by pioneer Dell. So successful has Cisco been in selling complex, expensive equipment over the Net that last year Cisco alone accounted for one-third of all electronic commerce.” (Byrne, John A.) Business Model Summary
In summary, in support for Cisco to have a shift is business concept, increase and re-allocate capabilities, and positioning themselves to yield a higher return in value, the ERP system was pivotal point that became a turning point when Cisco was able to “pass the $100 billion mark” (Applegate, Austin, McFarlan, p.601) on July 17, 1998. Cisco maintained the ability to work in a “small business environment”, but produce “big company results”, thus perfectly demonstrating a “networked management” (Applegate, Austin, McFarlan, p. 237) approach. The ERP system also improved customer service, while allowing Cisco to focus on research and development, continue to revolutionize the market with integrating buyers and suppliers, and cultivate the technology of the future via acquisition.
Strategy and Strategic Planning
Cisco has been a leading organization in the information and technology world. CISCO has shaped the future of the Internet by creating extraordinary value and opportunity for our customers, employees, investors and ecosystem partners and has become the worldwide leader in networking – transforming how people connect, communicate and collaborate (“CISCO the Network”, n.d.). The key business strategies and practices adopted to be the successful and leading firm in Information and technology world can be defined as follows. Implementing ERP product
After the critical failure (January 1994) in the central database system, it was very necessary for CISCO to implement the right strategy to compensate for the failures and continue growth of the business. After John Morgride (CEO in 1991) was hired, CISCO was rapidly growing and its products were being shipped all over the world. The traditional structure and internal software of CISCO was not enough to support its growth. A month after the failure, CISCO management team together decided to bring the ERP system.
The goal for Cisco IT was to design and ensure adoption of a new enterprise resource planning (ERP) platform for Cisco’s quote-to-cash business process that would give customers and partners a world-class purchasing experience (“CISCO the Network”, n.d.). Identifying potential managers and partners
CISCO has chosen external partners to provide much of necessary competence in operations and customer services, coordinating a virtual organization that extends well beyond its own corporate boundaries.
Cisco System Inc. started experiencing serious growth when its management was changed, and headed Morgridge. After the system failure in January 1994, CISCO’s management realized that to meet the business requirements, they will need heavy involvement of the business community. They wanted the people in the organization who do not possess a “give up” attitude. CISCO was in need of strong business partners as its economic growth was booming in January 1993. CISCO selected KPMG, a group of very experienced industry professionals, as an integration partner for implementing the new ERP system. Then CISCO chose Oracle and another software vendor for developing software packages. The Oracle ERP software implementation was successful by using experienced managers and key business partners (Applegate et al.,p.604) (Schwartz,2012).
Acquisition and integration for manufacturing
An intrinsic part of Cisco’s strategy was using acquisitions and partnerships to gain access to new technologies. This strategy was comparatively unique in the high-tech world. CISCO viewed partnership and acquisitions as the most efficient means of offering customers an end-toend networking solution and developing next-generation-products. “Cisco had three primary objectives for acquisitions. In order of priority, the company measured the success of its acquisitions by: 1) employee retention; 2) follow-on new product development; and 3) return on investment. Cisco viewed acquisitions as a means to ensure that it was offering the “best of breed” product technology” (Keller et al.,1998).
“As of January 2001, Cisco had acquired 71 firms for over $34.5 billion (it has made more since then), and effectively leveraged these acquisitions to become an industry leader. Without these acquisitions it could not have maintained a compounded annual growth in revenues and profits of over 30 per cent from 1987 through 2000, and likely would have been out-flanked by startups”. (Mayer, David, and Martin,2004)
Implementing web-enabled IT and e-commerce
The IT platform was standardized throughout the entire CISCO company. There were no mainframes, no mini computers and no legacy systems. UNIX controlled things at the sever level, while Windows NT controlled everything at the LAN level. TCP/IP maintained the worldwide network. Everything from voicemail to meeting schedule software to office productivity suites was standardized (Schwartz,2012). Cisco has used internet as a major element in the process of its main strategy.
Cisco introduced several web-enabled systems two years after Oracle was implemented successfully. Cisco was able to do business more efficiently and effectively by web-enabling their entire systems’ operations. Links to strategic vendors and customers allowed Cisco to collaborate more efficiently with those outside the company (Schwartz,2012). Cisco Systems’ corporate Intranet, Cisco Employee Connection (CEC) provided centralized access to information, tools and resources needed to streamline processes, facilitate knowledge, exchange and maximize employee productivity. CEC was a key enabler of workforce optimization (Schwartz, 2012).
