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The Company that revolutionized the world of Networking

Raheel Javaid
ISM 158 Analysis Term Paper 02 – 05 –04

Table of Contents

Paper Objective...............................................................................................3

SECTION I: AN ANALYSIS OF THE NETWORK COMMUNICATION EQUIPMENT INDUSTRY...................4
(a). Industry Profile.........................................................................................4 (b). Typical Industry Competitive Strategy....................................................7 (c). Porter Model Evaluation...........................................................................8 (d). Globalization of the Industry..................................................................11 (e). Importance of I/T to the Industry............................................................12

SECTION II: COMPANY PERSPECTIVE: AN ANALYSIS OF CISCO SYSTEMS.............................................................12
(a). Company Profile ....................................................................................13 (b). Competitive Strategy Statement............................................................16 (c). Market and Financial Performance.........................................................16 (d). Significance of Information and Information Systems..........................18 (e). Strengths and Weaknesses of Cisco Systems.........................................18

SECTION III: Information Systems at Cisco Systems............20
(a). Strategic Option Generator.....................................................................20 (b). Roles and Relationships:........................................................................23 (c). Redefine/Define......................................................................................24 (d). Significance of Telecommunications ....................................................28 (e). Success Factor Profile.............................................................................29

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SECTION IV: A Final Analysis of Cisco Systems.................30
(a). Success of Business Strategy and Information Technology Use to Date .......................................................................................................................30 (b). Is the Company Effectively Postured for the Future? ...........................31

Bibliography............................................................................33

Paper Objective
The objective of this analysis paper is to identify the role and importance of information systems for Cisco Systems in gaining a competitive advantage in the Network Communication Equipment Industry. The industry, which is the focus of this paper, manufactures and sells networking products, focuses on setting up networks, providing network solutions, providing other professional services such as supporting network products and helping businesses become more efficient and competitive. In its entirety it would be identified as the Network Communication Equipment Industry. Since this is fairly long, the industry will hereafter be referred to as the Network Equipment Industry. To accomplish the analysis of the industry and specifically Cisco Systems, the paper has four sections, which are as follows: Section I: This section analyzes the structure of the Network Communication Equipment Industry, briefly discusses the competitors of the industry, the impact of globalization and the importance of information technology within the industry. Section II: This section discusses Cisco Systems role in the Network Equipment Industry and its position in the industry along with its competitors of the industry. Section III: This section discusses the role played by Information Systems in the company internally and externally. Section IV: Lastly the paper anticipates the position of Cisco Systems in the future based on the analysis from the first three sections.

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In addition to these three large companies.89 Revenues 2002 18. Most importantly it was the huge revenues that companies in the industry experienced within a short period of time. was the competition between the different companies and the struggle for market share. Figure1 shows the revenues for each of these companies over a period of three years.9 28.9 10.67 0.7 4 Company Cisco Systems Nortel Networks Lucent Technologies Juniper Networks .5 12. The Network Equipment Industry has gone through immense changes and has developed significantly in a relatively short period of time. which is relatively a recent one.3 0. but continues to be successful. the competitors of the industry.3 0. extranets and new technologies like VoIP. It talks about the industry profile. Companies of different sizes compete on different levels. Industry Profile While the Network Equipment Industry focuses on both private and public networks. Network Mobility and new forms of Internet security. the industry has a significant number of smaller companies that successfully focus on product niches. The logic of this focus is dictated by the fact that the Internet connects the entire world and as such has become the backbone of today’s economy while giving new meaning to the word globalization.9 9. the current emphasis is on the Internet. Lucent Technologies and Nortel Networks are three major companies that dominate and influence the industry. A good example is a company like Juniper Networks. data storage networking. intranets.5 21. There is much competition in this industry on every level.SECTION I: AN ANALYSIS OF THE NETWORK COMMUNICATION EQUIPMENT INDUSTRY This section gives an overview of the Network Equipment Industry.47 .67 Revenues 2001 22.9 27. which is significantly smaller than the other three large companies discussed in this paper. globalization in the industry and the significance of IT (Information Technology) to the industry.3 17. Cisco Systems.55 Revenues 2003 18.26 8. Revenues 2000 18. The industry development was then a factor of fast economic growth and political stability throughout the world. (a). The beginning of this significant industry as it is known today began with the introduction of the first router by Cisco Systems. Another strong reason.

html 5 . network management software and an aggressive customer support service. Lucent Technologies had to face hard times during the recession and is still recuperating from the damage that it suffered. Lucent Technologies and Nortel Networks on the other hand experienced a major setback and are still struggling to regain their strength in the industry. Juniper Networks is also in the manufacturing business of the industry. The acquisition facilitated Nortel Networks in expanding its operations and exploring the data networking market.net/company/investor/ 2 http://www.Figure 1: Revenues for the major role players of the industry (*in billions)1 Cisco Systems is the world leader in the Network Equipment Industry.lucent. but focuses only on the IP segment of the industry. Its products comprise of telephone switches. Juniper Networks has also experienced losses in the last couple of years. 1 http://newsroom. Cisco Systems has been the only company in the industry to regain its strength and maintain its influence on the market. which have suffered significant losses.html http://www.com/dlls/corpfact.html http://www. like most of the other companies in the industry. Figure 2 gives a pictorial representation of how the companies of the Network Equipment Industry compete and influence the market.cisco. It has been a very stable company that has gone through hard times recently. also focuses on manufacturing products for networks. Optical equipment. They mostly provide equipment to small Internet Service Providers and other small businesses. a well-known company in the Network Equipment Industry. Lucent Technologies. Nortel Networks.com/edge/news/2003/0218mktshare.juniper. The router market declined globally by as much as 32% in 20022.nortelnetworks.com/corporate/investor/reports/index. also offers networking and communication services on a global level. another significant company in the industry.4 billion dollars (about 15% of the total revenue) in just one year. Nortel originally focused only on voice networks and cellular technology until after its acquisition of Bay Networks in 1998.html http://www. Wireless Network equipment. But to date. Cisco System’s revenues also dropped by about 3.nwfusion. The graph shows the revenue for these companies. But Juniper Networks regained its strength soon and is now a posing threat to all the companies in the industry.com/investor/financialreports.

