CISCO Systems: Implementing ERP

Presented By: Anand Bhatia 65 Payel Dey 68 Anshul Saxena 71 Achin Sehgal 72 Ajita Vishwakarma 80 Bindu Mishra 110

Founded in 1984, IPO in 1990

Primary product at that time-router

High growth company-return on revenues and on assets

First acquisition –Crescendo communication in Sept 1993

By 1997, its first year on the Fortune 500

On July 17,1998, market cap passed the 100 bn. mark

Company Background

•In the next five years plans to create over 200 new training facilities in India, for networking and system engineers.

•In the next 3-5 years plans to invest over $10 million into the Palestinian territories, for job creation and economic development.

•Has spent a $2 million investment aimed at 9th-10th graders in the Mediterranean region, to train new business leaders.

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Three functional divisions:–Order Entry– Finance– Manufacturing

Initial IT Strategy:– Let division take care of themselves.– Overall architecture is shared, enabling sharing of data.

Company Structure

UNIX-based software package to support its core transaction processing:– Functional areas supported: financial, manufacturing and order entry systems– Used common architecture and common databases

Growth of Cisco resulted in scalability problems.

Cisco was the largest single costumer of that vendor, resulting in a strategic weakness.

History of IT at CISCO

IT Problems“It had become too much spaghetti, too customized”-Pete Solvik

The original upgrade/patch approach made little progress, system outage became routine, hard to recover from outage

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

It would take a lot longer to implement a too customized system to end up as a mega-project

Systems were on the brink of total failure

Background - Cisco IT

•Communications Training: To complement Cisco Telephony solutions, Cisco has developed a range of learning offerings for these IT professionals and organizations.

•Security Training: Cisco has developed a range of network security certifications for IT professionals and organizations.

•Wireless/Mobility: For the need qualified professionals who can design, install, support, and operate a mobile wireless solution.

•Routing and Switching Training: For professionals who can plan for, design, implement, operate, configure, and troubleshoot Cisco switches and routers in multiprotocol internetworks.

Training Programs

Cisco Learning ConnectionCisco Learning Connection helps Internet professionals learn more effectively.

Applications Available * Application Networking Services * Broadband Cable * Networking Fundamentals * Network Management * Optical Networking * Routers

Self Study Options

* Routing Protocols * Security and VPN * Storage Networking * Switches * Voice and Unified Communications * Wireless

Partner Education Connection

Cisco Press

In Texas alone Cisco has 11 partners authorized to give classes using official Cisco material.

Learning Partners

Network Deployment Mentoring•These training camps focus on: The integration of advanced technologies.

Classroom Sessions include study on connectivity, config, and troubleshooting.

Curriculum Planning Service•Identifies skill and knowledge requirements•Identifies potential areas of development

•Prescribes a curriculum plan of formal training Technical Knowledge Library•Help avoid common difficulties and ease the training process. •Users access the knowledge content

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CASE STUDY

A Big Need

Recognized the need for change, but left actions to each functional division: Thus:

– Little progress was made in the year– Each functional area was reluctant to replace the legacy

system because of high risk involved – Systems outages became routine– Unauthorized method for accessing the core application

database malfunctioned, corrupting

Cisco’s central database

Company was shut down for two days

Selecting an ERP Product

The planning was driven only by timing constraints and panic.

– There was no business case

Cisco emphasized the need for:

– Strong team

– Strong partners

– Speedy decision making

– Getting Executive & Board approval

Project Team and Partners

Team:

–– Know that very best people are needed

–– Pulled best business & IT people out of their current jobs at Cisco

Partners:

–– Important that partner could work on the selection as well as implementation of project

–– KPMG as integration partner

–– KPMG team of 20 (highly experienced; not “greenies”)

Team Selection Strategy

Teams strategy – use experiences of other companies and best practices to accumulate knowledge

Selected five packages within 2 days

After a week of high level evaluation – two packages selected: ORACLE and another major player in the ERP market

10 days on request for proposals

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Oracle & other vendor given two weeks to respond to RFP

Current vendor customers were visited by the team during these two weeks

After response, received a 3-day software demonstration by each vendor (used Cisco’s sample data)

Goal is to show how software meets or does not meet Cisco’s requirements

Vendor Selection Strategy

Three main criteria used:

– Manufacturing capability

– Long-term development of functionality of package

– Flexibility of Oracle’s being close by (location wise)

Other motivations – Oracle’s first release of new ERP product

– if Cisco project goes well, favorable product launch of Oracle ERP package

Oracle chosen – team decision, no management approval at this point

Costs involved and Time

Costs:

– Software 16%

– Hardware 32%

– Headcount 14%

– System integration 38%

Time: Three main criteria used:

– Manufacturing capability

– Long-term development of functionality of package

– Flexibility of Oracle’s being close by (location wise)

Taking Approval of the Board

Met with CEO – comment about ‘jobs lost over much lesser amounts of money’

Got CEO’s support

Met with Board of Directors – chairman says ‘show me the money’ as first thing

Board approves project

Single largest project ever undertaken by company

CEO makes project priority for Cisco

Implementation Methodology

Prototyping: Rapid, iterative implementation was broken down into a series of phases called CRP’s.

•CRP 0: Training and Configuration of Oracle package.

•CRP 1: Detail documentation and analysis of each functional area.

•CRP 2 & 3: Centralized data warehouse developed. Final Testing with full load of users.

CRP 0

Two parallel efforts:– Training the team in the Oracle applications normal 5

day training pushed to two 16-hour days!– Getting the application up and running by a small “tiger

team” Configuring the Oracle package

Team members “locked” together for two days

1 % effort with 80 percent accuracy

CRP 1

Each track makes the system work within its specific area

Details and procedures were created, for a process

Realized that a lot of business processes were not supported by the software needed modifications Modifications were classified into:

• Green•Yellow• Red, needed to go to the steering committee for approval there were few reds

CRP 2

Continued scope change

Major technical issues

Creation of data warehouse for centralized data communication

100-person IT department started recommitting from other projects

CRP 3

Focus on testing the full system

Assess readiness to ‘go live’

Captured one day’s worth of actual business data and ‘re-running’ it on a Saturday

The Aftermath

The new ERP system went live on January 30, 1995, but it took two months before it was operating at a reasonable level of quality.

Problematic areas were hardware architecture and sizing.

The point of concern-How is it possible that no one in the team noticed this before?

CISCO Systems, until recently

John Chambers, president and CEO:– “Our strong position in the core switching and routing

business continues to be complemented by positive momentum especially this quarter in storage, security, wireless and IP telephony.”

Positive Q2 2007 figures:– Q2 Net Sales: $34.9 Billion (24.5% increase year over

year)– Q2 Operating Cash Flows: $41.7 Billion

Wrap Up

Total system replacement: $15 million, 9 months Initial Problems with Cisco ERP System:

Decrease in Business Performance due to an unstable system Database lacked capacity to process the required transaction load/volume

Resolution ERP project status and complete implementation became top priority for the company Commitment from Oracle, hardware vendor

Long Term Effects: Added capacity to the system ERP system would fulfill the promise of supporting the rapid growth that the company expected and desired

Wrap Up Continued…

Why Successful? Implementing an ERP system was top priority Best people were on the project Strong vendor relations and vendor’s determination for success Very timely

Cisco then and now

Cisco in 1998 Cisco in 2007

Employees: 14,500+ 61,500+

Market Cap.: $100 Billion+ $194.56 Billion

Sales $8.45 Billion+ $34.9 Billion