Focusing Customer needs and market
In recent years, market-driven organizations have begun to evolve as the new industry giants. “The market-driven formula for success in today’s marketplace is to produce the right product at the right price at the right time. Customer needs and priorities are continuously changing. Therefore, an organization must know how customers’ wants, needs and values emerge over time to be successful. To gain the desired knowledge of the customer, an organization must focus on the current and prospective markets and customers it serves and put the customer first in every aspect of the organization.” (Barrett, 2012).
Cisco’s business strategy regarding customers and the market is to listen carefully to customer requests and needs, supervise all technological advancements, and offer customers a range of options from which to choose. Cisco attempts to develop products using widely accepted industry standards to satisfy those requirements of customers (OReilly, Charles and Jeffrey, 2003). CISCO.com provided online support for customers, answering queries, diagnosing network problems, giving easy solutions and expert assistance worldwide. Sections of Cisco’s website were translated into 17 different languages for better serving the customers. The company stressed customer service to max (Schwartz, 2012).
SWOT analysis highlights critical strengths, weaknesses, opportunities and threats of the firm from the strategies it uses. ”A formal SWOT analysis not only increases the awareness of the unique situation the firm is in, but also provides a roadmap to maintain, build and to act effectively as well as to eliminate weaknesses so as to capitalize on the opportunities even while defending against potentially harmful threats” (“Key Marketing Concepts and Strategies Adopted by Cisco Systems Inc.”, n.d.).
Leading market position
Strong brand value
Vigorous financial performance
Skillful management team
Focusing customer satisfaction
Quality of products
Adopting cloud technology
Emerging customer needs
High pricing products
High reliability on external vendors
Fluctuation in currency exchange rates
Leading market position across all its products segments provides Cisco a competitive advantage over its peers. CISCO is on the top position in market for providing routing, switching and associated services, including security and mobility solutions. In addition, its strong brand value will act as a differentiating factor and will allow it to introduce new products to the market. In 1993, CISCO was of $500 million company, and it has reported cash and cash equivalent of $7662 million at the end of year 2011, compared to $4581 million in 2010 (“Cisco Systems, Inc. 12
SWOT Analysis.”,2012). Cisco’s financial strength has complemented its long
term vision and strategy since it moved into new market adjacencies in conjunction with prioritizing the existing opportunities. Moreover, Cisco Management is well-respected for its ability to react to adverse business conditions, especially during the downturn. “Even in this downturn,” says chairman and CEO John Chambers, “We intend to be the most aggressive we’ve ever been” (“Key Marketing Concepts and Strategies Adopted by Cisco Systems Inc.”, n.d.,2012) (Malone,2012). CISCO has adopted customer satisfaction based strategies to grow in the competitive market. CISCO has always given importance and attention to the needs and requirements of the customers while delivering the products and services. Focusing on customer needs is the key business strength. CISCO provides a broad line of quality products such as routers and switches for transporting data, voice and video (“Key Marketing Concepts and Strategies Adopted by Cisco Systems Inc.”, n.d.).
CISCO is highly dependent on external vendors, suppliers and manufacturers. CISCO has limited control on the delivery schedules due to its outsourcing strategy in manufacturing. The company has suffered product and component scarcity due to manufacturing process issues. These supply chain issues and persistent shortages in supplying products may affect revenue and margins of the company. It has been analyzed that some of the CISCO’s products are high priced compared to those offered in the market by other competitors. This may affect the net revenue of the company (“Key Marketing Concepts and Strategies Adopted by Cisco Systems Inc.”, n.d.). Opportunities
Robust outlook for cloud computing provides new revenue opportunities to the company. The worldwide demand of the latest cloud computing technology is expected to be a key factor for the strong economic growth of CISCO. Cloud computing reduces the licensing payments for soft wares, investments and other hardware expenses. CISCO is keen to benefit from the high demand and adoption of cloud computing technology worldwide. CISCO pursues strategic agreements with other companies in areas that produce industry advancements and acceleration of new markets.
The agreements are based on technology exchange, product development, and joint sales and marketing and new market creation. Such strategic alliances with leading technology partners would allow the company to strengthen its products and services and drive incremental revenues in future. CISCO can analyze the current requirements of the customers which are not available in the market by other competitors and use it as the opportunity to grow the business (“Cisco Systems, Inc. SWOT Analysis.”,2012).