Juniper Networks. So basically. Nortel Networks also focuses more on cellular technologies (CDMA. Telephone Switches. For instance. It has grown really fast and has shown exceptional results in a very short period of time despite the threats it has had to face in the industry. it is important to understand that though these companies compete in the same industry. which helped the company survive and develop and get to the point where it is today. UMTS). they also focus on product segments that make them different from each other. 3G solutions and other networking management software. GSM. unlike these giant companies. and providing complete business solutions along with selling specific network equipment products. 6 . end-to-end communication. Though Juniper Networks is a small company that has emerged in the industry recently. Optical Networks etc. they focus on the LAN and WAN throughout the world. it still poses a great threat to the giant companies in this industry. Cisco Systems is a company that focuses specifically in data networking. which is IP routing. TDMA. The key for Juniper Networks’ success was that it only focused on the IP routing segment of the industry.Juniper Networks is a new entrant in the industry that was founded in 1996. Lucent Technologies on the other hand are more into Wireless Base Stations. 30 billion 25 billion 20 billion 15 billion 10 billion 5 billion 0 billion 2000 2001 2002 2003 Cisco Systems Nortel Networks Lucent Technologies Juniper Networks Figure 2: A graph showing the fluctuation in revenues in the industry (*in billions) In order to be able to compare these companies. focuses only one segment of the market. Focusing on different sectors give these companies a competitive advantage on each other.

Figure 3 shows a little comparison of what these companies’ net incomes were in the last four years.(b). When we think of Cisco systems. Wireless networking etc. It has even sent its employees to train the people that are being hired there.014) (4.17) (. we think about cellular technologies. These companies have products that overlap each other or depend on each others products. companies are also moving their product and technical support offshore. Nortel is the leader in the cellular phone technology along with phone switches and Optical Networks.6 (. When we talk about Nortel Networks. Wireless Base Stations etc. Typical Industry Competitive Strategy To understand the competitive strategies of these market leaders. routers and Wireless network products. which is cutting their cost down by a huge percentage.1 . The Network Equipment Industry is a very competitive industry.148 Net Income 2001 (1. There is a lot of competition and marketing strategies these companies use to stay ahead of each other and in order to keep innovating. resulting in major cost reduction. 3G wireless etc.5 3. it is essential to first understand what business they are in. When we think of Lucent Technologies. It has shown a great improvement in the year 2003 though.826) (. we think of Telephone Switches.039 7 .7 2.58) (11. Along with manufacturing. overall has suffered the highest losses in the industry.5) (14. Cisco Systems has been able to stay stable and it is evident by the numbers in the figure. Company Cisco Nortel Networks Lucent Technologies Juniper Networks Net Income 2000 2.120) Net Income 2003 3. Lucent Technologies. but their revenues are shown in Figure 1. This was mostly made possible by laying off employees and cutting down other expenses.9 (3. Companies are getting a significant chunk of their manufacturing done offshore.013) Net Income 2002 1. Lucent Technologies is known for its Telephone Switches. routers. They all make routers and switches but Cisco Systems is the industry leader. Outsourcing is a major and one of the most recent competitive strategies in this industry. Nortel Networks net income for 2003 is not yet published. Networking equipment can be divided into different categories as mentioned earlier.77) . Outsourcing increases profits. LAN and WAN. Cisco Systems has moved most of its manufacturing and support to India. we think of cable modems. to which these companies are able to spend more on Research and Development.

8 . There are four main parts to the Porter Competitive Model: Potential New Entrants. Bargaining Power of Buyers. in order to keep their influence in the market. since the products being manufactured and technology are constantly being innovated. Figure 4: Business Strategy Model for Cisco Systems Business Strategy Model Products Routers Individuals Switches Large/Medium/Small Corporations Cable Products Customer Institutes Market Europe USA International Manufacturing Outsource Sales/Distribution Resellers Company Structure Subsidiaries Information Systems Company Structure Support Asia/Pacific Region Vertically Integrated Online Store Alliance Business Solutions/Services Governments LAN/WAN Products Subcontract Sales Force Independent Customer Support Products Development Sales/Distribution (c). Porter Model Evaluation The Porter Competitive Model examines the Network Equipment Industry in detail in relation to the buyers and suppliers of the industry. These companies. have to come up with new and improved products on a regular basis that could give them a niche in the industry.Figure 3: Companies Net Incomes show the competitive edge in the market (* in billions) Research and Development is one of the most important ingredients of this industry.

Nortel Networks Bargaining Power of Buyers Internet Service Providers Corporations Small/Medium Businesses Government Entities Substitute Products And Services Outsource network management Used Equipment Sales Figure 5: Porter Competitive Model for Network Communication Equipment Industry (i).Substitute Products and Services. This model identifies all the competitive forces in the market. existing alliances. Potential New Entrants Barriers to Entry Still Attracts startups Foreign Companies Bargaining Power of Suppliers IT vendors Standards Organization Technically Skilled Personnel Component and end product manufacturers Intraindustry Rivalry SBU: Cisco Systems Rivals: Lucent Technologies. Some of these are struggling for survival. The Network Equipment Industry is a very competitive industry. The Bargaining Power of Suppliers 9 . and the Bargaining Power of Suppliers. The analysis clearly shows that the Network Equipment Industry encompasses all kinds of companies. some are trying to gain a bigger industry share and some are just too big for most of the companies to compete with. The Porter Competitive Model shows three enormous corporations in the industry that dominate along with the new entrant that could impose a threat to these giant corporations. potential threats and other sources of positive and negative influence instead of just focusing on the use of Information Technology.

