Enterprise IT at Cisco (2004) Question: How well did Solviks’ model work? Did it have the desired effect of turning managers into IT enthusiasts? Answer: At Cisco, Pete Solvik was considered a “visionary” and a “cult-like figure” to many managers because of his innovative ideas on how to use IT to change the company. (Aungle video). During Solviks’ rein, Cisco was growing at an exponential rate and it was John Chambers’ attitude that as long as they were growing, the business units could spend whatever they wanted on IT.
(Id. Solvik wanted an enterprise IT solution to manage inventory and manufacturing so he chose Oracle, a single-vendor solution, to help manage Cisco’s inventory and manufacturing processes. (Id. ) Unfortunately, while this made it easier to implement globally, it later created problems when Boston came on board and wanted to upgrade and streamline the system. Prior to Solvik, IT was always an internally oriented cost center, but Solvik moved Cisco’s IT organization out of finance and into the customer advocacy group.
(Case study, p. 3).
This meant that IT spending was no longer thought of as “overhead” and now each business unit manager was responsible for their own investment decisions; it became a client-funded project system. However, Oracle didn’t have all the functionality required by each segment of the business and even though ERP systems are “designed to plan and integrate processes, enforce data integrity, and better manage resources”, managers needed to customize it to their needs. (Bendoly, p. 79). Managers remained enthusiastic because they were given the freedom to purchase and install whatever they wanted to sit on the Oracle platform.
As a result, inconsistencies developed between different business units and even within the different regions of a specific segment. (McAfee, p. 104). For example, the sales team in Europe and the sales team in the US each created different tools for the same process but they pulled from different data. The result of having multiple teams in different parts of the country all needing to check the status of orders meant that multiple tools were built to do the same thing. (Case study, p. 4).
Solviks’ model failed largely because the ERP system expanded such that it no longer pulled information from a single database. Furthermore, the client-funded-project system still relied on a central IT unit and with so many different projects going on they simply didn’t have the resources to keep up. As the business scaled at such a fast pace, they needed to hire more and more people to help the infrastructure scale with it. (Case study, p. 4) Since managers directed IT to do what they wanted, Boston had a hard time putting an end to the customized solutions.
He recognized that they needed to stop creating more havoc in the system if they wanted to upgrade the ERP. Unfortunately, with the model created by Solvik, business managers were used to doing what they wanted. They continued funding IT projects for bolt-on solutions even when corporate IT refused to do the job. These “shadow IT” projects were a big problem because they used contractors and Cisco didn’t have any means of controlling them. As Mabert’s article explains, a successful enterprise solution must establish clear guidelines on how to use outside IT consultants. (p. 75).
In essence, Solvik failed to take into account that most companies need other systems for specialized functions, especially highly fragmented companies like Cisco, and ultimately his model was not successful due to a lack of oversight and failure to properly scope out the Oracle implementation. Question: What capabilities is Cisco seeking with the IT efforts described beginning on page 5 of the case (Boston’s actions). Answer: Boston needed to gain control of Cisco’s IT spending, and there needed to be a major shift away from local independence and a move toward adoption of a globally consistent infrastructure.
If Cisco continued down Solviks’ path, fixing IT problems would get more difficult and costly. Boston believed that “standardization has to be seen in the context of something that is gained. ” (Glaser, p. 33). There were many projects going on that didn’t benefit the business and needed to be put on pause. Boston’s highest priorities were to upgrade the Oracle ERP system, develop a single, master customer database and establish an enterprise reporting and BI solution. (Case study, p. 5).
First, the upgrade would impact all the other systems that were added on and it needed to be done very carefully and strategically. Culture was a problem. The IT funding model needed to change because managers were used to doing what they wanted as far as what technology they were implementing. If they were going to standardize cross functionally, then they had to stop creating customized tools. Boston decided that the business units would no longer be in control of their own destinies and instead each needed to contribute resources to the larger good of the organization. Case study, p. 6). Everyone needed to be accountable, even the corporate IT function that in the past would do whatever the business unit asked. Boston’s solution was to break down the allocation into three categories: infrastructure, application development and direct charge items. Corporate IT would control the infrastructure, keeping the business units in control of application development and direct-charge funds. (Case study, p. 6). Everyone needed to contribute to companywide initiatives.
It was a trade-off, but Cisco needed to find a middle ground between what Boston started to implement and what Solviks’ model created. Next, each initiative had an owner within the particular business unit that made sure things would get done right and their needs would be met, including all the manual work necessary to clean-up the data. As Aungle explained, it all comes back to the data and if you don’t get the right policies in place to get the data right you won’t be able to innovate. Boston set out to fix the data because they desperately needed a “single source of truth” as their customer database. Case study, p. 5). The “e-customer” initiative sought to centralize all its sources of customer data, but they faced many challenges. One issue was that they needed to go through two or three layers to find out information about the end-user (Aungle video). Cisco really had to work with its partners in order to get the data they needed for e-customer. Another problem was that simple naming conventions of data were inconsistent, especially company names, like “IBM” and “I. B. M”, all needed to be recognized consistently across the board.
The names would also be a problem when working with similarly named subsidiaries of a larger parent. To get the customer database in place was a big task, so the enterprise reporting and BI solution was built to standardize and put the data in one place where everyone could go and get what they needed. They already had many BI tools but none of them talked to each other, a single solution finally allowed the European sales team and the US finance team to see all the same bookings and shipments in one place. (Case study, p. 6)
After the three major implementations were put in place, Boston was able to reorganize IT into business process groups so that now each part of IT had its own disciple to work with and they could be seen as partners to help grow specific parts of the business. (Case study, p. 8). The BPOC was formed so that many of the high level authorities within the groups could help make policy decisions and influence others to help change the culture. It remains a balance of keeping some of the old with the new because Cisco is still highly decentralized, and each initiative must be approached cautiously.
As Mabert suggests in his article, the most successful ERP implementations are done when teams spend more time up front to define exactly how things should be carried out. (P. 75). Cisco continues to face problems making sure the new process organization does not frustrate people when they are unable to get their initiatives going. However, Boston’s goal is to build a sustainable model for the future and in order to make that happen, policies, processes and data must be properly managed before IT projects can move ahead.
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