Asian markets contain enormous potential but due to inadequate intellectual property protection, Cisco is unable to invest heavily in these markets. Regulatory and logistical issues have prevented the emergence and establishment of new market areas such as Voice Over IP. The company is vulnerable to the fluctuations in exchange rate of the currency because it conducts the business globally in various currencies. The exchange rate fluctuation from time to time may significantly affect financial performance and economic growth of the company. The company faces intense competition in the networking and communication product markets. These markets are categorized by rapid change, converging technologies, migration to networking and communication technologies that offer competitive advantages. CISCO’s major competitors in various products include Dell, Fortinet, Hewlett-Packards, International Business Machines, 13
Juniper Networks, Motorola Solutions, Netgear, Polycom, Symantec, and Extreme Networks (“Key Marketing Concepts and Strategies Adopted by Cisco Systems Inc.”, n.d.). There are great price wars between CISCO and its competitors for the same products.
Management realized that the implementation of an enterprise system would meet the company needs and require heavy involvement from the employees and IT department within the company. Their handpicked team not only included the best people from these two departments, but the most knowledgeable people from every department to be part of the ERP implementation team. With the team in place the company decided to involve a consulting partner to aid in the implementation process. Cisco was looking for a partner who would, in addition to providing consulting services would also help Cisco to choose the ERP vendor. Cisco considered the following consulting partners: Cap Gemini Sogeti, Siemens, IBM, KPMG and Price Waterhouse Coopers. KPMG consulting had agreed to provide support so KPMG consulting joined Cisco at this stage with their great technical skills, and expert business knowledge. KPMG appeared to be an ideal partner with Cisco because they were willing to give them the expert resources that Cisco required to complete such a large project in as short a time as possible. KPMG sent their best ERP Implementation program manager, Mark Lee. Under Lee’ leadership, a 20 member team from Cisco evaluated the available software packages in the market. Ten days were spent drafting the ERP Request for Proposal (RFP).
The team targeted on two prime packages within little more than a week. They had used the knowledge of large corporations and research sources like Gartner to know the most preferred option among other users in the market. Over one month, Cisco and KPMG went through a rigorous process of selecting the right option from the two narrowed choices. In the end Oracle was chosen due to their better manufacturing capability than the other vendor. Oracle made a promise of long-term functionality development along with their geographical closeness to Cisco. Oracle was mostly motivated to make the Cisco project a success. The Cisco project would be the first major implementation of a new release of the Oracle ERP product. Oracle had to confirm their point that their new product had major improvements in support of manufacturing. If this would become a successful implementation at Cisco this could launch the new product on a very favorable trajectory.
Having so much at stake forced Oracle to put a large amount of resources and some of their best people on the project to guarantee its success. The contract itself reflected Oracle’s commitment by promising capabilities, not simply a software package. In addition Cisco agreed upon helping Oracle to market their latest newest releases to potential customers, should Oracle be successful in delivering the system in time and budget. Here Oracle was getting a service that it needed to have far more than Cisco needed to give. This gave Cisco a huge bargaining power, something it could not have had with SAP.
Cisco had not gone through formal processes of management approval, which further sped up the implementation. The board of directors at Cisco were concerned with how long the project would take and how much would it cost. A gigantic project such as this often consumes a huge amount of resources and has the ability to spin out of control, and deliver imperfect results in the end. After much debate the team was committed to do the entire process within nine months and 14
for $15 million. Cisco did not attempt to do a formal economic justification for the costs of this project. The project became the single largest capital project ever approved by the company. It took the Cisco team only 75 days, from analyzing the problem, to the final selection the vendor and finalizing the schedule and budget. From the initial conception of the project, its leaders knew what they wanted, a large system in a short amount of time that contained the ability to adapt and grow concurrently with their business, and a provider that was going to be around to support their product well into the future. The certainty of the leaders on what they wanted pushed the selection process forward in a short amount of time. With senior management fully backing the project and being kept informed on every step from the beginning, leading to a strong schedule and the backing of the entire corporation.
Cisco was able to have its ERP system operational by 9 months and within budget. Although there was no cost benefit analysis done to determine Cisco ROI in this project, Cisco has been able to make billions of dollars from the successful implementation of the ERP implementation.
General Technology Factors
To be clear, ERP “systems integrate internal and external management information across an entire organization, embracing finance/accounting, manufacturing, sales and service, customer relationship management, etc…The purpose of ERP is to facilitate the flow of information between all business functions inside the boundaries of the organization and manage the connections to outside stakeholders,” (Wikipedia, n.d.) When you conduct an ERP implementation, it usually involves a significant change to business processes.
