Cisco Case Study 65q

Abhinav Capoor Cisco ERP Implementation Case Study 701550051 1. Describe the objective of the case.

Cisco Systems, Inc. is a big player in the Internet technologies field, manufacturing their primary product – the router. Two Stanford computer scientists founded the company in 1984, unbelievably by 1997, Cisco became a fortune 500 company and in the following year Cisco’s market capitalization was over $100 billion dollars. With the gigantic growth experienced Cisco needed to look into their future regarding their existing Enterprise Resource Planning package. Unreliability and common outages brought into question the validity of trying to enlarge the current system to meet the Cisco’s constantly growing needs. The current system was a UNIX-based software package that ed financial, manufacturing, and order-entry systems. An upgrade was made available to Cisco, but would be a fix that offered more reliability and redundancy without maintainability or room for growth. The management structure in 1993 provided that each functional business unit make its own decisions regarding the future of their IT systems. Each department head knew that “ban-aiding” the current system was not going to be sufficient in coordination with the company’s rapid growth. However, no individual was willing to approach the board with a costly and lengthy proposal for replacement of the legacy systems. Pete Solvick CIO of Cisco did not primarily want to undertake a huge company wide ERP project, but in January of 1994, a system failure halted nearly the entire business for two days, and the problem could no longer be ignored. Solvick, along with other managers put together a plan to take on replacement of all faulty legacy applications in a single ERP project that would provide a common data architecture throughout each business unit.

2. Discuss the issues and relate to class, textbook and internet sources.

There were a number of issues that Cisco faced. Since the need for a new ERP arises from the current state of the system we assume the issues faced by the company are irrelevant. Initially, the company decided to change the system by giving every functional area the provision to make its own decisions. After an entire year there was no change. As discussed in class, to implement an ERP, there are a number of steps that need to be undertaken. Cisco realized that out of the given options, selecting an ERP for the entire

Abhinav Capoor Cisco ERP Implementation Case Study 701550051 organization was the most efficient alternative. From the preliminary investigation to the final operation, every step was completed with utmost diligence. There were a few hurdles on the way but proejct management was at its peak. They were a number of issues they were facing with their current systems. They were inlfexible financial, manufactruing and sales systems could not business needs nor anticipate future growth. These systems caused routine system outages. Each department was working independently creating silos of information which led to redundancy and ineffienciency. This prevented the top management from seeing the big picture. Another important issue was, Cisco was the largest customer of their current software company and the company was being bought out by another company. When targeting the new ERP system, certain guidelines were taken. Cisco was not going do a phased implementation and they were not going to allow a lot of customization. A project of this scale could not have been solely an IT initiative. As we discussed in class, during the generation and implementation of any IS, there needs to be heavy involvement from the business end of the system (the end s). It was of utmost importance that there would be a strong team of IT aswell as business individuals. To make a project of this magnitutde successful, the team needed to comprise of the very best individuals that were working in the entire company. The people, who were pulled out, were the people who the business absolutely did not want to give up. The decision to bring KPMG on board was a very effective one. KPMG provided them with the technical and business knowledge that they had and helped them in chosing the ERP system. Once the product was shortlisted, it was important to determine the project feasibility. In class we discussed, when determing the project feasibility, the operational, technical, schedule and economic factors of the product need to be assessed. Cisco management was able to determine the operational, technical and schedule effectivness of the ERP. But they did not measure the economic benefits of the product. There was no Cost-Benefit Analysis done. This was a risky measure but they took a risk, the system was created to insure the long term fesibility of the company and future development. Cisco had a strong manufacturing capability and long term development of functionality, it needed oracle to prove the ERP proficiency. Oracle had the same goals as Cisco for ERP, they were eager to work with company of Cisco’s size. The decision to choose Oracle ERP was based on the manufatring capability, the number of promises and the flexibility of Oracle as compared to the other vendor. After chosing the product, one of the major hurdles Cisco faced was to convince the board for aproving $15 million dollars for the project. Due to the due diligence by the team the case was very well prepared and got the boards approval. The project management, structrue from her on end was phenomenal. The way the team connected, their enthusiasm and the flow of information was unmatched. The CRPs were formed to build on previous work to develop a deeper

