MGB 207 – Team 3 Cisco ERP implementation case Joann Suen Seema Sangari James Sun Sekhar Varanasi

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Company Background

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 billion mark

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2.Cisco IT Infrastructure 1. manufacturing. Only core IT infrastructure spending was centralized and budgeted out of general overhead accounts Most IT expenditures delegated to individual business unit-Client Funded Model 3 . order entry systems Governance 1.Background . Running a UNIX-based software package to support core transaction processing Function areas supported by the separate packages financial. 2.

Background . 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 4  . too customized”-Pete Solvik The original upgrade/patch approach made little progress.Cisco IT IT Problems  “It had become too much spaghetti.

support. SOX.)  Contract friendliness – “Am I getting a good deal?”  What is the TCO (Licensing.)  Service scalability (partner. etc)  How quickly can the vendor support the market changes (e.Vendor/partner evaluation  What is the criteria in ERP vendor evaluation ……. etc. security.g. functional and external integration aspects  Think about product scalability (rich features. implementation cost. 3rd party vendor support. etc. M&A. infrastructure needs.) How did Cisco do……? 5 .  Not all vendors can serve a billion-dollar company  ERP is a commodity  ERP usually has 10 to 12 year life span  Horizontal. etc.

prior ERP implementation experience and “eagerness” to work with Cisco – Mantra “Strong Cisco team” needs strong partner  Major decision points for vendor selection – “Vendor size”. business knowledge. research groups to identify top ERP vendors )  Hone down from 5 packages to “two” in 2 days after evaluating features  Sent for request for proposal (RFP). “Long-term R&D investment” and “How close is the vendor” Vendor evaluation process –  Reference calls (to Big “six”. attend vendor demos  “Oracle you won .Cisco’s evaluation  Implementation partner should have – Technical skills. “Strong manufacturing capabilities”. [other vendor] you lost” 6 .

ERP implementation Cost  Software (Licensing)  Hardware  System integration  Consulting resources (this is largest portion of the entire costs)  Internal resources (pulled out to work on ERP implementation)  Training costs (Gartner recommends 17% of the total cost)  It is not uncommon to use industry benchmarks Expenditures (US$ Millions) Company sales (US$ Billions) *source AMR research 7 .

Cisco cost estimates  Cisco’s justification  No cost-benefit analysis  “We are going to do business this way” – management commitment to change  Customers and Competitors  Cost avoidance will be costly consequence  Estimated at $15M based on then revenues Boy! How do I tell ya…Cost of ERP is like weather 8 .

target date : Feb’ 1995 % of respondents from 479 US manufacturing companies surveyed by AMR research 1994 9 .Implementation Timelines  Cisco’s financial year : Aug 1 – July 31  Constraint was it cannot implement in Q4  Another option was to implement in July/August 1995 but was rejected because it is too late  So they worked backwards  Q3 should go live  System should be completely stable by Q4  So the target date was set to February 1995  Project time line : 9 Months.

so what is the big deal?  ERP customization vs BPR  Strategic decision to reduce customization as much possible in order to simplify future migration and upgrade projects  Customizations cost time and money initially and for life of the software  They are deviations from the best business practices already developed by the vendor By the way Cisco kept it to minimum 10 ..ERP customization  Lets go “Vanilla” with some parameter changes to system -> Well. I need some customization -> 2 months later -> I need sizable customization….

Other issues and decisions  Immediate upgrade?  It wasn’t an IT-only initiative 11 .

Success had a huge upside while failure meant threat of job losses.Over $200.000 cash bonus. helped in selection and implementation of ERP solution   Incentives: Reward for the ERP Team . 12 .Management Choices  Structure of Project Team: Sought the best people. 5 Track teams -> PMO-> Executive Steering Committee Implementation partner – KPMG KPMG had both the technical skills and business knowledge.

2-days offsite and 80-20 CRP 1: Detail documentation and analysis of each functional area.  CRP 0: Training and Configuration of Oracle package. 13   . iterative implementation was broken down into a series of phases called CRP’s.Implementation Methodology  Prototyping: Rapid. CRP 2 & 3: Centralized data warehouse developed. Approach . Final Testing with full load of users. Needed another package to support after-sales.

Alpha. Beta.Crunch time  Testing and “Go Live”  Official Testing begins at the end of CRP2  Full system testing and assessment of company’s readiness to “Go Live” during CRP3  “Go Live” Readiness was determined by each track team. specifically each functional lead  “Go Live” Date: January 30th 1995  Testing Method  Testing did not occur at CRP0  Testing was not broken down into phase.g.  “Go Live” Method  Big Bang roll out  “Go live” determined by each functional lead. rather than one large entity 14 . e. etc.

hardware vendor. 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 within the Cisco environment  Resolution  Swat Team-like Mode (3 months):  ERP project status and complete implementation became top priority for the company  Commitment from Oracle.Wrap up Total system replacement: $15 million. and KPMG eventually stabilized the software and improved performance  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 15 .

: Sales $100 Billion+ $8.56 Billion $34.9 Billion 16 ..Wrap up continued…. Why Successful?  Implementing an ERP system was top priority  Buy-in from executives  High visibility project  Best people were on the project  Strong vendor relations and vendor’s determination for success  Very timely Cisco then and now Cisco in 1998 Employees: 14.500+ Market Cap.45 Billion+ $194.500+ Cisco in 2007 61.

Q&A 17 .

Wrap up 18 .

Backup slides 19 .

2. 4. CIO of Cisco KPMG –Implementation Partner Oracle-ERP vendor Hardware vendor 20 . Major Players Pete Solvik. 3.Implementation Management  1.

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