If the changes are not implemented correctly, you can tank an organization, causing them to downsize to the point of bankruptcy. It is because of this, that Cisco chose Oracle as its ERP vendor because at the time, Oracle’s product supposedly had great improvements in order to support manufacturing processes. Of all the business processes Cisco had to consider in the ERP, manufacturing was recognized as their leading area.
This is an important technology factor to consider. In the case of Cisco, modifications were not to be made to the software; this was based on Cisco manger Redfield’s perspective. Redfield believed that modifications would take a lot longer to implement and not necessarily producing the intended result. I agree with his perspective here, if there is already a complete, logical architecture for how to do something-and you change it-it may not work. In the Cisco case, some modifications were needed and when too many had to be made for the customer support area, the team decided to purchase a supporting software package instead. Researchers have identified that organizations need to determine if pre-customized ERP systems are of intrinsic value to them during the planning stage because any further customization after delivery usually results in cost overrun, schedule slips and project scope creep (Noyes).
A critical failure factor noted by Wong regarding ERP implementations is over customization of software. “Customizing the ERP to fit with business processes might lead to sacrificing ‘best practices;’ embedded in the ERP system,” (“Critical Failure Factors in ERP Implementation”). In Wong’s review, two Hong Kong manufacturing companies, one for electronic components and one for multimedia speakers, both failed to have a good knowledge of their ERP software. In both cases, companies chose an ERP system that was not good for their needs. Order Entry
This is the main process of the Cisco ERP system. Orders, also called “Work Orders”, are the entries that allow employees in different departments to access the same data, add to and modify it, and keep track of it. In the case study, this process is defined as the ATP (Available To Promise) process. The case study highlighted several considerations for this process, including: Process for Order Scheduling, ATP System Issues, ATP Process Issues, and process commentaries, (Applegate, p.610-11). It begs the question, has Cisco considered good process script definitions?
In this case I believe the answer is “yes”, because of detailed script documenting, process tracking sheets, and weekly meetings to address issues. The detail the IT team gave to defining system processes helped make sure the system was efficient by the go-live date. The way Cisco treated each process script helped to ensure that any modifications that had to be made would still allow the ERP system to run smoothly. Data warehouse
This is to be the central point of storage for all of Cisco’s information. It is how orders are stored and retrieved. Having a central location for access and retrieval is a major part of an ERP system. Cisco chose the data warehouse method over a “point-by-point” communication method because the “Utilization of a data warehouse would allow all of Cisco’s applications to access a single source for their information needs,” (Applegate, p.614). Perhaps unaware at the time, the decision Cisco made would allow them to have a more central web presence as well.
By the late 1990’s, Cisco had migrated most of its internal applications to the web, along with the already existing external, customer self-help applications. Of the internal applications, human resource functions for employees and management tools for managerial reviews were available. “Before these applications were deployed, each Cisco manager spent nearly 120 hours each year reviewing his or her employees and their compensation. Cisco estimated that each manager saved over 25 hours a year using these web-based workforce tools, resulting in overall company savings of over $7 million,” (Networked at Cisco, p.6).
There are a few important things IT managers should consider when selecting an ERP product, or any other major software product for that matter. One thing is modifications; if a product needs too many modifications it is probably not going to be an effective product for company production. Scripting business processes very thoroughly will help catch any errors and ensure a smooth operation of the ERP product. A centralized storage area such as a data warehouse makes information available in a timely manner across the company. It also allows for less paperwork while tracking product builds and customer requests.
How much would it cost? This was an important question the Cisco ERP implementation management team considered. It had to be answered before the implementation could begin. An important strategy Cisco manager Redfield is noted for is his thought: ‘You really need to look at…institutionalizing a business model for your organization,’ (Applegate, p.606). Following Redfield’s insight, Cisco managers Pete Slovik, Randy Pond, and Tom Herbert took a $15 million project pitch to the board. The pitch is so important, and for many IT managers, it is a major career move-if a company invests a lot of money into your idea and it doesn’t work, then out the door you go!
There are several reasons businesses struggle with negotiations involving ERP implementations. The size and scope of the project can raise a lot of technical complexities, even for the most straightforward implementations. Cost and time are directly associated with how much leverage the vendor can have over the buyer-the longer the implementation life cycle, the more leverage the vendor can have. Along with Oracle, SAP is another major ERP vendor. A report by Forrester Research, a major market research firm, suggested that “buyers evaluate their strategy, and potential risks, to negotiate a deal reflecting longer term business goals. To accomplish this, buyers must understand their own requirements, while remaining aware of [ERP vendor] strategies and goals,” (Krigsman, “SAP license and price negotiation dynamics”). HR
In Cisco’s case, the management team realized that in order for the implementation to be a success, they needed to involve key employees from the business community. Key employees were identified based on how much they were missed if they were not in their departments. Employees the company could not live without were chosen as consultants for this project. Including employees in the implementation process helped reduce the risk of employees resisting the change.