and are highly capable of competing with the strategic business unit directly. Standards Organizations such as ANSI. (iii). Government entities are also buyers in this industry. (iv). developed. Sometimes these competitors. They depend on the networking equipment to provide service to businesses as well as individuals. Foreign competitors in this industry are one of the biggest threats because of the fact that most of them do not have any laws regarding intellectual property. Corporations depend on networking equipment to perform almost any aspect of their business. by means of reverse engineering. IT vendors and skilled personnel have the most bargaining power.The bargaining power of suppliers is significantly based on the uniqueness of their products or services that they have to offer. This reduced the sales for the companies in the Network Equipment Industry. Conclusions based on Porter Competitive Model analysis 10 . Their strategy is to manufacture and sell the same products at a price lower then these industry giants. a significant number of companies ran out of business due to recession and most of them sold a lot of equipment for a lower price. Cisco Systems is essentially in the business of manufacturing. The Internet service providers are the most significant buyers in the industry. NIST. (ii). Component and end-to-end product manufacturers are the most significant suppliers of the industry and have a great deal of bargaining power. create most of these products at a very low cost. since they buy some of the most sophisticated and expensive equipment to run their operations. In the last couple of years. Potential New Entrants New entrants are companies that are either new competitors in the industry or existing companies that have grown. This in turn increases their profit and influence over the industry. The Bargaining Power of Buyers The bargaining power of the buyers mostly depends on the volumes of production. and IETF are considered to have significant bargaining power also. Most of the work these days is being transferred offshore because of the cost efficiency factor. Leaders of this industry are under constant threat by startups and foreign competitors. Threats of Substitute Industries A substitute is an alternative to doing business with the strategic business unit. Since. The two biggest substitutes for the industry are the outsourcing of network management and sellers of used equipment.

The bargaining power of the buyers is also high. Economies. Lucent Technologies. For instance. it is almost impossible for any business to grow after a certain point. Capturing the world market not only means increased sales and increased profits. push and pull. since there are so many end users of these products and services that are offered by the industry. The bargaining power of suppliers is predictably high. globalization is the most important element needed for the growth of any kind of business. This is because a lot of these companies are still capable of generating profits in the industry and because they realize a possibility of getting bought out by one of these giant corporations. it would be impossible for these companies to compete in the industry.The analysis of the Porter Competitive Model of the Network Equipment Industry helps us derive various conclusions about the industry. The threat of substitute products and services is something that this industry has started experiencing recently. which could harm the Network Equipment Industry itself. Outsourcing network management is something that can turn out to be a threat in the long run. support and sales. Globalization of the Industry In today’s world. but also means lowering the manufacturing cost by outsourcing. and Nortel Networks all compete on a global level since without being global. 11 . these days the technology of VoIP is being used to communicate throughout the world. and individuals throughout the world depend on it on a day-today basis. Push is the type of globalization in which the company goes global just for the simple fact that it is pursuing added business potential. Without globalization. it is important to first understand that globalization can be divided into two types. The pull form on the other hand. All products and services travel well to many countries with only minor changes. this is a highly competitive industry. Cisco Systems. since the companies that are providing these services can end up gaining too much control of the industry. One main advantage for globalization in this industry is that many of the products only need minor changes to be sold in other countries. To understand globalization in this industry. since this is an industry that depends on highly skilled personnel and IT vendors for manufacturing. Network Equipment industry is one of the most globalized industries for the simple reason that there are customers for this industry all over the world. Companies are setting up their networks to make these calls possible throughout the world using the VoIP technology. That makes both the suppliers and buyers of this industry global. This is just one small and recent example of globalization in this industry. businesses. we still see new entrants frequently. This is a big advantage because companies do not need to spend too much money on modifying and creating new products in order to compete globally. (d). is based on the needs of foreign customers. Mostly the changes are in documentation of the products or some minor manufacturing changes that do not require too much time or capital. Though.

First. the 12 . However. the risks of globalization include strain on company resources. Cisco Connection Online uses IT to offer online customer services such as product support and sales. Cisco Systems has used IT throughout its operations because they want to show that proper use of their products and services can result in a more efficient business environment. Research and Development through the use of information technology makes it possible for the companies to keep innovating and developing their products. cost and legal issues. they are just marketing their products by using them for their own operations.A company in this industry cannot thrive if it does not have a strong global presence. Also sales of their equipment and service over the Internet accounts for a majority of their sales. Research and Development Engineering Production and Manufacturing Marketing Sales and Distribution Services Customer Figure 6: Value Chain for the Network Communication Equipment Industry SECTION II: COMPANY PERSPECTIVE: AN ANALYSIS OF CISCO SYSTEMS This section analyzes Cisco Systems position in the Network Equipment Industry. In a way. Importance of I/T to the Industry Information technology plays a great role in this industry from the manufacturing standpoint as well as the service point of view. The section gives an overview of the company profile including its business leaders. information technology is used in the manufacturing of all the products. (e). and most importantly. which would be impossible without the support of IT.

and a lack of network management. The company’s total strength is 34. This lack of network management meant that no centralized method of managing and troubleshooting networks existed.com/sanjose/ 13 . 1984 by a small group of engineers from Stanford University. as did a separate support staff.bizjournals. California and they have facilities all over the world. Company Profile Cisco Systems was founded on December 10. thereby interconnecting geographically dispersed users. it is important to discuss the industry profile first and then see how the company’s profile relates to the industry profile. Duplication of resources meant that the same hardware and software had to be supplied to each office or department.yahoo. largely because they operate at very high speeds and support such high-bandwidth applications such as voice and videoconferencing. Cisco provides solutions for businesses to make them more productive. high-speed LANs and switched Internet works are becoming widely used. network management. The company headquarters are in San Jose. The first networks were time-shared networks that used mainframes and attached terminals. Europe. make information storage more manageable. LANs enabled multiple users in a relatively small geographical area to exchange files and messages. the Middle Eastern countries and even in the Caribbean islands. Wide Area Networks (WANs) interconnect LANs across normal telephone lines and other media. The company has offices all over Asia.com/q/ks?s=CSCO http://sanjose. Local Area Networks (LANs) evolved around the PC revolution. 0003 employees and captures over 80%4 of the Network Communication Equipment Industry. Isolated LANS made electronic communication between different offices or departments impossible. Cisco Systems as described earlier is in the business of Network Communication Equipment. especially in the areas of connectivity. Implementing a functional Internet network was no simple task. Today. (a). significance of the information systems and the company’s strengths and weaknesses. and data more secure and mobile. duplication of resources.company’s competitive strategy in the market. Africa. Many challenges had to be faced. Internetworking evolved as a solution to three key problems: isolated LANs. and 3 4 http://finance. as well as access shared resources such as file servers. In order to analyze Cisco Systems and understand the company profile. reliability. Both IBM’s System Network Architecture (SNA) and Digital Network Architecture (DNA) implemented such environments.

