CISCO SYSTEMS INC.

:
IMPLEMENTING ERP

INTRODUCTION
Established in 1984
Primary product was Router
In 1997 entered into elite club of fortune 500

CISCO
IIIIIIIII

Among top 5 companies in return on investment and in return on assets

Exceptional growth in 1998 as companies market capitalization passed $100 billion mark (15
times 1997 sales)
Financial year divided into four quarters starting from 1st August
Package was majorly supporting three functional areas
Financials
Manufacturing
Order Entry

In early 1993s, how did CISCO do IT?

What is Pete Solviks preferred approach to managing IT?
What decisions does he want to make, and what ones does he not want to make?
IT infrastructure was running on a UNIX based software
Application did not support the desired degree of redundancy, reliability and maintainability

CISCO
IIIIIIIII

Further enhancements were not possible to meet the business needs

Solvik was not inclined towards the implementation of ERP.

He wanted Functional heads to decide their own IT infrastructure.

He wanted functional areas to make the budgetary decisions.

He wanted to make more of strategic decisions and therefore the IT

organization to directly report to him.

Why didnt this approach work with ERP? Why did the different functions do nothing for
over a year, when it was so clear that something needed to happen? Why wasnt anyone
willing to volunteer to lead the ERP project at CISCO?
ERP implementation often turned out to be mega projects.
Nobody wanted to throw out the legacy system and go for something big.

CISCO
IIIIIIIII

The systems were difficult to replace and there were ownership questions.
There was an apprehension in everyones mind that the board would not
approve the kind the project that ERP implementation would turn out to,
its cost and period of implementation.

Due to the amount of risk involved in replacing the whole system and the
business disruption it would cause, no one wanted to take lead and hold responsibility.

Why would general managers stay away from a technology thats going to make the
company work better? What can a company do to overcome the kind of inertia that
CISCO experienced?
Monolithic IT projects are very susceptible to failure and could take on lives of their own.
Also none wanted to deviate the way they were doing business. With ERP, the functional
areas would not be allowed to customize according to their needs. Instead of retraining the
people, functions want the system to mirror their method of operation.

CISCO
IIIIIIIII

Cisco needs a visionary leader who understands the problem and articulate well about the
issues they had and how is it going to impact the growth of the organization as a whole.
The inertia can only be broken when there is a drive to change the mindset of people
regarding adoption of new technology. Organization should be anti-incumbent and change
according to the future needs.

Suppose you are the CEO of the company and you have just personally taken the
responsibility for the project in front of the board? Then what do you do? Youre not
going to configure the software yourself, so what can you do? What actions can you
take to maximize chances for success?
Make sure that the ERP project is the most important priority for all members of the firm.
Why?/How?/importance?/strategic advantage?

CISCO
IIIIIIIII

Highlighting existing issues and business outages with legacy system.

Hire Industry best strategic partners with proven track record. Implementation plan
Reduces the risk of business disruption/outage. [Rapid iterative prototyping]
Sufficient Budget approval from board to finance the project.

Make sure Internal IT Team is aware of the complexity/technical know-how/large-scale

implementation plan.
Milestones/potential RoadblocksHigh response team.

Industry best practices are followed during implementation.

Contract with software vendor to include Maintenance tasks responsibility.

CISCO went live with ERP in a big bang fashion, which is inherently risky since you
really dont know how the softwares going to work until you start using it. How did
CISCO mitigate this risk?
Generate detailed documentation for each process/issue/workaround. Standard document
to understand the product.

CISCO
IIIIIIIII

Formation of SWAT-team which included the vendor. Oracle had 30 resources on site at
one point.
Contract from hardware vendor based on the promised capability rather than specific
configuration.
Training the Implementation CISCO IT Team so that they are also involved and aware of
the changes done.
Testing the whole system sequentially.

Weekly executive staff document to discuss all issues raised with consultants/vendors.

In your opinion, what were the most important things that CISCO did to yield a
successful implementation?

Minimizing customization was probably the most important element that contributed to the
success and risk mitigation.
Shortened the implementation time significantly and reduced the risk of the project.

CISCO
IIIIIIIII

Hiring an experienced consulting team (KPMG) and bringing together a team of

stakeholders from around the company helped the company build as much knowledge as
possible by leveraging in-house knowledge and the experiences of others.
Also, forming an executive Steering Committee provided high level sponsorship for the
project, to ensure visibility, and to motivate the team.
Hiring the best and the brightest for the implementation team.

Creating a unique sense of importance and urgency; working in a SWAT-team mode

Hardware contract was based on the committed capacity, not the amount of hardware.
Thus, when additional hardware needed to handle the full load, Cisco didnt have to pay
any extra for it. The vendor had to absorb the cost associated with its under sizing mistake.

Why would a company want to change its existing business processes to match those
that come in a piece of off-the shelf software?

Customization can be costly and can complicate future upgrades to the software because
the code changes may not easily migrate to the new version.

CISCO
IIIIIIIII

Oracle's ERP system follows industry best practices which would make the Cisco's
business processes to get in line with the industry best practices.
Customization in one module will affect the functionality of other modules.

Why was CISCO so interested in moving quickly on this implementation? What was
their hurry?

Due to inability of system to perform a workaround caused corruption of database which

resulted in shut down of company for two days.

CISCO
IIIIIIIII

System outages were routine.

Company was able to sustain an annual growth rate of 80% and legacy system was not
able to handle such load and required incremental modifications.

Is there anything you didnt like about the implementation? Anything they didnt do
well?

Though the ERP implementation was a success in Cisco, there were a few glitches which
occurred

CISCO
IIIIIIIII

The Big Bang adoption technique used has high risks .

End to end testing was not done

User Training was not done properly

Was CISCO smart or lucky with its ERP implementation? What about performance dip
afterwards? Doesnt that indicate that they did something wrong?

Although there are some instances which suggest that Cisco had made a few mistakes and
were lucky to get through them, there are quite a lot of others which suggest that Cisco had
acted smart in implementing the ERP system.

CISCO
IIIIIIIII

The best employees were pulled out of their projects for the ERP implementation
The best of consultants and Vendors were selected Avoiding the Devils triangle
Proper team structure and development

Implementing the one Database approach

Implementing the company best practices

The performance dip afterwards is a normal phenomenon in any new system

implementation which gets smoothen over time .

CISCO
IIIIIIIII