Cisco mangers Pete Slovik (CIO) and Carl Redfield (senior vice president of manufacturing) agreed that the company would also need a strong integration partner. KPGM was chosen for this role, because both Cisco mangers believed the company possessed the technical and business skills needed for a successful ERP implementation. Using a consultant was wise; it allowed the company to have a professional, outside perspective that could help troubleshoot issues that came up. A critical success factor her was Cisco’s choice in an experienced and reputable consulting partner. There are documented cases of failures due to a company not choosing a good implementation partner.
Delta is a multimedia speaker manufacturing company that is an example of an ERP implementation failure. “For Delta, the consultants were inexperienced in using the ERP system, they followed their formal implementation methodology during only the first two months, BPR was poorly conducted as they were not satisfied with the consulting fee received from the project. Also, the user requirement analysis document produced was too wordy (all business process flow charts for clarifying how to conduct BPR were absent) and the training material (prepared by the consultants) was found to be too brief and unhelpful,” (Wong, et al. “Critical 17
Failure Factors in ERP Implementation”). This is a great example of why it is so important to choose a capable partner when you are trying to implement new technology into your business. Training
Another key non-technology factor was Cisco employee training for Oracle applications. Two, very long, 16-hour training days were designed to replace Oracles five-day training classes. Honestly this is one area of the cases study that is important to consider for future implementations. It is critical that if you are switching over to new process that your employees know how to use any tools necessary to complete the process.
In this case it is Oracle software. Honestly I think Cisco was lucky that they were able to function on the limited training they had. Without good training, a company can lose its production capabilities when it switches over to a new ERP system, or any other kind of technology that drastically changes its business processes. Another critical failure factor noted in “Critical Failure Factors in ERP Implementation” was a lack of training. Along with poor consultant effectiveness, there was also a poor knowledge transfer, meaning ineffective training.
Time and timing
How long would it take? This was the question raised by the Cisco team responsible for selecting the ERP product. Cisco mangers debated between a 15 month and 5 month deadline, eventually settling on an 8 month time line for the ERP implementation. Aside from the size of the project, another key factor for Cisco was the time the project would end. Pete Slovik noted ‘you know we can’t implement in the forth quarter [Cisco’s fiscal year]. The auditors will have a complete cow,’ (Applegate, p.605). This is true in any business. The critical success factor for this case had a lot to do with a realistic, well thought out project timeline that began in June, 1994 and ended in January, 1995.
In short, people, money and time are always going to be factors you need to consider when implementing an ERP system. Choosing knowledgeable consultants will enhance your project but failing to choose good consultants or key personal can potentially diminish any chances of a successful ERP implementation. Training is also important; it helps ensure that production will be smooth and also decreases employee resistance to change. Money and time are also important, in both cases you need to be realistic about how much and how long you need. For many IT managers, asking for money is a career move that depends on the success of the project. A project that takes too little or too much time can hinder operations.
IT Systems Supporting Business Processes
IT goals were to support the company’s decision to go to a $500 billion dollar company. Cisco chose an ERP system that would allow the IT system to grow and integrate with customer support service systems. There were 6 other goals during the time of decision and one would imagine two of the goals were to 1. Improve and integrate customer support systems with background manufacturing databases and 2. Improve customer service through IT systems 18
integration. The ERP choice and integration was the catalyst that formed the foundation for Cisco to grow into the successful enterprise it is today.
“The project emerged as one of the company’s top seven goals for the year.” (Applegate, Austin, McFarlan, p. 607)
The customer service impact and “virtual integration” (Applegate, Austin, McFarlan, p. 246) that Cisco was able to improve and create, respectively improved Cisco’s position in the infrastructure producer market concept. One of Cisco’s philosophies was to include a customer service approach to captivating the market and customers. Cisco wanted to develop a customer that relied on their company for all infrastructure data networking components. The only way that this would be feasible was to have a IT system that could provide an exceptional customer service experience. Measuring the benefits of the IT systems was the customer service experience as a result of merging suppliers and customers.