He started working for IBM Corporation as a sales person in 1977./--ID__13494--/free-co-factsheet. speed. reliability.-inc.xhtml 14 .hoovers. quality and service. Business Leaders A company is known by its leaders and its culture. he was promoted to CEO of Cisco Systems. The networking market has evolved from just being used as the department of defense’s and academic researchers communication line to being a medium to network every single household and business. Cisco Systems is the leader in resolving these exact problems and a lot more. Other things like scalability. Cisco has focused on all these aspects and much more to make itself the number one equipment and service provider in the networking/data communication market.com/cisco-systems.9 billion in just 6 years5. Chambers has had the honor of serving two of the American Presidents. 5 http://www. It has entered every possible market that has to do with data networking and communication and has become an icon of technology. service and pricing are of utmost importance as well. Each area of these areas was a key in establishing an efficient and more effective Internet network. innovation. The most important aspect in this industry is the interoperability among various vendors equipment and different technologies. John Chambers brought a strong leadership to the company along with his experience and vision. Cisco as well has tremendously progressed from just an equipment provider to a full fledge solution provider. In 1983 John Chambers joined Wang Laboratories and in a seven year period was promoted to senior vice president of US sales and field service operations. He was on the Vice Chairman of the President George Bush’s National Infrastructure Advisory Council and he was on the President Bill Clinton’s Trade Policy Committee.flexibility. the company’s revenue went from 1. Chambers left Wang in 1991 and joined Cisco Systems the same year as Senior Vice President of Worldwide Sales and Operation.2 billion annually to 18. John Chambers: (President and CEO) John Chambers received his law degree from University of West Virginia and an MBA from Indiana University. In 1995. Cisco Systems is fortunate enough to have some of the most capable leaders of the industry. Since Chambers became the CEO.

Indeed there were many acquisitions that did not justified at the time but proved to be an important step towards the success of the company afterwards. Pete Solvik: (Senior Vice President and Former CIO) Another important leader in Cisco Systems’ history is Pete Solvik.Chambers was voted the Most Powerful Person in Networking by Network World magazine. his vision. Aside from his leadership. Boston is following the footsteps of Solvik and is making sure that the infrastructure of 15 . Boston has a huge role in creating and expanding the Cisco online retail store and developing the company’s image online. John and his team shifted through numerous ideas and were lucky enough to choose the perfect ones. and his commitment to excel he made some amazing acquisitions of companies that could have threatened the company or those. which were coming out with cutting edge technology. such as the CCO and the MCO. He is the former Senior Vice President and CIO for Cisco System. he became a brand himself. He has received many other awards and in recognition of what he has achieved and in his career so far and how he made it possible to make Cisco Systems the industry leader and maintain the companies position. the right technology and the right market to focus on. John Chambers was a visionary sales person. which has led to its success. which is an important measure. This did not happen all the time but most of the time. From the very beginning he started selling the idea of Cisco to the world. He made an attempt to redefine the company’s infrastructure by integrating all the business divisions with the implementation of the ERP systems. Solvik gave the company its vision and made it clear that it would be impossible to compete in the industry at this level without depending on information systems. Peter Solvik was a visionary and played a significant role in changing the IT infrastructure of the company. He took over the responsibilities of Solvik after he left the company. He dedicated himself on a personal level and brought revolution in the high tech sector by introducing his management style. He was also responsible for implementing many other applications and tools the company uses in its operations. In the beginning he made sure that he delivered on all his promises as far as the product and technology went. Brad Boston: (Senior Vice President and CIO) Brad Boston. After a few years. Solvik joined the company in the early 1990’s. has been involved in integrating Information Systems in every segment of the company. Senior Vice President and CIO of Cisco Systems. He was smart enough to pick the right team. Implementing the information systems in the infrastructure of the company every step along the way has helped the company achieve all this success and be competitive in the industry.

Cisco Systems has always aimed for high goals and has been able to accomplish them.9 billion during the recession. The company’s overall sales have increased from 12. They believe in having loyal.3 billion to 18. Cisco Systems assets have doubled in this five year period. Competitive Strategy Statement Cisco Systems competitive strategy is to produce the best products and support them in the most aggressive manner possible. Cisco Systems showed an unbelievably huge difference in its revenue from $6.the company stays well integrated and uses information systems to stay competitive in the industry. These facts are very impressive compared to the other companies in this industry that have been experiencing huge losses over the last couple of years. Market and Financial Performance Figure 5 shows the company’s financial highlights over the period of five consecutive years.6 billion dollars in five years. They believe in innovation and uniqueness of products and providing complete business solutions to large corporations. Cisco Systems was the only one company in the industry to regain its strength and survive the recession without any major damage.9 billion dollars in the year 2003. even though they have tried all possible measures to cut down their cost and increase their incomes.4 billion in fiscal year 1997 to $22. The net income of the company has also increased overall by 1. (c).3 billion in fiscal year 2001.2 billion dollars in 1999 to 18. In year 2002 the revenue dropped from 22. which is why Cisco Systems has managed to maintain its 80% of the market share. 16 . but the company’s competitors in the industry experienced worse times. The numbers clearly show the company’s stable financial position in the industry. Cisco Systems is also a firm believer in forming alliances and acquiring small companies in the industry that might pose a threat down the road. (b). trusting and satisfied customers and building a reputation in the industry based on goodwill and brand recognition.

