CISCO : ERP & Web Enabled IT [MOT6107-IT Strategies]

Georgia Institute of Technology
Executive Master of Science of Management and Technology (MSMoT)
MOT6107-IT Strategies
EMSMOT 11
CISCO : ERP & Web Enabled IT

(a) Was the decision to implement ERP justified for CISCO?

Given the current and project growth patterns, Cisco’s $15m investment in the software made sense, given that the implementation’s success and time frame could be reasonably assured. Given the two days of down time experience by the system being over utilized, this was a clear indicator a significant change was in order. That Cisco is positioned to sell products that secure and enhance the business use of the Internet justifies the need to break ground on completely web enabling their entire business. If Cisco has done it, then they can help their clients do it. The operational efficiencies are numerous. They reduced average inventories requirements; they reduced the variable availability of their source parts from their suppliers by giving partners more timely and accurate forecasting. It enables customers to better order and provision the various products. The effort also made it easier for Cisco to acquire new companies, enabling a standard and reliable assimilation path.
(b) What were some of the key factors that enabled them to implement the system in nine months? Based on the information given in the case, evaluate their project management approach.

The nine-month time frame was driven by a few factors. The leading issue was a perceived need for an immediate solution to the shortcomings of the existing operational IT Infrastructure. Next, the auditor would have fit if the reporting systems were down during the Q4 Audit season. This could have severe consequences in terms of reporting to the markets. A qualified audit statement can seriously diminish the perceived market value of a company. Furthermore, Cisco correctly anticipates a surge in demand for their products. The current operational infrastructure would simply not accommodate this flux of volume. That level of growth could literally choke the organization. Therefore, it was necessary to find a feature rich and scalable solution to bring in all the data silos, compartmentalized operations, and disparate sales methods and product lines.
(c) What are the benefits of the Web Enabled architecture at CISCO? What are the drawbacks of the architecture? As CIO, would you have done anything differently?
There are many advantages to what Cisco accomplished. First and foremost, they demonstrated by example that their business case for an pervasively Internet facing company can cut costs, improve customer service, and stabilize production and design work flows. The only serious drawback was the expense. During the time, few applications were web enabled. Cisco invested enormous amounts of capital into software vendors own products to web enable these for Cisco’s use. The return on investment was rather interesting as Cisco enjoyed a radically reduced operational cost structure. Another potential danger to the strategy lies in the pervasive interconnected model that Cisco has to create between Customers, Cisco, and the suppliers. This leaves many points where a security breach could occur, or a software malfunction could incorrectly execute a large order. These bugs could significantly reduce the effective cost savings delivered by the new web enabled IT infrastructure.

(d) How would you justify the expenditure that CISCO incurred in implementing the web enabled architecture? You do not have enough information to actually do a cost-benefit analysis. However, you can discuss what approach you would use to justify the expenditure.

There are many facets of the implementation that would have to be analyzed. First of all, the internal operational efficiencies enabled the organization to scale to meet demand and to easily assimilate new technologies into the product lines by their acquisition activities. Employees can be trained and managed more effectively through the use of self-service applications. The CEC addressed the various unique needs for 40,000+ employees during a time when many other companies still used three ring binders and paper forms to handle HR related functions. Dissemination of executive directives, new employee training, and product training all saw vast time and operational efficiencies. Distance learning, workflow collaboration, and web enabling legacy systems for ubiquitous access and use, all improve the bottom line.

The supply chain is where a huge improvement was experienced. Dynamic Replenishment reduced delays and errors, and saved tem $275 million through increased profitability. The effort streamlined New Product Introduction. The orders could be fulfilled directly from the customer pulling all the way back to the part, components, and product OEM suppliers on demand and on time. The example is one of the relatively few instances where JIT actually works.

The executive management tier leveraged the entire system by the ability to dashboard the entire organization globally in real time. This allows more effective decision-making. It allows the organization to react to changes in the market before competitors.

All this is fine and well, however in 2001, when I work for the Cisco-KPMG team, the $1 billion investment did not pay off. The demand for product nosedived. KPMG did not actually receive any significant volume of integration engagements. The 4000 people hired for headcount to service the anticipated accounts remained benched for months. For my part, I free-agent walked onto team doing BellSouth’s Electronic Applications Interface project to create an intranet and extranet eStore for the entire BellSouth organization. Instead of using Cisco router skills, our team found ourselves learning UML, CORBA, SOAP, DCOM, XML, and UDDI. We found ourselves gathering requirements and setting scope to web enable the entire IT assets of BellSouth. We found ways to jettison the legacy systems. Nonetheless, the hammer came down only 4 months after they hired everyone. 3000 people received the axe. While Cisco, operationally is a sound company, it has not really recovered from the leveling of the dot com market. See the five-year chart. They have gone sideways since 2001 with one major dip and one major “peak” of 29 since then. This peak should be placed in the perspective that the stock was trading above 30 from 1999-2001 and peaked at 70 accounting for splits.