“In 1996, the company introduced a new Internet initiative called the ‘Networked Strategy’ to leverage its network for fostering interactive relationships with customers, partners, suppliers and employees. Cisco wanted to ensure enhanced customer satisfaction through online order entry and configuration. Customers’ order information flowed through the supply chain network, which consisted of Cisco employees, resellers, manufacturers, suppliers, customers and distributors. Orders from customers were stored in Cisco’s enterprise resource planning database and sent to contract manufacturers over the virtual private network (VPN). Cisco’s suppliers could clearly see the order information as their own production schedule was connected to Cisco’s ERP system.” (Scribd.)
“It’s also the company’s mind-set and culture, its willingness to team up with outsiders to acquire and retain intellectual assets, its near-religious focus on the customer, and its progressive human resource policies.” (Carlsen, Clifford)
Value of IT investments
The next benefit of integration of suppliers and customers leads to the value of the IT investment in the ERP system. Once again, the IT system depended on backend systems to create efficient processes that would lead to quicker and faster turnaround times for producing routers. This fed back into customer service as well as integration with Cisco’s approach to acquisition. IT systems had to be well equipped to deal with Cisco’s new business concept of merging with new companies. The value of the IT systems directly relates and gives external entities an idea of the value of the company. Needless to say, with the high number of mergers and acquisitions taken place, and value of IT systems and the company going hand in hand, Cisco was a valued company with valued IT systems.
Benchmarks with IT best practices
During the phased implementation of the ERP system, each cycle ended with some type of feedback and simulation of input and processing information. Lessons learned were conducted from one cycle to the next to build on the expectations and efficiency of the project. When the system was cutover to a live production system, the IT department quickly realized that accurate 19
measures weren’t taken in terms of quantity of scalability of the system. The system was built within its original scope of the project. Unfortunately, the scope undermined what Cisco was really doing in terms of the business volumes. During this decision, integration and cutover time period, Cisco was reaching to international markets, acquiring new companies and enhancing its functionality on their manufactured routers. Needless to say, Cisco’s IT system requirements were not in sync with what the business was really producing. These lessons learned serve as benchmarks at certain milestones and critical points with the system development life cycle.
These are the feedback loops that indicate how well or poor the system is advancing and what are the unforeseeable opportunities for improvement. Without these feedback mechanisms in place, Cisco would have had a robust system that was unable to meet business demands. Business effectiveness assessment
To exemplify the business effectiveness measurement, there are many factors that can be used. Cisco’s ERP system directly impacted other IT systems including customer service and support systems. The ERP system can be measured by how effective and efficient processes have become with internal and external teams working together for one business goal. Another assessment for business effectiveness is the obvious one, which is revenue and profit as a result of IT systems. “In the same year, it also introduced customized business applications for its large customers. These applications resided inside the customers’ corporate intranet and automated the ordering process by linking directly to Cisco’s internal systems.
By the end of 2000, more than 75% of the orders for Cisco’s products were being placed over the Internet. Aided by Cisco’s Internet initiatives, the company’s net sales grew at an impressive 78% compounded annual growth rate (CAGR), from $ 2 billion in 1995 to $ 9 billion in 1998. The company’s fourth quarter revenues in 2000 were $ 5.7 billion, up 61% from the same period in 1999.Operating profits also went up from $ 710 million in 1999 to $ 1.2 billion in 2000. According to many analysts, the company’s networking strategy had played a major role in its success over the years.” (Scribd.) Summary of IT systems Supporting Business Processes
In summary, the IT goals listed in the case study were met for at least 1 and 2 assumed of the 7 for the year that the ERP system was chosen. The ERP system had a direct effect on other critical IT systems that were measured in terms of the external customers and efficient processes on the backend. The value of IT investments are in parallel with the value of the company. The value of the company is measured by acquisition of technical companies. Lessons learned from phase to phase was an example of IT best practices, and effectiveness measured by the bottom line. The bottom line is sales, revenue, efficient cost savings, thus increased profit.
Pillars of IT
It is often assumed that because a company like “Cisco” who sells network equipment would have no use for computer programming. On the contrary most of their operation is run through computer programming. We are living in a world of technology and as such we much abide by what technology demands. Can you imagine trying to account for hundreds of thousands of components, equipment, accounts, stock, inventory and personnel without a database to control it 20
all? Hundreds of transactions are made daily at Cisco, but it didn’t start out that way. It was tough; mistakes were made and money was lost before they went on to become one of the largest and leading networking companies in the industry.