Abhinav Capoor Cisco ERP Implementation Case Study 701550051 undertanding of the software. As we studied before, this was a third order change in the organization. People from IT and business both were involved in the decision making process. Teams worked in parallel efforts, for the training of the team and to get the systems running. To esnure the best confuguration of the system with minimum customization, teams used 80-20 principle to get to recommendations. This was the 1% that gave 80% configuration. Cisco had intitally decided not to modify the ERP software, after the CRPs, it was realized that there had to be a number of changes that need to take place inorder for the ERP to be effective. Another issue was that the Oracle package would not adequately the after sales needs of the company. The additional package was selected and implemented ona schedule that matched the overall implementation schedule. During the third CRP, the teams had discovered that the major modifications and a new after sales package and changed the project scope. All this led to more hours spent by the 100 person IT team and they bore the maximum responsibility. After switching on the system the hardware architecture and sizing failed. But due to the contract of promised capability, Cisco did not bear any costs. These problems were solved on the project was on track. Attempts to complete the processes without modifications indicated exactly what kind of customization would be neessary. It helped find the modifications that were necessary and made the system work in each are.As discussed in class, inorder to have an effective system, testing at various levels are required. Thesting was conducated before the complete cutover; although results satisfied everyone, it was clear that the tests were not complete. Faliure to have proper tests led to a below expectations performance of the system at the beginning. The forward thinking approach of Cisco allowed problems to be corrected without additional expenditure for this project. There were a number of problems/issues that were faced by Cisco. But due to their approach and the of mangement, they were able to see the entire project through. Cisco followed the entire process, from Preliminary Investigation , Systems Analysis, Systems Design, Acquisition/Development, testing, Installation and Training to Operation and Maintenance. Due to strong coordination between the team and the coordination of the with the mangement the software become extremely effective. The project management schedule was extremely well laid out. The employees were well motivated and looked at this as the biggest opportunity. The project was carried out with utmost care and precision.

3. What factors had made the difference between success and faliure?

Abhinav Capoor Cisco ERP Implementation Case Study 701550051

Cisco’s overall performance was very successful. There were a number of factors that played an important role: i.

Faliure of the Existing System: The initial effort to restructure the system. Every functional area could make its own decision regarding the software application they wanted to use. They were required to use a common database to maintain standardization. This method was contiued for a year, which was ineffective as there was little or no change. This caused the company to shut down for 2 days. Hence, the need for a stable and effcient ERP system was created.

ii.

The System Replcament: The decsion to purchase a single ERP system was the changing point at Cisco. The factors for chosing the ERP system were less time, low customization and high priority.

iii.

Selection of Partnering Consultant or Vendor: The decision to get KPMG onboard was a good one. Cisco needed the expertise of people who had already been involved in ERP implementation. The project was considered to be a solely IT project, it needed heavy inlovement of business people. With the help of KPMG and its own team of highly motivated individuals they narrowed it to Oracle ERP.

iv.

Setting up the Budget and Schedule: All the team were involved in the budgeting and scheduling of the project. They provided recommendations on the 80-20 basis. This effort let to the 80% of the configuration of the system. The decisiveness of the leaders on what they wanted pushed the selection process forward in a short amount of time. Senior management fully backed the project. This backing helped insure the success of the project. The team set out a budget and a deadline for the project.

v.

Managing the implementation team: The team expanded from 20 to 100 for the actual implementation process. It consisted of the best people, representing a cross-section of Cisco’s business community. The looked at this project as THE challenge/opportunity and were highly motivated. The organization structure for the project was phenomenal. The chain of command was synced and there was no communication failure.

vi.

Implementing Oracle in Iterative prototyping: The implementation was broken into a series of phases called CRP. The purpose was to build on the previous work, to develop a deeper understanding of the software and how it functioned within the

Abhinav Capoor Cisco ERP Implementation Case Study 701550051 busniess enviornment. Due to the CRP phases a number of instabilities were detected and correct measures were taken. vii.

The Initial Instability and its correction: The primary instability was the hardware overload. Correcting the inefficiency meant purchase of additional hardware, thus increasing the project expenditure for Cisco. Here, Cisco pulled out an unusually attractive deal. Deal was to purchase a promised capability, rather than a specific configuration. In the end, all the pieces fell into place with the new system fulfilling the promise of ing the rapid growth that Cisco was expecting in the years to come. As a result, the responsibility for fixing the hardware problems fell completely on the hardware vendor.

4. Where had they been just plain lucky?

There were a number of issues that were potenital risks but the one issue where they had been lucky was the Contract with the Hardware Vendors. After CRP3, the primary problem faced by Cisco was the faliure of the Hardware Architecture and Sizing. Correcting this deficiency would have required the purchase of additional hardware, thus increasing the total project expenditure. The contract with the vendor was unusual; it was based on the Promised Capability of the equipment. The entire burden of cost was on them. The vendors had 30 workers in the office and the onus was on them. Therefore, Cisco was lucky to escape the cost.

5. Where had they been smart? Cisco performed all their functions with thought and due diligence. There was Efficient Decision Making, from the top management to the programmers, everyone was involved in the decision making process. The Focus was always on the Core Business, the vision and guidelines for the project were well directed. There were Strong Cross- Functional Teams; the structure was setup extremely efficiently. There was no lack of communication and all the departements were well reperesented and involved in the entire process. The inclusion of KPMG as an Integration Partner was one of the smartest moves. KPMG was reputable and well motivated to be working with a client of Cisco’s Size. The project manager for KPMG had over 20 years of experience and had overseen a number of ERP projects. Cisco’s Implementation Schedule was extremely aggressive. Issues were

Abhinav Capoor Cisco ERP Implementation Case Study 701550051 addressed at rapid rate and were given top priority. One of the most motivating factors for the entire team was the 100% of the Top Management. To meet deadlines and to esnure cost efficiency there was Limited Customization of ERP Software.