Cisco System Inc.

Implementing ERP: Summary of case study

1. Case Background:

a) It reviews Cisco system approach to implement oracle’s enterprise resource

planning (ERP) software product.

b) It studies diverse, critical factors and obstacles faced by Cisco during its
implementation.

c) Deterioration of Cisco’s legacy environment in functional areas led to

implementation of ERP.

2. Introduction

a) Cisco System, Inc., was founded by two Stanford Computer Scientists in 1984.

b) The company’s primary product is the “router”.

c) It soon began to dominate the markets with the rise of Internet technologies.

d) By 1997, its first year on the Fortune 500 Cisco ranked among the top five
companies in return on revenues and return on assets.

e) Cisco’s market capitalization passed the $100 billion mark just 14 years after being
founded.

3.

a) In 1988, Don Valentine, vice chairman of the board of Cisco hired John Morgridge as
chief executive officer (CEO).

b) Morgridge maintained a centralized functional organization since he believed that

many Silicon Valley firms decentralized too quickly losing control.

c) While product marketing and R&D were decentralized into three “lines of business”.
The manufacturing, customer support, finance, human resource, information
technology (IT) and sales organizations remained centralized.

4. History of IT at Cisco:

a) Pete Solvik joined Cisco in January 1993 as the company’s CIO.

b) Cisco was running a Unix-based software package its core transaction processing.

c) The functional areas supported by the package included: Financial, Manufacturing,

Order entry system
 d) Solvik’s initial inclination was to avoid an ERP solution planned to let each
functional area make its own decision regarding the application and timing of its
move

e) Solvik’s objection to ERP solutions was also born out of concerns about the types of
“megaprojects” that ERP implementations often became.

5. Factors leading to implementation of ERP:

a) Failure of Cisco’s legacy environment showed the short comings in existing systems.

b) An unauthorized method for accessing the core application database malfunctioned,

corrupting Cisco’s central database.

c) The company was largely shutdown for two days, this major shutdown made the
company realize that its systems were on the brink of total failure.

d) It would take too long to get applications in place by making decision and
implementation separately within group.

6. Selection of an ERP Product

a) Cisco realized implementing ERP will require very strong team to work for the
project and would also need strong partners.

b) Cisco required a partner with great technical skills and business knowledge, so they
selected KPMG as their integration partner.

c) Team of 20 people was formed to identify the best software packages.

d) The team’s strategy was to build as much knowledge as possible by leveraging

experience of others.

e) By tapping research sources such as the Gartner group, Cisco narrowed the field to
five packages within two days.

f) After week of evaluating the packages at a high level, the team decided on two prime
candidates: oracle and another major player in the ERP market.

g) After Cisco’s analysis of the request for the proposals (RFP) responses, each vendor
was invited for three-day software demonstration.

h) The selection of oracle was based on the three major decision points:

 The project was being driven pretty strongly by manufacturing and oracle
had better manufacturing capability than other vendor.

 Oracle made number of promises regarding long term developments in the

functionality in the packages.
  Flexibility offered by Oracle as the headquarters of both were 20 miles away
from each other.

7. Seeking Board Approval: Before going to the board for approval, the team needed to answer
two important questions :

a) How much would it cost? : The total cost for the project was expected to be $15
million

b) How long would it take? : Time duration for completing the implementation process
was 9 months.

This project was single largest capital project approved by the Cisco. Implementing the ERP project
was the priority for Cisco and it emerged as one of the company’s top seven goals for the year.

8. Building The Implementation Team:

a) With board approval, the ERP team started setting up a structure for the
implementation.

b) KPMG’s performance through the software selection process and its commitment to
staff led to extended relationship between Cisco and KPMG.

c) The team had to expand from its core 20 members to about 100 members

d) Team members (best and brightest from the firm) from were placed onto one of five
tracks.

e) Each track had the following : • Cisco information system • Cisco business leader •
Business and IT consultants

9. Project Management:

a) All the tracks were managed from a “project management office” which included
Cisco’s business project manager, Tom Herbert. KPMG project manager, Mark Lee.

b) All these were controlled by executive steering committee composed of : VP of

manufacturing, VP of Customer advocacy, Oracle’s senior VP of applications,
Partners in-charge of West Coast consulting for KPMG

10. The committee’s role was to provide:

a) High-level sponsorship for the project

b) Ensure visibility

c) Motivate the team

11. Implementing Oracle

 a) The team’s implementation strategy employed a development technique referred to
as rapid iterative prototyping.

b) Using this approach the members broke the implementation into a series of phases
called “conference room pilots.”(CRPs)  Each CRP’s purpose was to build on
previous work to develop a deeper understanding of the software and how it
functioned within the business environment.

12. CRP0:

a) It began with training and implementation team and setting up the technical
environment.

b) It focused on getting the team trained in Oracle applications.

c) Tried to getting up the application and running.

d) Team members from all areas of company were “locked” in an off-site meeting.

e) To discuss appropriate setting for hundreds of parameters within software, team

members were joined by specialist from Oracle and KPMG

f) Team’s experience during the first phase of project indicated that without
significant number of changes software will not support effectively.