Obviously, Cisco has to maintain an appropriate level of HCI to effectively operate. The training and preparation can be very taxing and expensive. There is usually not a high turnover rate of personnel so that helps to supplement the expense of training, however due to the vast development of new technology, retraining becomes a major factor in the budgetary aspects of financial management for HCI with Cisco as it does with all organizations. Database
Cisco’s database is very broad and intricate. There are many things to be considered when developing a database such as name change, price change, expansion or reduction and inventory, just to name a few. The database is sub-divided to manage the entire organization while ensuring that there is no cross contamination of information. Data-mining becomes very important as well. In many cases, large organizations, such as Cisco, deals with repeat customers but because personnel changes occur within their organizations as well, good effective communication must be established and protocols put in place to anticipate and combat both known and unexpected changes.
The following interviews were conducted via telephone with 3 Cisco employees between the dates of 06/25/2012—06/29/2012. The purpose of the interview was to understand how Cisco’s IT pillars are used today. The questions and responses are listed below: 1.
How have you used programming in the past to gain business advantages?
Melissa Rainer: “Initially programming was not a major concern for Cisco, at least as far as actually programming computers. I mean, our business was selling routers, and we didn’t consider programming to be important, but as the company grew we realized that our concerned needed to be geared towards being able to maintain the computer programs that we used to run the business.”
Sheila McFadden: “I really don’t know a whole lot about that part of it; I just know I had to go to training to learn how to use the inventory system.” “I do believe though that keeping up with technology is important and it definitely gave us huge advantage.” 2.
How does your use of programming differ today from 5-10 years ago?
Bobby Drayton: “The use of the programming doesn’t change so much as the software that we use to conduct business. When we went through the phase where we were deciding if we were going to build or buy great consideration was given to the programming aspects because we knew that training and availability could be an issue.”
Has your HCI increased or decreased over the years?
Bobby Drayton: “Definitely increased. Some people just think that HCI only deals with sitting in front of a computer, turning it on and start typing
away but it’s much deeper than that. As we lessened our outsourcing and the lay person became more and more familiar with the use of computers we had more interaction and less need for calling in outside help.” 4.
Do you anticipate a drastic change up or down in your HCI?
Bobby Drayton: “Absolutely! As I said, technology will continue to grow and the common person will become more and more savvy at assembling, using and even programming computers in some cases.”
Do you feel that your database system is completely safe?
Sheila McFadden: “I don’t know that anything is 100% safe. With advanced technology also come smarter hackers and people who mean you no good. We do have some of the best engineers in the world working for us and we have over 73,000 employees, so they and our assets have to be protected. I believe there is more danger and concern in human error than there is as far as the safety of our database”
What measures do you take to ensure security?
Melissa Rainer: “Well we have passwords; everything is password protected.” We have layers of security. Like, we’re prompted to change our password every 6 months and if we don’t use it for a certain length of time it will lock us out and we have to contact IT to reset it.” Sheila McFadden: “We’re not supposed to wear or display or badge in public, you know because it has company information on it and we’re not allowed to talk about some things dealing with some of our processes.”
Does the training for your Web-Systems come from within the company?
Bobby Drayton: “Yes. It is way more cost effective to conduct our training onsite. We cut out lost time, travel and liability. It’s definitely better to train onsite.” 8.
What percentage of your company’s functionality account for web-systems?
Bobby Drayton: “I can’t tell you percentages but I can certainly say that because we are such a large company, web-systems play a major role in our business and account for most of our revenue.”
How many employees do you currently have?
Melissa Rainer: “73,000.”
How many are employed in your call center?
Melissa Rainer: “I don’t know that exact number but I would guess over 5,000.”
Recommendation for Decision
Focusing current customer need in the market not offered by competitors CISCO should evaluate the current market requirements of the customers focusing the latest technologies offered in the field of networking and communication. It should analyze what is not being offered by its competitors. The company should develop the outline for manufacturing those products which are not being provided by its competitors. This strategy will help in overall economic growth of the company.
Look over strong competitors
CISCO should develop the business strategies by evaluating the competitor’s business strategy. The company should focus what competitors are offering and at what prices. Company should keep products and prices based on this analysis and evaluation. It may lead to achieve success in global competitive world.
Focus on cloud computing
Cloud computing technology can be proven to be key benefit for overall company growth across the globe because of increasing demand of this technology worldwide. Cloud computing provides a simple and easy-to-use interface for users to access and manage their physical and virtual resources. With the growth of cloud computing, companies are expecting to gain benefits and increase revenues.