0 0 0 0 0 .0 1 . which comprise 70% of the total sales.0 0 0 5 0 .0 0 0 0 0 .0 19 97 19 98 19 99 20 00 20 01 20 02 Figure 7: Sales for the company (millions) Figure 8 provides an overview of the company’s profits and revenues over the period of the last five years.0 2 . The only year Cisco Systems had a net loss was 2001. this was the time of the recession.0 . The main source of their revenue was the routers and switches.0 5 0 .0 1 .S le ($m a s il.0 0 0 5 0 .) 2 .0 0 0 0 0 . 17 . Figure 7: Financial Highlights for Cisco Systems Figure 9 gives a break down of the company’s total sales percentage of different products.

sales and distribution etc. and respond more quickly to customer’s needs.915 Perc. By integrating into every part of its business Cisco was able to lower costs. Without the ERP system Cisco Systems would not be able to sustain its tremendous growth.522 3. All these applications act as a catalyst to the company’s competitiveness. which accounts for around the biggest part of the company’s sale. opportunities and threats of this company. 6 Cisco Systems Hoover’s Company Profile 18 . reduce errors in the system. would not have been possible without the implementation of the ERP system. The company uses information systems in manufacturing. Also Cisco Connection Online. It has developed a business strategy that highly depends on the use of information systems in order to be efficient.560 5. (e). Strengths and Weaknesses of Cisco Systems Cisco Systems has done a tremendous job in this short period of time and has come out to be the worldwide leader of the industry in less then two decades.Products Switches Routers Access Other Service Total in millions 7. This section of the analysis talks about the strengths. Significance of Information and Information Systems Cisco Systems is a Network Equipment Industry and depends on information systems for every single segment of its operation. of total sales 40% 30% 5% 8% 17% 100% Figure 9: Breakdown of Cisco Systems sales6 (d). The strengths/weaknesses analysis can also be a useful tool in determining the role or the position of the company in the industry in relation to the position of its competitors in the industry. CCO. weaknesses.607 980 1. support.246 18. Implementation of the information systems in the company’s infrastructure has been the key reason for its success. Cisco Systems is one of the few companies that have integrated the use of information systems in every single operation. be able to compete in the industry and also make the whole company more manageable. day-to-day management. Cisco systems implemented the ERP system. MCO and the Cisco Employee Connection.

The company leaders have a tendency to look at the big picture and this poses high visibility in terms of innovation. Cisco Systems is known worldwide and is trusted in the local as well as the international Network Equipment industry. (ii). Signal Networks and Okena etc.(i). intelligence and profitability. Weaknesses 19 . These acquisitions have made this company even stronger in terms of having a greater influence in the Network Equipment industry. which gives them an opportunity to do Research and Development. financial stability. These are all good signs for the company’s future. Global Presence One of the most important factors under economic strength would be the company’s global presence. Vast Range of products The company has the most expansive range of products starting from just small routers and switches for individual household use to complete business solutions for huge corporations. innovation. Brand is considered a sign of prosperity. high quality. The high return on investment and increased profits give the company a great opportunity to invest in Research and Development. Financially Strong Cisco Systems is financially one of the most stable companies in today’s economy. Excellent Leadership The company has the strongest team in terms of the leaders as well as engineers that work on the products directly. The company has a huge amount of cash at its disposal. which in return helps them keep innovating their products and their business strategies. service. Strengths Cisco Systems has always set high standards for itself and has mostly been successful in achieving them. Acquisitions Cisco Systems has acquired the most valuable and fastest developing companies such as Linksys. The company leaders have been able to have some of the best relations with their buyers and suppliers and are highly appreciated by its investors. Brand Recognition and Industry Leadership Cisco Systems most valuable strength is its extremely valuable brand equity and recognition. Hammerhead Networks. The high quality of their products and prompt customer support guarantees customer satisfaction.

Acquisition strategy can be viewed as both strength and a weakness. Whenever a company in the industry competes. doing business throughout the world. just as in case of Microsoft Corporation. how information technology has helped sustain Cisco’s’ position in the industry.000 employees worldwide. Acquisitions Cisco systems has made over twenty nine7 acquisitions in the last three years alone and in the long run can face legal issues by taking over too many companies and forming a monopoly. The size of the company and the fact that it is globally very active makes it hard to manage the company. It has over 34.html 20 . Some of them are ironic because of its size and the market share it has in the industry. Size of the Company Cisco is a significantly large company. Some topics covered are how information technology has helped the company achieve its goals. (a). It is a conceptual model that was developed by Charles Wiseman to recognize strategic and business 7 http://www. Lack of Success within the Telco market One main weakness that can be found in Cisco Systems and that might hurt them in the long run is that there is too much focus on the enterprise and all sectors of Network products but not enough on Telco.com/warp/public/750/acquisition/summarylist. Another important issue is that it is difficult to assimilate new products and people into the organization. and what approaches did the company follow that led to its success.Cisco in spite of being the worldwide leader and the most influential company in the Network Equipment industry has a few weaknesses. SECTION III: Information Systems at Cisco Systems The following section will focus in detail on the use of information technology at Cisco Systems. Strategic Option Generator The Strategic Option Generator is a tool used to evaluate an organization that has used information systems to gain competitive advantage in an industry.cisco. Target of every competitor Cisco systems is a giant company in the industry. it always thinks about Cisco Systems.