13. CRP1:

a) The goal of this phase of the project was for each track to make the system work
within its specific area.

b) Emphasis was on getting the system to accommodate Cisco processes without

modification.

c) Team members generated detailed scripts that documented the purpose for and
procedures used to complete a process.

d) To ensure all contingencies were accounted for, business process prototype tracking
sheets were developed.

e) Team members carefully documented issues while modeling, which were addressed
in weekly three-hour meetings held by program management office.

f) There was huge number of business processes that the software couldn't support.
The team’s response to gaps was to develop a means for categorizing and evaluating
each gap individually.

g) Need to modify oracle led to unplanned changes in the project plan and budget.
 h) Implementation team determined oracle package would not adequately support
after sales support needs of the company. So, team embarked on a concurrent effort
to evaluate and select a service support package.

14. CRP2 :

a) In the CRP2, the implementation team found itself in the most difficult part of the
implementation.

b) The project scope had expanded to include major modifications and new after sales
support packages.

c) A new approach was employed by the team in which all data communication took
place via “data warehouse”.

d) Utilization of a data warehouse allowed all of Cisco’s applications to access a single

source for their information needs.

e) IT group started moving from their other projects and spent time on the core
project in the company which was changing and needed more energy and resources.

f) The implementation team continued to deepen its understanding of the oracle and
service packages and determined how to best make them work for Cisco.

g) The final goal of CRP2 was to begin testing the system to see how well it would
stand up to the processing load.

15. CRP3:

a) Its focus was on testing the full system and assessing the company’s readiness to
“go live”

b) A final test was conducted to see how the system would perform with a full
transaction load.

c) At the end of CRP3 each one of the functional leads presented its piece of the
process results and later the system was put into action.

16. Cutting Over to the Oracle:

a) The initial success of the Oracle system was something less than expected. On an
average, the system went down nearly once a day.

b) The Primary Problem: Hardware architecture and sizing. Correcting the deficiency
required additional hardware purchase which would increase the total expenditure.
Cisco had purchased the equipment on the basis of promised capability as a result
the responsibility for fixing the hardware problems fell on the hardware vendor.
 c) The Second Problem: Ability of the software to handle the transaction volume
required. The company had gone wrong in its final testing of the system. Cisco had
run individual processes sequentially rather than at the same time. After cutover,
when processes were running together system lacked the capacity to process the
required load.

17. Overcoming of problems:

a) ERP project status became the number one agenda item for weekly executive staff
meetings.

b) Strong vendor commitment from Oracle, the hardware vendor and KPMG led to an
eventual stabilization of the software and improved performance.

c) After stabilization problems associated with implementation of oracle was short-

lived.

d) Over the next three month on its implementation, Cisco and its vendors together
stabilized and added capacity to the system.

e) Thus successful implementation of the system was concluded with a celebration

party for the team and the company management.

Conclusion:

This ERP implementation was successful because:

a) Cisco’s focus on completing the process without modifications brought clarity about the
kind of modifications needed. The modifications were not viewed as showstoppers and a
strategy was developed to keep the project moving.

b) Both Oracle and other hardware vendors agreed to contracts for long-term functionality of
the software and hardware and because the contracts were based on promised capability,
the vendors bared the costs of fixing the equipment. This formed the basis for the decrease
in total project expenditure.

c) The support from the top management especially the CEO who made it clear to the
organization how important this project was for CISCO thus having an organization wide
support.

d) The project became successful was because of internal recruiting. The team consisted of
the best business people. The company just did not rely on IT department, instead IT and
business people worked together to meet the core objectives. It was very important to fill a
sense of pride in the people associated to the project to attract the best people and company
was largely successful in achieving that. Additionally company laid emphasis on involving
the vendors and consultants even in the steering committee that helped bring focus into the
project from all the stakeholders involved.
Smart Moves:

a) Efficient Decision-Making- The Company did not spend significant amounts of time
debating. Some of the needs were immediately understood and company took and acted on
those decisions very fast.

b) Focus on Core business – The company held its focus while in implementation towards
manufacturing which was the core of operations.

c) Strong Cross functional teams – The project was viewed as a Business relevant project
rather than IT initiative. This helped broaden the perspective and bring in more
participation.

d) Reputed Partner – KPMG was known to be building specific expertise around the topic and
their knowledge helped Cisco identify the right vendor.

e) Committed vendor – Cisco rightly identified the main issue that this is the first major
release of oracle which company wanted to use as the showcase and therefore it would be
in the best interest of Oracle to pursue the success of the project.

f) Aggressive Implementation schedule – Cisco set extremely aggressive timelines that kept all
the stakeholders on the vigil leading to timely identification of the issues and their
resolution mechanisms.

g) Smart contract on Performance- Cisco entered the contracts on the guaranteed performance
rather than the package.