Expand the market through offering other products and services CISCO is already a leading organization in networking and communication solutions. CISCO can expand the market by offering a wide range of other products and services apart from networking and communication solutions. This may prove to be a great success for CISCO and can enhance its business expansion plans.
Maintain R & D team
Cisco’s main strength is its R&D Team. Cisco should sharpen its research team further to analyze current market situation and start working on its ten year strategies utilizing the competencies of its R&D Team. It can also consider to persistently work on developing and manufacturing new products so as to retain its existing customers and more essentially, to attract new customers (“Key Marketing Concepts and Strategies Adopted by Cisco Systems Inc.”, n.d.,2012). Cost optimization for products
CISCO should analyze its prices for the products and services it offers over the competency in the market prices for the same products and services. The company should develop a plan to offer the products and services at lowest market prices while maintaining the quality. This may be useful in increasing overall profit of the company.
Advertising trough television
CISCO is already in social networking sites on advertisement fronts but it should also try to gain more popularity through television, radio and other communication media that are easily accessible by the large number of customers. This will help the company to capture more markets by attracting more number of customers (“Key Marketing Concepts and Strategies Adopted by Cisco Systems Inc.”, n.d.,2012).
Implementing ERP systems
Choose people wisely
When you are planning on an ERP implementation, it is important that you include people from all departments. Choosing key employees that are important to the success of business processes allows for valuable input. Key employees know if you are going to enhance or kill the production value of a business process. Along with key employees, it is also important to choose knowledgeable consultants. Simply look for people who have experience with ERP implementations as well as successful track records.
Along with avoiding modifications to software packages, you should also look to add support as needed. Often times answers do not come boxed up all nice and neat in one package, this is also true of software systems. Cisco was successful because the ERP implementation team identified the major business process the company was dependent on. It was discovered only later that the customer support in the ERP was not great. Cisco added another package to handle this which helped launch them to success.
In good time
Be reasonable about your timeline. If you are planning a major multi-million dollar ERP implementation, consider when you would like to finish, make sure it is not during an ending fiscal quarter. Also, set milestones and follow through with them on time.
The implementation of a new IT system can improve efficiency or can lead to a breakdown in operations of an organization(Koch, Slater and Baatz). This is a result of IT dependent processes which translate to revenue from the products and services offered by the organization. As the case outlined, the need for a new system could be driven by factors that range from inefficient legacy systems, increased customer demand or competition to business process realignment. Cisco’s ERP implementation was mainly driven by inefficient legacy systems (Applegate, Austin and McFarlan). Although the application was finally rolled out into production, the challenges experienced served as identifiable gaps in both the planning and implementation phases. The choice to go with an ERP application that required tweaking was a major hindrance to the 24
operational debut of the new system. The decision to “make vs. buy” is directly affected by what options exist on the market and how many customizations are needed to get a quality product. Another area that was identified was the composition of the team. The team was made up of the best members of the departments, as well as an experienced consultant (KPMG). The result of this was a test order that failed and mandated a redesign of a section of the system. This could have been avoided if the user groups were part of the requirement analysis stage. Finally, the ability to recover from problems during IT project deployments are dependent on factors like cost, time and complexity of the project.
For instance a project that involves harmonizing the operations of a multinational company will most likely be abandoned if it causes extended periods of wide spread outages that disrupted the entire organization while a project that installs fifty desktop computers in just one location can still recover from a poor plan because of its simple nature. The need for a detailed and living project plan cannot be over emphasized and the requirement for a holistic implementation method is important because the overall business objective of keeping the organization operational must not be jeopardized because of the need to replace a component in it.
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Appendix A-Key Terms
Business model- a design of the operations of a business which focuses on how revenue will be generated (Dictionary.com’s 21st Century Lexicon, “Business model”,) Case Study- Documented study of a specific real-life situation or imagined scenario, used as a training tool in business schools and firms. Students or trainees are required to analyze the prescribed cases and present their interpretations or solutions, supported by the line of reasoning employed and assumptions made,( Webfinance ,“Case study”). Data warehouse- a database used for reporting and analysis, (Wikipedia, “data warehouse”). Electronic commerce (e-commerce): “It is the buying and selling of products or services over electronic systems such as the Internet and other computer networks.” (Wikipedia, “Electronic commerce”)
ERP systems:” Enterprise resource planning (ERP) systems integrate internal
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(2013, 10). Cisco Case Study: an in-depth look at IT Management during an ERP implementation.StudyMode.com. Retrieved 10, 2013, from http://www.studymode.com/essays/Cisco-Case-Study-An-In-Depth-Look-39449884.html
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