Customer and Competitor. The company’s customer service has been the key to its well-recognized brand name and goodwill. The Cisco Connection Online is one of the biggest online stores that serves its customers and provides them with customer support for the products. Cisco Systems has always kept a keen eye on its customers and have acted according to their needs. Mode and Direction before it significantly uses the information systems to execute the plan. It has made buying services and products more convenient and reliable. Supplier.opportunities involving the use of information systems. Analysis of Cisco Systems Using the Strategic Option Generator Supplier Differentiation Cost Offensive Direction Use Execution Provide Target Customer Thrust Innovation Mode Competitor Growth Defensive Alliance Strategic Advantage Figure 10: The Strategic Option Generator Target: There are three possible strategic targets that a company can choose to gain competitive advantage over others. and then goes through layers of Thrust. Thrust: 21 . The way it works is that it starts out by identifying a business target.

a) Primary Strategies: Primary strategies consist of two different strategies. Cisco Systems has used all three of the secondary strategies for its success.e. Cisco Systems is recognized as a company with an offensive business strategy in the industry. has tremendously grown in a short period of time and has formed the most alliances in the industry then any of its competitors. They are as follows: i) Innovation ii) Growth iii) Alliance Cisco Systems’ primary strategy has clearly been differentiation. It can be divided into two categories. are they the leaders or are they the followers. which are as follows: i) Differentiation ii) Cost A company can choose only one out of the two primary strategies. Mode: Mode simply means if the company is aggressive in the industry or not. The company’s intensive use of information technology throughout its business process has made it competitive and unique in the industry. A company can choose none or all three of these strategies. It can either have a business strategy that differentiates itself by having something unique about itself from its competitors or it can go for the cost effective route and provide the same services and products as its competitors for cheaper prices. It has been innovative. primary and secondary strategies. This depends on a few factors such as innovation. how much the company spends on Research and Development and a lot of other factors. Direction: Direction is divided into two classifications Use and Provide. If the use of the information system is internal i.Thrust deals with the business strategy a company adopts. within the company then it comes under Use. b) Secondary Strategies: In addition to choosing the primary strategies a company can also choose secondary strategies. If the use of the information systems is beyond the boundaries of the company then it is also 22 . The company has always focused on customer satisfaction and providing complete business solution to its customers rather than providing solutions to smaller problems like many of its other competitors. The company has spent a lot of money of Research and Development and has taken risks just to be the industry leader.

The role of senior management: Making the information systems an integral part of the business to give it a competitive advantage. (b). Cisco Systems is one of the very few companies that uses its own products internally and externally to run its daily operations. Senior Management IT Leadership Business Leadership Information Systems Organization Use of information systems has proven to be not only one of the most significant and contributing sources to the company’s success but has played an integral part in 23 . The concept of roles and relationship can be explained as follows: The role of information systems: Make the business competitive in relation to its competitors.provide. The relationship: The relationship between the information systems department and the senior management. Roles and Relationships: Roles and relationships identify the importance of information systems in a company’s operations and success by recognizing the involvement of the senior management with the information systems department.

By this time Cisco’s information system had become a key competitive advantage by generating most of Cisco’s sales. He was able to analyze the effects and the benefits of having a online connection between the company and its customers.managing the fast paced growth of the company in a short period of time. Brad Boston as the CIO got all the support of the senior management and the funding to implement the strategies. pointed out by Peter Solvik. He implemented various other applications to the infrastructure of the business. Solvik recognized that the current infrastructure at that time would not be able to support the growth the company’s business strategy was aiming for and nor would it be able to let the company to compete in the industry. Given the nature of its products it is also both logical and necessary for it to become the best possible example of running its business through the use of its own products. Peter Solvik was a visionary and played a significant role in changing the IT infrastructure of the company which has led to its success. which helps us to understand a company’s approach 24 . Like any large company Cisco is motivated to run its business in the most effective way possible. Peter Solvik was able to recognize early on that Cisco had two primary challenges in its IT department. When Brad Boston took over as the CIO he continued the work of Solvik by further improving the company’s information systems department and making innovations on a regular basis. He was also the person to let the information systems department give the authority to make all the decisions about implementing any new application or making changes to any of the existing strategies. which helped the company integrate its partners and suppliers in its EDI systems. First. Redefine/Define Redefine/Define is another concept. Senior management was smart enough in its evaluation and implementation strategy. Secondly. the IT department was too traditional because it was viewed as a cost center that reported to the Finance department. Peter Solvik attempted to change the role of IT within the infrastructure of the company. Since the company realized the importance of information systems. (c). The implementation of the CCO was also Solvik’s idea. He was the one to make the most significant change in the business strategy of the company by implementing an ERP system to integrate all the different divisions of the company. The nature of the business and the size of the company make the use of information systems essential and possible to manage the company. He changed this by making the information systems department report to the Senior Vice President of Customer Advocacy himself.

of successfully using information systems to gain a competitive advantage in the industry. an order from the customer would take much longer to process.com 25 .cisco. Before the ERP system was implemented. cost-effective and manageable. It is an application that is used to integrate all the different divisions of a business into one. The ERP system also enables the company’s partners and suppliers to act as part of the company itself. Cisco implemented the Oracle 11i ERP system in the year 19948. Product/Service Network Equipment/Services Delivery Process • ERP Systems • High quality products • Cisco Connection Online • Cisco Employee Connection • Manufacturing Connection Online • Customer support available 24/7 • Convenient and fast online transactions • High Merchandise Availability Value to Customer Figure 11: Value to Customer Analysis ERP (Enterprise Resource Planning): ERP is the backbone of a business. which integrated the company’s manufacturing and sales departments and made the production more efficient. hence making the operations more effective. 8 www. Cisco Systems has implemented the use of information technology in almost all of its daily operations within all its departments. The use of information technology has added to the company’s competitiveness significantly.

The Cisco Connection Online is an online store where the customers can conveniently place orders after doing research on different products of their interest.CCO (Cisco Connection Online): Cisco System introduced the Cisco Connection Online. CEC (Cisco Employee Connection): Cisco Systems has implemented a system used within the company itself. The system has made it easier for the company to deal with its internal issues and also communicate more efficiently. A big part of the company’s sales is done through CCO. MCO (Manufacturing Connection Online): The Manufacturing Connection Online is an attempt to communicate with the company’s manufacturers and suppliers online and be able to place orders to the suppliers. These online buyer connections not only provide convenience and advantage to the company’s customers but also enable the company itself to keep track of the orders and process the orders more efficiently. This system maintains contact between the employees of the company and the senior management and the sales and manufacturing departments. which cuts down the cost of their sales expenditure. This application keeps all the information of the suppliers and the status of the orders that the company puts in. 26 . get technical support for their products and manage their accounts online etc.

The DF model is shipped directly from the CM to the customer and once it is shipped. The payment is made to the CM as soon as the product is received. The manufacturing department sends the order out with all the specifications to the manufacturer who has the contract for that specific product with Cisco Systems. These orders are refreshed every other day in the database. Figure 12 gives an overview of the complete traditional cycle from the point of receiving an order to shipping it to the customer. depending on the product and its quantity. The CM downloads all the information for this product from a Cisco Systems database. once the product is manufactured. it is shipped back to Cisco Systems from where it is shipped to the customer site. Cisco Systems has a lot of tools to assist the whole process. the DF model (Direct Fulfillment model) and the non-DF model. the accounting department at Cisco Systems makes the payment to the CM. In case of a non-DF model. The company uses a tool 27 . The sales department puts the demand for the order through an EDI (Electronic Data Interchange) system to the manufacturing department along with the product number and the order specifications.Customer Sales Department Manufacturing Database DF Model Non DF Model Contract Manufacturing Contract Manufacturing Customer Cisco Systems Customer Figure 12: An overview of a typical manufacturing and sales process The manufacturing and sales process can sometimes be a highly complex procedure. First the customer places an order with the sales department. The manufacturing department links to all the CMs’ (Contract Manufacturers) and product manufacturers through another EDI system. There are two different types of orders.

Their H. CPAT (Corrective / Preventive action tool) is one of the most commonly used applications within the manufacturing department of the company. a tool used within CPAT. Then the company has another tool called the SCE (Score Card Evaluation).R. MCN (Manufacturing Change Notification) is also a part of the CPAT. The company uses VoIP technology to form communication between employees throughout the world and also with the vendors and partners. Accounting and Finance and sales departments to stay closely connected with not only its suppliers and customers but also its employees. The employees of Cisco Systems use a file transfer tool called CCO to transfer data internally. their employee benefits. which have enabled the company to be more competitive. their ERP system (Enterprise Resource Planning). Cisco Systems has implemented various other information systems tools. It takes about 3 to 6 months to lift a SCAR off the supplier. 28 .called the Meter (Manufacturing end-to-end report). (d). The company has implemented a variety of other tools in its Human Resource. vendors and business partners. In addition to all these tools and software. These evaluations are then added to the suppliers’ history in the database. The transfer speed of the data is very fast and has no limitations to the size of the file being transferred. is a report that is issued to a supplier in a case where they mess up the order. which evaluates the company’s suppliers. Cisco was one of the first companies that focused on web-based technologies. The manufacturing department can access the progress of an order on this system. Failure analysis is a tool that detects any issues with parts while assembling them. These reports also affect the evaluation of the company. their financials. If any problems arise then the report is sent to the supplier of the part using another tool called Purge Process. Line Alert is another tool that alerts the line staff of any changes or issues with the manufacturing. This tool is an online instrument. Significance of Telecommunications Cisco Systems is one of the pioneers in Silicon Valley who realized the importance of an IT infrastructure for their own business and to interact with their customers. and customer oriented. The person it was sent to or even a group of members within the company can access the data. The application consists of a wide variety of tools within itself that help supervise the manufacturing of products. timecards as well as EDI (Electronic Data Interchange) are all web based and done electronically. The tool enters the sent data in a database and saves it in some safe location. If two SCARS are issued to a supplier within one quarter. The contract manufacturers are logged in the system by serial numbers provided by the company. SCAR (Supplier Corrective Action Report). system. which keeps track of different manufacturing processes with different contract manufacturers. then no more orders are placed with that supplier. This tool just notifies the manufacturing department of any changes that need to be made in the order placed by the customer.

which has significantly helped the company be competitive and form relationships with its customers and suppliers. Cisco Systems main factors that are responsible for its success are as follows: Business Vision: Cisco Systems has a vision of Internet and networked applications as primary information technology platforms around which organizations will create sustainable competitive advantage in the future. the Supplier Corrective Action Procedure is used to correct it. Information systems play an important role in a business vision as it helps accomplish the goals the business has for the future. Information Systems Integral to the Business: Cisco relies on its Information systems to do its day-to-day business. and cost requirements of our product. (e). which makes it easier for the company to accept orders from customers and place orders to suppliers. Cisco Systems implemented an application called the eHub9. http://www. Business vision has always been focused on the customer.manufacturing.The GSM (Global Supply Management) is responsible for the selection of an approved supply base that meets the quality. service. the vendor is controlled through Approved Vendor List (AVL) and EDI software. It has allowed the company to completely integrate and streamline its operations ranging from 9 “Cisco's eHub Initiative “. defined as either Cisco Preferred Suppliers or Cisco Approved Suppliers. In the year 2001. The ERP system forms the basis for the company's web-centric and IP-based IS infrastructure. All production commodities are acquired from these approved sources.net/scm/index. After a component is qualified. technology. Supply Operations personnel are responsible for acquiring material from approved suppliers only. It gives a detailed inventory of all the suppliers in one place.asp 29 . Customer satisfaction has always been the top priority by creating and delivering new technology. Success Factor Profile There usually are a lot of factors that lead to the success of a business but there are some that are responsible for its success. which is responsible for maintaining a close connection with the company’s suppliers. If an issue is encountered with a supplier’s part or process. It is basically an application that the company’s suppliers can access along with the company’s employees. Cisco Systems has implemented telecommunications and network communication internally and externally in its day-to-day operations.

Cisco has successfully used IS to be more competitive in the industry develop its business processes which as resulted in increased efficiency and reduced cost. Success of Business Strategy and Information Technology Use to Date Information Systems have played a significant role in the success of Cisco Systems. These 30 . If all of a sudden Cisco’s IS suffers a shutdown the company will simply screech to a halt and tens of millions will be lost everyday. Executive/IS Manager Partnership Cisco Systems is a company with a culture that allows the senior management and the information systems management develops an ongoing working relationship.customer service and internal client service to supply chain management and net commerce. Linkage to Customers The main purpose of implementing the information systems for Cisco has always been its customers. The senior IS executives have played a major role in implementing the information systems in the company’s infrastructure. The Success of Cisco Systems (a). The applications and tools used by Cisco Systems integrate the whole infrastructure of the company and make it very manageable for the senior management. The company’s main focus has always been its customers. The support and leadership of senior management plays an important role in both the planning and implementing of its Information System at Cisco. which is obvious from their business strategies and implementation of the information systems. The company implemented the EDI systems. The information systems department has achieved so much in making the company competitive in the industry that it has made itself credible in the company. SECTION IV: A Final Analysis of Cisco Systems This section summarizes the analysis of the company and predicts its situation in the industry. The senior management and the information systems management work together on forming competitive business strategies and analyzing the already existing ones. CCO and various such applications just to be able to form a close relationship with its customers.

Apart from the manufacturing and sales department. The CCO has generated a large amount of the sales performed by the company in the recent years. be efficient. One third of Cisco’s new technologies are from partnerships and acquisitions. Externally. partners. They must continue to use IS to provide innovation. suppliers. It is clear that Cisco would not be able to sustain a competitive advantage without the use of IS. These online sales reduce the cost of the company by a huge number. Cisco continues to maximize the utilization of its IS architecture for customers with online help. Internally. Cisco Employee Connection (CEC) helps its employees by providing centralized access to information. Cisco keeps employees informed with the latest data relevant to them and provides current information regarding Cisco’s performance resulting in an increase in employee morale. monitoring of progress and a total optimization of the workforce. The online support also guarantees customer satisfaction. hence increasing the profits. Through the Communication and Distance Learning initiatives. (b). Senior management within the company understand the importance of IS in the company’s continual success and that is something very crucial to a business. The company has also maintained its market leadership by being able to create innovative products and service that keep the company’s customers interested.applications make it possible for the company to be efficient and have a competitive edge over its competitors. the company is able to quickly and efficiently add the capacity required to handle the administrative processes of acquired businesses. Is the Company Effectively Postured for the Future? Cisco Systems has established itself as the worldwide leader in the Network Equipment Industry. and cut cost to provide even more value to its customers. “Because of Cisco's Internet Protocol and standards based IS architecture. The company uses its highly sophisticated Information System to remain on the offensive side and to maintain its leadership position in the industry. tools and resources. Cisco Systems must concentrate on making sure that it will always have the competitive advantage over its competitors by focusing on its customers. Because of IS Cisco was able to create an environment that keeps their customers. which is the key for the company’s success. and employees satisfied. even the HR and the finance department use highly sophisticated software to carry on with their daytoday operations. It has established a sold foundation both on the technical and business side of IS which will allow it to remain a market leader. Much of Cisco’s success come from the understanding of the importance in implementing and updating IS to stay competitive in the industry. An integral part of Cisco’s growth is derived from external acquisitions. 31 .

With a remarkable management and information systems team. motivated employees.Cisco System’s IT strategy both harmonizes and supports its business strategy. and the financial situation of the company. 32 . Cisco Systems will continue to be the leader of the industry. Cisco Systems is a company with a solid financial background and have enough assets to invest into Research and Development and keep innovating their products. service and their infrastructure.

html http://www.html http://www.juniper.manufacturing.html http://newsroom. Hoover’s Company Profile-Nortel Networks http://newsroom.asp http://newsroom.html http://newsroom.soe.Bibliography • • • • “Hoover’s Inc”.com/dlls/innovators/mario_mazzola_qa.cisco.hoovers.cisco.ucsc.com/corporate/investor/reports/index.bizjournals.edu/classes/cmps158/Winter04/cisco.com/edge/news/2003/0218mktshare.-inc.lucent.nortelnetworks.com/warp/public/750/acquisition/summarylist.com “Cisco's eHub Initiative “.com/investor/financialreports.html http://www.cisco. Hoover’s Company Profile-Cisco Systems “Hoover’s Inc”.html http://finance.cisco.html http://www.net/scm/index.html • • • • 33 .com/dlls/tln/exec_team/chambers/chambers_about.com/dlls/corpfact. http://www.yahoo./--ID__13494--/free-cofactsheet.html www.nwfusion.xhtml • • • • • • • • • • • Cisco Systems Hoover’s Company Profile http://www.cisco.net/company/investor/ http://www.com/cisco-systems. Hoover’s Company Profile-Lucent Technologies “Hoover’s Inc”.com/q/ks?s=CSCO http://sanjose.com/dlls/ts_013102.com/sanjose/ http://www.cisco.

cisco. Business Week.networkmagazine.• • • • http://www. 2002 34 .html “Cisco Behind the Hype”.com/q?s=csco&t=1y http://www.yahoo. January 21.com/shared/article http://finance.com/warp/public/750/execs/solvik.

Three Best Sources “Hoover’s Inc”. Hoover’s Company This site was one of the best sources since it provides all the factual information about the company and its competitors in the industry in a precise and clear way.html This was a good source since it has all the inforamtion pertaining to the paper in one place.edu/classes/cmps158/Winter04/cisco. http://www.ucsc.com This site provided the most current and relevant information about the company in depth. www. growth etc. This source has all the information about the company and its competitors divided up in sections just like in the guidelines. which gave a good understanding of the business the company is in. financial information.cisco. and topics like innovation. the leaders of the company. It also gives a very good undersatnding of the company for someone who does not know much about the company itself or the industry. 35 . alliances.soe.